Context:

• IMF’s executive board has backed increasing its special drawing rights (SDR) by $650 billion as it looks to support countries recover from the COVID-19 crisis.

About IMF

• The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation.
• It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.
• The IMF is governed by and accountable to its 190 member countries.
• The IMF was conceived in July 1944 at the United Nations Bretton Woods Conference in New Hampshire, United States.
• The 44 countries in attendance sought to build a framework for international economic cooperation and avoid repeating the competitive currency devaluations that contributed to the Great Depression of the 1930s.
• The IMF's primary mission is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries and their citizens to transact with each other.

About Special Drawing Rights:

• Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969 that operates as a supplement to the existing money reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.

Key takeaway for SDR

• Special drawing rights (SDR) are an artificial currency instrument created by the International Monetary Fund, which uses them for internal accounting purposes.
• The value of the SDR is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound.
• The SDR interest rate (SDRi) provides the basis for calculating the interest rate charged to member countries when they borrow from the IMF and paid to members for their remunerated creditor positions in the IMF.

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