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20 Aug, 2015 09:35

Yuan won’t join IMF reserve currency basket till September 2016

Yuan won’t join IMF reserve currency basket till September 2016

The IMF has postponed the inclusion of the Chinese yuan in the reserve basket of currencies. The fund decided to extend the current composition (US dollar, euro, yen and British pound) of Special Drawing Rights (SDR) by nine months from December 31.

“While the board is currently expected to complete the review in November 2015, staff sees merit in agreeing now on a limited extension of the current valuation basket,” Bloomberg quotes the IMF’s report released Wednesday.

The IMF also said the move would facilitate the "continued smooth functioning of SDR-related operations and responds to feedback from SDR users on the desirability of avoiding changes in the basket at the end of the calendar year.”

Beijing offered to add the yuan to the currency basket last year. Commenting on the issue, IMF Chief Christine Lagarde said in March that the yuan’s incorporation is “not a question of if, it's a question of when." But for that to happen the Chinese government needs to conduct a series of reforms in the foreign exchange market.

READ MORE: China stages biggest currency devaluation in 20 yrs to revive exports

In mid-August, the IMF praised China for progressively devaluing its currency against the US dollar. According to the IMF the devaluation of the yuan would allow the market to play a greater role in determining the exchange rate. However, the fund stressed that the devaluation would not affect its decision on the introduction of the yuan to the list of reserve currencies.