'No mention of dollar in BRIC draft'
Yekaterinburg (Russia), June 16, 2009
The draft communique of Brazil, Russia, India and China (BRIC) does not mention the role of US dollar or a supranational reserve currency, sources with knowledge of the document told Reuters on Tuesday.
The sources said the draft communique calls for a 'diversified, stable and predictable currency system' as well as for a bigger role by emerging economies in international financial institutions.
The communique is yet to be signed by BRIC leaders. The leaders of Brazil, Russia, India and China, known as BRIC, are seeking to use their economic clout to get a bigger say in how the world's financial system is run.
In a run-up to the summit, Russia said reserve currencies will be discussed at the meeting but China - which holds nearly $2 trillion in foreign currency reserves - was silent, indicating little unity on any potential challenge to the greenback.
'The existing set of reserve currencies, including the US dollar, have failed to perform their functions,' president Dmitry Medvedev told a news conference in the Russian city of Yekaterinburg, ahead of the BRIC summit.
'We will not do without additional reserve currencies,' Medvedev said, adding that a new supranational reserve currency was also an option as the International Monetary Fund's Special Drawing Rights (SDR) gained a bigger role.
The US dollar slid on Tuesday on the Russian comments, which came a day after Finance minister Alexei Kudrin said the dollar's status as the world's main reserve currency would unlikely change in the near term.
Chinese President Hu Jintao has remained silent on the Kremlin's currency ideas which could ultimately indicate more about the divisions of the BRIC club rather than its strength.
The four BRIC countries, which account for 15 per cent of the $60.7 trillion global economy, are expected to issue a communique after the summit on Tuesday and BRIC leaders are scheduled to speak later in the day to the media.
The initial response from the developed world to Russia's initiative came from Japan where Finance minister Kaoru Yosano reiterated his view that the dollar will remain the world's key reserve currency.
Medvedev's chief economic aide, Arkady Dvorkovich, called on the International Monetary Fund (IMF) to expand the basket of SDRs to include the Chinese yuan, commodity currencies such as the rouble, Australian and Canadian dollars and gold.
The SDR is an international reserve asset allocated to member countries with its exchange rate determined by a basket of currencies, at the moment including dollar, euro, yen and sterling. A review of the basket is due in November 2010.
Dvorkovich said BRIC leaders will discuss new reserve currencies at the summit but called for caution in the currency debate, saying it was in no-one's interest to ruin the dollar. He said new reserve currencies were inevitable.
'The world economy will grow. In the future we are sure growth will resume. This growing pie should be divided in a fairer way. We are not talking about excluding the dollar but the share of other currencies should increase,' he said.
Bric leaders will discuss investing their reserves in each other's currencies, settling bilateral trade in domestic currencies and striking currency swap agreements, he said.
He said BRIC countries had a common position regarding the reform of the International Monetary Fund while a decision by China, Brazil and Russia to purchase SDR-denominated bonds issued by the IMF would boost the role of SDRs.-Reuters