What is an IMF SDR?
On August 23, the International Monetary Fund (IMF) undertook a general allocation of Special Drawing Rights (SDRs) of SDR 456 billion to all its 190 members. These SDRs have a monetary value of US$650 billion. This week’s reader focuses on explaining some of the most frequently asked questions surrounding this SDRs allocation.
This is an international reserve asset that was created by the IMF in 1969 to supplement the reserve assets of its members. Generally, SDR is an artificial currency in which IMF member countries can exchange freely for a basket of real international currencies which comprise the US dollar, the British pound, the euro, the Japanese yen, and China’s renminbi. SDR exchange rate is set daily by the IMF.
Under the Articles of Agreement, the Fund is allowed to create unconditional liquidity provision via ‘general allocations’ to participating members but in proportion to their quotas. A general allocation should promote the achievement of IMF’s purposes; avoiding GDP stagnation and deflation (the opposite of inflation).