23 August, there was information about, that the IMF allocated Russia 18 billions dollars. in the form of an SDR package - special loan rights. At the beginning of August, the IMF governors approved the largest ever distribution of SDRs between countries in the highest amount - 650 billions dollars. The distribution started to work 23 august 2021 G. It aims to replenish global stocks after the unparalleled crisis of the past year..
Consider more carefully, what is SDR like, how funds are distributed and for what purposes they can be used.
What's similar to SDR?
Special loan rights (Special Drawing Rights, SDR) is an artificial reserve and payment unit of the IMF. With all this, the SDR is not a currency or a debt obligation and does not have a physical form. The SDR rate is determined every day based on a basket of subsequent currencies: US Dollar, euros, Chinese Yuan, Japanese yen and British pound.
The total amount of SDR assets is distributed among IMF member countries in proportion to their quotas. The quota is calculated by the formula, which takes into account the subsequent characteristics: gross domestic product of the state, level of interstate reserves, balance of payments indicator. SDRs are located in special accounts of central banks, they can be spent only in interstate settlements on certain criteria.
The last time the IMF issued SDRs was twice in 2009 G., after the crisis 2008 G., in total size 182,7 billion SDR (or 250 billions of dollars.). IN 2021 G. The IMF issued two and a half times more SDRs - 650 billions dollars.
Rice. 1. A source: IMF data Rice. 1. A source: IMF data
The United States received a huge part of the SDR this year - about 115,7 billions of dollars., for the reason that, what is their norm 17,43 %. In RF, the norm is equal to 2,71 %, or approximately 18 billions dollars.
Rice. 2. A source: IMF data Rice. 2. A source: IMF data
IMF distributes SDR assets between 190 participating States. But this year, Venezuela does not take part in the distribution, Myanmar and Afghanistan due to the tense political situation.
What can you use SDR for??
SDR is not funds or debt, therefore they cannot be included in the budget and spent at one's own discretion. SDR should not be returned back to the IMF, it's not a loan. To enjoy special loan rights, they need to be monetized. State, who got SDR, can exchange them among themselves, pledge these funds, lend, but only within swaps.
There are various use cases for SDR.
- Keep as a cash reserve.
- Wealthier states can agree to reallocate SDRs to needy states.
- Change SDR to an IMF loan on certain criteria.
- Change SDR to hard currency, having agreed with another state and signed a voluntary bilateral agreement, in order to reduce external or internal municipal debt.
- Pay interest on a previously acquired loan from the IMF, how Argentina plans to do it.
- The government, represented by the Ministry of Finance, can receive the allocation of funds from the Central Bank in the form of state currency secured by SDR, how Ukraine did it last year.
How the SDR will dispose of the Russian Federation?
SDR in size 18 billions dollars. received by the Central Bank of Russia, which in our state is responsible for interstate reserves. What will this amount go to?, not yet clear. By virtue of that, that Russian municipal debt remains among the lowest in the world, different distribution options can be imagined.
- Take part in the program of redistribution of assets between rich countries in favor of countries in need.
- Provide support to Belarus, by lending or donating SDRs allocated to Russia or by providing hard currency to Belarus in exchange for their SDRs.
- Increase the international foreign exchange reserves of the Central Bank. Today, Russia's international reserves amount to about 594 billion dollars.
How different countries use SDR
Despite the name - Special Drawing Rights - there is no obligation for a country to receive an SDR. However, to sell such assets, which are distributed to help states, not so easy. Countries with high levels of debt are primarily allocating funds to reduce borrowing - government debt or a loan from the IMF. Richer countries and countries with low debt burdens reallocate these funds in favor of countries in need.
