Central Bank profits BRL 85.9 billion in 2021 and will transfer BRL 71.7 billion to the Treasury

The Central Bank recorded a profit of BRL 85.9 billion in 2021 and will transfer BRL 71.7 billion to the National Treasury until March 7 of this year. The resources strengthen the government’s cash and help in the management of public debt.

The balance sheet was approved by the CMN (National Monetary Council) this Thursday (17). The collegiate is formed by the president of the BC, Roberto Campos Neto, by the Minister of Economy, Paulo Guedes, and by the special secretary of the Treasury and Budget, Esteves Colnago.

The result is lower than in 2020, when profit was BRL 469.6 billion, largely due to the effect of the significant appreciation of the dollar on the value in reais of international reserves.

Last year, in turn, most (R$ 71.7 billion) of the positive result was obtained from operations not related to the exchange rate, which includes the differential of internal and external interest.

The law provides that this portion of the funds is transferred to the National Treasury, to be used exclusively to pay the public debt.

A smaller part of the result came from international reserves and foreign exchange derivatives, with a profit of R$ 14.2 billion.

“These 14 billion are constituted as a reserve of results of the bank and remain here to support any negative results that may happen in the future”, said Marisa Minzoni, deputy head of the Accounting, Budget and Financial Execution (Deafi) department at the BC.

According to BC data, the rise in the dollar raised the value of international reserves in reais, which had a positive impact on the result. On the other hand, exchange rate swap operations, in which the Central Bank operates in the futures market to smooth out exchange rate fluctuations, resulted in losses. Even so, the final balance was positive.

Since 2019, the share of foreign exchange profit is not automatically passed on to the Treasury. It is kept in a graphic account, to cushion eventual losses in foreign exchange operations in the future.

At the height of the Covid-19 pandemic, however, the Treasury resorted to an exception in the law to receive a transfer of BRL 325 billion from foreign exchange profit, an amount that helped the government face the most critical moment of the crisis.

The legislation allows amounts from this result to be passed on to the Federal Government for the cost of public debt “when severe restrictions on liquidity conditions significantly affect its refinancing”.

In 2020, the government had to burn its cash to pay for extraordinary expenses to combat the effects of the crisis, at the same time that investors slammed the brakes on the purchase of public bonds, which imposed financing difficulties.

“The law provides that, in exceptional market conditions, the CMN can authorize an exceptional transfer to the National Treasury. This transfer took place in relation to the 2020 result given the pandemic situation. But this year [2021] there was no exceptional transfer, only the normal transfer provided for by law,” said Minzoni.

The situation is different now: the Treasury has more than BRL 1 trillion in cash, and has already secured practically all the resources needed to pay debt commitments for the entire year of 2022.

When releasing the 2021 result, the BC also reported the balance of new monetary policy instruments recently launched.

One of them is the voluntary deposit, which allows the BC to collect funds from financial institutions and remunerate them. They are an alternative for the BC to regulate the amount of money in the economy and, consequently, maintain the basic interest rate at the target set by the Copom (Monetary Policy Committee).

According to the BC, the balance of voluntary deposits was R$ 7 billion on December 31. The monetary authority started to make these collections in September and already provided for a gradual implementation.

The Financial Liquidity Lines had a balance of R$ 1 billion on December 31, in loan operations with terms of up to 359 days, to meet the liquidity needs of financial institutions.

According to the BC, an independent auditing firm –KPMG Auditores Independentes– evaluated the 2021 financial statements and made no reservations regarding the result.