Fri. AM TNT News Articles 5-21-21

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TNT

Harambe:
The Insider: Zimbabwe to get US$1bn from the IMF for free

(5/20/21)

So, Zimbabwe could soon come into some money. Nearly US$1 billion, courtesy of a general US$650 billion allocation by the International Monetary Fund (IMF) to all its 190 members.

 The IMF executive board will soon meet to approve the allocation, the fifth but by far the biggest such since 1970.

In 2009, Zimbabwe received US$500 million from a general IMF allocation.

 What is happening?

 The International Monetary Fund says COVID-19 pushed the global economy into its worst recession since the Great Depression, inflicting long-term damage on the world economy.

 In response, the IMF is proposing to distribute US$650 billion to its 190 members, in proportion to each member’s quota. The proposal already has the backing of the United States, which has the biggest vote in the IMF, as well as the Fund’s executive directors.

 Why is the IMF planning to allocate billions?

 By providing a direct liquidity boost to countries without burdening them with debt, the IMF seeks to help member states fight COVID-19 by freeing up their available resources, particularly at a time when most have embarked on vaccination programmes. Zimbabwe, for instance, will spend US$100 million on vaccine procurement this year, about 2% of its planned expenditure for the year.

 Is it a loan?

 No, this is an allocation by the IMF to its 190 members who do not have to pay anything back.

When will the funds be available?

 IMF managing director Kristalina Georgieva has said she hopes to obtain official executive board approval for the allocation by June. Her deputy, Geoffrey Okamoto has said the IMF is pushing to have the distributions of the funds done by August this year.

 How will the funds be distributed?

Once approved, the IMF will distribute the US$650 billion in the form of Special Drawing Rights (SDRs), the Fund’s accounting unit or, put very loosely, the IMF’s “currency.”

Although the SDR is not money in the strictest sense, it is considered a stable international reserve asset that is freely exchangeable for usable currencies.

 To use SDRs, a country must find an IMF member willing to provide a usable currency (USD, euros, pound, yen etc) in exchange for SDRs.

 Once allocated SDRs, many countries, including Zimbabwe, will immediately seek to cash them in for US dollars.

 Not all countries will be selling. Some with solid reserve assets, such as the United States, will buy up SDRs from countries looking to convert the SDRs.

 There are 32 countries, including the US, which have voluntary SDR purchasing agreements with the IMF.

Distribution of the SDRs will be done according to each member state’s IMF quota.

 Based on Zimbabwe’s current quota of 0.15%, the country stands to receive US$975 million. The US, which has the largest quota, is in line for US$113 billion.

 How are quotas assigned?

Each IMF member is assigned a quota, reflecting its standing in the global economy. A member country’s quota determines its maximum financial commitment to the IMF, its voting power, and has a bearing on its access to IMF financing.

The quotas are determined by GDP (which carries a 50 percent weight), openness (30 percent), economic variability (15 percent), and international reserves (5 percent).

Zimbabwe’s current quota is 706.8 million SDRs, or 0.15% of the total.

The United States has the biggest quota allocation, SDR82.99 billion, or 17.44%, while Oceanian island Tuvalu has the least, with SDR2.5 million, or 0.001%.

Can the US block funds to sanctioned countries, like Zimbabwe?

Unlike the IMF’s lending programme, the general SDR allocation is not subject to a US veto. All IMF members, including countries such as Zimbabwe that are under US sanctions, will receive their share of the allocation.

 However, the US will not purchase SDRs from countries it disapproves of. It may also influence other countries to do the same.

“Because all IMF members receive an SDR allocation proportionate to their quota share, some countries whose policies the United States opposes will receive an SDR allocation. However, these countries will not necessarily be able to exchange their SDRs for hard currencies. First, the country’s authorities must be recognised by the IMF membership. Then, the country would need to find a willing country to provide them with hard currency in exchange for their SDRs.  We are working to increase transparency around SDR exchanges,” the US Treasury said last month.

 “The United States retains the right to refuse to purchase SDRs from any countries that we choose, including those under US sanction regimes, and we are working to coordinate with other countries to do the same.”

Impact on Zimbabwe

The nearly US$1 billion allocation will be a significant injection of liquidity into Zimbabwe’s forex-starved economy. The cash is the equivalent to about 5% of the country’s GDP and 20% of its 2021 budget.

Reserve Bank of Zimbabwe governor John Mangudya says he expects the IMF funds to help stabilise the country’s currency and, by extension, the economy.

 Zimbabwe’s currency, reintroduced in 2019, has enjoyed a year of stability after a tumultuous spell that greeted its return. This has been largely credited to a foreign currency auction system introduced in June 2020.

 Between June 2020 and April 2021, nearly US$1.2 billion has been traded through the auctions. The injection of a similar amount into the economy, through the IMF allocation, can only help improve availability of forex.

 President Emmerson Mnangagwa’s government has also prioritised infrastructural development, after decades of under-funding and neglect left the country’s roads, and power plants in a poor state.

Some of the IMF cash is expected to find its way into infrastructure projects.

Tishwash:
Advisor to the Prime Minister: 50 trillion dinars outside the control of Iraqi banks

The financial advisor to the prime minister, Mazhar Muhammad Salih, revealed the existence of 50 trillion dinars outside the control of the banking system, indicating that there are reasons that impede private investment and others that have caused the emergence of a “usurious” credit system.

Saleh said in a press statement that the parallel market is still granting its usurious cash loans to the public on very high-cost loan terms, as the annual interest in it is between 50-80%, (which is called obscene interest) and the usurious market is a parallel financial market (unorganized) ) Highly exploited with high risks, but at the same time it has high flexibility in dealing with stagnant cash liquidity by moving the interest-based tool. Important and vital that is currently trading outside the control of the legal or official banking system, “explaining that”Both scenarios, whether in the formal financial or banking market, or the parallel interest-based market (informal and unorganized) have made it difficult for the public to obtain credit or loans, whether at reasonable costs or conditions, especially loans that are commensurate with the average income of the general social class that needs money.

Pushing the monetary policy to really go to (direct quantitative) intervention in the official credit market by adopting credit facilitation policies and supporting the market with very easy and low-cost loans, most of which were provided (within the initiative of the Central Bank of Iraq), whether in the form of housing loans through the government real estate credit apparatus (the Real Estate Bank and the Housing Fund) ) Or in the form of supporting economic activity with small, medium and large loans in various economic fields.

He concluded by saying, “The liquidity obtained from these bonds will help, as they are excellent debt instruments, in activating the granting of credit, especially to small borrowers, on easy terms through banks or digital financial companies and others. Small or microfinance. link

Tishwash:  here’s a different version that has a little bit more details

Advisor Al-Kazemi reveals that there are 50 trillion dinars outside the control of the banking system

The financial advisor to the Prime Minister, Mazhar Muhammad Salih, revealed today, Thursday, two restrictions that curb the banking credit system, and while he confirmed the existence of 50 trillion dinars outside the control of the banking system.

Saleh said that “the banking credit system in Iraq is subject to inherited and complex structures, the first limitation of which is the high risk of debt recovery and default in the collection of loans granted, which amount to 18%, while the global standard rate of defaults does not exceed 3%, which pushes banks to make large hedges.”

And constantly around the capital to face credit losses due to the same quality of guarantees, which are often real estate that cannot be liquefied at default, which increases the degree of reluctance to grant cash credits or loans or helps to raise credit risks by strictly using high bank interest, “pointing out that” “The loans granted by banks to the public or to the public are still no more than 5% of the gross domestic product, which is the lowest in the world.”

He added, “The second constraint is the decrease in the ability of banks to mobilize public liquidity leaked outside the banking system, which is in the possession of the public and in the form of cash hoardings.

 They are deducted from the income cycle and are outside the control of the official financial system and are subject to the behavior of the public in demanding cash liquidity because of its customs and traditions in revering liquidity.”

The available cash is immediately under the hand, “indicating that” these funds are considered in all cases important financial surpluses and a large cash wealth (immobile and only partially conducive to the private investment activity).

Low across the banking system itself instead of being hoarded in homes, and its averages are estimated as hoarded surplus liquidity outside the banking system today, equivalent to about 25% of the gross domestic product of Iraq. “

He pointed out that “based on these patterns of monetary habits and the initial interaction with the surplus cash liquidity outside the legal banking credit system, a (usurious) credit apparatus has been formed in the parallel or informal financial market, as the parallel market continues to grant its usurious cash loans to the public on loan terms.

Very high cost, as the annual interest in it is between 50-80%, (which is called obscene interest). The usurious market is a parallel (unregulated) financial market that is highly exploited with high risks, but at the same time it has high flexibility in dealing with stagnant cash liquidity. By moving the usurious interest tool. “

And he continued, “Its money is estimated, as we have mentioned above (as leaked funds available outside the banking system) at perhaps 50 trillion dinars, which are important and vital funds that are currently trading outside the control of the legal or official banking system,” explaining that “Both scenarios, whether in the formal financial or banking market, or the parallel interest-based market (informal and unorganized) have made it difficult for the public to obtain credit or loans, whether at reasonable costs or conditions, especially loans that are commensurate with the average income of the general social class that needs money.

Pushing the monetary policy to really go to (direct quantitative) intervention in the official credit market by adopting credit facilitation policies and supporting the market with very easy and low-cost loans, most of which were provided (within the initiative of the Central Bank of Iraq), whether in the form of housing loans through the government real estate credit apparatus (the Real Estate Bank and the Housing Fund) ) Or in the form of supporting economic activity with small, medium and large loans in various economic fields.

He pointed out that, “due to the institutional complications in maintaining communication between the public and banks in easy handling, it has become imperative to introduce auxiliary financial instruments carrying bank interest in the form of (bonds) that are sold optionally to the interested public of cash surplus holders, and these tools are insured from any failure in Repayment by formal guarantee institutions and granting their holders privileges even when borrowing and accepting those instruments as optimal bank guarantees when credit is needed and capable of immediate liquidation in the secondary financial market such as the Iraq Stock Exchange.

He concluded by saying, “The liquidity obtained from these bonds will help, as they are excellent debt instruments, in activating the granting of credit, especially to small borrowers, on easy terms through banks or digital financial companies and others.

They are authorized to deal with bonds by sale, purchase or mediation, and their actions are in accordance with the law in order to deal with credits.” Small or microfinance. “link

Summer bears its teeth … heat of forty days, starting from Friday, and warnings of the sun’s rays!

Weather forecasts, on Wednesday, indicate that the country will be affected by high and medium-rise clouds on Thursday, with a significant rise in temperatures.  

 Weather forecasters Hussein Al-Asadi said in a clarification followed by “Nas” (May 19, 2021), that “weather maps indicate that the country will be affected by high and medium-altitude clouds tomorrow, Thursday, as they start from the south of the country and deepen Friday over most areas, causing partly cloudy weather.”

To cloudy in some areas, and most of them will be passing clouds without rain, with the availability of random rain showers on Friday afternoon and evening on the western region and may include other areas of the north of the country, which is a weak and changing opportunity.  

“The country will also witness fluctuations in wind movement between the northwest and southeast during the coming days, and there will be activity in the northwestern winds on the western region on Saturday evening, and they will be very dusty, according to the latest data,” he added.  

He continued, “While the country will witness a further rise in temperatures, during Friday and Saturday, to reach the end of the forties, especially in the southern regions, and to a lesser extent in the rest of the regions. Therefore, it is advised not to be exposed to direct sunlight for long periods,” indicating that “weather maps indicate To a decrease in the rise above, by several degrees, starting next Sunday.     link

Source: Dinar Recaps

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