Reference no: EM133284401

Questions

1. Special drawing rights (SDRs) are a type of international reserve currency that the International Monetary Fund (IMF) created in 1969 to supplement member countries' existing money reserves.

2. SDRs, which act as an addition to standard reserve currencies, were developed in response to concerns regarding the limitations of gold and dollars as the sole means of settling international accounts. As a result, they increase international liquidity.

3. The International Monetary Fund created special drawing rights (SDRs) as an artificial currency instrument and uses them for internal accounting.

4.A weighted basket of major currencies, including the U.S. dollar, euro, Japanese yen, Chinese yuan, and British pound, is used to determine the SDR's value.

5. The basis for calculating the interest rate paid to members for their remunerated creditor positions in the IMF and charged to member countries when they borrow from the IMF is the SDR interest rate (SDRi).

6. SDRs are distributed according to the quotas of each member nation.A nation will receive a larger SDR allocation the higher the quota amount.

7. Stronger economies typically have higher quotas.
SDRs can be exchanged for other currencies, paid back loans, paid obligations, paid pledges, paid interest on loans, or paid for quota increase increases.

8. Understanding Special Drawing Rights (SDRs) An SDR is essentially an IMF-created currency made up of a basket of significant national currencies.
SDRs are used for internal accounting purposes by the IMF.

9. The IMF provides its member nations with SDRs, which are backed by the full faith and credit of those governments.

Every five years, the SDR's composition is reviewed.

10. The following table depicts the SDR's current composition and will be updated in July 2022.