The International Monetary Fund’s five-yearly review of which currencies should constitute its Special Drawing Rights may seem a dry technical exercise. But a great deal more hinges on the decision than the internal accounts of the Washington-based institution.
For the second time since 2010, the IMF is scheduled in November to raise or lower its thumb as to whether to include the renminbi along with the dollar, the yen, the euro and sterling in the basket of so-called SDR currencies. It is on the surface an arcane distinction. SDRs are a synthetic unit of account used by the IMF to allocate assets among member countries. They are neither used for international trade deals, nor does their existence preclude central banks from holding reserves in other widely circulated currencies.
What gives the application its political piquance is Beijing’s hunger to garland the RMB with the status of being an internationally-badged reserve currency. Indeed, so sensitive are the politics that great attention has been paid to an internal IMF report suggesting China might not meet the entry criteria, and proposing an extension to the existing basket until September 2016.