SPECIAL DRAWING RIGHTS (SDR)

Special Drawing Rights (SDRs) are a form of international monetary reserve currency created by the International Monetary Fund (IMF) to supplement its member countries' official reserves. SDRs are not a traditional currency, but rather a potential claim on the freely usable currencies of IMF member countries.

The value of the SDR is determined based on a basket of major international currencies. As of my last knowledge update in January 2022, the SDR basket includes the U.S. dollar (USD), euro (EUR), Chinese renminbi (CNY), Japanese yen (JPY), and British pound sterling (GBP).

SDRs can be used by IMF member countries in a variety of ways, such as settling international transactions, diversifying reserves, and participating in the allocation of SDRs by the IMF to its member countries. The allocation of SDRs is a way to provide liquidity to the global economy, especially during times of economic crisis

3. Special Drawing Rights (SDR) Value – Weightage of Basket Currencies

The Special Drawing Right (SDR) is an international reserve asset created by the International Monetary Fund (IMF) in 1969. It's not a physical currency, but rather a claim on freely usable currencies of IMF member countries.

The value of the SDR is based on a basket of five major currencies:

U.S. dollar (USD): 41.73% weightage

Euro (EUR): 20.94% weightage

Chinese renminbi (RMB): 12.28% weightage

Japanese yen (JPY): 11.30% weightage

British pound sterling (GBP): 10.95% weightage

These weights are determined by the IMF based on the relative importance of each currency in the world's trading and financial systems. The basket is reviewed and adjusted every five years, or earlier if necessary.

The value of the SDR is calculated daily based on the exchange rates of the basket currencies. As of today, January 12, 2024, the SDR is equivalent to XDR 1.46

4.Special Drawing Rights – Used by International Organizations

Special Drawing Rights (SDRs) are primarily used by member countries of the International Monetary Fund (IMF). SDRs provide a supplement to the existing reserves of IMF member countries and serve as a potential claim on the freely usable currencies of other member countries. Member countries can use SDRs in various ways, including settling international transactions, diversifying their reserves, and participating in the allocation of SDRs by the IMF.

In addition to member countries, some international organizations also use or hold SDRs as part of their financial operations. These organizations may include international financial institutions, development banks, and other entities involved in global economic and financial activities. The use of SDRs by such organizations can contribute to liquidity and stability in the international monetary system.

Here are some specific examples of how international organizations have used SDRs:

• In 2021, the IMF made the largest-ever allocation of SDRs, amounting to SDR 456 billion (around $650 billion at the time). This allocation was designed to boost global liquidity and support countries' responses to the COVID-19 pandemic.
• The World Bank has used SDRs to finance development projects in countries like Tanzania, Ethiopia, and Mozambique, focusing on areas like education, renewable energy, and climate change adaptation.
• The African Development Bank has issued bonds denominated in SDRs to raise funds for infrastructure projects across the continent