IMF Board Today Analyzes Emergency Measure That Would Add Another USD 3.5 Billion To Argentina’s Reserves

The repertoire of The International Monetary Fund will discuss today “informally” a capital increase of its member countries which would bring Argentina a $ 3,500 million increase in reserves of the Central Bank. The IMF’s highest decision-making body would extend its $ 650,000 million Special Drawing Rights (SDRs) to all partners, according to the agency. Bloomberg.

The process of debate within the Fund on the possibility of increasing the funding of its member countries began a few months ago. after the outbreak of the global economic crisis due to the pandemic and accelerated in recent weeks. At the last meeting of the G20, the nations of this club supported the initiative, which was therefore examined by the board of directors.

According to Bloomberg, this Tuesday, the council will discuss informally how to move forward in that direction and there might even be a public statement from the CEO Kristalina Georgieva in the next few hours. Monetary Fund spokespersons consulted by Infobae they did not comment on this information.

The process of debate within the Fund on the possibility of increasing funding to its member countries began a few months ago after the outbreak of the global economic crisis due to the pandemic and has gained momentum in recent weeks.

The momentum for the injection of funds has increased from Washington the countries associated with the IMF strengthened after the change of administration at the White House. The initiative had been blocked by Steven mnuchin, former Secretary of the Treasury of the United States under the Government of Donald trump. With the arrival of Joe biden Yes Janet Yellen at the Treasury, the idea of ​​increasing the SDR was back on the agenda.

An SDR issue of around $ 650 billion would be the maximum amount the United States can support without obtaining congressional approval, he continued. Bloomberg. Initially, the initiative involved an increase in funding of $ 500,000 million, which ended up being high.

If approved, it is estimated, the transfer of funds will not be automatic. For reference, the agency spokesperson Gerry Rice mentioned at his last press conference that in 2009, during the international financial crisis, the board approved the extension of drawing rights in April, while the expedition to the treasures of member countries ended in August.

“(The initiative) will be presented to our Executive Board for discussion. And then, assuming the board approves this proposal, it will go to our board for final approval. Approval by the Board of Governors requires a majority vote of at least 85% of the total voting power of the IMF ”, specified the spokesperson for the Monetary Fund a few days ago.

If approved, it is estimated, the transfer of funds will not be automatic. In 2009, during the international financial crisis, the board approved the extension of drawing rights in April, while the member countries’ treasure expedition ended in August.

Approval of the extension of special drawing rights would imply a respite for the central bank’s international reserves. According to the entity’s latest balance sheet, updated to March 15, theGross international assets amounted to USD 39,865 million.

Of these, USD 20,005 million corresponded to to exchange with China; An additional $ 455 million for SDR allocations; $ 3,159 million for the BIS loan (Bank for International Settlements Basel, and there are about $ 10,737 million in reserve requirements (difference between private foreign currency deposits of $ 15,776 million and loans for $ 5,039 million).

So, net reserves of the entity were at the end of the second week of March, according to the consolidated balance sheet, at approximately USD 5,510 million. If gold holdings are also discounted ($ 3,431 million), the assets that can be used to intervene immediately in the market – although gold requires a simple financial transaction abroad to become liquid – total approximately 2079 million of dollars.

An injection of 3.5 billion USD would imply, in this case, increasing the net reserves of the Central Bank to 5.5 billion USD and 9 billion USD if the gold holdings were taken into account.

As indicated Infobae, according to data from the Finance Secretariat of the Ministry of the Economy, this year, Argentina to pay USD 5,072 million to the IMF if the maturities of principal and interest are taken into account together. Of that number, $ 305 million was already paid last month. The next deadline is in May, for an additional $ 296 million and after that an additional $ 396 million will be paid in August. These are the three interest payments, minimal in all.

An injection of 3.5 billion USD would imply, in this case, increasing the net reserves of the Central Bank to 5.5 billion USD and 9 billion USD if the gold holdings were taken into account.

The large expenses would come with principal repayments, which are due in September and December. In either case, it is $ 1,868 million that you must pay in one go if Guzmán does not get an agreement that refinances these maturities before these dates.

With no major bond payments in the hands of the private sector following the dollar debt restructuring that closed in September of last year, the first major hurdle to maturity comes in May. That month, payments of $ 2,419 million between principal and interest on the debt with the Paris Club are due., who have a period of 60 days before the cessation of payments.

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