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Tuesday, May 12, 2015 1:11 PM

Greece Empties IMF Reserve Account to Pay IMF; Liquidity "Terribly Urgent" Says Finance Minister

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Greece said it would make its payment to the IMF on time and it did, one day early in fact. How? Greece Taps IMF Reserve Account.

Greece emptied an IMF holding account to repay 750 million euros ($840 million) due to the fund, a Greek central bank official said, avoiding default but underscoring the dire state of the country's finances.

Greece, like all other International Monetary Fund members, holds reserves from the IMF that are denominated in Special Drawing Rights (SDR), a basket of international currencies. The reserves must be kept at a certain level or the country must pay interest if its holdings fall below its "allocation" of SDRs from the IMF.

A government official told Reuters that Athens used about 650 million euros from the SDR holdings account and 100 million euros from its cash reserves to make the payment on Monday.

The Greek central bank official confirmed the account had been tapped after government officials met the central bank chief last week to figure out how to make the payment.

As of the end of March, Greece had about 554 million SDRs, equivalent to 695 million euros, according to IMF data.

The last time Greece made a significant withdrawal from its SDR holdings was in November 2011.

Made a day early, the IMF payment calmed immediate fears of a Greek default, but Finance Minister Yanis Varoufakis said on Monday the liquidity situation was "terribly urgent" and a deal to release further funds was needed in the next couple of weeks.

"The central bank governor put forth the idea to tap the 650 million euros in the holding account, which needed IMF approval," the official said, declining to be named.

"Governor Stournaras made the arrangement with the IMF and on Saturday we got their okay and the account was unlocked."
Going, Going, Gone

Here are a few additional details from the Financial Times.
Asked whether Greece’s decision to tap its IMF funds was a cause for alarm, Valdis Dombrovskis, the European Commission vice-president in charge of eurozone policy, said: “It’s for the experts to look into the issue before I can comment.”

Like every IMF member, Greece is allocated a stock of the IMF’s own notional currency — known as Special Drawing Rights — but they are rarely tapped. Greece’s allocation of SDRs is normally worth about €985m, but the account stood at €700m at the end of March, the most recent data publicly available.

Although IMF members are allowed to use the account at their own discretion, it is highly unusual to use the funds to repay the IMF itself.

Yanis Varoufakis, the finance minister, said after a meeting of eurozone finance ministers in Brussels on Tuesday: “The liquidity issue is a terribly urgent issue . . . From the perspective [of timing], we are talking about the next couple of weeks.”

“It’s marginal at the moment whether the government will be able to cover the public sector payroll at the end of May even if it delays most other payments,” said one Athens official with knowledge of the government’s cash position.
Greece is supposed to refill those reserves over the next "several weeks". How is that supposed to happen?

Add repayment of IMF reserves to the amount of the next "bailout" that Greece needs.

This charade is beyond ridiculous.

Mike "Mish" Shedlock

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