The IMF's Special Drawing Rights

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Special Drawing rights are interest-bearing reserve assets introduced by the International Monetary Fund in 1969 they're frequently called STRs but their currency code is actually XDR while all this sounds complicated it's not that difficult to understand how things work 189 countries are IMF members at this point the International Monetary Fund simply creates these X DRS out of thin air if you will and distribute them to members based on their IMF quota which pretty much reflects their position in the global economy they cannot be used to buy products or services but can be created between countries let's say country a needs some more liquidity it can decide to sell X DRS the country B in exchange for US dollars simple enough but why would country B buy as the ours well two main reasons one the IMF has the authority that asked countries with robust foreign exchange reserves to buy X DRS from countries with weaker reserves and to the interest-bearing dimension if a country's XDR holdings fall below its allocation it has to pay interest on the difference and the same way countries receive interest payments on the difference if they end up owning more SDR than their allocation this interest rate is determined by the IMF once per week whereas the value of an x Dr. is determined daily based on a basket of five currencies at this point the US dollar the Euro the Japanese yen the British Pound and as of the first October 2016 also the Chinese renminbi