A new scheme to ease some of the pressure of the U.S. dollar has been proposed to the International Monetary Fund's executive directors by its managing director, H. J. Witteveen.
Witteveen has suggested the creation of a substantial new amount of special drawing rights (SDRs), an international monetary asset created by the IMF and distributed proportionately among its members.
But this new amount of SDRs would not be a net additional to total world liquidity because they would be substituted for dollars now held as reserves by many of the 130 IMF member countries.
A feature of the Witteveen plan, The Washington Post learned, is that the dollars traded in for SDRs would be put into a "sterilized" account that could never be touched. The depositng countries, however, would draw any interest from such dollars as they were invested, presumably in Treasury securities.
Witteveen reportedly has two objectives in mind. First, the plan would promote SDRs, which are now supposed to be at the center of the international monetary system. Inasmuch as the world at the moment is not suffering from a shortage of liquidity, there is no prospect of a "normal" issue of SDRs. The substitution idea would at the one time create additional reserves of SDRs, but hold the level of total reserves constant.
Witteveen has not suggested how many SDRs he proposes to create, but a source said "the amount would not be token."
And secondly, it would ease the pressure on the dollar that arises when nations around the world find that they are holding uncomfortably large amounts. It would be a small step forward relieving the dollar from its solitary role as a reserve currency.
So far, the proposal is looked on favorably by Great Britain, and with some skepticism by West Germany. The Germans are not sure that the dollar could be effectively sterlized by Witteveen, and not some day become the source of inflation. All individual countries are studying the plan.
It is not clear whether or how the U.S. would get a share of the SDR allocation. This and other details of the scheme are scheduled to be discussed at the IMF Interim Committee meeting in Mexico City at the end of the month.