Argentine congressman Luciano Laspina questions how the Central Bank funds the National Treasury. The official urges the State to regain confidence in its fiscal solvency by reducing public spending.
Congressman Luciano Laspina recently stated the Central Bank of Argentina (BCRA) violates its Organic Charter by putting citizens on the verge of hyperinflation.
The government official is part of the Juntos por el Cambio (Together for Change) bloc. He said the BCRA has allowed funding the Treasury with reserves since the reform of the Organic Charter in 2012.
However, Laspina pointed out that this reform limited the monetary funding of the National Treasury by the banking entity. According to Article 20, the Bank may make transitory advances to the government of up to 12% of the monetary base. The legal document also indicates that the BDRA may grant advances not exceeding 10% of the national cash resources.
The BCRA Uses Taxes to Fund the National Treasury
The economist commented that the BCRA has decided to ignore those limits, despite their laxity. He explains that the financial institution is bypassing them to fund the Treasury. They have recently bought Treasury debt for over ARS 600 billion, equivalent to about USD 2.6 billion.
According to the congressman, the BCRA abuses Article 18 of the Organic Charter to bypass the self-imposed limits. That rule establishes they can buy and sell public securities in the market for monetary, exchange, financial, and credit regulation purposes.
Laspina considers those security purchases do not aim to regulate the money supply, the exchange rate, or the credit. He believes they should not use inflationary taxes to finance an illiquidity or insolvency crisis. He explained that this would lead the limits imposed by Article 20 to become abstract, useless, and irrelevant.
The 49-year-old congressman, with legislative experience since 2014, maintains that the State must take forceful and urgent measures. The objective would be to recover confidence in its fiscal solvency, starting by reducing public spending generated in the first half of 2022. He added that the BCRA must comply with its Organic Charter, refraining from monetizing the irrational exuberance of national government spending.
The Argentine congressman said it would only be possible to prevent citizens from suffering hyperinflation by meeting those two conditions.
In 2022, the Argentine Hyperinflation Could Rise by 72%
Private consultants have predicted that inflation will be close to the levels registered in May (5.1% monthly) in June. However, it will be necessary to wait until July 14th for the Institute of Statistics and Censuses (INDEC) to publish its official data. According to financial news media Bloomberg, year-on-year inflation could exceed 72% at the end of 2022.
All this happens amid the high devaluation of the national fiat currency, the peso (ARS). On the other hand, the US dollar (USD) price has recently reached all-time highs measured in ARS.
Meanwhile, the cryptocurrency market has also suffered a considerable drop in the first half of 2022. For example, Bitcoin (BTC) is trading at around USD 18,976 and has accumulated a 5.6% loss over the last 24 hours.
By Alexander Salazar