Here is the link that will take you to the 2016 Final Report of various proposals by the G20 Financial Architecture Group that includes their proposals on the SDR, debt restructuring, and things like the next IMF review of quotas in 2017.
Below I have pasted in a few of the proposals that might be of interest to readers here. I don't really much comment on this document. I don't see anything in it that seems like dramatic news. It mostly talks about things to do in 2017 and no real major expanded role for the SDR this year that I can see. This is consistent with the fact that things tend to move slowly at the IMF. It looks like it will be 2017 before we get any more news on the SDR and what the new quotas might look like at the IMF (see proposal #8 below).
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From the Introduction:
"This final report, endorsed by the members of the Working Group, summarizes the Group’s
discussions and progress achieved so far, and presents a set of recommendations for consideration
by Ministers and Governors.
Beyond the G20 Summit in Hangzhou, members recommend that the Finance Ministers and Central
Bank Governors prolong the Group’s mandate into the following year. Indeed, in a number of areas,
it would be useful for the IFA WG to follow up on the work done in 2016. In some areas, there is an
issue of implementation. In some others, more than one year appears necessary to complete the
work."
Proposal #5
"The Working Group members propose the following recommendations for the consideration of
G20 Finance Ministers and Central Bank Governors.
Proposal 5:
The G20 reaffirms its commitment to a strong, quota-based and adequately resourced IMF. The
G20 supports an IMF fully equipped to fulfill its responsibilities in this very uncertain financial and
economic time."
Proposal #8
"The Working Group members propose the following recommendations for the consideration of
G20 Finance Ministers and Central Bank Governors.
Proposal 8:
The G20 looks forward to the completion of the 15th General Review of Quotas, including a new
quota formula, by the 2017 Annual Meetings. Any realignment under the 15th review in quota
shares is expected to result in increased shares for dynamic economies in line with their relative
positions in the world economy, and hence likely in the share of emerging market and developing
countries as a whole, while protecting the voting share of the poorest.
G20 members commit to work expeditiously to build consensus on the quota review and quota
formula to meet this timetable."
(Note: it is possible this proposal may relate to the comments recently made by Putin which we covered in this recent article that includes reaction from Jim Rickards and Warren Coats)
(Note: it is possible this proposal may relate to the comments recently made by Putin which we covered in this recent article that includes reaction from Jim Rickards and Warren Coats)
Proposal #10
"The Working Group members propose the following recommendations for the consideration of
G20 Finance Ministers and Central Bank Governors.
Proposal 10:
The G20 supports the continued incorporation of the enhanced collective action and pari passu
clauses into sovereign bonds. It underlines the importance of dialogue between creditors and
borrowers, and their timely engagement in the case of build-up of risks associated with repayment
of sovereign debt obligations. The G20 affirms that the Paris Club, as the principal international
forum for restructuring official bilateral debt, should keep pace with the changing landscape of
official financing. The G20 welcomes the admission of the Republic of Korea to the Paris Club and
supports the ongoing work of the Paris Club towards the broader inclusion of emerging creditors.
The G20 supports the Paris Club’s discussion of a range of sovereign debt issues. In addition, the
G20 calls for further work to improve debt restructuring processes. In this view,
(i) The G20 asks the IMF to explore and report on the cost and feasibility of the incorporation of the
enhanced clauses in the existing stock of debt.
(ii) The G20 will examine and discuss additional measures taken by some jurisdictions to smooth the
sovereign debt restructuring processes."
Proposal #12 (on the SDR)
"The Working Group members propose the following recommendations for the consideration of
G20 Finance Ministers and Central Bank Governors.
Proposal 12:
The G20 supports the examination of broader use of SDR. In this view:
(i) The G20 supports the publication of some international financial institutions’ and countries’
accounts and statistics in SDR, and will study the benefits and possible ways of broader reporting in
SDR.
(ii) The G20 calls on the IMF to assess the recent developments regarding SDR, and in particular the
potential issuance of SDR denominated bonds, and report to G20 Finance Ministers and Central Bank
Governors in 2017."
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Added notes -- Here are links to various news articles that covered the G20 meeting. Please note the difference in tone between coverage in western media vs. eastern media (compare Time vs. the South China Morning post articles below for example):
Sputnik News - G20 Welcomes Yuan's Inclusion into IMF's SDR
FX Street - G20 Trumps SDR
Christine LaGarde's statement on G20
**** Gateway House - Rethinking SDR's Uses **** - this article calls for making the IMF a global lender of last resort in the next financial crisis just as Jim Rickards has predicted
South China Morning Post - World Bank backs China's push to challenge US dollar
Time - Diplomatic Jostling Characterizes Inconclusive G20 Summit
"But for all of Beijing’s assiduous preparation for the Group of 20 (G20) summit in Hangzhou that convened world leaders in the lakeside Chinese city, diplomatic wrangles and unrealized ambitions dominated the proceedings."
The Guardian - Red Carpet Snub for Obama not trivial
BRICSPost - Xi, G20 Leaders to fight Protectionist Trade Policies
The Economist - G20 Leaders Meet in China
The Australian - Nothing to show from Leaders at G20
Meanwhile - N. Korea fires off 3 Ballistic Missiles during G20
Global Times - Statement on meeting between US and China Presidents at G20
Point #4 in this statement verifies that the US and China agreed on the following regarding the IMF and the SDR:
4. China and the United States remain committed to supporting an inclusive and resilient international economic architecture able to evolve with global realities, challenges and opportunities, including promoting comprehensive cooperation between the existing and new international financial institutions. China and the United States also share a commitment to upholding and further improving the high governance, environmental, and social standards of the existing international financial institutions, as well as in new and future institutions, consistent with the commitments made in September 2015. To this end:
-- China and the United States support a strong, quota-based and adequately resourced IMF at the center of the global financial safety net. China and the United States support maintaining the IMF's current lending capacity. China and the United States welcome that the 2010 IMF quota and governance reform have taken effect and are working towards the completion of the 15th General Review of Quotas by the 2017 Annual Meetings. China and the United States reaffirm that any realignment under the 15th review in quota shares is expected to result in increased shares for dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole.
-- The United States supports the IMF's decision to include the RMB into the SDR currency basket on October 1st. Both countries support examination of the broader use of the SDR and exploring initiatives in this regard, including through broader reporting of accounts and statistics in the SDR and the issuance of SDR-denominated bonds.
It appears that the US has no problem with the relatively minor moves towards the SDR called for at this G20 meeting and the related SDR Bond issue. Perhaps of more interest is that the US seems to agree with giving "dynamic economies" a larger quota share at the IMF in the next quota review in 2017. Putin called for this before the meeting.
It will be interesting to see if all this impacts the sole veto power the US has held at the IMF or not. Dr. Warren Coats advises me that he doubts the US veto power would be in question even if the BRICS nations do get an increased quota and also points out that no new actual quota formula has yet been agreed to. It appears it will be 2017 before we find out.
Added notes -- Here are links to various news articles that covered the G20 meeting. Please note the difference in tone between coverage in western media vs. eastern media (compare Time vs. the South China Morning post articles below for example):
Sputnik News - G20 Welcomes Yuan's Inclusion into IMF's SDR
FX Street - G20 Trumps SDR
Christine LaGarde's statement on G20
**** Gateway House - Rethinking SDR's Uses **** - this article calls for making the IMF a global lender of last resort in the next financial crisis just as Jim Rickards has predicted
South China Morning Post - World Bank backs China's push to challenge US dollar
Time - Diplomatic Jostling Characterizes Inconclusive G20 Summit
"But for all of Beijing’s assiduous preparation for the Group of 20 (G20) summit in Hangzhou that convened world leaders in the lakeside Chinese city, diplomatic wrangles and unrealized ambitions dominated the proceedings."
The Guardian - Red Carpet Snub for Obama not trivial
BRICSPost - Xi, G20 Leaders to fight Protectionist Trade Policies
The Economist - G20 Leaders Meet in China
The Australian - Nothing to show from Leaders at G20
Meanwhile - N. Korea fires off 3 Ballistic Missiles during G20
Global Times - Statement on meeting between US and China Presidents at G20
Point #4 in this statement verifies that the US and China agreed on the following regarding the IMF and the SDR:
4. China and the United States remain committed to supporting an inclusive and resilient international economic architecture able to evolve with global realities, challenges and opportunities, including promoting comprehensive cooperation between the existing and new international financial institutions. China and the United States also share a commitment to upholding and further improving the high governance, environmental, and social standards of the existing international financial institutions, as well as in new and future institutions, consistent with the commitments made in September 2015. To this end:
-- China and the United States support a strong, quota-based and adequately resourced IMF at the center of the global financial safety net. China and the United States support maintaining the IMF's current lending capacity. China and the United States welcome that the 2010 IMF quota and governance reform have taken effect and are working towards the completion of the 15th General Review of Quotas by the 2017 Annual Meetings. China and the United States reaffirm that any realignment under the 15th review in quota shares is expected to result in increased shares for dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole.
-- The United States supports the IMF's decision to include the RMB into the SDR currency basket on October 1st. Both countries support examination of the broader use of the SDR and exploring initiatives in this regard, including through broader reporting of accounts and statistics in the SDR and the issuance of SDR-denominated bonds.
It appears that the US has no problem with the relatively minor moves towards the SDR called for at this G20 meeting and the related SDR Bond issue. Perhaps of more interest is that the US seems to agree with giving "dynamic economies" a larger quota share at the IMF in the next quota review in 2017. Putin called for this before the meeting.
It will be interesting to see if all this impacts the sole veto power the US has held at the IMF or not. Dr. Warren Coats advises me that he doubts the US veto power would be in question even if the BRICS nations do get an increased quota and also points out that no new actual quota formula has yet been agreed to. It appears it will be 2017 before we find out.
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