Riffrag Business & Finance Report

Members of the International Monetary Fund (IMF) requested a study conducted next year’s balance of payments problems, financial volatility, and the accumulation of foreign reserves that are not productive.

Addressing this problem means changing the behavior of countries that have the largest economy in the world. Next there must be certainty synchronous policy. China would prefer to invest most of the reserves devisanya to reach $ 2 trillion in dollar-based assets of the United States (USD).

China argues, the IMF should not only serve as a police policy implementation, but also police the flow of capital so that the IMF could provide stability of currency exchange rates which became the main foreign exchange reserves of the world. If the role of world policeman executed exchange, IMF would focus criticize China’s policy of fixing the yuan’s value. The IMF did not simply follow the opinion of economists that fixing yuan rate to exporters of weapons in winning the China trade and economic control of the world.

“It should not be that simple in assessing the mechanism of a state policy,” said Deputy Governor of Central Bank of China (PBOC) Yi Gang in the IMF meeting in Istanbul. Previous PBOC Governor Zhou Xiaochun offers recipes reform the international monetary system that can prevent damage to the value of foreign reserves that is creating international reserves have long-term stability through an independent exchange. He proposed the use of special drawing rights (SDR). The IMF can use SDR in full, allocates to the country in desperate need.

According to Zhou, this function makes the IMF could cope with the crisis and maintain monetary stability and the international financial system. Zhou explained, the IMF should establish an open fund. Operation of these funds must follow the market mechanism and then formed the smallest unit of SDR in which investors could buy foreign exchange reserves to fund and withdraw those funds when needed. According to Zhou, this will encourage the development of SDR-based assets and bring liquidity rules of global currency reserves so that the IMF could publish various types of SDR-based instruments.

SDR will gradually become a new global reserve. PBOC Vice Governor Hu Xiaodong argued, issuance of bonds is a way for the IMF to raise funds in the short term. China ready to buy when IMF issue bonds. He added, China will continue buying U.S. government bonds because of very low credit risk. However, many countries still doubt the IMF can not do justice because many countries have felt the pain of a patient IMF. Moreover, the IMF is still dominated by developed countries like the United States.

It’s hard to believe the IMF as a krisis.Tidak hit clear rules about the protection of the state of a patient IMF. Mexico Central Bank Executive Guillermo Ortiz rate, raising foreign reserves in the Chiang Mai Initiative better. If you want to enhance the role, the IMF must be able to convince the developed countries most of the right hand votingnya to developing countries in 2011. Cornell University Professor Eswar Prasad is also a former senior IMF official doubted that the borrower if the institution will have the authority to impose sanctions in case of developed countries dispute.

“It would be interesting to see how the IMF’s power to carry out major shareholders (developed countries). And how the IMF’s response under criticism when they evaluate a policy developed countries,” he said