New IMF dollars are coming: what will the government use them for and what impact they may have on the pre-election dollar
The day has arrived. This Monday 23, the International Monetary Fund (IMF) will begin to rotate between member countries the 650,000 million US dollars of special drawing rights (SDRs), approved in early August to help countries with needs generated by the coronavirus pandemic, as the international organization explains to him -same.
The Argentina will receive approximately US $ 4.33 billion, at the current exchange rate, for its 0.67% interest in the Fund. This money will be used directly to increase the reserves of central bank (BCRA).
According to several officials, the government plans to use it to pay at least the first main installment loan with the own IMF, which works around September 22, negotiating program refinancing.
At the IMF, the country must pay you $ 1.9 billion capital, plus interest, at the end of next month and a similar amount around Christmas under the agreement signed in 2018 and for which Argentina accessed US $ 45,000 million from the multilateral.
The government negotiates with the entity it heads Kristalina Georgieva a new understanding that allows for longer maturities, given that the current program concentrates most maturities in 2022 and 2023.
“We are going to use the SDR to pay off the debt we have with the International Monetary Fund, maturities that exist by the end of the year,” Deputy Chief of Staff Cecilia Todesca Bocco said last week.
The decision was finalized on the weekend when the ruling party presented its candidates to PASO lawmakers. was the vice president Cristina Kirchner who publicly endorsed the use of those dollars to pay off debt with the IMF and not for pandemic spending or poverty alleviation, as a group of Kirchner senators tried to force him to do.
The impact that SDRs can have on the dollar
The arrival of IMF dollars means relief, expected since mid-May, the firepower of the Central, whose reserves start the week at $ 42,000 million, in the middle of the new tensions on exchange rates Pre-election.
Even if they will not be used to neutralize a possible race against weight, with SDRs, Reservations international They will be at the highest level from October 2019. They will allow so-called liquid reserves (i.e. those available to the BCRA to meet payments or emergencies) to exceed US $ 6 billion.
This “reassuring” effect may be the key to the pre-election phase, even if open questions regarding what is to come. Do analysts stress that they are not enough to face the deadlines that will follow from March, then the Government would accelerate an agreement after the elections so as not to fall into fault with the IMF.
Just in the first quarter 2022, the government has to face Payments the Fund and other international organizations in over US $ 7 billion.
Before this additional injection, the plant acquired on the market some 6 billion US dollars purchased during the first months of the year on the market, thanks to the record liquidation of agro-industrial exports, prices of soybeans, corn and wheat peaking. . of the last 9 years.
Some of those Dollars they went into financial price interventions, whereby investors make currencies with the buying and selling of bonds. This was the last segment where the exchange rate was strengthened to avoid an escalation that puts pressure on the official dollar and, therefore, is transferred to prices, in a second half with international prices far from highs and when revenues in foreign exchange from agriculture declines for seasonal reasons.
The drain on reserves will continue, they say in the market, although at a slower pace than seen in recent weeks.
What are SDRs and what can they be used for?
The Special drawing rights son reserve assets international created by the IMF in 1969. They are not a currency but function as such and their price is determined on the basis of a basket of currencies in which are the US dollar, the euro, the Chinese renminbi, the yen and the pound sterling.
The the assignment is not a loan, Rather, resources are increased and countries that receive them can exchange them for foreign currencies, based on voluntary swap agreements between nations that have SDRs and countries that act as market makers.
As the IMF explains on its website, SDRs can be used as needed that the country which receives them must assist the population in the face of the crisis, strengthen international reserves or promote reforms.
After the enlargement voted in early August, Argentina will strengthen its claim to allow the voluntary transfer of SDRs received by the most advanced countries (United States, China, Japan, Spain or Italy, among others, to income countries) . low and medium.
“We will continue to work actively with countries to identify viable options that enable the voluntary channeling of SDRs from the richest member countries to the poorest and most vulnerable, to support their recovery from the pandemic and to achieve resilient growth. and sustainable, ”he said. noted. Georgieva at the beginning of the month.