RIO DE JANEIRO, BRAZIL – The International Monetary Fund (IMF) has provided US$15 billion for Brazil to use for managing its international reserves. The funds will be available as of August 23.
These resources are part of the US$650 billion allocated by the fund to member countries to stabilize their economies after the impact of the pandemic, with allocation based on each country’s quota in the IMF.
The amount was set aside for Brazil in the form of Special Drawing Rights (SDRs), assets created by the IMF based on a basket of currencies (dollar, yen, yuan, pound and euro) and serve as a possible extra resource for international reserve management with no cost for its use.
International reserves serve as a country’s guarantee of its foreign obligations, such as debts and financing. In addition, they are considered a “safety cushion” for shocks, such as currency crises and moments of high dollar volatility.
In countries without reserves, SDRs can help stabilize the value of the local currency.
Brazil has robust international reserves, currently at US$355.9 billion, and may use the resources made available by the IMF if it deems necessary.
At the start of the pandemic in March 2020, the Fed (Federal Reserve, the American central bank) provided the Brazilian Central Bank with US$60 billion in swap operations. Despite the dollar’s high volatility and the economic uncertainties at the time, the Central Bank never found it necessary to use these funds.