SDR as a reserve currency

JOSEPH E GAGNON, fellow at the Peterson Institute for International Economics argues that IMF’s Special Drawing Right (SDR) could serve as a solution to address the asymmetry of international reserve assets and enhance reserve diversity and reduce distortions caused by excessive reliance on the US dollar as the main reserve asset.
In his article, “A Currency System for a Multi-Polar World”, he outlines his 2-step proposal for the IMF

1. expand the SDR basket to include the currencies of all countries that have sound macroeconomic policies and whose bond markets meet minimum standards of openness and supervision;
2. create synthetic SDR bonds backed by medium-term sovereign bonds denominated in the currencies of the SDR basket.

He states that several dozen countries would qualify for inclusion in the SDR, including almost all advanced countries and a number of developing countries, and the IMF had acknowledged the benefits of a broader SDR basket for reserve diversification and for financial development in emerging markets. He also states that synthetic SDR bonds could be backed by sovereign debt in the currencies of the SDR basket and tradable among investors like exchange-traded funds (ETF), providing investors with a standardized asset that provides both a high degree of diversification and a deep and liquid market.

Test of Effectiveness for the G-20

ARVIND SUBRAMANIAN, fellow at the Peterson Institute for International Economics states that while the monopoly on power and influence wielded by the west was being broken for real with the G20, what was most significant was the impact of the de-cartelization of power and influence on the role of ideas.  In an op-ed in The Business Standard, "The G-20, Power, and Ideas", he states that the fate of two bad ideas (i) western leadership of the IMF and the World Bank and (ii) indispensability of the Doha round to the health of the world economy, could serve as a testing ground for the proposition that the G-20 might be better for the marketplace of ideas than the G-7.