Jeff Kearns, managing editor of the International Monetary Fund’s blog, wrote Wednesday that the IMF’s largest ever, $650 billion, liquidity boost continued to benefit the global economy.
The Special Drawing Rights in August 2021, was intended to help “turn the pandemic crisis toward recovery,” Kearns said.
UNCONDITIONAL ASSETS
“SDRs are unconditional reserve assets issued to member countries at times of stress to safeguard global stability,” he said. “SDRs can be saved as international reserves, providing a cushion against shocks. These assets can also be exchanged for other currencies and spent, including on vaccines or social assistance for families.
“Two years after this historic allocation, our new study shows that it met its objectives by giving member countries a boost and helping the global economy avoid worse outcomes,” Kearns said.
And, the benefits seem poised to continue, he said, with more than $100 billion of the SDRs in pledges being channeled from into vulnerable and low-income countries, amplifying the benefits.
While advanced economies drew the largest allocations in dollar terms, pulling $376 billion from the fund, low-income countries received, on average, almost double the allocation compared to advanced economies in terms of their economic output, Kearns said.
LOWER BORROWING COSTS
Countries generally used SDRs to increase their reserve buffers, lowering borrowing costs and amplifying the benefits of the allocation by helping to meet urgent population needs, he said.
And while countries that spent SDRs now face higher interest costs, they still are lower than alternative market financing, Kearns said.
“With higher global interest rates, the total long-term expected costs of using SDRs have more than tripled for the median country since August 2021,” he said.
More help for struggling economies is coming from countries with strong balance of payments positions “pledging part of their allocation to support more vulnerable members and standing ready to provide currencies in exchange for SDRs through voluntary trading operations,” Kearns said.
COLLECTIVE RESPONSIBILITY
Going forward, the international community has a responsibility to evaluate carefully any future decisions to issue SDRs and ensure transparency in the use of such funds, he said. In particular, they need to monitor the current environment of higher interest and inflation rates, which make the use of SDRs more costly.
Stronger economies also need to live up to their pledges of more contributions to the IMF to keep more vulnerable economies growing, Kearns said. He said this was “critical to adequately resource the global financial safety net and support vulnerable countries facing multiple shocks and challenging transitions.”
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $179.85 per cwt to $185.93, compared with last week’s range of $178.75 to $189.46 per cwt. FOB dressed steers, and heifers went for $280.56 per cwt to $290.72, compared with $283.80 to $293.58.
The USDA choice cutout Wednesday was up $0.75 per cwt at $315.11 while select was off $0.15 at $289.53. The choice/select spread widened to $25.58 from $24.68 with 95 loads of fabricated product and 13 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.60 to $1.80 a bushel over the Sep corn contract, which settled at $4.61 3/4 a bushel, down $0.07 3/4.
Ten steer contracts were retendered for delivery Wednesday against the Aug cattle contract at one. They also were reclaimed at one.
The CME Feeder Cattle Index for the seven days ended Tuesday was $249.15 per cwt, up $0.03. This compares with Wednesday’s Aug contract settlement of $250.05 per cwt, down $0.65, and Sep’s $252.62, down $1.40.