The International Monetary Fund (IMF) has been striving to expand the use of Special Drawing Rights (SDRs) in the global monetary system for a long time but its efforts have yielded only a limited degree of success as its use has generally been confined to the Fund's transactions with its member states. However, a turning point seems to have been reached in the recent G20 Summit in Hangzhou, China, where a favourable consensus emerged on this critical issue. Highlighting the main points of the consensus, IMF Chief Christine Lagarde said that her institution will now explore ways to broaden the use of SDRs more vigorously as the leaders of G20 had agreed at their latest summit in Hangzhou to enhance the resilience of the international financial system. The reporters at the press conference were told that the IMF was really encouraged by the determination of China to use the SDR as a yardstick to measure its reserves and as a currency for bond issuance. The call for greater use of SDRs, a synthetic reserve currency administered by the IMF, was strongly backed by China as the country has been working to lift the international profile of its currency. It was also reiterated that the Chinese currency meets the criteria for the inclusion in the SDR as the Chinese monetary authority had made a great deal of progress by making its monetary policy more market-determined. It may be noted that Chinese yuan will be officially included in the IMF's currency basket by October 1, 2016.
Although greater use and wider acceptability of SDRs at universal level would appear to be a minor development in Pakistan, the popularity of SDRs in international financial transactions could go a long way in improving the stability of global financial system and ensuring certainty in the unit value of transactions. This is so because, unlike other currencies, a value of SDR is not subject to fluctuations and its users will not be worried about the risks of currency depreciation/appreciation while quoting prices of their products in the international market or measuring the value of financial assets. Greater use of the SDR could, therefore, facilitate world trade and expand its magnitude which would be economically beneficial for the member countries. It may also be noted that consensus reached in G20 at Hangzhou would both help improve the status of Chinese yuan in the world financial markets and also increase the influence of the SDR in international transactions. It will also be worthwhile if the IMF continues to expand representation of other major emerging and developing economies in the organisation of the SDR basket in order to better serve the entire membership. Finally, it needs to be stated that though there is no hope of the PKR to be included in the SDR basket, greater use and wider acceptability of the SDR could help the country in expanding its trade across the borders. Pakistan's economy is more open than most of other countries and, as such, any incentive to facilitate world trade could only be welcomed.
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