IMF not ready to charge SDR basket

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IMF not ready to charge SDR basket

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IMF said that it is not ready to adjust the formula for its SDR currency.

12 November,2011 02:53 am

The International Monetary Fund said Friday it was not ready to adjust the formula for its SDR currency, following a report suggesting ways it might expand the four-currency basket.Answering calls to widen the basket to include emerging economy currencies -- specifically Chinas yuan -- the IMF executive board said it did not think it should ease its requirement that only freely usable currencies be included.Commenting on a report requested by the G20 group of leading economies to see how the basket could be widened, the board acknowledged there was some room to review what constituted freely usable.A number of directors were open to exploring alternatives to the freely usable criterion, along the lines of the reserve asset criterion presented in the staff paper, the board said in a statement.However, it said, directors stressed that the bar for SDR basket inclusion should not be lowered.The IMF maintains the SDR or special drawing rights as a special reserve currency that it lends to needy countries for liquidity needs.Since 2000, with the introduction of the euro, the basket behind the SDR has included only the US dollar, the euro, the yen and the British pound.In November 2010, the IMF said after a review that Chinas tightly controlled yuan, or renminbi, was not freely usable and so could not be included in the SDR basket, even though China had become the worlds second largest economy.But in February, then-IMF chief Dominique Strauss-Kahn proposed expanding the SDR basket to include currencies of emerging nations such as the yuan.And in March, French President Nicolas Sarkozy, speaking as head of the G20, urged the group to set a timetable to widen the SDR basket.