IMF ponder what to do with the 170 billion pounds

As a spring session of the International Monetary Fund (IMF) approaches member of the executive council are said to be considering several and varied various options on how to distribute the 170.6 billion pounds ($250 billion) in Special Drawing Rights (SDRs) to member countries. The money, part of the sum agreed to by the G20 during their conference last week in London, has been earmarked to boost global liquidity.

According to an IMF spokesman it was considered unlikely that any decision would be in place allow a vote by the fund’s membership, due to the complexities involved in the issue. The IMF spring meetings, due to be held in two weeks’ time, is the first gathering of the body since the G20 summit

Any proposals as to whom to allocate the capital requires an 85 percent majority approval by the IMF’s board of governors, the board is made up from a group of finance ministers or central bankers from the fund’s 185 member countries, who meet twice a year.

The IMF staff are working around the clock preparing and gathering proposals, taking into account both the time scales required as well as the extent of funding required for each project.

The IMF’s intention is fairly straightforward as they work closely within the G20’s guidelines for allocating SDRs to IMF members. In the meantime the group’s quandary is ascertaining the exact value in using SDRs to increase global liquidity

The spokesperson explained that they were unable to provide a specific date to complete the package proposals, but one thing for certain is that it would take more than two weeks.

All in all, the G20 set aside a massive trillion-dollar package to be handled by the IMF, which includes $750 billion for countries hardest hit by the financial crisis as well as the additional $250 billion issued in SDRs designed to boost members’ foreign reserves.

Key members of the IMF, China and Russia, in the meantime have tabled their suggestions to carry out a sweeping overhaul of the global monetary system designed to enhance the use of the SDRs to be allocated. Their proposal encompasses an increasingly emergent drive to either create or adopt an international reserve asset to act as a super-sovereign reserve currency.

Their proposals reflect growing concern over the stability of the U.S. dollar as the main reserve currency.

The IMF have responded by stating that while the dollar’s status as the dominant reserve unit is not currently under threat, they could understand why China and Russia might have seen fit to raised the issue.

• Getting Ready for the Triathlon Season Seeing snow everywhere and feeling temperatures that would make a...
• Buildify Gives Back: Blog Action Day 2008 This year, the focus for the annual Blog Action Day...
• China’s Dollar Dilemma Wages On As most people are aware by now, China spoke pretty...

Tags: Financial News, International Monetary Fund, Recession, Special Drawing Rights