BCRA's new measures: A respite for reserves?

In the last days of June 2025, the BCRA has promoted a series of key measures. In the recent context, Argentina has been facing a persistent need to accumulate net international reserves, despite a certain recovery. This challenge is crucial to strengthen the economy, reduce the country risk (which remains above 650 points, according to reports) and generate confidence in the markets. In addition, meeting the targets agreed with the International Monetary Fund (IMF) is a fundamental requirement.

These measures, part of "Phase 3" of the government's economic program, seek to deepen macroeconomic stabilization, with greater monetary control and a gradual easing of some restrictions. Inflation, although it has shown a downward trend, requires the elimination of potential sources of monetary expansion to ensure the sustainability of the disinflationary process and anchor expectations. Likewise, the normalization of the capital and foreign exchange markets, through the elimination of minimum terms for non-residents and the subscription of government securities in dollars, seeks to encourage capital inflows and provide greater liquidity.

The measures are grouped into two main pillars:

I. Measures to Strengthen International Reserves:

The BCRA seeks to increase its stock of dollars to give greater solidity to the economy and meet the goals agreed with the International Monetary Fund (IMF).

• - Public Securities Tender with Subscription in Dollars: As from June 2025, the Ministry of Finance will allow public debt securities to be purchased directly in dollars, with a limit of USD 1 billion per month for placements over one year.

• - Elimination of Minimum Permanence Terms for Non-Residents: Time restrictions are eliminated for foreign investors entering foreign currency through the Mercado Libre de Cambios (MLC) or in primary Treasury placements with maturities over six months, in order to attract capital.

• - Placement of Repos in Dollars with International Banks: The BCRA called for a second tender of its repurchase agreements (repos) program with foreign banks, seeking to add up to USD 2 billion additional in foreign currency, complementing a first placement of USD 1 billion in December 2024.

II. Measures to Strengthen the Monetary Regime:

These actions aim to consolidate control of the amount of money in circulation and reduce potential sources of monetary issuance, seeking lower and more predictable inflation.

1. - Reduction of the BCRA's Contingent Monetary Liabilities: The Central Bank repurchases "puts" contracts on Treasury securities held by banks, which allows it to clean up its balance sheet and eliminate future sources of monetary expansion.

2. - End of the Fixed Monetary Policy Rate and Focus on Monetary Aggregates: The BCRA stops setting a fixed reference rate, allowing the interest rate to be determined by the market, in line with a regime focused on direct control of monetary aggregates.

3. - Elimination of LEFIs and Exchange for LECAPs: The Central Bank will stop offering Fiscal Liquidity Bills (LEFI) and its stock will be exchanged for Capitalizable Treasury Bills (LECAPs), which are traded in the secondary market, seeking to simplify the management of interest-bearing liabilities.

The strengthening of international reserves has the direct effect of improving confidence in the Argentine economy. This may lead to a reduction in country risk, which, in theory, should lower the cost of financing for the State, provinces and companies, thus encouraging productive investment. Greater exchange rate stability, backed by solid reserves, reduces uncertainty for companies and consumers, facilitating the planning of investments and purchases. Furthermore, the attraction of foreign investments, encouraged by the elimination of minimum permanence terms, could generate employment and growth if they are destined to the productive economy. A higher level of reserves is also a key step for the normalization of access to foreign currency and the eventual lifting of exchange restrictions, which facilitates imports and payments abroad, improving economic activity and business efficiency.

As for the control of monetary aggregates and the end of the fixed rate, the central objective is to reduce inflation. Lower inflation improves the purchasing power of salaries and pensions, boosting consumption and providing greater predictability for businesses. Regarding interest rates, the BCRA seeks to have them determined by the market. Although in the short term high rates could make credit more expensive and discourage investment and financed consumption, in a scenario of successful disinflation, nominal rates will tend to fall, making credit more accessible in the medium term and stimulating investment and consumption. The ultimate goal is to generate an environment with low inflation, a stable exchange rate and access to cheaper and abundant medium and long-term financing, conducive to job creation, productive investment and sustained growth of the real economy. The success of these measures will depend on their consistency and the government's ability to maintain confidence.

In conclusion, with these measures, Argentina is heading towards a significant increase in international reserves, seeking to reach IMF targets (a target of USD 9 billion between repos and Treasury issues is mentioned). Greater control over liquidity and inflation is expected, with the elimination of puts and the shift to a monetary aggregates regime, which should reduce discretionary issuance and contribute to lower and more predictable inflation. Reduced country risk and improved access to financing, attraction of foreign capital and exchange rate stability with a narrowing of the gap are the expected results.