IMF plans $100B injection of SDRs into world economiesSubmitted by SteveMT on Sun, 01/31/2010 - 03:40
IMF plans $100bn injection into economy to fund energy efficiency
The International Monetary Fund (IMF) has issued a radical proposal to pump $100bn (£62.5bn) of its international currency into the world economy in order to fund an overhaul of how the economy generates growth.
By Edmund Conway
and Jeremy Warner
Published: 9:01PM GMT 30 Jan 2010
Dominique Strauss-Kahn said that the fund planned to issue the Special Drawing Rights (SDR) in order to boost low carbon growth, helping fund an overhaul of energy efficiency around the developed and developing world. The proposal will prompt further suspicion that the Fund is quietly attempting to institute the SDR – a special reserve currency, which can be exchanged for national currencies – as a possible replacement for the dollar as a global reserve currency.
Mr Strauss-Kahn said "huge investment" was needed to make energy production around the world low carbon.
"Finding the finance for this transformation is possibly going to be quite problematic," he said. "If the finance cannot be raised through traditional means, then you need out-of-the- box thinking. We are planning to issue a report in a couple of weeks – one suggestion is it might be done through SDR issuance."
The IMF head added that he was concerned at the prospect of a further relapse into recession if national economies cut back their deficits too quickly, saying: "If you exit too early and there is a double dip, the problem is that there will be nothing left to throw at the problem."
The comments came after he and other leading world policymakers, including the Chancellor Alistair Darling and European Central Bank president Jean-Claude Trichet, met bank chiefs to attempt to reach an agreement on future restrictions on bonuses and regulation. Insiders said that although the high-level meeting failed to reach solid agreement, the bankers had opened the door to potential restraints on pay and, more substantively, a new "insurance levy" on bank's balance sheets.
The IMF promised to produce detailed plans on how to impose the unprecedented levy to guard against future crises later this spring, meaning G20 countries could impose the new tax before the end of the year.
The new tax is likely to take the effect of a small annual charge on banks' balance sheets.