{"id":94166,"date":"2026-03-21T17:49:37","date_gmt":"2026-03-21T12:19:37","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=94166"},"modified":"2026-03-21T17:49:37","modified_gmt":"2026-03-21T12:19:37","slug":"special-drawing-rights","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/special-drawing-rights\/","title":{"rendered":"Special Drawing Rights (SDR), Meaning, Value, Currencies, Uses"},"content":{"rendered":"<p><b>Special Drawing Rights (SDR)<\/b><span style=\"font-weight: 400;\"> are an <\/span><b>international reserve asset<\/b><span style=\"font-weight: 400;\"> created by the <\/span><b>International Monetary Fund (IMF) <\/b><span style=\"font-weight: 400;\">to <\/span><b>enhance global liquidity, support financial stability, and supplement the foreign exchange reserves of member countries.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Special Drawing Rights (SDR) is <\/span><b>not a currency<\/b><span style=\"font-weight: 400;\">, it cannot be used directly for buying goods or services; it functions as an <\/span><b>accounting unit for IMF transactions<\/b><span style=\"font-weight: 400;\"> with member countries and a stable asset in countries\u2019 international reserves. It is <\/span><b>not a foreign aid<\/b><span style=\"font-weight: 400;\">, an SDR allocation does not add to any country\u2019s public debt burden.<\/span><\/p>\n<h2><b>Special Drawing Rights (SDR) Value<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Special Drawing Rights (SDR) Value was <\/span><b>initially defined in terms of gold<\/b><span style=\"font-weight: 400;\"> (0.888671 grams), which was equivalent to one US dollar at that time. After the collapse of the Bretton Woods system in 1973, SDR was redefined as a <\/span><b>basket of currencies.<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Currently, the value of Special Drawing Rights (SDR) is based on a basket of five currencies &#8211; <\/span><b>dollar, euro, Japanese yen, pound sterling and the Chinese Renminbi.<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Criteria for Inclusion in SDR Basket<\/b><span style=\"font-weight: 400;\">: A currency must satisfy two key conditions:\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Export Criterion<\/b><span style=\"font-weight: 400;\">: A currency meets the export criterion if the issuing country is an IMF member (or a monetary union that includes IMF members) and one of the top five world exporters.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Freely Usable Criterion<\/b><span style=\"font-weight: 400;\">: A currency meets the freely usable criterion if it is widely used in payments for international transactions and widely traded in the principal exchange markets.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The value of Special Drawing Rights (SDR) is decided every day by the <a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/international-monetary-fund\/\" target=\"_blank\"><strong>International Monetary Fund<\/strong><\/a>. It is calculated using the exchange rates of a basket of major currencies, based on market rates around noon in London.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This value is published daily on the IMF website for transparency.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The value of Special Drawing Rights (SDR) is <\/span><b>denominated in terms of dollars.\u00a0<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The IMF <\/span><b>reviews the SDR basket every five years, or earlier<\/b><span style=\"font-weight: 400;\"> if required, to reflect changes in the global economy.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>For Example<\/b><span style=\"font-weight: 400;\">: In the 2015 review, the IMF recognized the growing importance of China and included the Chinese Renminbi (RMB) in the SDR basket.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The IMF fixes the quantity (units) of each currency in the basket for five years. Suppose the SDR basket contains 2 US Dollars and 1 Euro. These quantities remain fixed for 5 years. However, their relative importance (weights) changes daily due to exchange rate movements. For example, if 1 US Dollar equals \u20b980 and 1 Euro equals \u20b990 today, and the next day the Dollar strengthens to \u20b985 while the Euro weakens to \u20b988, the overall value composition of the basket changes. As the US Dollar becomes stronger, it contributes more to the total value of the SDR. Consequently, the relative importance or weight of the Dollar in the SDR increases, even though the actual quantity of currencies in the basket remains unchanged.<\/span><\/li>\n<\/ul>\n<h2><b>Who can hold Special Drawing Rights (SDR)<\/b><\/h2>\n<p><b>Special Drawing Rights (SDR) are held by<\/b> <b>countries <\/b><span style=\"font-weight: 400;\">(through their central banks or governments) that are <\/span><b>members of the International Monetary Fund<\/b><span style=\"font-weight: 400;\">. They can <\/span><b>also be held by some international institutions, but not by individuals or private companies.<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">All member countries of the International Monetary Fund can hold SDRs as part of their official foreign exchange reserves.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The <\/span><b>IMF allocates SDRs to its members in proportion to their quota.<\/b>\n<ul>\n<li><b>For example<\/b><span style=\"font-weight: 400;\">, If the IMF allocates $650 billion worth of SDRs globally and a country has a 2% quota, it will receive 2% of SDRs (\u2248 $13 billion).<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>IMF quota<\/b><span style=\"font-weight: 400;\"> is the financial contribution (subscription) that each member country makes to the International Monetary Fund when it joins. IMF quota determines subscription, voting power, borrowing limits, and SDR allocation<\/span><\/li>\n<li><span style=\"font-weight: 400;\">IMF quota is determined by indicators like GDP, trade openness, and foreign exchange reserves, hence countries with stronger economies receive a larger share of SDRs.<\/span><\/li>\n<li><b>India&#8217;s share in SDR allocation (quota) is 2.75% and voting power in IMF is 2.63%<\/b><\/li>\n<li><span style=\"font-weight: 400;\">The first allocation was done in 1970-72. The most recent allocation of Special Drawing Rights (SDR) was made in August 2021 by the IMF to SDR 456 billion (approximately $650 billion), the largest allocation in history, to support global liquidity during the COVID-19 crisis. The allocation was distributed among member countries in proportion to their IMF quotas.<\/span><\/li>\n<\/ul>\n<h2><b>Uses and Features of Special Drawing Rights (SDR)\u00a0<\/b><\/h2>\n<p><b>Special Drawing Rights (SDR) serve as an important international reserve asset that provides liquidity, supports financial stability, and facilitates transactions within the global monetary system.<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SDRs do not exist in the form of notes or coins; they are not a physical currency. Hence, they are often referred to as<\/span><b> \u201cpaper gold\u201d or a notional currency.<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SDRs <\/span><b>cannot be held by private individuals or entities<\/b><span style=\"font-weight: 400;\">; only governments, central banks, and approved international institutions can hold them.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SDRs <\/span><b>cannot be used directly to buy goods and services<\/b><span style=\"font-weight: 400;\"> in international trade.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Instead, <\/span><b>countries exchange SDRs for freely usable currencies<\/b><span style=\"font-weight: 400;\"> such as US Dollar, Euro, Yen, Pound, and Yuan through IMF-facilitated arrangements.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These <\/span><b>exchanges take place through voluntary trading arrangements among IMF member countries<\/b><span style=\"font-weight: 400;\">, ensuring liquidity in the global system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SDRs function as an <\/span><b>interest-bearing reserve asset<\/b><span style=\"font-weight: 400;\"> &#8211; If a member purchases SDRs and its holdings rise above its allocation, it earns interest on the excess. Conversely if it sells SDRs and holds fewer SDRs than allocated, it pays interest on the shortfall.<\/span><\/li>\n<\/ul>\n<figure style=\"width: 317px\" class=\"wp-caption aligncenter\"><img decoding=\"async\" class=\"my-image my-image-align-none\" style=\"max-width: 100%; height: 512px; border: 2px dashed #ccc; width: 327px;\" src=\"https:\/\/d35xcwcl37xo08.cloudfront.net\/current-affairs-wp-uploads\/2026\/03\/sdr-allocations.webp\" alt=\"sdr allocations\" width=\"327\" height=\"512\" data-wp-shortcode=\"%5Bmy_image%20src%3D%22https%3A%2F%2Fd35xcwcl37xo08.cloudfront.net%2Fcurrent-affairs-wp-uploads%2F2026%2F03%2Fsdr-allocations.webp%22%20size%3D%22full%22%20align%3D%22none%22%20width%3D%22327%22%20height%3D%22512%22%20alt%3D%22sdr%20allocations%22%20title%3D%22sdr%20allocations%22%5D\" \/><figcaption class=\"wp-caption-text\"><strong>Sourse:<\/strong> imf.org<\/figcaption><\/figure>\n<h2><b>Special Drawing Rights (SDR) Significance\u00a0<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Special Drawing Rights (SDR) hold significant importance in the global financial system as they <\/span><b>enhance liquidity, strengthen reserves, and support economic stability, especially during times of crisis.<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Special Drawing Rights (SDR) provide <\/span><b>non-debt creating liquidity,<\/b><span style=\"font-weight: 400;\"> helping countries strengthen foreign exchange reserves without increasing borrowing.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They play a key role in <\/span><b>managing balance of payments crises<\/b><span style=\"font-weight: 400;\">, allowing countries to access foreign currency during external shocks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">SDRs contribute to <\/span><b>global financial stability<\/b><span style=\"font-weight: 400;\"> by acting as a safety net, especially during crises like the <a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/covid-19\/\" target=\"_blank\"><strong>COVID-19<\/strong><\/a> pandemic.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Being based on a basket of currencies, SDRs help <\/span><b>reduce dependence on a single dominant currency <\/b><span style=\"font-weight: 400;\">such as the US dollar.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">They <\/span><b>support developing countries by providing additional reserves<\/b><span style=\"font-weight: 400;\">, though allocation remains unequal due to quota-based distribution.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Special Drawing Rights (SDR) are IMF reserve assets that boost global liquidity. Know SDR meaning, value, basket currencies, uses, and role in financial stability.<\/p>\n","protected":false},"author":11,"featured_media":94184,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[786],"tags":[6272],"class_list":{"0":"post-94166","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-general-studies","8":"tag-special-drawing-rights","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/94166","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=94166"}],"version-history":[{"count":1,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/94166\/revisions"}],"predecessor-version":[{"id":94168,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/94166\/revisions\/94168"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/94184"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=94166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=94166"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=94166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}