Economists alerted a dangerous maneuver by the Ministry of Finance that jeopardizes the independence of the Central Bank of Paraguay (BCP) and threatens macroeconomic stability.
In the last few hours it became known that The Ministry of Finance quietly maneuvered to avoid paying interest next year on short-term advances granted by the Central Bank of Paraguay (BCP). to finance budgeted expenses.
It is worth mentioning that The Treasury already had this intention of not paying interest, according to the PGN 2022 project, but at the time the plan was rejected by the National Congress. Now the maneuver had a free hand both in the Chamber of Deputies and in the Senate.
About, The economist and former head of the BCP, Carlos Fernández Valdovinos, warned that “it is not minor or innocent” what was done by the Treasury by silently modifying by a temporary law (PGN), a permanent law (organic charge of the BCP). He added that it does not make theoretical sense and threatens the independence of the parent bank, in addition to contradicting any criteria of economic stability.
If your bank offers you a loan at zero interest, are you going to take 1, 5 or as much as you can? Advances to the treasury at 0 interest rate to finance fiscal deficit is exactly what Argo Ven does. It is the “cheap” solution in the short term, but very expensive in the long term. pic.twitter.com/P4hOKpuBXN
— Carlos Fernandez V (@cgfernandezv) December 8, 2022
Fernández Valdovinos stressed that The plan of
The Treasury also contradicts what is established in Article 7 of Law 1535: which indicates that the PGN cannot include provisions or clauses that modify or repeal other laws of a permanent nature. “Clear and dangerous ignorance of the law,” he emphasized.
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“If your bank offers you a loan at zero interest, are you going to take 1, 5 or as much as you can? Advances to the treasury at 0 interest rate to finance fiscal deficit is exactly what Argentina or Venezuela do. It is the “cheap” solution in the short term, but very expensive in the long term,” he explained.
For her part, the former Minister of Finance, Lea Giménez, warned that it is a “dangerous and populist management of monetary and fiscal policies” by the Government of Mario Abdo Benítez.
Dangerous and populist management of monetary and fiscal policies. Let’s remember something basic in
economy to #JoseCantero Already @OscarLlamosas: There is no free lunch. The bills that you two are generating are paid by all Paraguayans through record inflation levels.? https://t.co/qI555aJZuF— Lea Giménez 2️⃣2️⃣? (@leagimenez22) December 8, 2022
On the point, he sent a message to the Minister of Finance, Óscar Llamosas and the head of the BCP, José Cantero, to whom he reminded that “The bills that you two are generating are paid by all Paraguayans through record inflation levels.”
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“You would do well to remember that the charges are temporary, but the consequences of their actions and the responsibilities derived from them are permanent,” Giménez claimed.
