The use of the International Monetary Fund’s (IMF) artificial currency, known as Special Drawing Rights (SDR), may help countries temper the harm of foreign exchange fluctuations, the Chinese central bank said.
People’s Bank of China Deputy Governor Yi Gang said the SDR is now more important than ever, given economic uncertainties around the world.
“If more and more people, companies and markets are using SDR as a unit of accounts, that would give it more advantages in the market,” Yi said at the sidelines of the IMF's and World Bank's Spring Meetings in Washington.
The SDR is made of a basket of currencies, including the US dollar, the Japanese yen, and the euro. The Chinese yuan joined that exclusive group of currencies in the SDR last October.
“The politics today do not favor delegating economic governance from national to multilateral levels. And yet the case for an SDR is very strong,” economist Mohamed El-Erian said.
But there are still challenges in using the SDR. “We need to remember it’s not money,” said Catherine Schenk, an economic historian at the University of Glasgow.
“What we're talking about with the market SDR is trying to turn it, to add more facilities on it, to turn it into money. That will take time.”