17 July 2023
The International Monetary Fund (IMF) has acknowledged the use of the Chinese Yuan as a currency for debt repayment, signaling a potential shift away from the U.S. dollar. Argentina recently paid off a portion of its debts to the IMF, equivalent to $1.1 billion, in Chinese currency. IMF spokesperson Julie Kozack confirmed that the renminbi (RMB) is one of the five freely usable currencies accepted by the IMF for settling obligations.
While negotiations regarding Argentina’s $44-billion program are ongoing, Kozack denied receiving a letter from China indicating the use of a swap line with the Chinese Central Bank for IMF dues repayment. The Argentine Central Bank previously signed a deal with China to renew a swap line, increasing freely accessible funds from 35 billion yuan to 70 billion yuan.
Argentina’s move to incorporate the yuan as a currency accepted for deposits in savings banks and checking accounts, along with Brazil’s agreement to conduct trade and investments in their own currencies, demonstrates a growing trend of reducing reliance on the U.S. dollar.
However, Milton Ezrati, chief economist at Vested, suggests that the yuan is still far from becoming an international reserve currency like the dollar. China’s financial markets may not fully support widespread financial arrangements in yuan, which is a key requirement for a world reserve currency. Challenges may arise when traders attempt to find markets for investment due to China’s control over money flows into and out of the country.