BAKU, Azerbaijan, Aug-24
By Fakhri Vakilov-Trend
Uzbekistan will receive about $746 million from the International Monetary Fund (IMF) to help the country after the pandemic, Trend reports with reference to the IMF.
On August 23, the largest allocation of Special Drawing Rights (SDR) in the history of the International Monetary Fund, among IMF member countries came into force in the amount of approximately $650 billion.
The disbursement should help countries recover from the pandemic by increasing the liquidity of international reserves
“Countries can use the financial resources provided under the SDR allocation to support the national economy and strengthen the fight against the crisis,” the fund said.
The distribution of SDRs, unlike IMF lending programs, does not imply conditions and obligations.
Special Drawing Rights (SDR) is an artificial means of payment settlement by the IMF.
The SDR exchange rate is determined daily based on exchange rates of currencies - dollar, euro, yen, British pound, and yuan.
The last time the IMF issued SDRs was in 2009 to support the global economy after the global financial crisis.
SDRs are distributed in proportion to the country's quota in the IMF.
The size is determined based on a formula that takes into account the country's GDP, the balance of payments indicators, and the level of international reserves.
Since SDRs are not considered physical assets, they need to be converted to be usable outside of internal transactions with the IMF.
Uzbekistan can sell to another SDR member country, as well as buy, borrow, lend and pledge SDR.
SDR can also be exchanged for hard currency. To do this, you need to conclude a voluntary bilateral agreement with one of the countries that will agree to provide such a currency.
At the same time, if someone voluntarily wants to exchange SDR for dollars, but there are no willing ones, the country can apply to the IMF, and the fund can appoint someone who will have to conduct such a transaction. This provides certain liquidity to the SDR.
The country can also receive foreign currency financing under the IMF loan program. In exchange for financial support, the fund will require the country to fulfill certain conditions.
SDRs are placed at the disposal of a “politically neutral” institution (for example the Central Bank). These funds will strengthen reserves.
In order to use the money, the country needs another IMF member to agree to accept this money as a means of payment.
SDRs are usually held in reserve as an emergency reserve.
The liquid part of the reserves (dollars, euros, and other currencies) can be used more freely by replenishing reserves.
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