President Andres Manuel Lopez Obrador has reported that he will submit a formal request to the Bank of Mexico to transfer the Special Drawing Rights (SDR) that the country will receive from the International Monetary Fund (IMF).
On August 2, the Board of Governors of the International Monetary Fund, where the Minister of Finance represents Mexico, approved the historic distribution of 450 million Special Drawing Rights to member countries, assets equal to a total value of $650,000 million, with the aim of strengthening their capacity. to respond to external shocks.
During his morning conference, Lopez Obrador warned that “the formal proposal will be presented to the Bank of Mexico so that the public treasury benefits and the people benefit.” After confirming that this transfer, which will be carried out by the International Monetary Fund, will amount to about 12 thousand million dollars.
He then asserted that Deputy Governor Gerardo Esquivel “has become an extreme technocrat”, saying that these resources cannot be used as the president suggests.
This reference from the president relates to the message that Deputy Governor Esquivel put on his official and personal Twitter account, esquivelgerardo, where he said: “SDRs are not a currency, they are an international reserve asset. In Mexico, by law, international reserve assets cannot be used to pay off debts.” .
“You can’t (use the Special Drawing Rights that will be distributed by the IMF) because you don’t want to, because with all due respect, it’s very profitable,” the president went on to explain.
This, after making sure that he respects the recent action taken by the Governing Council to raise the interest rate “because inflation must be kept under control.”
The IMF has clarified since August 2 that SDRs are reserve assets; It is not a legal tender and does not work for purchase or sale between individuals.
In accordance with the agreement of the IMF Board of Governors, these reserve assets will be distributed proportionally on the basis of the share paid by each member of the body to become part of the IMF.
Thus, Mexico is entitled to 4.2 SDRs equivalent to $12,200 million.
Engineering to make it fluid
Officials of the international financial system made it clear to El Economist that SDRs cannot be in the hands of private entities or individuals. The only way to make it liquid is for the central bank to exchange it with another foreign exchange issuing institution.
According to the monetary policy specialist, Raymundo Tenorio, the SDR is an accounting asset whose value is valued by the behavior towards its interior of the basket of currencies that compose it, namely the US dollar, the euro, the British pound, the Japanese yen and the Chinese yuan.
“The only way the money can be monetized is for the central bank to ask another central bank to give you 1,000 million SDRs and give me dollars in return.”
But the transfer of the SDR will go directly to the reserve assets of Bankiku, and therefore it will belong to the Central Institute. “If at any time the government uses a part of the international reserves, whether it is those that it currently has or those that the International Monetary Fund will transfer to it, then this means that the central bank is incurring some funding outside the scope of it,” the expert said.
The failure to allocate the issuance of initial funds to traditional spending items plays a major role in the independence of the Central Bank. In other words, the reserves cannot be used at its discretion without any compensation in return. You can only take reserves to pay off debts if you buy them from the central bank.”
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