Question for WINDREADER

Your opinion please windreader. Following is an excerpt from an article posted earlier today.
<<<George Soros said the success of the G20 meeting was "hovering on a knife edge between success and failure" and would depend on a pledge to increase the global money supply to help poor countries.

In a speech at the London School of Economics, the billionaire investor said the G20 should create about $250bn of the International Monetary Fund's Special Drawing Rates – international reserve assets which can be exchanged for major currencies – to make an impact. IMF member countries are allocated SDRs in proportion to their IMF quotas.>>>

Regarding what was said in blue above, I was struck with a question that may be simple enough, but I wanted to ask you. Is the SDR AMOUNT (250bln) exchangeable for MORE than 250bln? These sdr amounts don't impress me much when it comes to Iraq having enough to finance a big RV. Thanks for the answer in advance! OWL

The SDR is an accounting unit. It is not a currency, but is a potential claim on the currencies of IMF members. Its value is based on a basket of currencies. Today’s exchange rate for USD is 1 SDR equals about $1.55. The value of the SDR is an international reserve asset and is used to supplement the existing official reserves of member countries. It gets added to the bottom line total of the funds that a country has in reserves (like how much does a person have in savings). IMF members can voluntarily exchange SDRs for currencies among themselves. In addition, IMF members with a balance of payments can exchange their SDRs for freely usable currencies (U.S. dollars, euro, Japanese yen, pound sterling) provided by other IMF members that have a higher value. SDRs are allocated to member countries in proportion to their IMF quotas.

What the G20 was recommending was to increase the allocations by 250 billion over what is now available to countries. The increase would be added to the countries bottom line on the total amount the country has in reserves.

Iraq is currently allocated 68.46 million in SDR which is 100% of their allocation. If a country holds more SDR’s than their 100%, the IMF pays them interest on the surplus. If they own less, then the country has to pay interest to the IMF. Iraq is actually holding 93.55 million SDR’s which is 136% of their quota and as a result the IMF is paying them interest. Multiply 93.55 times $1.55 and you will get the equivalent value in USD. This dollar amount is part of the total reserves that the CBI would report on the balance sheet. The reserve funds are part of what would be used to fund the RV. Keep in mind there are billions of dollars that have not yet been turned over to Iraq.

Hope this answers your question.

What you reported is definitely interesting, but my question had to do with can Iraq somehow - through 'majic banking' somehow borrow 250bln and it becomes a much greater amount? By you answer, I think not. Again wind, Thanks!

Iraq does not get all the 250 billion, it would be spread over multiple countries. Iraq would get a percent but have no idea how much that would be until it is posted to their financial page on the IMF website