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UPDATE 2-Mexico's president says IMF funds can repay debt, cenbank pushes back

(Adds comments from Bank of Mexico board member)

MEXICO CITY, Aug 11 (Reuters) - Mexican President Andres Manuel Lopez Obrador said on Wednesday that his administration could use funds disbursed by the International Monetary Fund (IMF) to pay off debt, though a Bank of Mexico board member rejected the idea.

The IMF said on Aug. 2 that its board of governors approved a $650 billion allocation of IMF Special Drawing Rights (SDR) and said its largest-ever distribution of monetary reserves would become effective Aug. 23.

Speaking at a regular news conference, Lopez Obrador said Mexico should receive around $12 billion from the IMF. Still, it was unclear if those funds could be used to repay debt.

Bank of Mexico board member Gerardo Esquivel poured cold water on Lopez Obrador’s proposal.

“Special Drawing Rights (SDRs) are not a currency, they are an international reserve asset. In Mexico, by law, international reserve assets cannot be used to pay debt,” Esquivel wrote on Twitter.

The IMF SDR plan will distribute reserves to all 190 member countries in proportion to their ownership, with the lion’s share going to G20 countries, which include Mexico.

SDRs are the IMF’s unit of exchange, made up of dollars, euros, yen, sterling and yuan. To spend them, countries must arrange an exchange for underlying currencies. (Reporting by Anthony Esposito and Ana Isabel Martinez Editing by Chizu Nomiyama and Jonathan Oatis)