IMF to distribute SDR to member countries by August

The International Monetary Fund recently announced that it will distribute the Special Drawing Rights to its member countries by mid-August.

Key Highlights

The IMF has agreed to support SDR allocation of 650 million USD. This is the largest in the history of IMF. Recently, the G20 Finance Minsters agreed to the International Monetary Fund to provide fresh SDR to its member countries. Earlier the ministers were concerned that liquidity injection could produce costly side effects if countries used the funds for irrelevant purposes.

Special Drawing Rights

The Special Drawing Right is neither a currency nor a claim on the IMF. The private entities cannot hold SDRs.

International Treaties

The international treaties that use Special Drawing Rights are Montreal Convention, Convention on Limitation of Liability for Maritime Claims. The convention caps personal liability for damage to shops at 330,000 XDR. XDR is the unit of Special Drawing Rights.

International Organisations

The international organisations using Special drawing rights are as follows:

  • Japan External Trade Organisation
  • Islamic Development Bank
  • African Development Bank
  • Asian Development Bank
  • International Fund for Agricultural Development

Currencies used

The value of SDR changes every day. The IMF uses a basket of currencies to determine the SDR value, The weightage of the currencies depends on its prominence in international trade and the foreign exchange reserves of the respective nation. The weightage given to the currencies are as follows:

  • US Dollar: 41.73%
  • Euro: 31%
  • Chinese Renminbi: 11%
  • Japanese Yen: 8.33%
  • British Pound: 8.09%

These currencies are reviewed once in five years. The Chinese Renminbi was added to the basket in 2016.

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