A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.
"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," the U.N. World Economic and Social Survey 2010 said.
The report says that developing countries have been hit by the loss of value of the U.S. dollar in recent years.
"Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s," it said.
The report supports replacing the dollar with the International Monetary Fund's special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies.
"A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency," the U.N. report said.
It said a new reserve system "must not be based on a single currency or even multiple national currencies but, instead, should permit the emission of international liquidity (such as SDRs) to create a more stable global financial system."
"Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development," it said.
Nobel Prize winner Joseph Stiglitz, who previously chaired a U.N. expert commission that considered ways of overhauling the global financial system, is among the economists who have advocated the creation of a new reserve currency system, possibly based on SDRs.
© 2011 Thomson/Reuters. All rights reserved.