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The IMF explained what the SDR is and how Argentina can get US $ 3.5 billion this year

2021-03-08T15:52:54.543Z


How much is it worth, how is it allocated and what is the 'currency' of the International Monetary Fund for? This 'reserve asset' would help increase the BCRA's reserves.


03/08/2021 12:29

  • Clarín.com

  • Economy

Updated 03/08/2021 12:35

Faced with the decision of the G20 countries to promote a new allocation of Special Drawing Rights (SDR), the "currency" of the International Monetary Fund, for about US $ 500,000 million, the organization decided to refloat a document in which it explains what is treats and how they are assigned and how they are used.

According to the IMF fact sheet,

the SDR is an international reserve asset

created in 1969 for the international credit agency to help supplement the official reserves of member countries.

"In March 2016, SDR 204.1 billion (currently equivalent to about US $ 285 billion) had been created and allocated to member countries.

The SDR can be exchanged for freely

usable

currencies.

As of October 1, 2016, the value of the SDR is based on a basket of five major currencies: the US dollar, the euro, the Chinese renminbi (RMB), the Japanese yen and the British pound, "the document describes.

The main objective of the allocation is to provide liquidity to countries with low reserves and financing problems.

For Argentina, it will mean adding US $ 3.35 billion to reserves, when the country faces maturities for

2021 for a total of US $ 7.1 billion

, between what it owes to the Paris Club and the IMF itself.

That figure that could add arises from the "quota" of 0.67% that the country has as a partner of the Fund.

That amount is equivalent to almost US $ 1 billion more than the maturity that Alberto Fernández's government must face last May with the Paris Club, which was US $ 2.4 billion.

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In 1969, when the SDR was created, the intention was

that it would allow the system of fixed parities established

in 1946 to be maintained, but the supply and evolution of gold and the US dollar did not allow it and increasingly blocked trade flows. and international finances, until the final collapse, in 1973,

of the fixed exchange system and its replacement by floating exchange rates

between the main currencies and also with those of the rest of the world.

It was created as a supplementary international reserve in the context of the Bretton Woods peg system

.

The countries that participated in this system needed official reserves - government or central bank holdings in gold and widely accepted foreign currencies - that could be used to acquire the national currency in the exchange markets,

"in order to maintain their exchange parity." .

The SDR is neither a currency nor an asset to the IMF.

Rather, it

represents a potential asset against the freely usable currencies of the Fund's member countries

.

"Holders of SDRs can obtain these currencies in exchange for their SDRs through two operations: first, the conclusion of voluntary exchange agreements between member countries and, second, the designation, by the IMF, of member countries with a solid external situation so that they buy SDR from member countries with an unsound external situation. In addition to its function as a complementary reserve asset, the SDR serves as the unit of account of the IMF and some international organizations, "the IMF details.

Regarding the Argentine case, according to the IMF itself, the country could benefit even more from the Fund itself underlines the possibility that in addition to

the US $ 3,350 million (in SDRs) corresponding to their "quota",

Argentina could access amounts higher

if you agree with countries that will not use that higher allocation, such

as some European countries (which generally prioritize their African neighbors), the US, Canada and Asian countries such as China and Japan.

The SDR allocation would add to the list of good news for the country.

The other leg is the super harvest.

Prices are flying and there will be billions of agro-dollars.

With an economy recovering (and importing more), agriculture will help sustain the trade balance at high levels.

In addition, the super stock will remain strong.

The BCRA bought US $ 157 million in January and US $ 630 million in February, although the impact on reserves is even less.

With the new SDR, plus the US $ 1,000 million, which today are in the BCRA's net reserves, there will be a total of US $ 4,300 million to cover the debts with the Paris Club and the International Monetary Fund.


Part of the "quota"

, in the Argentine case those US $ 3,350 million to which it would automatically access,

has no cost

and that the rate on the additional amounts that it eventually accesses based on "agreements" is also very cheap.

That rate is determined each week and has fallen sharply since the start of the pandemic, from about 0.8% to 0.1% per year today.

As of last Friday, one SDR is equivalent to $ 1.4367.

Its value is published daily on the IMF website.

The currency basket is reviewed every five years and

the last review was in October 2016

, when the Chinese renminbi was included.

The Fund document also explains that countries

can buy SDRs to meet their obligations to the IMF or sell them to reinforce their reserves by exchanging them for freely usable currencies.

This is what the Argentine government will most likely do, as the first government of Cristina Kirchner did in 2009, to face the financial crisis.


Martín Guzmán will travel to Washington in mid-March

Guzman's trip to Washington

Economy Minister Martín Guzmán will travel to Washington in the middle of the month to continue negotiations for a new program with the International Monetary Fund (IMF).

President Alberto Fernández said last week that the government is trying to reach "an agreement with the IMF."

In addition, he stressed that "it must be one that suits Argentina" and that starts from the premise that the country has to face a "crazy and shameful credit" granted by the body "for political purposes and without any economic sense. "during the administration of Mauricio Macri.

For its part, the international credit organization pointed out that “these discussions continue to be very active and constructive while the Argentine authorities work to design their economic plan that could be supported by an IMF program, and build broad support for the policies that would support said program ”.

Guzmán stated that "Argentina fully supports a new general allocation of Special Drawing Rights, which will provide funds for urgently needed low and middle income economies."

The minister added that "the time when (these allocations) are most needed is now, so we must act quickly."

YN

Source: clarin

All business articles on 2021-03-08

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