New | IMF defers addition of China’s yuan to currency basket until October 2016

The International Monetary Fund extended the effective period of the current Special Drawing Rights basket by nine months, granting more time to its executive members to consider whether or not to add the yuan in the reserve currency basket.

The proposal was submitted on August 4 in a 63-page paper that proposed extending the eligibility period of the current basket – which expires this year – until the end of September 2016. The IMF yesterday announced that it has approved the proposal last Friday.

“The extension would allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket,” the IMF said in the announcement.

Following a 2010 review, the SDR basket, which includes the US dollar, euro, Japanese yen and sterling, took effect on January 2011 for a five-year period. The extension will allow that currency basket to stay in place until further changes at the beginning of October next year.

China has been trying to push its currency into the elite club IMF reserve currencies as part of its drive to internationalise the yuan.

The executive board members will discuss formally the method of evaluating the SDR later this year. IMF warned that “the approved extension of the current basket does not in any way prejudge the outcome of the review of the method of valuation of the SDR”.