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Facts about SDR

CCTV.com

09-30-2016 12:37 BJT

Special Drawing Rights aren't physical currencies. Created in 1969, they are meant to address limited supplies of gold and U-S dollars as the only reserve assets and means of settling global transactions. 

The SDR was created to supplement existing reserves of IMF member nations to help boost global financial liquidity.

At first its value was pegged to the price of a unit of gold, which was also equivalent to one U-S dollar.

In 1973, IMF decided to link SDR value to a basket of currencies after the U-S dollar was deemed overvalued.

Today it includes the euro, U-S dollar, U-K pound and Japanese yen.

The IMF allocates the SDRs among its member countries.

Members can then buy or sell SDRs between them and exchange them for a 'freely usable' currency - one that's widely used in international transactions and easily converted in foreign exchange markets.

The total value of SDRs is 280 billion dollars -- about the size of Chile's economy in 2014-- only the forty-second biggest economy in the world.

The basket is reviewed every 5 years to determine if new currencies should be added.

 

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