Special drawing rights

A special drawing right allows a member country of the IMF to obtain surplus currency held by another member country.

The special drawing rights reserve (SDR) was created by the International Monetary Fund (IMF) in 1969. It is designed to supplement the existing official reserves of member countries. But what is it?

As the IMF states, the SDR is "neither a currency nor a claim on the IMF". Multiple currencies are held all around the world in many different countries so, for example, not all of the sterling in the world is held in Britain. So an SDR allows a member of the IMF to obtain surplus currency held by another IMF member. This can be arranged by agreement.

Alternatively, the IMF can designate members with strong external positions (current account surpluses) to buy SDRs from members with much weaker positions to release the currency that they need to meet their external obligations and payments. The value of an SDR is based on a basket of currencies the euro, yen, sterling and the US dollar and carries an interest rate. The US dollar value of the SDR is available every day on the IMF website.

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How to stop recurring subscriptions becoming a drain on your money
Personal finance

How to stop recurring subscriptions becoming a drain on your money

Tracking and pruning subscriptions isn’t as easy as it sounds. Here's how to take charge.
14 Sep 2021