Special Drawing Rights (XDR)

Basic Concepts of Special Drawing Rights

The Special Drawing Right (SDR) is an international reserve asset created by the International Monetary Fund (IMF) in 1969 to supplement the official reserves of member countries. It is not a physical currency, but a unit of account based on a basket of major international currencies, the value of which is determined by a weighted average of the U.S. dollar, the euro, the Chinese yuan, the Japanese yen and the British pound.

Countries of Use

SDRs are used only by IMF member countries and selected official institutions and are not traded in private markets. All 189 IMF member countries can allocate SDRs in proportion to their shares for intergovernmental balance of payments settlements, reserve management, or repayment of IMF loans, covering almost all sovereign countries in the world.

Units and Denominations

The SDR has the currency code "XDR" and has no physical bills or coins. Its smallest unit corresponds to the IMF's unit of account and is usually recorded as a whole number. The value is recalculated daily based on the currency basket, e.g. 1 XDR may be equivalent to approximately US$1.2-1.4 (subject to exchange rate fluctuations). The nominal value is only reflected in the IMF's electronic account bookkeeping.

Historical Background

SDRs were born during the Bretton Woods system to address the global shortage of gold and dollar reserves. the first allocation was made in 1969, and a four-currency basket (USD, EUR, JPY, GBP) was formed after 2001, with the inclusion of the Chinese Yuan (CNY) in 2016. There have been four large-scale allocations in history, the most recent of which was a new 650 billion XDR in 2021 to deal with the epidemic crisis.