BCRA reserves have reached US$30 billion for a maximum of 10 months, how sustainable is this?

The Central Bank (BCRA) bought $109 million this Wednesday on the official exchange market and began the third round, followed by pockets, given that on Friday last week the day ended with a neutral result. However, what attracts most attention today is the fact that which exceeded US$30 billion for the first time in almost ten months.

And BCRA already has gross reserves of $30,017 million.. “Since June 29 last year, it has not reached these indicators,” says the minister. Romano Group economist Salvador Vitelli in dialogue with Volume. This is the result of a process in which the financial regulator has already purchased US$14,542 million from the official market since the current government took office.

Meanwhile, if we take the last working day of the Alberto Fernandez era as a starting point, December 7 last year when gross reserves stood at US$21,208 million.in the current government administration, During the reign of Javier Milea, they increased by 8,809 million US dollars.

That is, BCRA retained just over 45% of what it bought.

BCRA keys for accumulation of reserves

“ devaluation allowed BCRA to restore reservesbecause with a 2% crawling peg and an initial exchange rate shock, contributed to the elimination of exports and reduction in imports. Likewise, this has been supplemented maintaining currency restrictionswhich helps curb imports,” Vitelli details, explaining how he was able to achieve this trend in purchasing.

In the same sense, Eco Go economist Lucio Garay Mendes notes that “The Central Bank manages to accumulate reserves, and reserves allow them to buy currency every day. And positive rate in dollars and a real exchange rate appreciating over time provides an incentive to sell foreign exchange.”

“Another factor that favors the current dynamics is that They allow very few import dollars.At the same time, he notes that these have been relatively quiet months in terms of dollar debt.

So as described Gustavo Quintana, “Operators of PR Change”who closely monitors the dynamics of the official dollar every day, assures that this level of reserves is “the result of a strategy developed since December and combining several measures”:

• maintaining stock,
• A large adjustment to the original exchange rate,
• He encourage the entire export sector to liquidate
  with the spread of the mixed dollar in all sectors,
• A monetary limit very strong and
• A change in expectations economic agents.

“This also affected decline in economic activity which, despite the exemption from certain imports and previous restrictions, has not had a consistent impact on the demand for foreign exchange,” Quintana notes.

In the same sense, economist Jorge Neuro indicates that this was achieved based on “a recipe that has been in use since December: lack of demand for foreign currency for import due to restrictions on payment terms, late dollar which is charged at a rate of 2% per month and recession this limits the purchase of resources in dollars abroad.”

Are BCRA’s current stock levels sustainable?

However, Neuro believes that “this is not as significant a figure as it seems” as he points out that we cannot ignore the fact that This $30 billion won’t last long.Considering BCRA must pay US$2,000 million to the Monetary Fund (IMF). Until the end of the month. And then you will have to make another payment at the beginning of May. In two months they will amount to about 2.6 billion US dollars. This will undoubtedly affect reserves.

On the other hand, Garay Mendez warns that “all the factors that come together for the BCRA to be able to buy dollars and hold them have a limit” and this will mean less accumulation of reserves forward,

and today it even creates dependence on stocks.

Thus, he foresees that “At some point they will have to speed up their crawling.imports must be paid for, and in the coming months payments to the Fund, capital and interest payments to Globales and Bonares and, in turn, the abolition of BOPREAL will put severe pressure on the Central Bank’s reserves.” .