Professor Dominique Strauss Kahn

The International Monetary Fund (IMF) says it will be establishing a green fund through the issuance of more special drawing rights (SDRS). SDRS are a basket of currencies, which include the American dollar, British pound, the Japanese yen and the euro.

This basket was developed as a reserve asset by the Washington based institution during the 1960s in order to increase the level of international liquidity to facilitate a boom in world trade. One SDR is valued at approximately US$1.60.

Professor Dominique Strauss Kahn, the managing director of the agency, said that the money would be used to help finance a shift in the global economy through the establishment of a multi billion green fund, which could peak at US$100 billion per annum in a few years time.

Speaking at a panel discussion on the future of the global economy last week, the former French economy minister, who is now managing director of the fund posited that it is obvious that developing countries do not have the resources to finance the measures needed to tackle climate change, while developed countries are saddled with the enormous debts incurred by combating the current global crisis.

Strauss Kahn also stressed that the IMF would be starting discussions with central banks and finance ministers on the feasibility of creating the green fund, partly financed by SDRS shortly.

He also pointed out that climate change financing was such a big issue that it cannot be seen as a problem that cannot be solved. He however conceded that the debt overhang created by the global crisis makes it necessary to seek alternative financial solutions for this problem.

The IMF top man also argued that the agency would be releasing a paper containing detailed proposals on the scheme in a few weeks while stressing that the global crisis has created problems related to fiscal sustainability for many countries, that could take up to seven years to solve because of the huge debts built up during the crisis.

There is currently some US$204.1 billion in SDRS available across the globe now, following the general allocation, which took place in August of last year. Professor Strauss Kahn’s proposal would lead to the release of more SDRS if it is approved.­