What is "special drawing rights"

n. (special drawing right English)

n. reserve assets in the International Monetary Fund; designed to supplement reserves of gold and convertible currencies used to maintain stability in the foreign exchange market [syn: paper gold]

Special drawing rights ( ISO 4217 currency code XDR, also abbreviated SDR) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). The XDR is the unit of account for the IMF, and is not a currency per se. XDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged. The XDR was created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the U.S. dollar.

XDRs are allocated to countries by the IMF. Private parties do not hold or use them. The amount of XDRs in existence was around XDR 21.4 billion in August 2009. During the global financial crisis of 2009, an additional XDR 182.6 billion were allocated to "provide liquidity to the global economic system and supplement member countries’ official reserves". By October 2014, the amount of XDRs in existence was XDR 204 billion.

The value of the XDR is based on a basket of key international currencies reviewed by IMF every five years. The weights assigned to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and national foreign exchange reserves. In the review conducted in November 2015, the IMF decided that the Renminbi ( Chinese Yuan) would be added to the basket effective October 1, 2016. From that date, the XDR basket will consist of the following five currencies: U.S. dollar 41.73%, Euro 30.93%, Chinese yuan 10.92%, Japanese yen 8.33%, British pound 8.09%.