7. The International Monetary System at a Crossroad
Felipe Larrain B.
In the most likely scenario the US dollar will remain as the main reserve currency in the foreseeable future, but will face growing competition over the medium term from other national currencies, such as the euro, the BRIC (Brazil, Russia, India, and the People's Republic of China) currencies, the yuan, etc., and a supranational currency such as the SDR. Therefore, the dollar will probably lose weight in time as a share of international reserves. However, this process is likely to be slow and gradual, particularly due to lingering doubts about the future of the euro following fiscal problems in several countries of the Euro area.
The SDR is likely to gradually win greater importance as a reserve currency if it can play a larger role in trade and financial transactions in the global economy, and if it can substantially increase its liquidity and use as an international lender of last resort (ILLR) currency. The increase in 2009 of the SDR allocations and the flexible credit line go in that direction.