Important Facts For Prelims
Special Drawing Rights: IMF
- 02 Sep 2021
- 3 min read
Why in News
Recently, the International Monetary Fund (IMF) has made an allocation of Special Drawing Rights (SDR) 12.57 billion (equivalent to around $17.86 billion at the latest exchange rate) to India.
- Now, the total SDR holdings of India stand at SDR 13.66 billion.
Key Points
- Special Drawing Rights (SDR):
- The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
- The SDR serves as the unit of account of the IMF and some other international organizations.
- The currency value of the SDR is determined by summing the values in US dollars, based on market exchange rates, of a SDR basket of currencies.
- The SDR basket of currencies includes the US dollar, Euro, Japanese yen, pound sterling and the Chinese renminbi (included in 2016).
- The SDR currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every five years.
- Quota (the amount contributed to the IMF) of a country is denominated in SDRs.
- Members’ voting power is related directly to their quotas.
- IMF makes the general SDR allocation to its members in proportion to their existing quotas in the IMF.
- India's foreign exchange reserves also incorporate SDR other than gold reserves, foreign currency assets and Reserve Tranche in the IMF.
- International Monetary Fund (IMF):
- The IMF was set up along with the World Bank after the Second World War to assist in the reconstruction of war-ravaged countries.
- The two organisations were agreed to be set up at a conference in Bretton Woods in the US. Hence, they are known as the Bretton Woods twins.
- Created in 1945, the IMF is governed by and accountable to the 190 countries that make up its near-global membership. India joined in December 1945.
- The IMF's primary purpose is to ensure the stability of the international monetary system — the system of exchange rates and international payments that enable countries (and their citizens) to transact with each other.
- Its mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.
- Reports by IMF:
- The IMF was set up along with the World Bank after the Second World War to assist in the reconstruction of war-ravaged countries.