Special Drawing Rights

SDRs were created in 1969 to supplement countries’ official reserves, at a time when gold and US dollars were the main reserve assets. They are not a currency used by the public. Instead, member countries can exchange SDRs among themselves for usable currencies when they need them.

The value of the SDR is based on a basket of five currencies: the US dollar, the euro, the Chinese renminbi, the Japanese yen and the British pound. The renminbi was added in 2016. The basket is reviewed periodically.

The IMF allocates SDRs to members in proportion to their quotas, its measure of each country’s size in the IMF. In 2021, during the COVID-19 pandemic, the IMF made its largest allocation ever, worth around 650 billion US dollars, to support global liquidity.

For example, a country facing a shortage of foreign currency reserves could exchange some of its SDRs for US dollars or euros through the IMF. The SDR is also the IMF’s unit of account, used to denominate its loans and some international agreements.