BUENOS AIRES – Argentina's Deputy Economy Minister Axel Kicillof on Friday lashed out at a report that his economic team is drafting legislation to abolish the use of foreign currencies in the economy as double-digit inflation spurs Argentines to seek the perceived safety of the U.S. dollar.
"It's all a lie. I don't have a bill...I haven't submitted any bill," Kicillof said in a televised press conference. The deputy minister responded to a report by newspaper El Cronista that the administration of President Cristina Kirchner would seek to ban financial and commercial transactions in foreign currencies.
Citing unnamed government sources, El Cronista said the administration would also eliminate the ban on inflation indexing that has been in place since the early 1990s.
Kicillof--the architect behind the nationalization of Argentina's biggest oil company YPF SA (YPF, YPFD.BA) last month--said the government's dollar needs are "manageable".
Kirchner and her allies have called on Argentines in recent days to stop using the dollar as a means of payment and a store of wealth, and instead fully embrace the peso.
But inflation that most private sector economists say is running above 20% a year has dented the public's faith in the peso and led to capital flight that hit a three-year high of $21.5 billion in 2011.
The government imposed rigid foreign exchange controls last October to limit capital outflows that were draining the international reserves Kirchner needs to pay creditors.
However, the controls have only fueled demand for dollars that Argentines see as a safe-haven currency owing to their country's long history of devaluations, high inflation and financial crisis.
The public has pulled more than $3.5 billion in foreign currency deposits, mainly dollars, out of the banking system since October.
At the same time, a vibrant black market for dollars has emerged where Argentines can obtain dollars paying a steep premium over the official exchange rate.
The black market rate has eased to about ARS5.90 to the dollar after soaring above ARS6.00 last week. In comparison, the peso was quoted in Friday afternoon trading around ARS4.4720 to the dollar on the local wholesale foreign-exchange market.
Kicillof accused unnamed special interest groups of using the media to undermine the public's faith in the peso in hopes of forcing the government to devalue the currency for their financial benefit.
"What this story is trying to do is to force a mega-devaluation of the currency. Those who are in dollars would obtain a short-term profit," he said.
foxbusiness.com
"It's all a lie. I don't have a bill...I haven't submitted any bill," Kicillof said in a televised press conference. The deputy minister responded to a report by newspaper El Cronista that the administration of President Cristina Kirchner would seek to ban financial and commercial transactions in foreign currencies.
Citing unnamed government sources, El Cronista said the administration would also eliminate the ban on inflation indexing that has been in place since the early 1990s.
Kicillof--the architect behind the nationalization of Argentina's biggest oil company YPF SA (YPF, YPFD.BA) last month--said the government's dollar needs are "manageable".
Kirchner and her allies have called on Argentines in recent days to stop using the dollar as a means of payment and a store of wealth, and instead fully embrace the peso.
But inflation that most private sector economists say is running above 20% a year has dented the public's faith in the peso and led to capital flight that hit a three-year high of $21.5 billion in 2011.
The government imposed rigid foreign exchange controls last October to limit capital outflows that were draining the international reserves Kirchner needs to pay creditors.
However, the controls have only fueled demand for dollars that Argentines see as a safe-haven currency owing to their country's long history of devaluations, high inflation and financial crisis.
The public has pulled more than $3.5 billion in foreign currency deposits, mainly dollars, out of the banking system since October.
At the same time, a vibrant black market for dollars has emerged where Argentines can obtain dollars paying a steep premium over the official exchange rate.
The black market rate has eased to about ARS5.90 to the dollar after soaring above ARS6.00 last week. In comparison, the peso was quoted in Friday afternoon trading around ARS4.4720 to the dollar on the local wholesale foreign-exchange market.
Kicillof accused unnamed special interest groups of using the media to undermine the public's faith in the peso in hopes of forcing the government to devalue the currency for their financial benefit.
"What this story is trying to do is to force a mega-devaluation of the currency. Those who are in dollars would obtain a short-term profit," he said.
foxbusiness.com
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