Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries.
Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.
SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries' governments.
Value of SDR
The value of the SDR is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound.
The SDR basket is reviewed every five years, and sometimes earlier if warranted. Reviews take place to ensure that the SDR reflects the relative importance of currencies in the world’s trading and financial systems.
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