What are Special Drawing Rights? See what "SDR" is in other dictionaries Special Drawing Right monetary unit
Special Drawing Rights (SDR) are an artificially created reserve and means of payment issued by the International Monetary Fund (IMF). In fact, it is not a currency, but acts as a unit of account. However, Special Drawing Rights can be exchanged by countries for money. SDRs were created in 1969 to address the shortage of gold and US dollars as the preferred reserve medium. Since then they have been used as an alternative.
The IMF allocates special drawing rights to member countries. Private organizations and individuals cannot be their holders. As of August 2009, $21.4 billion had been appropriated. Additional funds were released throughout the global financial crisis. The total amount was $182.6 billion. The main purpose of such an injection was declared to ensure liquidity of the global economic system and supplement the official reserves of member states. As of October 2014, more than 204 billion SDRs have been issued.
Name
According to the International Organization for Standardization standard, the WDD code is XDR. The name of the new reserve asset came from discussions about its main function - payment or credit. The original name was slightly changed during the discussion. The IMF proposed calling future SDRs “reserve drawing rights.” However, it was decided to replace the first word due to the controversial nature of the asset being created.
It should be noted that prior to 1981, SDRs were primarily used as a debt security. That is, during this period the main function was the credit function. The International Monetary Fund required member countries to hold a certain reserve of SDRs. If some of them were used, then the state had to replenish its stock. However, in 1981 this requirement was abolished. Countries are still required to maintain their SDR reserves at a certain level, but the penalties for violations have become much less onerous.
Story
The International Monetary Fund created the SDR in 1969. It was planned that they would become an asset that would be held as a reserve. At this time, the Bretton Woods system was in effect, so fixed exchange rates were assumed. One SDR was equal to one dollar and 0.888671 grams of gold. After the collapse of the system in the early 1970s, SDRs began to play a lesser role. Since 1972, they began to be used mainly as a sign of payment between countries.
The IMF itself considers the current role of the SDR to be insignificant. It is unlikely that developed countries will be able to use Special Drawing Rights for anything. Therefore, they are simply contained in their accounts. As for developing countries, they see SDRs as an extremely cheap means of credit. Another problem is that the holders of special drawing rights can only be IMF member states and a few licensed organizations. This is why the International Monetary Fund calls the SDR an “imperfect reserve asset.”
As an alternative to the dollar
The IMF created the Special Drawing Rights at a time when the economy was experiencing a shortage of traditional reserve currencies and gold. The use of SDRs increases when the dollar is weak. For example, this happened in the 1970s. During this period, the American economy was expected to decline. However, the United States government soon began an active monetary policy and was able to provide the necessary liquidity for its currency. During the first phase of distribution, approximately SDR 9.3 billion was allocated.
Special Drawing Rights became popular again in 1978. Many countries were suspicious of the dollar at this time, so an additional reserve was needed. During the second stage, about 12 billion SDRs were issued. The next time the role of special drawing rights increased was during the global financial crisis. This period marks the third and fourth stages of SDR distribution.
Special Drawing Right: Course
The value of the SDR is based on a basket of key international currencies, which is revised every five years. The weight that is assigned to each component is determined based on the use of a particular monetary unit as a means of payment in international trade and reserve.
During the basket revision in November 2015, the IMF decided that the Chinese yuan would be included in the list of components of the SDR. This innovation will come into force on October 1, 2016. From now on, the shares of currencies in special drawing rights will be as follows: US dollar - 41.73%, euro - 30.93%, Chinese yuan - 10.92%, Japanese yen - 8.33%, pound sterling - 8, 09%. The SDR currently has a floating rate.
Distribution
Special rights are allocated to IMF states. A country's quota is defined as the maximum amount of financial resources that it is required to provide to an organization. To begin a new stage of SDR distribution, it is necessary that 85% of the votes be “for”. However, it should be noted that the decision-making process at the IMF has some peculiarities. One country may have, for example, 16.7% of the vote, while another may have 0.02%. This is determined based on quota. The United States of America has the greatest influence on voting. The allocation of SDRs does not occur on a regular basis, and to date there have only been four rounds of allocation.
Usage
SDRs can be used as a loan facility. However, in order to use the special drawing rights it has in its account, a country must find a government that is willing to buy them. The IMF acts as an intermediary in such a voluntary transaction. As of 2015, SDRs can be exchanged for euros, Japanese yens, pounds sterling and US dollars. The operation may take several days. Some organizations also use special drawing rights as a unit of measurement. Sometimes international agreements and treaties specify fines and prices in SDRs. Some countries peg their currencies to the Special Drawing Rights rate in hopes of making their economies appear more transparent.
Special Drawing Rights (SDR) - English Special Drawing Rights (SDR), are an artificial means of payment that is used for international payments or for the formation of gold and foreign exchange reserves. In accordance with the international standard for currency codes ISO 4217, this payment unit is designated as XDR. The issue of SDRs is carried out by the International Monetary Fund (IMF) exclusively in non-cash form in the form of entries in bank accounts. It should be noted that special drawing rights themselves are not a currency, but their holder has the right to demand their conversion into one of four currencies: the US dollar, the Euro, the British pound or the Japanese yen. Historically, SDRs emerged in 1969 as the crisis of the Bretton Woods monetary system required additional reserve assets beyond monetary gold and the US dollar.
The collapse of the Bretton Woods monetary system in 1972 led to the abandonment of the gold standard, which kept exchange rates fixed to each other. As a result, in 1976-78, the Jamaican currency system was finally formed, in which gold finally lost its role as a means of payment, and the rates of the world's main currencies became freely floating. In the new realities, the role of the International Monetary Fund has increased significantly, and special drawing rights have become widely used by participating countries to form their gold and foreign exchange reserves.
From a technical point of view, Special Drawing Rights are an artificial currency whose exchange rate is tied to a basket of currencies. Initially, this basket included 5 currencies: the US dollar (USD), the German mark (DEM), the French franc (FRF), the Japanese yen (JPY) and the British pound (GBP). In the period from 1981 to 1998, the cost of 1 SDR was as follows.
* the share of each currency in the basket is rounded to the nearest whole fraction
Subsequently, the German mark and the French franc were transformed into the Euro in 1999, and the value of 1 SDR became the following.
Thus, starting from 2011, 1 unit of special drawing rights is equivalent to 0.66 US dollars, 0.423 Euros, 12.1 Japanese yen and 0.111 British pounds. At the same time, the share of each currency in the basket is determined by the IMF based on its importance for the global financial system and international trade. At the same time, the IMF revises the shares every 5 years, but if necessary, the revision can be carried out more often.
Due to the fact that the exchange rate of the currencies included in the basket is constantly changing, the IMF recalculates and publishes the SDR rate daily as the dollar value of the currency basket in the form of the XDR/USD currency pair.
Currently, the IMF uses special drawing rights to regulate the balance of payments of member countries in order to prevent crisis phenomena in the global financial system. The fund's authorized capital is formed from contributions made by countries within their quota. At the same time, 25% of the quota is paid in SDRs or in the currencies of other participating countries, and 75% in the national currency at the current exchange rate. If one of the participating countries faces a balance of payments deficit, it can apply to the IMF to obtain a loan. If the need for financing exceeds the quota, the issuance of such a loan requires the approval of the Board of Governors ( English Board of Governors), which imposes a number of mandatory conditions on the borrower country. In this case, the accounting of issued loans is carried out in SDR, and the interest rate is determined as the weighted average for short-term loans on the money market for each of the currencies included in the basket. Because money market conditions are constantly changing, the interest rate on Special Drawing Rights is recalculated weekly.
Special Drawing Rights(SDR) or HAPPY BIRTHDAY(Special Drawing Rights - SDR) - an artificial reserve and means of payment issued by (IMF). It has only a non-cash form in the form of entries in bank accounts; SDR banknotes have never yet been issued.
Special Drawing Rights are neither a debt nor a debt obligation. Currently, SDRs, in addition to settlements between the IMF Fund and its members, are used by 14 official organizations, the so-called “third-party SDR holders.”
Three states established their currencies in the SDR (at the end of the 80s there were 11); About 10 international and regional organizations use the RDD as a unit of account. A number of international organizations use SDR to express monetary values: prices, tariffs for communication services, transportation, etc. SDR is also used to regulate balance of payments, for covering balance of payments deficit, replenishing reserves and paying off IMF loans.
This means of payment was created by the IMF in 1969 as a supplement to the existing reserve assets of member countries. The main purpose of creation: to overcome Triffin's paradox within Bretton Woods monetary system- contradictions between the international nature of use and the national nature of currencies.
SDR (SDR) rate and currency basket
The SDR rate is published daily and is determined based on the dollar value of a basket of four leading currencies:
- (41.9%)
- (37.5%)
- Yen (9.4%)
- Pound sterling (11.3%).
Special Drawing Rights (SDR) is a reserve asset created by the International Monetary Fund. The SDR is used only in non-cash form for settlements between the IMF, its members and a limited number of third-party organizations.
To briefly denote SDR in texts, the symbol is used XDR, written after the amount. The letter code for the WBS according to the international standard ISO 4217 is XDR.
Dynamics of the rate of special drawing rights to the ruble over the past week:
SDR rate calculator
This online calculator will help you convert the value of SDR into rubles and vice versa. Enter the amount you need in the input field:
SDR rate chart
Information about SDR
At the time of creation special drawing rights in 1969, their exchange rate was fixed against the US dollar (1 XDR = $1). In July 1974, the rules changed: since then, the value has been defined as the dollar value of the basket of currencies that make up the SDR unit. The composition of these currencies has changed several times, and the IMF reviews their share every 5 years. From 1999 to 2015, the SDR included four currencies: the US dollar, the euro, the Japanese yen and the British pound. In 2016, the Chinese yuan became part of the SDR.
The unit value of special drawing rights in US dollars is published daily on the IMF website. The Central Bank of the Russian Federation sets the official SDR exchange rate based on this information and the official dollar exchange rate.
SDR exchange rate history by year
Maximum Special Drawing Rights Rate for the last 10 years was January 22, 2016 and amounted to 115.5616 rubles. for 1 XDR, the minimum was April 13, 2010 and was equal to 43.8949 rubles. The average exchange rate for this time is 67.8805 rubles, which is 23% less than the current value.
| Year | Minimum | Maximum |
|---|---|---|
| 86.7525 from 07/19/2019 | 94.0245 from 01/15/2019 | |
| 80,5411 | 97,8145 | |
| 75,8303 | 85,8153 | |
| 80,6182 | 115,5616 | |
| 68,1843 | 101,2377 | |
| 50,2944 | 99,6319 | |
Drawing Rights (DDR)- IMF unit of account, which has a conditional character. Used to provide loans and make payments between countries. In a reserve system, special drawing rights are the sum of reserve payments of different countries. The English name of the term is Special Drawing Rights. The abbreviations used are SDR, SDR, SDR.
- an artificially created means for payments and accumulation of reserves, the issuer of which is the IMF. The main feature of SDR is its non-cash form, which looks like entries in bank accounts.
Special Drawing Rights- a type of reserve currency of international importance, issued as an addition to existing gold and foreign exchange reserves.
Borrowing rights: essence, goals, history
Special Drawing Rights- a system of non-cash accounts, the holders of which can be IMF countries, system participants and other organizations (for example, large issuing banks). The use of SDR by private individuals is permitted only for calculating the amount of the contract, for example, the nominal value of securities.
History of appearance. SDRs were introduced in 1969 to complement the existing currency and gold reserves of participating countries. The main task was to maintain the fixed exchange rate system of the Bretton Woods system. SDRs have their own rate, published every day based on a basket of currencies. Since 1981 (before the advent of the euro), the basket included the currencies of five countries - the USA, France, Japan, Germany, and Great Britain. Since 1999, the currencies of France and Germany have been replaced by the euro.
Objectives of Special Drawing Rights:
Introduction of a new means of payment, acting as the basis of the monetary and credit system at the international level;
Moving away from the gold coin standard to Special Drawing Rights (SDR);
Creation of a full-fledged alternative to the American dollar and gold;
Stabilization of the world economy;
Reducing the impact of balance of payments imbalances in developing countries;
Preventing the development of imbalances caused by distortions in balances of payments;
Introduction of a new unit of account for international structures (including the IMF).
Special Drawing Rights are neither a requirement of the IMF nor a currency. This is a requirement for the currencies of countries that are members of the IMF. SDR holders are entitled to receive these currencies in exchange for their Special Drawing Rights.
Transactions with SDR are carried out in one of two ways:
Through normal exchanges between member states of the IMF;
By appointing representative countries by the Fund that are members of the IMF and have strong positions in the foreign market. These states undertake obligations to buy drawing rights from other countries with weaker economies.
Drawing rights: cost, scope, results
The original price of Special Drawing Rights is 0.888671 g of gold. In 1969, this figure was equivalent to 1 US dollar.
Since 1973, the SDR price has been determined based on a basket of currencies. Since 1999, this basket has included the currencies of the USA, Great Britain, Japan and the EU (euro). Information on the latest price of Special Drawing Rights can be found on the official IMF website (data is updated daily).
Calculation of drawing rights is carried out based on the exchange rates for the currencies in the basket. Rates are provided daily by the London Exchange at noon.
The composition of currencies in the SDR basket is reviewed once every 5 years by the executive board (by decision of the IMF it can be done in a shorter period of time). The last revision was carried out in 2010. At the same time, the weight of currencies in the Special Drawing Rights basket has been changed based on the adjusted price of exports of services and goods, as well as the amount of currency reserves of IMF member countries. The changes took effect at the beginning of 2011. The next revision is planned for the end of 2015.
Special drawing rights can be used for:
Receipt by the country of convertible currencies, allowing to regulate the liabilities of the balance of payments. To purchase the required currency, the state that has it transfers a certain amount of funds in SDR from a personal account in the fund to an SDR account in another state. In return, the country receives currency;
Conducting transactions with the IMF (repayment of previously received SDRs in the currency of another country, making commission payments, repurchase of one’s own currency from the IMF);
Making transactions with other countries that are members of the IMF, for example, to buy back domestic currency in exchange for SDR.
Trends and results of SDR application:
Drawing rights have accumulated in the accounts of developed countries, which has caused tension in the relationship between countries with a balance of payments surplus. The reason is the need to “freeze” foreign exchange assets by the amount of SDR;
In third world countries, the available amount of SDRs has been completely exhausted;
Special Drawing Rights were no longer used to normalize the level of the balance of payments, but to cover obligations to the IMF, making payments on commissions and interest;
A new channel has emerged for introducing the American dollar into global circulation, since most of the SDRs are exchanged for this currency.
Stay up to date with all the important events of United Traders - subscribe to our
