Monday, June 1, 2009

Putting Some Teeth into the SDRs

The WSJ's RTE blog is reporting that the IMF will soon be issuing bonds denominated in the IMF's currency called the SDRs. Interestingly, those countries eager to see alternative reserve currency emerge are some of the first to express interest in these bonds:

The International Monetary Fund is putting final touches on its plans to issue its first bonds. Russia has already said it would buy $10 billion of the bonds, which would be priced in the IMF’s quasi-currency, “special drawing rights.” SDRs are a basket of currencies consisting of the euro, yen, pound sterling and U.S. dollar. As of Friday, 1 SDR equals $1.55.

China, Brazil and India also have said they are interested in buying IMF bonds, with China likely to purchase more than $20 billion of instrument. The IMF wants to issue bonds as a way to build up its lending war chest as the global economic nosedive continues.

Might this development be the starting point for making the SDRs an alternative reserve currency?

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