LONDON (Reuters) - World Bank chief Robert Zoellick urged big economies on Friday to modernise the global monetary system to be able to handle multiple major currencies.
In a guest column for the Financial Times, Zoellick said China’s yuan should be given a bigger role within a restructured system, echoing remarks made last week by the head of the International Monetary Fund, Dominique Strauss-Kahn.
Many officials support the idea in principle of the yuan becoming part of the Special Drawing Rights (SDR), a basket of currencies administered by the IMF, but say that is unlikely to happen unless it becomes fully convertible.
“The U.S. dollar will remain the predominant reserve currency, but over time the world economy will need to manage a system of multiple major currencies,” Zoellick wrote ahead of Friday’s meeting in Paris of finance chiefs from the Group of 20 rich and developing nations.
“We need to modernise multilateralism to steer towards a new monetary system.”
Zoellick said countries participating in the SDR should review monetary and currency issues in an SDR forum.
“This group should offer China the incentive to join the forum and eventually the SDR after it takes steps to internationalise the renminbi and moves towards an open capital account.”
Zoellick said over time other major internationalised currencies could be added to the SDR basket.
“Leading powers are not going to accept the SDR as a new global reserve currency, nor the IMF as a global central bank,” Zoellick said.
He added, however, that the IMF would act as a referee, “able to blow the whistle on the appropriateness of external policies but not to impose penalties” in order to support a healthy global economy.
Reporting by Karolina Tagaris; Editing by Andrew Hay