The Special Drawing Rights (SDR) is an international reserve asset created by the International Monetary Fund (IMF) in 1969 to supplement member countries’ official reserves.
Key features:
- Not a currency, but an accounting unit
- Value based on a basket of five currencies:
- US Dollar
- Euro
- Chinese Renminbi (added 2016)
- Japanese Yen
- British Pound
- Allocated to IMF member countries
- Can be exchanged for freely usable currencies
Functions:
- International reserve asset
- Unit of account for IMF transactions
- Provides liquidity to global economic system
- Allocated based on countries’ IMF quotas
- Helps stabilize international financial system
The SDR serves as a supplementary international reserve asset, providing additional liquidity to the global financial system when needed.