New high for reserves a sign of 'growing confidence' in Argentina – Sturzenegger

For the first time in more than three years, Argentina's international currency reserves have risen above $40 billion, after large inflows from exports and government-issued debt resulted in a dramatic increase in accumulation over the past week.

On October 20, the Central Bank of Argentina posted a figure of $40.6 billion – 63% higher than the $24.9 billion held by the central bank when Argentinian president Mauricio Macri was inaugurated in December the previous year.

"I have insisted the level of reserves is not very relevant. But exceeding the $40 billion mark says something about the growing confidence in the country," said governor Federico Sturzenegger via social media.

The former government of Cristina Kirchner restricted imports and foreign currency transactions in an attempt to maintain the level of reserves without resorting to devaluation, which would have had an impact on purchasing power. Nevertheless, under Kirchner's regime, reserves dwindled.

Exceeding the $40 billion mark says something about the growing confidence in the country
Federico Sturzenegger, Central Bank of Argentina

Shortly after taking office, Macri abolished the nation's currency controls, allowing the peso to dramatically depreciate. As a result, central bank reserves have slowly been accumulating as export levels picked up.

However, since October 15, there has been a marked increase in the rate at which reserves are being accumulated. A large proportion has come from loans to the Central Bank of Argentina, as well as bonds raised by the treasury, which are counted as central bank reserves.

Last week, the Argentine treasury raised a total of 76.4 billion pesos ($5.04 billion); 53.6 billion pesos came from a 10-year bond auctioned for an average rate of 15.3%, and the remainder from a seven-year bond, at an average 15.6% rate.

The Argentine government said this "historic" sum was only possible because of the foreign investor contribution of $3.8 billion.

Since Sturzenegger took office, he has worked closely with the treasury, which has since promised not to rely on the central bank to finance its deficit. Instead it says it will raise debt abroad to meet its obligation of cutting the deficit over the next four years.