2024-05-07 18:29:56
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Argentina’s central bank has put the country’s first 10,000-peso notes into circulation, in a long-awaited step to streamline the nation’s cumbersome use of large heaps of cash following the collapse of its currency.
The new notes, worth $11 at the country’s official exchange rate, are five times more valuable than the previous largest note, of 2,000 pesos — which began circulating last year and remains relatively rare — and 10 times more valuable than the more common 1,000-peso note.
Cash payments remain popular in Argentina, where many retailers prefer to receive funds immediately amid chronic economic instability, and others operate off the books. Residents are forced to carry large wads of bills to make small payments, and backpacks of them to make larger ones.
The central bank said in a statement on Tuesday that the new bills would “facilitate transactions between users” and “make the logistics of the financial system more efficient and less costly”.
Argentina’s peso has shed 95 per cent of its value over the past five years as a severe economic crisis has taken hold, driving the annual inflation rate to 287 per cent in March.
President Javier Milei, a libertarian economist who took office in December, has said the key to curbing inflation and stabilising the peso is to end previous governments’ reliance on money printing to finance spending. He has launched a far-reaching austerity drive, halting the need to print money to finance the primary fiscal deficit.
But the central bank continues to rely on money printing to pay interest on a large pile of short-term liabilities issued to domestic creditors.
The monetary authority has cut its benchmark interest rate five times since Milei took office, from 133 per cent in December to just 50 per cent — far below inflation — in order to discourage local banks from holding those short-term notes and clear its balance sheet.
Argentina’s monthly inflation rate peaked at 26 per cent in December, and has since fallen to 11 per cent, as of March. Milei has said the April rate, which will be published next week, might be in single digits.
The new 10,000-peso bills were printed in China by its state-owned China Banknote Printing and Minting Corporation. Argentina’s government has relied on notes printed in China, Brazil and Spain as surging demand for cash overwhelms its national mint.
For example, the number of 1,000-peso bills in circulation has doubled over the past year to more than 6bn, according to data compiled by Argentine newspaper La Nación.
A 20,000-peso note will begin circulating towards the end of the year, the central bank said.
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