Managing Director of International Monetary Fund (IMF) Christine Lagarde recently said that the idea of one single global currency has thus far not been realized and in fact won't come true in the near future. Lagarde gave her talk when she attended the Tsinghua PBCSF Global Academic Leader Forum on March 23, 2014.
She explained that the sovereignty of a country involves not only the national flag, but also the currency of that country.This single currency idea as backed by John Maynard Keynes may not be realistic.
Lagarde explained that the special drawing rights (SDRs) were created by the IMF. The IMF may determine how to allocate SDRs to its member countries. The value of SDRs is defined in terms of a basket of the U.S. dollar, the euro, Japanese yen, etc. There are currently ongoing discussions on whether to broaden the SDR currency basket by adding China's yuan to it.
"When the yuan meets our standard, we can add it to SDRs," Lagarde said.
Lagarde further explained that several regions had created a single monetary unit to replace their national currencies, such as the EU. However, such arrangements can become very complicated because of the various aspects they involve.
She said that the development of such a regional monetary unit is a recent trend. However, attention must be paid to control its volatility.
When talking about the IMF reform, Lagarde said that from the aspects of global financial and IMF stability, she hoped the reform scheme could be pushed forward quickly. China is the fourth largest member of the IMF with rapid economic growth. The emerging economies are also growing very fast. Lagarde did express her hopes that China gets more say in the future.
There are few global economic organizations that possess the institutions to adjust or improve the voice of some countries, Lagarde said. She said the IMF has such a mechanism and is working to adapt and upgrade it.
As early as in 2011, Largarde already expressed the idea of promoting the IMF reform to better reflect the changing global economic landscape.
According to Lagarde, in the next few years the IMF will continue to advance the governance reforms to enhance its effectiveness and legitimacy. This process will take two steps. The first step is to implement the ongoing reforms, which involve the transfer of the quota and the composition of the executive board.