“The bank’s purpose is to promote, to the extent of its powers and within the framework of the policies established by the national government, monetary stability, financial stability, employment and economic development with social equality.” Article 3º, Charter of the Charter of the Central Bank of Argentina.

General guidelines

The monetary and exchange rate policy that had been promoted during the previous years, and which continued between January and November 2023, led to a picture of macroeconomic instability and stagflation, fiscal and external imbalances, negative net international reserves, low financial intermediation, large distortions in relative prices and a network of regulations and obstacles designed to repress and delay the inflationary consequences of the monetary financing of the fiscal deficit.
During 2023, first due to the severe drought, and then during the election campaign period, these problems worsened until the economy reached a critical situation. It is estimated that, as a whole, the measures for electoral purposes increased the fiscal deficit by more than 1 percentage point (p.p.) of the Gross Domestic Product (GDP). In a context in which access to sovereign financing was limited, monetary financing from the Central Bank of the Argentine Republic (BCRA) was used. In the case of direct financing, through the granting of transitory advances and the transfer of profits. In the case of debt instruments in pesos, the National Treasury achieved the roll over of all the capital and interest services of market instruments, within the framework of an active intervention of the BCRA in secondary trading (indirect tax monetization). A large part of the monetary expansion to finance the National Treasury was sterilized through the issuance of remunerated liabilities of the BCRA, which also continued to grow endogenously due to the effect of the interest rate. All this led to remunerated monetary liabilities reaching a balance of $248,000,000,000,000 (two hundred and forty-eight billion pesos) as of November, representing 9.8% of GDP and almost 3 (three) times the monetary base.
The financing needs of the National Treasury and the interest rate policy not only sharply increased the BCRA’s liabilities and deteriorated its composition, but also affected the assets of its balance sheet. Foreign exchange sales in the official market and in the financial markets and debt payments reduced international reserves. After registering a fall of more than USD56,000,000,000 (fifty-six billion US dollars) from the peak recorded in April 2019, gross international reserves stood at USD21,000,000,000 (twenty-one billion US dollars) as of 11/12/23, while net international reserves (after deducting the swap with China, liabilities with Seguros de los Depósitos Sociedad Anónima (SEDESA), the Latin American Integration Association (ALADI), the Bank for International Settlements (BIS) and commercial banks’ foreign currency reserve requirements (BIS) were in negative territory since May 2023, with a negative record of USD 11,200 million as of 11/12/23.
The change of authorities as of 12/10/23 led to a transformation of the monetary and exchange policy framework with the aim of correcting monetary imbalances, moving steadily towards the elimination of controls and restrictions and recovering the full use of all monetary policy instruments.
The establishment of a new exchange rate was announced and a sliding path of 2% (two percent) per month was defined, in order to provide a nominal anchor that extends beyond the period of sincerity of relative prices. A strategy was also put in place to sort out importers’ debt to foreign suppliers and simplified the payment of import flows. In addition, the monetary policy rate was lowered.
These first measures constituted a fundamental step towards re-establishing basic macroeconomic balances, directing a process aimed at cleaning up the BCRA’s balance sheet, reducing the sources of issuance, recovering the full power of all monetary policy tools, achieving monetary stability and reducing inflation.