June 9 (Bloomberg) -- Argentina’s dollar deposits from individuals and non-government businesses fell to the lowest since April 2010 as President Cristina Fernandez de Kirchner tightened controls on the exchange market.
Dollar-denominated deposits fell to $10.4 billion on June 1 from $11.95 billion a month earlier, the lowest since April 30, 2010, when deposits were $10.3 billion, according to the latest data released by the Banco Central de la Republica Argentina.
Dollar withdrawals have quickened since Fernandez, who was re-elected in October, restricted purchases of foreign currency to stem record capital outflow from draining central bank reserves. Since late October, Argentines need tax-agency approval to buy dollars or other currencies. Starting last month, those who want to buy foreign currency to travel abroad must submit details of the itinerary, estimated cost and purpose of the trip.
“With the controls, the government managed to control demand for dollars, but it generated panic and led people to withdraw,” said Camilo Tiscornia, a former central bank economist who runs research company C&T Asesores Economicos in Buenos Aires. “The withdrawals are leading to a drop in central bank reserves, which the government needs to pay debt.”
Fernandez, who used $6.6 billion from central bank reserves in 2010 and $7.5 billion last year to make debt payments, plans to use $5.7 billion in 2012 for the same purpose. Bank withdrawals led reserves to fall to $46.7 billion on June 8 from as high as $52.6 billion in January last year.
Capital outflows accelerated last year to $21.5 billion from $11.4 billion a year earlier on speculation that the country would let the peso fall because rising inflation was undermining the country’s competitiveness in foreign markets.
The peso, which has fallen 4.1 percent this year, was little changed yesterday at 4.4845 per dollar.
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