The International Monetary Fund is considering various options on how to issue the $250 billion in Special Drawing Rights to member countries as agreed to by the G20 in an effort to boost global liquidity, an IMF spokeswoman said on Thursday.
IMF spokeswoman Caroline Atkinson said it was unlikely that a vote by the fund’s membership on the SDR allocation will be ready by the IMF spring meetings in two weeks’ time, the first gathering of IMF members since the G20 summit last week.
Atkinson said a proposal will require 85% majority approval by the IMF’s board of governors, made up of finance ministers or central bankers from the fund’s 185 member countries, which meet twice a year.
“We are working intensively on getting papers ready ... to look at options for how to do the SDR allocation and when to do it,” Atkinson told a regular news briefing, a week after the Group of 20 summit of world leaders in London.
“I can’t give you a date for when we expect it to be completed but we’re hopeful that it won’t be too long,” Atkinson said, adding: “I suspect that these things will take a little longer than two weeks to put together ... but there is clearly a lot of momentum to move quickly.”
The G20 agreed to a trillion-dollar boost for the IMF, including $750 billion for lending to countries hit by the financial crisis as well as an additional $250 billion issued in SDRs to boost members’ foreign reserves.
Atkinson said the G20’s endorsement for allocating SDRs to IMF members suggest there is a value in using SDRs to increase global liquidity.
“Whether that leads to further development of use of the SDR remains to be seen,” she added. “At the moment, the SDR can be useful as a way to augment countries’ reserves and as a means by countries to obtain other currencies that they may use in international transactions.”
China and Russia have called for a sweeping overhaul of the global monetary system that would enhance the use of the SDR, an international reserve asset created by the IMF in 1969 that has the potential to act as a super-sovereign reserve currency.
The proposals by the emerging economic powers reflect concern with the primacy of the US dollar as the main reserve currency.
While the IMF has said the dollar’s status as the dominant reserve unit is not under threat, it was understandable that China and others have raised the issue.
Russia has said a new international reserve currency, which dislodges the dollar, could curb the volatility of foreign. (Reuters)