With record inflation, Argentine crisis continues to end foreign exchange reserves

Data released on Friday (12) by the National Institute of Statistics and Censuses (Indec) of Argentina indicate that the Consumer Price Index (IPC) in the country rose 8.4% in April, the biggest monthly rise in 20 years. In the annual accumulation, the CPI reached 108.8%, a record in the last 31 years. With an interest rate of 81% per year and negative real interest, the country sees its currency melt and the worsening of the Argentine crisis is seen as a path of no return for the depletion of its exchange reserves.

Despite the fact that the Central Bank of Argentina (BCRA) has not disclosed the country’s net reserves since the end of 2022, this week the latest balance of gross international reserves pointed to a balance of US$ 33.6 billion, a figure that shrank by US$ 10 .5 billion since the beginning of the year and the smallest amount available since the end of 2019, when Alberto Fernández took over as president of the country.

In addition to the shrinkage of reserves, they have an additional difficulty in using them, which is their low liquidity, since part of the assets are linked to gold or credit lines with the Bank for International Settlements (BIS) and China. This is a delicate problem, since the Argentine crisis makes the country have to quickly dispose of the American currency to escape the inflationary problems that affect the Argentine peso.

On the other hand, the BCRA announced new control measures to try to contain its international reserves. This time, a new limit was placed on the purchase of dollars for imports. Despite the decision having contributed to a positive daily net balance of US$ 101 million, in the long term these restrictions generate insecurity and increasingly scare away international investors.

Recently, President Fernandez also imposed that dollars from exports must pass through the Central Bank. This decision adds to others such as accepting IMF funds and establishing a partnership with the Brazilian government in order to intensify trade relations between the two countries using lines of credit in real, reducing the use of the dollar.

Despite successive attempts by the Argentine government to circumvent economic difficulties, anti-liberal measures that include State interventions in the economy increase the snowball of the country’s fiscal insecurity and make its economic stability increasingly distant from being achieved.