1. Executive Summary
In June, the broad monetary aggregate (private M3) would have registered a slight monthly expansion at constant prices (1.1% s.e.) for the second consecutive month. This expansion was mainly explained by the behavior of fixed-term deposits, while transactional means of payment would have registered a monthly contraction.
The balances of fixed-term deposits in pesos of the private sector remained around the highest levels in recent decades, both at constant prices and as a percentage of GDP. In terms of instruments, there was a greater preference for shorter-term assets. This was reflected in the growth of investments with early cancellation options, both in the segment in pesos and in those denominated in UVA.
The BCRA began a process of simplifying the minimum cash scheme with the aim of strengthening the monetary policy transmission channel. In this regard, a series of franchises were eliminated, preserving only those that favor productive credit to MSMEs and household consumption financing (through financing with the Ahora Program12).
Loans to the private sector at constant prices and without seasonality would have grown in June, ending a period of four consecutive months of declines. At the level of the different lines of credit, the boost came mainly from current account advances, credit card financing and, to a lesser extent, loans with collateral.
2. Payment methods
Means of payment (transactional private M21), at constant and seasonally adjusted prices (s.e.), would have registered a contraction of 0.7% in June, recording five consecutive months of decline (see Chart 2.1). This dynamic responded both to the behavior of working capital held by the public and of non-interest-bearing demand deposits. In the year-on-year comparison, and at constant prices, the transactional private M2 would be almost 5% below the level of June 2021. In terms of Output, private transactional M2 would have registered a decrease (0.1 p.p.) compared to May, standing at 8.5% (see Chart 2.2). In particular, the working capital held by the public remained at the lowest levels of the last 15 years, while demand deposits are at values similar to those of the average of recent years.
Figure 2.1 | Private transactional M2 at constant
prices Contribution by component to the monthly vari. s.e.
Figure 2.2 | Private transactional
M2 % of GDP
3. Savings instruments in pesos
In mid-June, the Board of Directors of the BCRA decided to raise the minimum guaranteed interest rates on fixed-term deposits for the sixth timeso far this year 2. The measure is in line with the objective of guaranteeing a greater availability of savings instruments that allow Argentines to obtain returns in line with the evolution of inflation and the exchange rate. Thus, the minimum guaranteed rate for placements of individuals for up to an amount of $10 million was increased from 48% n.a. to 53% n.a. (68% e.a.). For the rest of the depositors of the financial system3 , the interest rate was raised by 4 p.p. to 50% (63.2% e.a.).
In real and seasonally adjusted terms, fixed-term deposits in pesos in the private sector would have registered an expansion of 1.5% s.e. in the month. In this way, term placements persist around the highest levels in recent decades. As a GDP ratio, they would reach 6.4%, a record that continues to be among the highs in recent years.
When we analyze the evolution of term instruments according to the categories that were generated from the minimum interest rates set by the BCRA, heterogeneous behaviors can be observed. In fact, placements by individuals of less than $10 million at constant prices would have experienced a slight drop of 0.2% s.e. on average for the month. On the other hand, the rest of the deposits of the non-financial private sector (those constituted by legal entities, regardless of the amount, and by individuals with placements of more than $10 million) would have experienced an increase in the month in real terms (2.7% s.e.; see Figure 3.1).
With regard to time deposits of legal entities, companies (excluding Financial Services Providers (PSFs)) increased their holdings on average in the month, although the peak variation experienced a slight decrease. With regard to PSFs, a portfolio rebalancing was observed, with an increase in demand placements to the detriment of term holdings. This behavior occurred in a context in which the assets of the Mutual Funds of Money Market (FCI MM) increased, which are the main agents within the PSFs. It should be noted that, in a context of excessive volatility in the secondary market for domestic debt, at the beginning of the month there was a dismantling of positions in public securities of the National Government, especially those adjustable by CER, which led to a marked drop in their price. Part of the funds that came out of fixed-income FCIs were those that nurtured the assets of the MC FCIs, which in turn had an impact on a significant increase in interest-bearing demand deposits (see Figure 3.2). Some of that liquidity could also have contributed to Early Cancellation Investments reversing the downward trend that began at the beginning of the year.
Figure 3.1 | Fixed-term deposits in pesos from the private
sector At constant prices by rate
segment Original series
Figure 3.2 | Fixed-term deposits of more than $20 million
At constant prices by type of depositor and instrument
Original series
At the instrument level, a preference was observed for those assets with a shorter maturity. As we mentioned , deposits with early cancellation options showed a significant increase in the period, driven by wholesale placements. The greatest dynamism of pre-cancelable fixed-term deposits was verified both in placements in pesos and in those adjustable by CER. UVA deposits continued to continue their upward trend that began at the beginning of the year, with a relative share of total term instruments on the rise, although it remained very limited (around 7% of total time deposits). At constant and seasonally adjusted prices, these placements registered an average monthly increase of 9.6%, reaching a balance of $359,740 million at the end of June and a new all-time high in real terms. This dynamic was due to both traditional and pre-cancellable UVA placements, whose monthly expansion rates stood at 3.7% s.e. and 17.7% s.e. at constant prices, respectively (see Figure 3.3). Discriminating the balance by type of holder, it can be seen that the boost came again from the placements of individuals, while companies (excluding FSPs) decreased their holdings (see Figure 3.4).
Figure 3.3 | Fixed-term deposits in UVA of the private
sector Monthly Var. s.e. by type of instrument
Figure 3.4 | Fixed-term deposits in UVA of the private
sector Daily balance at constant prices by type of holder
Original series
All in all, the broad monetary aggregate, private M34, at constant prices would have registered a monthly expansion of 1.1% s.e. in June. In the year-on-year comparison, this aggregate would have exhibited a slight increase (0.6%) and as a percentage of GDP it would have stood at 16.5%, 0.2 p.p. above the previous month’s record.
4. Monetary base
In June, the Monetary Base stood at $3,891.2 billion, which implied an average monthly nominal increase of 5.3% (+$194,792 million) in the original series. Adjusted for seasonality and at constant prices, it would have exhibited a contraction of 2.5% and in the last twelve months it would accumulate a fall of around 13%. In terms of GDP, the Monetary Base would stand at 5.2%, a figure around the lowest values since 2003 (see Figure 4.1).
Figure 4.1 | Monetary Base
Among the factors of variation in the monetary base can be mentioned the expansion due to public sector operations, which in terms of GDP remained among the lowest levels in recent years; the intervention of the BCRA in the secondary market of public securities with the aim of stabilizing the curve in pesos of these bonds given the greater volatility in the global and local financial markets and the net purchase of foreign currency from the private sector. The counterpart of these operations was the absorption of liquidity through the BCRA’s monetary regulation instruments.
In mid-June, the Board of Directors of the BCRA decided to raise interest rates on monetary policy instruments again, maintaining the objective of tending towards positive real returns on investments in local currency. Specifically, the interest rate of the LELIQ with a 28-day term was raised by 3 p.p., which stood at 52% n.a. (66.5% y.a.). For its part, the interest rate on the LELIQ with a 180-day term increased by 4 p.p. and was set at 58.5% n.a. (67.2% y.a.). As for shorter-term instruments, the interest rate on 1-day pass-by-passes increased 3 p.p. to 40.5% n.a. (49.9% y.a.); Meanwhile, the interest rate on 1-day active passes stood at 57.5% n.a. (77.6% y.a.). Finally, the fixed spread of the NOTALIQ in the last auction of the month remained at 5.0 p.p.
With the current configuration of instruments, in June the remunerated liabilities were made up of around 70% by LELIQ with a 28-day term. With respect to the longer-term species, the 180-day LELIQ decreased its participation to 6.3% of the total, unlike what happened with the NOTALIQs, whose participation continued to increase in the month (13.3% of the total). The rest corresponded to 1-day passes, which slightly increased their relative weight to 10.6% of the total (see Figure 4.2).
Figure 4.2 | Composition of the BCRA’s interest-bearing liabilities
5. Loans to the private sector
In June, loans in pesos to the private sector, measured in real terms and without seasonality, would have grown 1.6%, thus interrupting four consecutive months of decline. Thus, in the last twelve months, loans in pesos would have accumulated an increase at constant prices of 3.4%. The ratio of loans in pesos to the private sector to GDP grew 0.1 p.p. in the month and amounted to 6.7% (See Figure 5.1).
Figure 5.1 | Loans in pesos to the private
sector In terms of GDP
Figure 5.2 | Loans in pesos to the private
sector Real without seasonality; contribution to monthly growth
Analysing the evolution of loans by type of financing (see Figure 5.2), commercial lines made a positive contribution to monthly growth. In fact, this type of financing grew 1.6% s.e. at constant prices and interrupted 4 consecutive months of decline. In year-on-year terms, commercial loans would have registered an increase of 14.3% at constant prices. Within these financings, the growth of current account advances stood out, which was the most dynamic line and would have registered a monthly growth of 7.8% s.e. at constant prices (+24.2% y.o.y.). On the other hand, documents would have fallen 0.6% s.e. in real terms (+16.8% y.o.y.), a dynamic that was explained by the behavior of single-signature documents.
The Financing Line for Productive Investment (LFIP) continued to support the growth of loans to Micro, Small and Medium-sized Enterprises (MSMEs). At the end of June, financing channeled through the LFIP accumulated disbursements of approximately $2,500 billion since its launch, with an increase of 11.6% compared to last month (see Figure 5.3). As for the destinations of these funds, about 85% of the total disbursed corresponds to working capital financing and the rest to the line that finances investment projects. At the time of publication, the number of companies that accessed the LFIP amounted to 284,572.
Figure 5.3 | Financing granted through the Productive Investment Financing Line (LFIP)
Accumulated disbursed amounts; data at the end of the month
Figure 5.4 | Commercial loans to the private sector by type of debtor
Var. i.a. at constant prices of the 30-day moving average balance
In this way, the LFIP continues to support financing for relatively smaller companies. In fact, distinguishing commercial credit by type of debtor, it can be seen in June that credit to MSMEs would have grown by around 27% year-on-year, while credit to large companies showed a contraction of around 2% compared to a year ago and measured at constant prices (see Figure 5.4).
Another line that contributed to the growth of loans in June was financing instrumented with credit cards. They would have grown 2.9% s.e. in real terms, reversing a prolonged decline. Thus, the average balance for the month was around 7% below the level of a year ago. Meanwhile, personal loans would have exhibited a contraction of 0.6% per month at constant prices and would be 2.9% below the level of June 2021. The interest rate corresponding to personal loans rose in June to 60.3% n.a. (80.1% y.a.), increasing 1.3 p.p. compared to the previous month.
As for the lines with real guarantee, collateral loans would have registered an increase in real terms of 2.8% s.e. and in year-on-year terms they would have accumulated a growth of 41%. On the other hand, the balance of mortgage loans would have registered a fall of 0.9% s.e. at constant prices in the month, accumulating a contraction of around 15% in the last twelve months.
6. Liquidity in pesos of financial institutions
In June, ample bank liquidity in local currency5 averaged 66.6% of deposits, 0.5 p.p. below the May level. Thus, it remains at historically high levels.
With regard to the composition of bank liquidity, there was a change in the form of minimum cash integration, with LELIQs gaining relative weight to the detriment of public securities, and registering a fall in current accounts at the Central Bank. For its part, the integration with BOTE 2027 experienced an increase as a result of the full effect of the tender held at the end of May. The excess liquidity, considering that the LELIQ balance remained largely unchanged and a greater portion was allocated to minimum cash integration, was channeled into an increase in the NOTALIQ balance, with the passive passes remaining constant in terms of deposits (see Figure 6.1).
Figure 6.1 | Liquidity in pesos of financial institutions
Regarding regulatory changes, it is worth mentioning that the BCRA began a process of simplification of the minimum cash scheme with the aim of strengthening the monetary policy transmission channel. In this regard, a series of franchises were eliminated, preserving only those that favor productive credit to Micro, Small and Medium-sized Enterprises (MSMEs) and the financing of household consumption (through financing with the Ahora Program12). With the intention of having a neutral monetary effect, there was a change in the rates applied to minimum cash items. This modification will come into force in October, while the franchise associated with ATM withdrawals will be computed until Decemberinclusive 6.
7. Foreign currency
In the foreign currency segment, the main assets and liabilities of financial institutions registered limited positive variations. In fact, the average monthly balance of private sector deposits stood at US$15,585 million, which meant an increase of US$199 million compared to May. This rise was mainly driven by demand deposits, especially by the segment of legal entities of more than US$1 million. On the other hand, the average monthly balance of loans to the private sector was US$3,837 million, which implied an increase of US$125 million compared to the previous month, explained both by financing granted through signature documents and credit cards (see Figure 7.1).
Bank liquidity in foreign currency averaged 83.2% of deposits in March, experiencing an increase of 0.5 p.p. compared to February. This increase was explained by cash in banks, which was partially offset by a reduction in current account balances at the BCRA in terms of deposits (see Figure 7.2).
Figure 7.1 | Balance of private sector foreign currency deposits and loans
Figure 7.2 | Liquidity in foreign currency of financial institutions
The liquidity of financial institutions in the foreign currency segment stood at 82.8% of deposits in June, remaining stable compared to May. Among its components, the increase was observed by the variation in cash in banks, which was partially offset by a fall in current accounts at the BCRA (see Figure 7.2).
During June, some regulatory changes took place in foreign exchange matters. Thus, in the first days of the month, the BCRA approved the regime for the availability of foreign currency for exporters of services7. In this way, individuals who export services linked to the knowledge economy will be able to have up to US$12,000 per year in accounts in local financial institutions without the requirement of settlement in pesos. The benefit extends to companies in the sector, which will have foreign currency available for salary payment for a percentage of the increase in foreign sales they make this year compared to 2021.
At the same time, the system that governed access to the foreign exchange market by non-residents for the purchase of foreign currency was extended so that beneficiaries of retirements and/or pensions paid by the National Social Security Administration (ANSES) to other agencies and/or pension annuities can collect them in a bank account owned by them abroad8. In addition, the conditions for setting up Chacarero Fixed Terms, which can be set up by individuals and companies with agricultural activity and their yield is linked to the value of cereals or oilseeds and the price of the US dollar, were improved, removing limits for their renewal9. In line with the above, it was decided to increase the amount for access to financing in pesos for agro-export companies for purchase for export10.
On the other hand, the regulatory scheme corresponding to those imported goods and services for which it is required to have a declaration in the Comprehensive Import Monitoring System (SIMI) and are not included in the deadlines provided for in the exchange regulation was improved. Thus, during the month of June, exceptions and particular regulatory frameworks continued to be incorporated for imports linked to certain productive activities, with the aim of responding to the extraordinary needs for foreign currency to meet energy imports, promote the development of SMEs and sustain economic growth11. Finally, at the end of the month, the strategy of promoting an efficient allocation of foreign currency was continued by preventing financial institutions and non-financial credit providers from financing purchases of products or services from abroad in installments12.
In this context, the BCRA’s International Reserves ended June with a balance of US$42,787 million, reflecting an increase of US$1,226 million compared to the end of May (see Figure 7.3). The second disbursement of the IMF towards the end of the month for US$4,013 million had an impact on the dynamics of June, within the framework of the Extended Facilities Program (PFE) signed with our country. It allowed to meet the capital payments to the agency in June and will allow to meet those scheduled for July. Another factor that contributed to the growth of the Reserves was the net purchase of foreign currency from the private sector, which totaled US$948 million in the month.
Finally, the bilateral nominal exchange rate (TCN) against the U.S. dollar increased 4.1% in June to stand, on average, at $122.65/US$ (see Figure 7.4). In this way, the rate of depreciation of the domestic currency is gradually converging to levels more compatible with the inflation rate, with the aim of preserving the Multilateral Real Exchange Rate Index (ITCRM) around adequate levels of competitiveness.
Figure 7.3 | International Reserves
Daily Balance
Figure 7.4 | Variation in the bilateral nominal exchange rate with the United States
Glossary
ANSES: National Social Security Administration.
BADLAR: Interest rate on fixed-term deposits for amounts greater than one million pesos and a term of 30 to 35 days.
BCRA: Central Bank of the Argentine Republic.
BM: Monetary Base, includes monetary circulation plus deposits in pesos in current account at the BCRA.
CC BCRA: Current account deposits at the BCRA.
CER: Reference Stabilization Coefficient.
NVC: National Securities Commission.
SDR: Special Drawing Rights.
EFNB: Non-Banking Financial Institutions.
EM: Minimum Cash.
FCI: Common Investment Fund.
A.I.: Year-on-year .
IAMC: Argentine Institute of Capital Markets
CPI: Consumer Price Index.
ITCNM: Multilateral Nominal Exchange Rate Index
ITCRM: Multilateral Real Exchange Rate Index
LEBAC: Central Bank bills.
LELIQ: Liquidity Bills of the BCRA.
LFIP: Financing Line for Productive Investment.
M2 Total: Means of payment, which includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the public and non-financial private sector.
Private M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and demand deposits in pesos from the non-financial private sector.
Private transactional M2: Means of payment, includes working capital held by the public, cancelling cheques in pesos and non-remunerated demand deposits in pesos from the non-financial private sector.
M3 Total: Broad aggregate in pesos, includes the current currency held by the public, cancelling checks in pesos and the total deposits in pesos of the public and non-financial private sector.
Private M3: Broad aggregate in pesos, includes the working capital held by the public, cancelling checks in pesos and the total deposits in pesos of the non-financial private sector.
MERVAL: Buenos Aires Stock Market.
MM: Money Market.
N.A.: Annual nominal
E.A.: Annual Effective
NOCOM: Cash Clearing Notes.
ON: Negotiable Obligation.
GDP: Gross Domestic Product.
P.B.: basis points.
p.p.: percentage points.
MSMEs: Micro, Small and Medium Enterprises.
ROFEX: Rosario Term Market.
S.E.: No seasonality
SISCEN: Centralized System of Information Requirements of the BCRA.
TCN: Nominal Exchange Rate
IRR: Internal Rate of Return.
TM20: Interest rate on fixed-term deposits for amounts greater than 20 million pesos and a term of 30 to 35 days.
TNA: Annual Nominal Rate.
UVA: Unit of Purchasing Value
References
1 Corresponds to private M2 excluding interest-bearing demand deposits from companies and financial service providers. This component was excluded since it is more similar to a savings instrument than to a means of payment.
3 Financial Services Providers, Companies and Individuals with deposits of more than $10 million.
4 Includes the working capital held by the public and the deposits in pesos of the non-financial private sector (demand, time and others).
5 Includes current accounts at the BCRA, cash in banks, balances of net passes arranged with the BCRA, holdings of LELIQ and NOTALIQ, and public bonds eligible for reserve requirements.
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