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Argentina to Sell Dollars on Parallel Market as Part of Anti-inflation Drive

Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
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Argentina to Sell Dollars on Parallel Market as Part of Anti-inflation Drive

Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto

Argentina's central bank will start selling US dollars in the country's parallel foreign exchange markets in an effort to combat inflation and freeze the country's money supply, the government said.
Economy Minister Luis Caputo announced the new strategy on messaging platform X on Saturday, saying it would "contribute to deepening the disinflation process."
Starting Monday, when Argentina's central bank issues pesos to buy US dollars on the formal exchange market, the bank will effectively balance Argentina's monetary base by selling an equivalent amount of dollars on the parallel "CCL" exchange market, Reuters quoted Caputo as saying.
"There are no more pesos printed in Argentina by any means. It is a historic novelty," Caputo later said in a radio interview. "We were beating inflation by (a few) points and this is the 'knock out' blow," the minister added.
The announcement comes after official data published on Friday showed a five-month streak of slowing inflation ended in June when monthly inflation came in higher than in May.
The strategy outlined by the government of President Javier Milei aims to stabilize the money supply, bring down inflation and help close the widening gap between Argentina's official and parallel exchange rates traded in financial markets.
The South American country's peso has been sliding since the beginning of the year in parallel markets, which for years has diverged sharply from the official rate due to strict currency controls.
At Friday's close, the official exchange rate traded at 919.5 pesos per dollar, while the so-called "CCL" rate traded at 1,416.2 pesos per dollar. Meanwhile, the widely-used black market "blue" rate weakened to a historic low of 1,500 pesos per dollar on Friday.
Milei celebrated Saturday's announcement from the sidelines of the Sun Valley Conference, investment bank Allen & Co's annual invitation-only gathering in Sun Valley, Idaho, where the president and Caputo are courting investors.
"The monetary base in Argentina is no longer increasing, and this is tremendously powerful news," Milei said during a phone interview with Argentine news channel LN+, adding that the plan would "accelerate the deflation process in the economy."
Since Milei took power late last year, inflation has slowed dramatically in Argentina, decelerating from 25.5% in December to 4.2% in May. June's figure was 4.6%.

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UK Borrowing Overshoot Underscores Task for New Government

Larry the Cat sits on Downing Street in London, Britain July 19, 2024. REUTERS/Toby Melville
Larry the Cat sits on Downing Street in London, Britain July 19, 2024. REUTERS/Toby Melville
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UK Borrowing Overshoot Underscores Task for New Government

Larry the Cat sits on Downing Street in London, Britain July 19, 2024. REUTERS/Toby Melville
Larry the Cat sits on Downing Street in London, Britain July 19, 2024. REUTERS/Toby Melville

Britain's government borrowed a lot more than forecast in June, according to official data published on Friday that highlighted the big budget challenges facing the new government of Prime Minister Keir Starmer.
Public sector net borrowing, excluding state-controlled banks, was a larger-than-expected 14.5 billion pounds ($18.75 billion) last month. A Reuters poll of economists had pointed to an increase of 11.5 billion pounds.
Dennis Tatarkov, Senior Economist at KPMG UK, said the data showed "the daunting task" for the new government to fund its agenda without worsening the public finances.
"A combination of high levels of spending and weak growth prospects will present uncomfortable choices – deciding between even more borrowing or substantially raising taxes if spending levels are to be maintained," he said.
New finance minister Rachel Reeves is likely to announce her first budget after parliament's summer recess. She and Starmer have ruled out increases in the rates of income tax, corporation tax and value-added tax, leaving her little room for maneuver to improve public services and boost investment.
Reeves has ordered an immediate review of the new government's "spending inheritance", a move that lawmakers from the opposition Conservative Party say could presage increases in taxes on capital gains or inheritances.
"Today's figures are a clear reminder that this government has inherited the worst economic circumstances since the Second World War, but we’re wasting no time to fix it," Darren Jones, a deputy Treasury minister, said after the data was published.
Starmer's government says it will speed up Britain's slow-moving economy - and generate more tax revenues - via a combination of pro-growth reforms and a return to political stability that will attract investment.
The borrowing figure for June was 2.9 billion pounds higher than expected by Britain's budget watchdog whose forecasts underpin government tax and spending plans.
In the first three months of the financial year which began in April, borrowing was 3.2 billion pounds higher than projected by the Office for Budget Responsibility at 49.8 billion pounds.
The Office for National Statistics said June's borrowing was the lowest for the month since 2019, helped by a big drop in spending on interest paid on bonds linked to inflation which has slowed sharply.
But the deficit was made bigger by a 1.2 billion-pound fall in social security contributions compared with June 2023. They were cut by former Prime Minister Rishi Sunak before the July 4 election that swept Starmer's Labour Party to power.