BUENOS AIRES (Dow Jones)--Argentine banks saw their foreign currency deposits fall 7% last week as savers pulled more than $1 billion out of the financial system due to fears the government could implement more foreign exchange controls in its bid to limit capital flight.
Those deposits fell to $14.31 billion on Nov. 11, from $15.39 billion a week earlier, the central bank said in a statement Friday. Foreign currency deposits, the vast bulk of which are U.S. dollars, account for about 15% of Argentine banks' total deposits.
About $1.76 billion in foreign currency deposits left the banking system in the two weeks after the government imposed new foreign exchange controls on Oct. 31.
Central Bank of Argentina Vice President Miguel Angel Pesce said Friday the draw down in U.S. dollar deposits eased this week. "An important slowdown has been observed in withdrawals, which were minimal in the final days of the week," he was quoted as saying by government news agency Telam.
The extent of dollar deposit outflows this week will be published in the central bank's weekly monetary report next Friday. The government said the measures, which require the federal tax agency to approve foreign currency purchases, are aimed at attacking money laundering and tax evasion.
But economists say the restrictions are in reality designed to counter a surge in capital flight that has taken its toll on central bank reserves, which have fallen to $46 billion from $52 billion in early August.
Capital flight was $9.8 billion during the first half and is thought to have accelerated in recent months as investors bet that annual inflation of more than 20% will eventually force President Cristina Kirchner to weaken the peso at a swifter pace than has been the case so far.
Last week, the central bank delayed publication of a key report that would have detailed capital flight during the third quarter.
The Kirchner administration's crack-down on dollar purchases risks fueling even more demand for the greenback given Argentines experience with violent devaluations and financial crisis in the not-to-distant past.
The central bank has tried to calm consumers worried about access to their dollar savings by lowering banks' reserve requirements. Starting this week, banks are required to keep just 20% of dollar deposits that haven't been loaned out at the central bank, down from 100% previously.