U.S. stalling massive IMF liquidity boost over Iran, China - sources

[webfact]

U.S. stalling massive IMF liquidity boost over Iran, China - sources

By David Lawder and Andrea Shalal

 

FILE PHOTO: The International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, U.S., April 8, 2019. REUTERS/Yuri Gripas/File Photo

 

WASHINGTON (Reuters) - U.S. opposition to opening new avenues of funding for Iran and China is preventing the International Monetary Fund from deploying a powerful tool to help countries fight the economic impact of the coronavirus, according to two sources familiar with the matter.

 

A massive IMF liquidity injection through issuance of new Special Drawing Rights, something akin to a central bank "printing" new money, has the backing of many finance ministers, prominent economists, and non-profit groups.

 

It could provide hundreds of billions of dollars in urgently needed foreign exchange reserves for all of the IMF's 189 member countries, and finance officials are debating the issue during this week's virtual IMF and World Bank Spring Meetings.

 

But sources said the United States, the IMF's dominant shareholder, actively opposed the new fundraising.

 

The Trump administration does not want Iran and China to have access to billions of dollars in new resources with no conditions, two of the sources familiar with the IMF's deliberations said, asking not to be identified given the sensitivity of the issue.

 

They added that the IMF's move would give even wealthy countries new assets that are not necessarily needed. Even embattled Venezuela would get an allocation, although the IMF has blocked Caracas' access to its SDRs while international recognition of its government remains unclear.

 

India also opposes a new SDR allocation, the two sources said, but New Delhi's reasons have not been made known. A spokesman for India's Finance Ministry did not respond to a request for comment.

 

MONEY FOR NOTHING?

SDRs <USDXDR=R>, based on dollars, euro, yen, sterling and yuan, are the IMF's official unit of exchange. Member countries hold them at the Fund in proportion to their shareholdings.

 

The IMF last approved a $250-billion new allocation of SDRs in 2009, boosting liquidity for cash-strapped countries during the last financial crisis.

 

Doing so again now could provide more flexibility to the 102 countries that have already sought IMF emergency loans and grants, and allow aid to flow to high-debt countries that can't qualify for new IMF loans, such as Argentina and Zimbabwe.

 

An SDR expansion has attracted some celebrity advocates, such as investor George Soros and U2 lead singer Bono's ONE anti-poverty organization, along with trade unions and faith-based groups.

 

IMF Managing Director Kristalina Georgieva floated the idea of a $500 billion SDR issuance in March to G20 finance officials. But the group said in a statement after a videoconference on Wednesday there was "no consensus on the issue."

 

Georgieva, who also has acknowledged U.S. resistance, told a news conference on Wednesday: "What we are concentrating on, is to act decisively with what we have, and where there is full consensus among members. We recognize that there are other options to be explored, and we will continue to do so," she said.

 

Among these efforts is persuading wealthier countries to donate or lend their existing, unused SDRs to IMF lending facilities for poor countries. The Fund is trying to triple the resources in its Poverty Reduction and Growth Trust to $18 billion, she said.

 

Some say $500 billion is too little. Former U.S. Treasury secretary Larry Summers and former British Prime Minister Gordon Brown, who both pushed for the 2009 SDR allocation, called on Wednesday for a $1 trillion-plus SDR issuance.

 

"If ever there was a moment for an expansion of the international money known as Special Drawing Rights, it is now," they wrote in an op-ed in the Washington Post Wednesday.

 

On Tuesday, the IMF said the recession sparked by the virus would be far deeper than the Great Recession of 2008 and 2009, shrinking the global economy by 3.0% in 2020.

 

HIGH TENSIONS

The Trump administration's opposition comes at a time when U.S. tension with China is running high over the causes of the virus and a long-running trade war. U.S.-Iran tension nearly boiled over into armed conflict in January.

 

The U.S. Treasury Department has pressed the IMF instead to focus on quickly deploying its $1 trillion in existing resources, including expanding emergency loans and grants to more than 100 countries that have sought aid.

 

A U.S. Treasury spokeswoman declined to comment specifically on the SDR allocations, but said the agency supported a variety of efforts at the IMF to provide rapid, targeted assistance to countries in need.

 

"We support accelerating IMF procedures, higher access from the IMF’s emergency lending facilities, and support from donors for the IMF’s assistance to low income countries, including grants to help these countries make debt payments to the IMF," the spokeswoman said in an emailed statement.

 

PATIENT APPROACH

French Finance Minister Bruno Le Maire argued in favor of a new SDR allocation of about $500 billion, saying in a statement to the IMF's steering committee it would provide an extra $16 billion to low-income nations that could be "decisive" in battling the virus.

 

Columbia University professor Joseph Stiglitz, a former World Bank chief economist, said new SDRs would not cost U.S. taxpayers anything.

"And if we can help emerging markets and developing countries, it will rebound to us in terms of health and in terms of the economic recovery," he said.

 

IMF officials, while acknowledging that a deal for a new SDR allocation is unlikely this week, are taking a patient approach, hoping to eventually persuade U.S. Treasury officials of the merits of the move.

 

"Nothing is off the table," IMF chief economist Gita Gopinath told Reuters on Tuesday.

 

(Reporting by David Lawder and Andrea Shalal; Editing by Andrea Ricci and Tom Brown)

 

-- © Copyright Reuters 2020-04-16

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[thaibeachlovers]

4 minutes ago, webfact said:

The Trump administration does not want Iran and China to have access to billions of dollars in new resources with no conditions,

I fail to see what is wrong with that. China is mega rich and doesn't need other people's money, and Iran is oil rich and should have saved for a rainy day.

[J Town]

I have a friend in Iran, and the people have been getting ROYALLY screwed for years! Sure, they may be oil rich, but that's only for the rich. NO trickle down whatsoever. Kicking people while they're already down will ensure the rest of the world completely "socially distance" themselves from the US.

 

 

 

Edited April 16, 2020 by J Town
redundancy

[anterian]

If Soros and Bono are in favour of this then I am against it. 

[HappyinNE]

Take a look at where the Special Drawing Rights go.  You might not be happy where all of it goes.  I personally am against issuing more SDR.  Instead the US and EU need to show real leadership and get their budgets and debt under control. 

 

I know fat chance of politicians doing that.

[exparte]

Both Iran and China have been sucking on the tit for too long. They both can burn in hell. 

[timendres]

2 hours ago, HappyinNE said:

Instead the US and EU need to show real leadership and get their budgets and debt under control. 

Agree with that!

[J Town]

21 minutes ago, exparte said:

Both Iran and China have been sucking on the tit for too long. They both can burn in hell. 

That's offensive. As I posted earlier, I have Iranian friends and they are suffering because of the ridiculous sanctions imposed on them. It's their government that can burn in hell, and imposing more sanctions will only screw the little people further, unnecessarily.

[Eric Loh]

39 minutes ago, exparte said:

Both Iran and China have been sucking on the tit for too long. They both can burn in hell. 

I am positively sure Iran and China shared the same feeling about US. 

[GreasyFingers]

Why is the article putting a $ value on SDRs. They are a unique identity so should be just talking about how many SDRs.

But then the Americans probably would not understand..

[Brigand]

China is the last place that needs a bailout to assist the expansion of their evil empire and Iran needs to earn it by stopping being a religious nutjob theocracy and come in from the cold. Why should the US help fund these two out-of-control hate filled bad actors? Better to fund places that actually need it. China and Iran have some cheek when they do Sweet fa to bring about anything positive at all.

[candide]

The coronavirus crisis could have been an opportunity to solve the Iran crisis without anyone losing face. Thanks to Trump (and maybe Iran leaders too), this will not happen.

[IAMHERE]

8 hours ago, J Town said:

I have a friend in Iran, and the people have been getting ROYALLY screwed for years! Sure, they may be oil rich, but that's only for the rich. NO trickle down whatsoever. Kicking people while they're already down will ensure the rest of the world completely "socially distance" themselves from the US.

 

 

 

I've watched Iranians dancing in the streets for over 40 years chanting 'Death to America'; those weren't rich Iranians jumping up and down burning the USA flags.

[cmiuc]

10 hours ago, J Town said:

I have a friend in Iran, and the people have been getting ROYALLY screwed for years! Sure, they may be oil rich, but that's only for the rich. NO trickle down whatsoever. Kicking people while they're already down will ensure the rest of the world completely "socially distance" themselves from the US.

 

 

 

This has to do with your government, none of us in the people sector see the results of these kinds... in pretty much every country, so your country is kicking you down...(or your friends). I heard that they are getting tired and are pushing for a new regime... that will be the way for them to get back up.

 

[cmiuc]

with covid-19 originating from china, this maybe able to pave the way for countries to sue for repatriations caused by the damage by the virus... so better to get repatriations than fight a terrible war. So maybe the rules opens the door for that.  

[Tropposurfer]

10 hours ago, J Town said:

I have a friend in Iran, and the people have been getting ROYALLY screwed for years! Sure, they may be oil rich, but that's only for the rich. NO trickle down whatsoever. Kicking people while they're already down will ensure the rest of the world completely "socially distance" themselves from the US.

 

 

 

Nicely said ???? And the US is gob-smacked when they are spoken of as being 'bad people' and an evil nation. Starving people and calling it diplomatic leverage and righteousness is pretty thick stuff to swallow.   

[Iron Tongue]

I've tried, but have never been able to find any information on what happened to the US$150,000,000,000+ that Obama handed back to the Iranians.

It sure didn't go towards improving health, infrastructure, or the betterment of the Iranian people.

 

[Mbaki]

8 hours ago, Brigand said:

China is the last place that needs a bailout to assist the expansion of their evil empire and Iran needs to earn it by stopping being a religious nutjob theocracy and come in from the cold. Why should the US help fund these two out-of-control hate filled bad actors? Better to fund places that actually need it. China and Iran have some cheek when they do Sweet fa to bring about anything positive at all.

Evil empire? You’ve been reading too many propaganda stories ????

[thaibeachlovers]

17 hours ago, J Town said:

I have a friend in Iran, and the people have been getting ROYALLY screwed for years! Sure, they may be oil rich, but that's only for the rich. NO trickle down whatsoever. Kicking people while they're already down will ensure the rest of the world completely "socially distance" themselves from the US.

 

 

 

Do think any overseas money would reach those you refer to? I don't.

[simple1]

9 hours ago, IAMHERE said:

I've watched Iranians dancing in the streets for over 40 years chanting 'Death to America'; those weren't rich Iranians jumping up and down burning the USA flags.

Iran is a brutal dictatorship imposing its political will on the people. When the people have attempted to protest and aim for a democracy they are violently suppressed. Other factors may be the US supported Iraq during its cruel unprovoked war against Iran as well as other injustices against the Iranian people. In summary not surprising some Iranian people are anti American.

[thaibeachlovers]

On 4/17/2020 at 10:48 AM, simple1 said:

Iran is a brutal dictatorship imposing its political will on the people. When the people have attempted to protest and aim for a democracy they are violently suppressed. Other factors may be the US supported Iraq during its cruel unprovoked war against Iran as well as other injustices against the Iranian people. In summary not surprising some Iranian people are anti American.

Regardless, if the Iranian leadership wishes to get American money they need to make the changes needed to get it. The piper plays the tune.

[metisdead]

An off topic post has been removed. 

[simple1]

2 hours ago, thaibeachlovers said:

Regardless, if the Iranian leadership wishes to get American money they need to make the changes needed to get it. The piper plays the tune.

You may well hold that POV, go tell it to the Iranian people who are are murdered when they demonstrate for democratic freedoms. In a health crisis some sort of compromise should be in-place to save the lives of innocents, as recognised by the Europeans, not the implacably cruel policy of the trump administration.

[thaibeachlovers]

1 hour ago, simple1 said:

You may well hold that POV, go tell it to the Iranian people who are are murdered when they demonstrate for democratic freedoms. In a health crisis some sort of compromise should be in-place to save the lives of innocents, as recognised by the Europeans, not the implacably cruel policy of the trump administration.

I might agree with you except that, IMO, if the money was given to Iran, nothing would be spent for the intended purpose by the government and I can't see independent entities being allowed in to work where it's needed.

The best outcome, IMO, is that the leadership are forced to change and allow more civil rights.

 

What happened to the money Obama gave them not long ago? Bet it wasn't spent on helping the people.

 

IMO as long as the present leadership is in power, Iran is a lost cause.

[simple1]

13 minutes ago, thaibeachlovers said:

I might agree with you except that, IMO, if the money was given to Iran, nothing would be spent for the intended purpose by the government and I can't see independent entities being allowed in to work where it's needed.

The best outcome, IMO, is that the leadership are forced to change and allow more civil rights.

 

What happened to the money Obama gave them not long ago? Bet it wasn't spent on helping the people.

 

IMO as long as the present leadership is in power, Iran is a lost cause.

 How can the theocracy be "forced" out when they have complete control of the security forces who do not shy from killing unarmed civilians. It was not Obama's money it was Iranian funds which were were released as a part of the Iran Nuclear Deal agreed by a number of countries. As you know trump, against the advice of allies, unilaterally pulled out of the agreement which has led to the mess Iranian people now find themselves.

 

Agree with your last sentence, including trump.

Edited April 20, 2020 by simple1

[thaibeachlovers]

Just now, simple1 said:

 How can the theocracy be "forced" out when they have complete control of the security forces who do not shy from killing unarmed civilians. It was not Obama's money it was Iranian funds which were were released as a part of the Iran Nuclear Deal agreed by a number of countries. As you know trump, against the advice of allies, unilaterally pulled out of the agreement which has led to the mess Iranian people now find themselves.

 

Agree with your last sentence, including trump.

I never said they could be forced out. I was arguing that they might be persuaded to grant more civil rights.

Does it really matter who's money it was? It is money that could have been spent to better the people but I doubt it was. I said Obama gave it to them, but I didn't say who's money it was. Good grief.

 

IMO Trump did the right thing pulling out of a ( IMO ) sham agreement that the Iranians, IMO, had no intention of honoring. As for the "allies" I can't post my opinion of them on here, but in Trump's place I wouldn't take any notice of them either, but that's all been said before on different threads.

[winslowsjardine]

On 4/17/2020 at 2:19 AM, Iron Tongue said:

I've tried, but have never been able to find any information on what happened to the US$150,000,000,000+ that Obama handed back to the Iranians.

It sure didn't go towards improving health, infrastructure, or the betterment of the Iranian people.

 

Actually, the number was about 1.3 billion.

[winslowsjardine]

On 4/16/2020 at 7:35 AM, thaibeachlovers said:

I fail to see what is wrong with that. China is mega rich and doesn't need other people's money, and Iran is oil rich and should have saved for a rainy day.

The U.S.has been waging economic warfare on Iran for about 2 years. Iran can only sell a fraction of the oil that it used to sell.

[thaibeachlovers]

1 minute ago, winslowsjardine said:

The U.S.has been waging economic warfare on Iran for about 2 years. Iran can only sell a fraction of the oil that it used to sell.

The solution is entirely in the the hands of the leadership. They can stop their nuclear program, allow inspectors unrestricted access and the problem goes away.

[J Town]

11 minutes ago, winslowsjardine said:

I've tried, but have never been able to find any information on what happened to the US$150,000,000,000+ that Obama handed back to the Iranians.

It sure didn't go towards improving health, infrastructure, or the betterment of the Iranian people.

That was their money the US gubmint had seized being returned to them.