The Central Bank has negative international net reserves by at least US$1 billion, various consulting firms have calculated.

A report by consulting firm Ecolatina published on Friday put them at negative US$1.1 billion, while one by 1816 calculated they were negative US$1 billion.

Net international reserves are calculated by subtracting the Central Bank’s liabilities —such as the China swap and the International Monetary Fund’s (IMF) special drawing rights— from its gross international reserves. It is a way of measuring the monetary entity’s actual firepower given that the net reserves are the ones freely available to, for example, intervene in the currency exchange market. Currently, gross reserves are at US$34 billion, but the bank’s liabilities are higher.

Expert calculations

Consulting firm 1816 said net reserves are at their lowest levels since the first days of former President Mauricio Macri’s administration in 2015. Before that, net reserves had not been this low since the crisis that was unleashed after the country ditched the “convertibility” (the US dollar-peso parity) law in 2002.

According to the Ecolatina report, the Central Bank lost US$3.24 billion this year due to its interventions in the foreign exchange market. The situation was aggravated this week with a US$800 million interest payment to the International Monetary Fund (IMF).

The Central Bank only reports the gross reserves.

The main reason for the current reserve scarcity crisis is the ongoing historic drought that will slash between US$ 18.5 and US$ 20 billion in agricultural exports this year, according to different calculations.

The new “Agro dollar III,” a preferential exchange rate for agricultural exports that gives exports AR$300 per dollar, failed to attract massive liquidations. Ecolatina said that, as new regional economies have been incorporated into the program, the government could be discussing further changes in the preferential liquidation mechanism with the agricultural sector.

1816 said that private deposits in US dollars decreased by US$ 1.08 billion in the last 28 working days. “It’s a high number, but far from what we have seen in other [currency] runs.”

The consulting firm also said that the market takes for granted that the next administration will receive the Central Bank with negative net reserves. Moreover, it said that if “everything goes exceptionally well,” monthly inflation will average 8% a month. 

Meanwhile, the government keeps negotiating with the International Monetary Fund (IMF) for it to bring its disbursements forward, as well as with Brazil and China, its main trading partners.

“What will the IMF demand in return: further fiscal and monetary tightening? Will payments also be brought forward?” the report by Ecolatina asked.