abhishreshthaa
Abhijeet S
SPECIAL DRAWING RIGHTS
- The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system.
- It is an artificial “basket” currency used by the IMF for internal accounting purposes. The SDR is also used by some countries as a peg for their own currency
- A country participating in this system needed official reserves—government or central bank holdings of gold and widely accepted foreign currencies—that could be used to purchase the domestic currency in foreign exchange markets, as required to maintain its exchange rate.
- Is used as an international reserve asset, to supplement members' existing reserve assets
- But the international supply of two key reserve assets—gold and the U.S. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place.
- Therefore, the international community decided to create a new international reserve asset under the auspices of the IMF.
- IMF voting shares and loans are all denominated in SDRs