NEW YORK, March 27 (Reuters) - Proposals for creating a new global reserve currency to replace the U.S. dollar are gathering momentum but need further examination, Germany’s development minister said on Friday.
Heidemarie Wieczorek-Zeul, Germany’s minister for economic cooperation and development, is a member of a panel of experts established by U.N. General Assembly President Miguel d’Escoto Brockmann to analyze the global financial crisis and recommend reforms.
One of the recommendations in an 18-page report the panel issued this week is to create a new reserve currency system based on the International Monetary Fund’s Special Drawing Rights, or SDRs, to replace the U.S. dollar as the top reserve unit, an idea China supports.
Wieczorek-Zeul said the idea, which the panel’s chairman, Nobel Prize-winning economist Joseph Stiglitz, staunchly supports, needed further development.
“This is one of the long-term issues,” she told reporters. “But it’s clear that even though it’s a long-term issue, it has acquired a certain momentum now that countries have spoken positively of it, such as China.”
“I’m absolutely certain that we will need further work on this from Stiglitz,” Wieczorek-Zeul said. “We’ll need to discuss not only the timeframe, but also in what steps it could be could be achievable.”
Stiglitz told reporters on Thursday that a global reserve system based on SDRs could be phased in over the next 12 months, though he said it was unlikely to happen that fast. He also said the specifics of a new system still needed to be worked out. For details, see [ID:nN26504037].
Asked about Stiglitz’s remarks, a top U.N. official on Friday also spoke in favor of scrapping the single-currency reserve system.
“We really need a system where a national issuer of currency does not have the added responsibility of providing global currency,” Jomo Kwame Sundaram, U.N. assistant secretary-general for economic development, told reporters.
Russia earlier this month proposed creating a new reserve currency, to be issued by international financial institutions. This week, China outlined how SDRs could take over the dollar’s role as the global reserve unit. [ID:nPEK257817].
On Wednesday, U.S. Treasury Secretary Timothy Geithner said the dollar would remain the top reserve currency but expressed openness to the expanded use of SDRs. [ID:nN26446657]
The reserve currency topic is expected to come up at next Thursday’s London summit meeting of the Group of 20 major developed and developing nations on the financial crisis.
The report by the U.N. panel said an SDR-based system “could contribute to global stability, economic strength, and global equity.” It also said that such a system would be “feasible, non-inflationary, and could be easily implemented.” (Editing by Neil Stempleman)