AMLO trying to use IMF resources to pay public debt

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The president of Mexico estimates that the country would have access to 12 billion dollars from an IMF program, however, the deputy governor of Banxico, Gerardo Esquivel, sees the initiative as unfeasible

President Andrés Manuel López Obrador (AMLO) said on Wednesday that he could pay the public debt in advance with resources from the IMF, which announced in July an allocation of 650 billion dollars of Special Drawing Rights (SDR) among its members to provide them with liquidity, prop up their reserves and boost their economies.

At the end of June, the balance of Mexico’s gross debt was 12.88 billion pesos, which represents 52% of GDP, according to data from the Ministry of Finance.

The president of Mexico affirmed that from the distribution of the International Monetary Fund (IMF) the country would have about 12 billion dollars that would go to international reserves, but argued that these have grown a lot and receive little return on their loans.


“Then we could use those resources to pay the debt in advance,” he said in his daily press conference, reiterating that the local economy is recovering from the blows of the coronavirus pandemic.

Banxico podría elevar las expectativas de inflación y del PIB, adelanta Gerardo  Esquivel
Bank of Mexico, Gerardo Esquivel

However, the deputy governor of the Bank of Mexico, Gerardo Esquivel, wrote a tweet this Wednesday afternoon in which he clarified that President López Obrador’s proposal is unfeasible because SDRs are an international reserve asset, so they cannot be used to pay the debt.

It is not the first time that since Q4 the use of these resources to pay the debt has been considered, in the midst of a strategy that has opted not to resort to the financing offered by international organizations to countries, especially in the middle of the double crisis that caused the Covid-19 pandemic. “We no longer follow that strategy,” said López Obrador, who, on the other hand, has opted for greater austerity in the Government and increasing social spending.

But this strategy has not been enough to avoid the rise in debt, which is explained by the drop of 8.5% of GDP last year, which showed an increase of 10 percentage points, reaching 59.2% with respect to GDP. at the end of 2020.

To spend their SDRs, countries would first have to exchange them for hard core currencies, forcing them to find a partner country willing to exchange them.

SDRs were created in 1969 and are part of the international reserve asset at the IMF.

The international body distributes SDRs to its member countries as long as there is a global need to supplement the reserves.

Source: expansion.mx, lapoliticaonline.com.mx

Mexico Daily Post