• February 5, 2023

Special Dollars for Dictators – WSJ

Government security forces have killed more than 250 people in Myanmar since a February 1 military coup. The Biden administration has imposed sanctions, but why is the US Treasury Department trying to provide the Burmese generals with new foreign aid worth $ 785 million?

The answer is the International Monetary Fund’s plan to issue a new allocation of “Special Drawing Rights”. These SDRs are printed in the fund, distributed to member countries – including Myanmar – and can be exchanged for US dollars, which the US is obliged to provide.

The IMF is looking to spend $ 1 trillion on this fun new money, and the Treasury Department is so nervous it is having a hard time bypassing US law that requires Congress approval. Treasury Secretary Janet Yellen paid lip service to “greater transparency and accountability in the exchange and use of SDRs”. But if she was serious, she would let Congress play its proper role in approving this IMF booty – of which the US will bear the greatest burden.

US law requires Congress to approve a general SDR allocation over a set five-year period during which the US will receive more than $ 120 billion. That $ 120 billion is the IMF’s U.S. stocks. The need for approval would be triggered by a new $ 1 trillion SDR allocation as the US SDR share would be $ 173 billion.

To help the administration circumvent the law, the IMF plans to split the new allocation into two groups. The first, slated for this year, will be an SDR allocation of $ 650 billion. This corresponds roughly to the highest amount (in round numbers) that Team Biden can stamp without a congress. The administration can then use the same trick to push through the remaining $ 350 billion – or more – over the next year. The consecutive years will fall into two different five-year periods.

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