(Illustration: Kompas/Wisnu Widiantoro)China's yuan is set to join other top global currencies in the International Monetary Fund's (IMF) benchmark foreign exchange basket after the leader of the Fund expressed her open support for the move on Friday
China's yuan is set to join other top global currencies in the International Monetary Fund's (IMF) benchmark foreign exchange basket after the leader of the Fund expressed her open support for the move on Friday.
IMF's Managing Director Christine Lagarde said IMF staff had issued a paper to the Executive Board on the review of the Special Drawing Rights (SDR), whether the Chinese renminbi (RMB), which has continued to meet the export criteria for inclusion in the SDR basket, also met the other criteria.
"In the paper, IMF staff assesses that the RMB meets the requirements to be a 'freely usable' currency and, accordingly, the staff proposes that the Executive Board determine the RMB to be freely usable and include it in the SDR basket as a fifth currency ['¦]. I support the staff's findings,' she said in a statement.
The staff also found that the Chinese authorities had addressed all remaining operational issues identified in an initial analysis submitted to the executive board in July, Lagarde said.
The recommendation paves the way for the Fund's executive board to make the final decision on 30 Nov. If the board allows the yuan to join the SDR, it will be on a par with the US dollar, Japanese yen , British pound sterling and euro.
It has been predicted that the executive board, which represents IMF's 188 members, is unlikely to go against the staff recommendation, especially after several developed countries including France and Britain have already pledged their support for the change.
Joining the Special Drawing Rights (SDR) basket would be a victory for Beijing, which has campaigned for the move over the last five years, and could increase demand for the yuan in the foreign exchange market.
In a bid to save foreign exchange reserves and reduce dependency on the dollar, Indonesia has secured an agreement with China for using the yuan instead of US dollars in its trade with China starting next year,
Macroeconomic and finance coordination deputy at Bappenas, Bobby Hamzar Rafinus, said the agreement on using the yuan and rupiah in the two countries' trade had been secured under the Bilateral Currency Swap Arrangement (BCSA) on Oct. 1, 2013.
Both governments would only need to settle the technical aspects before implementing the agreement, including working out the arrangements at the business level between traders and banks of the two countries. (ags)
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