Argentine central bank reserves at their lowest level since December 2007
Argentina’s central bank reported that at the end of January it had reserves totalling 42.65 billion dollars which is the lowest level since President Cristina Fernandez took office in December 2007. At the time the central bank international reserves totalled 46.2 billion dollars. Only in April 2007 were reserves at a lower level, 38.6bn dollars.
The end of January balance is ten billion less than the bank’s reserves two years ago when they stood at 52.6bn dollars.
During the first month of this year Argentina lost 640 million dollars in reserves despite the severe restrictions, ‘dollar clamp’ for common citizens wishing to purchase or save in the US currency. Compared to January 2012, the Central bank lost 3.94bn dollars in reserves.
Furthermore the 42.65bn dollars at the official rate of 4.94 Pesos to the US dollar are not enough to support the money issued by the bank which is almost equivalent to 60bn dollars. This misbalance helps to understand why together with the ‘dollar clamp’, the greenback shot up over the milestone 8 Pesos last Friday before falling back to 7.92.
However market and foreign exchange experts anticipate the US dollar will keep climbing steadily.
In December 2009 the Argentine government announced that it would appeal to central bank reserves to honour sovereign debt in foreign currency, with the purpose of helping lower domestic interest rates, because of the fiscal problems caused by an unexpected surge in government outlays.
At the time then Economy minister Amado Boudou, now Vice-president announced the creation of the Bicentennial Fund for lowering debt and promoting stability with resources totalling 6.55bn dollars and which now figure as liquid liabilities of the institution.
The decision at the time forced the exit of then Central bank president Martin Perez Redrado who was against using reserves to pay for debt. Boudou said then that the decision was “heterodox but moderate”. Three years later those reserves which begun to be used at the moment are down to 5bn dollars.
According to the report, the central bank holds government papers equivalent to 64bn dollars, which means government debt is higher than assets in US dollars.
These ‘documents’ are the collateral for the loans extended by the Central bank to pay the IMF debt, international organizations, private creditors and ‘transitory advances’ (which are not returned) to the Treasury to finance other debts and the fiscal deficit.