The The International Monetary Fund approved this Monday the transfer of 650 billion dollars to its member countries to face the health crisis. This is the largest distribution of capital in the history of the organization and will reach 190 economies. Argentina will receive 4354 million dollars on August 23 that will be added to the reserves and can be used to cancel capital maturities with the credit agency in the second part of the year. The debate continues at the international level for rich countries to voluntarily reallocate 100 billion of these resources to poor and middle-income countries.
The Fund will transfer to member countries 456 billion SDRs that have a value equivalent to 650 billion dollars. The Special Drawing Rights (SDR) are a basket of currencies made up of the dollar, euro, yen, yuan and pound sterling. The Fund uses SDRs as its unit of account to distribute resources.
“It is a historic decision: the Largest SDR Allocation in IMF History and a Boost for Global Economy in the midst of an unprecedented crisis, ”said agency director Kristalina Georgieva. “The SDR allocation will benefit all member countries, address the need for reserves on a global scale and in the long term will build confidence and promote the resilience and stability of the global economy. In particular, it will help the most vulnerable member countries that are fighting the ravages of the crisis caused by covid-19 ”.
The Fund specified that the resources approved for their distribution will be available to the countries from next August 23 and that each of the member economies will receive SDRs in proportion to their participation quotas in the credit institution. Some 275 billion dollars will be distributed to emerging and developing countries, that is, 42 percent of the total amount to be distributed.
Rich countries and poor countries
The data required by the Fund show that much of the resources will go to developed economies despite the fact that they have a lower need for liquidity to face the macroeconomic stresses caused by the health crisis. While it is true that countries like Argentina will receive about 4.4 billion dollars at no cost, that does not mean that the distribution continues to be very unequal.
Seven countries account for 45.16 percent of the IMF’s participation quotas. In other words, about 294 billion dollars of the total of those 650 billion dollars will be distributed, resources that, in reality, they do not need.
The The international financial architecture is thus reaffirmed uneven and regressive. In the Monetary Fund they recognize it although not in all its magnitude, because they request that the reallocation be on a voluntary basis for about 100 billion of the SDR of the countries with financial solvency towards the vulnerable and low-income countries. In this way, it leaves out of this distribution the middle-income countries, such as Argentina.
Georgieva stated that “we will continue to work actively to try to identify viable options that allow the voluntary channeling of SDRs from the richest member countries to the most vulnerable, to support their recovery from the pandemic and to achieve sustainable growth.”
The Fund’s formal statement highlighted that one of the options for getting developed economies to share part of the SDR received with poor countries is through a Fund for Growth and the Fight against Poverty. Another strategy under study is the creation of a new Medium-term Sustainability Fund.
The country with the largest share of participation in the IMF is the United States with 16.52 percent. They are followed by China with 6.15, Japan with 6.09, Germany with 5.32, France and Great Britain with 4.03 each, and Italy with 3.02 percent.
Maturities with the Fund
The announcement of the distribution of 650 billion dollars of which Argentina will receive 4.35 billion coincided with the payment of 345 million dollars of interest that the country made yesterday to the Fund. It is the last installment of interest before the beginning of the principal payments due for this year.
The schedule of maturities with the agency indicates that this year will have to be disbursed in capital about 3822 million dollars in two installments of 1911 million. The first scheduled for September and the second for December.
The SDRs distributed by the IMF will be available as of August 23 and may be used to cover part of these maturities until Argentina reaches a renegotiation with the credit institution.
The objective is not to rush into the agreement but to reach a situation that allows lengthen repayment terms, reduce interest costs and guarantee both economic and social sustainability.
For him next year the burden of maturities with the Fund becomes higher and the country does not have the conditions to be able to face those payments. The calendar indicates that some 738 million dollars of capital will have to be disbursed in January, 379 million of interest in February and from March high amounts that would require paying more than 18,000 million dollars until the end of 2022.