According to ABBREVIATIONFINDER, SDR stands for Special Drawing Rights which was built by the member countries of the International Monetary Fund (IMF) by changing the IMF Agreement from 28. 7. 1969 Book money created on special accounts at the IMF, which is subject to its control and which constitutes a member country’s right to transfer convertible currencies to all IMF members.
Originally, the creation of the SDR was intended to make the international currency system more independent of gold and US dollars and to make the international currency system more flexible in order to prevent a lack of international liquidity in the long term. The original goal of making the SDR the most important currency reserve was never achieved.
Special Drawing Rights: Currency Basket
| Special drawing rights: Calculation of the currency basket (as of October 1, 2016) | ||
| currency | Weight in the SDR basket (in%) | Equivalent per SDR (in US dollars) |
| U.S. dollar | 41.7 | 0.58 |
| Euro | 30.9 | 0.39 |
| Renminbi ¥ uan | 10.9 | – |
| yen | 8.3 | 0.08 |
| Pound Sterling | 8.1 | 0.14 |
The value of one unit of SDR was set in gold until June 30, 1974, with gold parity corresponding to the gold value of one US $ (1 SDR = 0.888 671 g gold = 1 US $). With the increasing displacement of gold as a currency reserve, the SDR value was initially determined parallel to gold and from April 1, 1978 exclusively using a currency basket (currencies of the 16 most important world trading nations). On January 1, 1981, the number of currencies in the basket was reduced to five. With entry into the final stage of the European Economic and Monetary Union (January 1, 1999), the IMF replaced the D-Mark and French franc currency amounts in the SDR basket with corresponding euro amounts (based on the official conversion rates). The separate reporting of the euro amounts for Germany and France was changed on January 1st. Replaced in 2001 by a uniform euro amount, so that since then there have only been four currencies in the SDR basket. After the admission of the Chinese renminbi ¥ uan on October 1, 2016, the SDR basket consists of five currencies. The weight shares in the basket, which are checked every five years (most recently in 2015) and adjusted if necessary, reflect the relative importance of currencies in international trade (share of the respective country or currency area in world exports) and finance (share of the respective currencies in world currency reserves) in the five years preceding the year of the review.
The value of the SDR, expressed in US dollars, is determined daily by converting the currency amounts in the basket with the dollar quotations of the individual currencies into US dollars and then adding them up. SDRs are not traded on the foreign exchange markets. The SDR value relative to each currency tends to be more stable than the value of any of the four basket currencies, as fluctuations in the exchange rate of one currency are offset by fluctuations in the exchange rate of the other currencies.
The IMF members are allocated their SDRs, whereby the allocation amounts are based on the national quota of the respective country at the IMF. Allocated SDRs become part of the currency reserves. In contrast to the use of normal drawing rights, the SDRs are taken over by the respective country without surrendering their own currency to the fund. The central banks can surrender their SDRs at any time to the central bank of another (designated) member state determined by the IMF and receive convertible currency in exchange for this. However, this is only allowed if the seller of SDR has balance of payments problems that he has to cope with with the purchase of foreign currency. The full use of SDRs to finance balance of payments deficits is not linked to economic or financial policy conditions. It is forbidden to use them to change the composition of the currency reserves. The “restitution obligation”, according to which the fund members were obliged to hold a fixed fraction (initially 30%, since January 1, 1979: 15%) of their SDR allocations as a “minimum reserve” for an average of five years, was changed on 4. Abolished in 1981. The “designated” members are only obliged to surrender their currencies as long as their holdings of SDRs in relation to the cumulative net allocations do not exceed certain maximum values (acceptance limit). Holding 15%) of their SDR allocations as a “minimum reserve” was abolished on April 23, 1981. The “designated” members are only obliged to surrender their currencies as long as their SDR holdings in relation to the cumulative net allocations do not exceed certain maximum values (acceptance limit). Holding 15%) of their SDR allocations as a “minimum reserve” was abolished on April 23, 1981. The “designated” members are only obliged to surrender their currencies as long as their SDR holdings in relation to the cumulative net allocations do not exceed certain maximum values (acceptance limit).
The IMF is authorized to expand the circle of official owners and users of SDRs beyond those of its member countries. The IMF has also designated organizations as “other owners” of SDRs, including the Bank for International Settlements and the World Bank. These “other owners” are generally treated the same with regard to the possible uses of SDRs, but are excluded from allocations by the IMF.
