[WASHINGTON] IMF experts recommended on Friday that the Chinese yuan be included in the Fund's SDR basket of currencies, backing a strong push by Beijing to join the elite grouping.
IMF chief Christine Lagarde said in a statement that the staff experts, in their report to the IMF board, ruled the yuan or renminbi (RMB) "meets the requirements to be a 'freely usable' currency."
That was a key hurdle to the yuan joining the yen, dollar, pound and euro in the Fund's "special drawing rights" currency basket, seen as the leading currencies of international commerce.
After years of keeping the yuan tightly controlled, China has moved over the past few years to allow it to be more widely used in international transactions.
Lagarde said the staff experts also ruled that Beijing has addressed "all remaining operational issues" required for SDR inclusion, which will be decided by the executive board at a November 30 meeting.
"I support the staff's findings," she said, adding to expectations that the board will also back the yuan.
The Fund has been generally receptive to the idea that the yuan could join the other four currencies in the grouping.
While not a freely traded currency, the SDR is important as an international reserve asset, and because the IMF issues its crisis loans - crucial to struggling economies like Greece - valued in SDRs.
China, now the world's second-largest economy, asked last year for the yuan to be added to the grouping.
But until recently the yuan's exchangeability on international markets has been too tightly controlled by Beijing for it to fully qualify.
On August 4 the IMF said the currency fell short of meeting all the standards for inclusion, particularly on being "freely usable" in international finance.
China's economic slowdown complicated Beijing's efforts to widen the currency's use to meet that requirement.
But there was strong pressure to do so because the IMF reviews the SDR basket only every five years, and the deadline for the current review is the end of the year.
In a move seen as trying to accommodate China's push for inclusion, on August 19 the Fund announced that it had extended by nine months the implementation of the basket revision, giving more time for adjustment to the potential inclusion of the yuan.
If a decision to include the yuan is made this month, the actual inclusion could take place as late as September 30, 2016, giving Beijing more time to prepare.
"The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket," the IMF said at the time.