The Government’s plan to “anchor” inflation and achieve exchange rate stability

The Government's plan to

© Juan Obregon

After two weeks with the exchange market red-hot, the Government hastens the step to form a comprehensive monetary program that is accompanied by a solid fiscal plan that allows to recover certainty, confidence and act as an “anchor” for inflation in the face to 2021.

Sources from the economic cabinet highlighted as an essential point that this strategy is already being discussed with the International Monetary Fund (IMF) and it would be the central scheme to gradually lower inflation.

The monetary program, as admitted by government sources, would be based on setting “quantitative targets” for issuance, based on M2, that is, money plus deposits, to establish a balanced index and avoid triggering the monetary overflow on cost. of life.

“This will be accompanied by a stricter fiscal policy in terms of meeting the objectives,” stressed a source from the economic team.

Specifically, the equation for quantitative goals implies a significant reduction in monetary issuance, with a reduction in the fiscal deficit in the next year of about four points of GDP, also accompanied by some mechanism that has been talking about a limit as to parity increases and prices of essential products.

“It is not a grandiloquent agreement on prices and wages, but rather a coordination, to avoid that this lower emission and reduction of the deficit is not overwhelmed by wage pressures or product prices,” stressed the same source.

For the moment, the Government continues to work with the IMF on the assumption of inflation of 29 percent for next year.

“In order to meet this lower cost of living level, an absolutely coordinated monetary and fiscal plan must be developed,” added another source consulted.

On this issue, Jorge Neyro, economist at the ACM consultancy, emphasized that “this system of quantitative emission targets was already used at the time that Alfonso Prat Gay and Martín Redrado were presidents of the Central Bank and it worked well.”

“I believe it can help, it can work, it must be accompanied by very solid fiscal behavior. Now, there are not going to be immediate effects in terms of inflation, because precisely, in the fiscal area, some decisions have to be made that have economic and price costs, such as the adjustment of rates, “he added.

The ruling party and the

IMF work on

the hypothesis of a


29% in 2021

Stock market. In addition to this initiative, in the urgency of the immediate situation, the economic cabinet led by Minister Martín Guzmán is drafting announcements for the next few hours on flexibility in the operation of stock exchange rates.

The objective is to eliminate or significantly reduce what in the market jargon is called “parking”, the period for which an investor must wait to sell the securities to get foreign exchange within the operation of the so-called “cash settlement”.

In this way, as Minister Guzmán anticipated last Friday at the IDEA Colloquium, it seeks to have fewer regulations in that market, expand it, which will take pressure off that value and thus promote a decrease and greater stability in the exchange market.

The economic team is also betting on the success of the latest measures announced to promote savings in pesos with tax exemptions through the bill sent to Congress.

“In line with the objectives that we set ourselves in December 2019 to rebuild the capital market in pesos, yesterday we took a new step: we sent a bill to the National Congress to encourage savings and financing in local currency”, Guzmán expressed on his Twitter account.

The official added that “it seeks to level the tax burden of assets in pesos with adjustment clauses with respect to those with fixed income. While working to solve the inflationary problem, it is important to offer people and companies instruments that protect their savings ”.


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