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BCRA assistance to the government doubled
Ambito Financiero
July 14, 2008

By Pablo Wende

The yields of the Central Bank have been transformed into a new source of funding for the government to comfortably close the public accounts. In the first five months of the year, the monetary authority already directed US$2.6 billion in funds accumulated in previous exercises and the amount as this newspaper reported on Friday could come to more than US$4.5 billion over the course of this year.

These extraordinary resources are held by the BCRA in a separate account, which have been accumulating over various years of quasi-fiscal surplus. The yields of the entity that is led by Mart n Redrado are coming basically from investment of the reserves, while soon the financial cost of the Lebac and Nobac will have to be dealt with. The contributions from the BCRA could make a big difference, has the increases in revenues are clearly slowing in recent months. In part it is over the smaller exports of grains (which generate less export taxes). But it's also due to the slowdown in economic activity, which generated a reduction in the revenues on check taxes and value-added taxes.

The Central Bank's resources are increasing the inflows that are not specifically provided from tax revenues and they are helping the increase in the fiscal surplus to continue growing in a significant manner over 2007 (over 50% in the first five months of the year). But it's a reality by half, since they are already taking into account extraordinary contributions that will not be repeated over time. In the 2008 Budget it was anticipated that the Central Bank would direct some 1.2 billion pesos in "holdings advances". But the definitive amount, from the problems in getting financing, will be more than triple that.

In the past few years, the Central Bank has been sending the Treasury between 1 and 1.5 billion pesos in terms of holdings, accumulating more than 3 billion pesos annually without distributing it. But before the impossibility of placing debt on the markets due to the rise in interest rates, the government opted to squeeze the most out of other funding sources.

Venezuela, for example, bought US$1 billion in BODEN 2015 bonds 45 days ago, at the same time as placements of Treasury Letters with autarkic organizations like AFIP, ANSeS and the National Lottery. This year, for example, it's calculated that there will be new net placements of titles with ANSeS for about US$1.045 billion and next year the amount will rise to US$1.775 billion.

In the orbit of the Finance Secretariat, led by Hern n Lorenzino, they are already playing down any possibility of emitting new bonds for the rest of 2008. But they are dreaming about when the market calms down and thus be able to hold new letter placements with the AFJP, which is receiving new flows of funding by more than 900 million pesos per month.

While the financial needs for this year are already overcome, for next year the challenge is serious, as they'll already have to come up with US$7.5 billion to deal with the debt coming due.