admin The new Economy Minister of Argentina, Sergio Massa, took a pledge on Wednesday night to stop printing money which is the leading cause of runaway inflation. He also outlined his strategy to turn around the deepening crisis of the country.
After being sworn in by President Alberto Fernandez, Massa released his roadmap for economic growth. He is the third such minister in a month. The measures presented by Massa also had a major focus on boosting exports, reducing the fiscal deficit of the country and increasing the reserves of the central bank that are currently on the brink of exhaustion.
Massa is now directly responsible to tame the inflation. It is an enormous challenge that is quite evident simply by looking at the numbers: it is now just over 60% and is expected to reach a whopping 90% by the end of this year. The decision to print money is because Argentina was essentially cut off from international capital markets. The government of Fernandez relied on money printing to cover its chronic fiscal deficit.
“There is no such thing as magic,” Massa bluntly told reporters in Buenos Aires. “We have to use determination to fight inflation.”
The government will finance its budget by reducing its deficit or by taking the help of private lending. The country is considering four loan offers by three international banks and a sovereign wealth fund, he said, without providing a figure of the potential deal.
Separately, Massa is launching a voluntary local debt swap in pesos for bonds that mature in the next 90 days. He said that there is already 60% “cohesion” to the swap, without providing any extra details at the press conference.
As per people with direct knowledge of all the matter, the government began discussions with some banks to offer a so-called dual bond to swap securities with maturities under 90 days. Eduardo Setti, the finance director, offered the dual bond, an instrument in which investors receive the highest rate out of two options at the time of the asset’s maturity. In this case, either an inflation-linked rate or a dollar-linked rate.
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