IMF raises India's special drawing rights allocation

Economic Affairs World Bank and IMF

02-Sep-21

Context: Recently, International Monetary Fund (IMF) has increased the allocation of Special Drawing Rights (SDR) to India in line with the existing quota of India in the fund.

This allocation is about 2.75 per cent of the overall 456.5 billion SDRs general allocation made to the Fund's member countries. IMF has a membership of 190 countries.

About SDR

It is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries.
SDR holdings is one of the components of the foreign exchange reserves (FER) of a country.
It can be freely exchanged between the member countries instead of relying on currency of any one particular country.
IMF makes the general SDR allocation to its members in proportion to their existing quotas in the Fund.
SDR is neither a currency nor a claim on the IMF.
It is a potential claim on freely usable currencies of the member countries.
It serves as the unit of account for IMF and other international organizations.

How SDR value is determined?

Currency value of the SDR is calculated by summing the values of SDR basket of currencies in U.S. dollars on the basis of market exchange rates.
It is calculated daily (except on IMF holidays or when IMF is closed for business). The valuation basket of SDR is reviewed and adjusted every five years.

SDR basket of currencies

SDR basket comprises of U.S. dollar, Euro, Japanese yen, pound sterling and Chinese renminbi.

International Monetary Fund (IMF)

IMF is an organization comprising of 189 member countries.
Each member is having representation on the IMF’s executive board in proportion of their financial importance.
Thus, most powerful countries in global economy have the most voting power.
IMF was conceived in July 1944 at a UN conference in Bretton Woods, United States.

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