Special Drawing Rights (SDR)

Definition

An international reserve asset created by the International Monetary Fund (IMF) to supplement the official reserves of member countries; it is not a currency but a claim on freely usable currencies of IMF members.

Key points

• Created by the IMF in 1969; its value is based on a basket of major currencies.
• The current SDR basket comprises five currencies: the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
• The Chinese renminbi was added to the basket in 2016, becoming the fifth currency.
• SDRs are allocated to members in proportion to their IMF quota; they can be exchanged among members for usable currencies and count as part of foreign exchange reserves.
• The interest rate on SDRs (the SDR rate) is set weekly from short-term rates of the basket currencies.

Why it matters for CAPF

The IMF as issuer, the year 1969, the five-currency basket, and the 2016 addition of the renminbi are commonly tested international-economy facts.

Common confusion

The SDR is a reserve asset and unit of account, not a real currency you can spend directly; the basket has five currencies (the Indian rupee is not in it).

Parent note

international economic institutions