Special Drawing Rights
Encyclopedia
Special Drawing Rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund
(IMF). Not a currency, SDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged. As they can only be exchanged for Euro
s, Japanese yen, UK pounds, or US dollars, SDRs may actually represent a potential claim on IMF member countries' nongold foreign exchange reserve assets, which are usually held in those currencies. While they may appear to have a far more important part to play, or, perhaps, an important future role, being the unit of account
for the IMF has long been the main function of the SDR.
Created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the US dollar, the SDR's value is defined by a weighted currency basket
of four major currencies: the Euro
, the US dollar, the British pound, and the Japanese yen
. SDRs are denoted with the ISO 4217 currency code
XDR.
SDRs are allocated to countries by the IMF. Private parties do not hold or use them. As of March 2011, the amount of SDRs in existence is around XDR 238.3 billion, but this figure is expected to rise to XDR 476.8 by 2013.
The name may actually derive from an early proposal for IMF "reserve drawing rights". The word "reserve" was later replaced with "special" because the idea that the IMF was creating a foreign exchange reserve asset was contentious.
under the Bretton Woods system
of fixed exchange rates. After the collapse of that system in the early 1970s the SDR has taken on a far less important role. Acting as the IMF's unit of account
has been its primary purpose since 1972.
The IMF itself calls the current role of the SDR "insignificant". Developed countries
, who hold the greatest number of SDRs, are unlikely to use them for any purpose. The only actual users of SDRs may be those developing countries
that see them as "a rather cheap line of credit".
One reason SDRs may not see much use as foreign exchange reserve assets is that they must be exchanged into a currency before use. This is due in part to the fact private parties do not hold SDRs: they are only used and held by IMF member countries, the IMF itself, and a select few organizations licensed to do so by the IMF. Basic functions of foreign exchange reserves, such as market intervention and liquidity provision, as well as some less prosaic ones, such as maintaining export competitiveness via favorable exchange rates, cannot be accomplished directly using SDRs. This fact has led the IMF to label the SDR as an "imperfect reserve asset".
Another reason they may see little use is that the number of SDRs in existence is relatively few. As of January 2011, SDRs represented less than 4% of global foreign exchange reserve assets. To function well a foreign exchange reserve asset must have sufficient liquidity, but SDRs, due to their small number, may be perceived to be an illiquid asset. The IMF says, "expanding the volume of official SDRs is a prerequisite for them to play a more meaningful role as a substitute reserve asset".
One of its first roles was to alleviate an expected shortfall of US dollars c.
1970. At this time, the US had a conservative monetary policy and did not want to increase the total amount of US dollars in existence. If the US had continued down this path, the dollar would have become a less attractive foreign exchange reserve asset: it would not have had the necessary liquidity to serve this function. Soon after SDR allocations began, the US reversed its former policy and provided sufficient liquidity. In the process a potential role for the SDR was removed. During this first round of allocations, 9.3 billion SDRs were distributed to IMF member countries.
The SDR resurfaced in 1978 when many countries were wary of taking on more foreign exchange reserve assets denominated in US dollars. This suspicion of the dollar precipitated an allocation of 12 billion SDRs over a period of four years.
Concomitant with the financial crisis of 2007–2010, the third round of SDR allocations occurred in the years 2009 and 2011. The IMF recognized the financial crisis as the cause for distributing the large majority of these third-round allotments, but some allocations were couched as distributing SDRs to countries that had never received any and others as a re-balancing of IMF quotas, which determine how many SDRs a country is alloted, to better represent the economic strength of emerging markets
. In total, 203.4 billion SDRs were allocated in this round.
During this time China, a country with large holdings of US dollar foreign exchange reserves, voiced its displeasure at the current international monetary system promoting measures that would allow the SDR to "fully satisfy the member countries' demand for a reserve currency". These comments, made by a chairman of the People's Bank of China, Zhou Xiaochuan
, drew media attention, and the IMF showed some support for China's stance. It produced a paper exploring ways the substance and function of the SDR could be increased. China has also suggested the creation of a substitution account to allow exchange of US dollars into SDRs. When substitution was proposed before, in 1978, the US appeared reluctant to allow such a mechanism to become operational. It is likely just as reluctant today.
for use by them as cost-free alternatives to building foreign exchange reserves though borrowing or running current account
surpluses. In 2009, a SDR allocation was made to countries that had joined the IMF after the 1979-1981 round of allocations was complete (and so had never been allocated any). First proposed in 1997, many of the beneficiaries of this 2009 allocation were developing countries.
after the 1973 collapse of the Bretton Woods system of fixed exchange rates. Composed of the Japanese yen
, the US dollar, the British pound and the Euro
, the basket of currencies used to value the SDR is "weighted" meaning that the more important currencies have a larger impact on the SDR's value. Currently, the value of one SDR is equal to the sum of 0.423 Euros, 12.1 Yen, 0.111 pounds, and 0.66 US Dollars.
This basket is re-evaluated every five years, and the currencies included as well as the weights given to them can then change. A currency's importance is currently measured by the degree to which it is used as a foreign exchange reserve asset and the amount of exports sold in that currency.
Current valuation:
Due to fluctuating exchange rate
s, the relative value of each currency varies continuously, and so does the value of the SDR. The IMF fixes the value of one SDR in terms of US dollars daily. The latest US dollar valuation of the SDR is published on the IMF web site.
Allocations are not made on a regular basis and have only occurred on several occasions. The first round took place due to a situation that was soon reversed, the possibility of an insufficient amount of US dollars because of US reluctance to run the deficit necessary to supply future demand. Extraordinary circumstances have, likewise, led to the other SDR allocation events.
to purchase SDRs from those with weak reserves. The maximum obligation any country has under this mechanism is currency equal to twice the amount of its SDR allocation. As of 2011, SDRs may only be exchanged for Euros, Japanese yen, UK pounds, or US dollars. The IMF says exchanging SDRs can take "several days".
It is not, however, the IMF that pays out foreign currency in exchange for SDRs: the claim to currency that SDRs represent is not a claim on the IMF.
by some international organizations including the IMF. A few countries peg their currencies to SDRs, too. And charges, liabilities, or fees prescribed by some international treaties are denominated in SDRs.
Unit of account:
Some international organizations use the SDR as a unit of account
. The IMF says using the SDR in this way "help[s] cope with exchange rate volatility". As of 2001, organizations that use the SDR as a unit of account, besides the IMF itself, include: African Development Bank
, Arab Monetary Fund
, Asian Development Bank
, Bank for International Settlements
, Common Fund for Commodities
, East African Development Bank
, Economic Community of West African States
, International Center for Settlement of Investment Disputes, International Fund for Agricultural Development
, and Islamic Development Bank
. And it is not only international organizations that use the SDR in this way. JETRO
uses SDRs to price foreign aid and the Reserve Bank of New Zealand
, foreign reserves.
Use in international law:
In some international treaties and agreements, SDRs are used to value penalties, charges or prices. For example, the Convention on Limitation of Liability for Maritime Claims caps personal liability for damages to ships at XDR 330,000. The Montreal Convention
, and other treaties also uses SDRs in this way.
Currency peg:
The IMF says, "the SDR may not be any country’s optimal basket
", but a few countries do peg their currencies to the SDR. One possible benefit to nations with SDR pegs is that they may be perceived to be more transparent. As of 2000, the number of countries that did so was four. This is a substantial decrease from 1983, when 14 countries had SDR pegs. As of 2007, Syria
pegs its pound
to the SDR.
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF). Not a currency, SDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged. As they can only be exchanged for Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
s, Japanese yen, UK pounds, or US dollars, SDRs may actually represent a potential claim on IMF member countries' nongold foreign exchange reserve assets, which are usually held in those currencies. While they may appear to have a far more important part to play, or, perhaps, an important future role, being the unit of account
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
for the IMF has long been the main function of the SDR.
Created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and the US dollar, the SDR's value is defined by a weighted currency basket
Currency basket
A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used to minimize the risk of currency fluctuations. An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of...
of four major currencies: the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
, the US dollar, the British pound, and the Japanese yen
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...
. SDRs are denoted with the ISO 4217 currency code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...
XDR.
SDRs are allocated to countries by the IMF. Private parties do not hold or use them. As of March 2011, the amount of SDRs in existence is around XDR 238.3 billion, but this figure is expected to rise to XDR 476.8 by 2013.
Name
The SDR was purposefully given an innocuous name free of connotations due to controversy, as disagreements broke out over the nature of this new reserve asset during its creation. Some wanted it to function like money and others, credit. While the name would offend neither side of this debate, it can be argued that prior to 1981 the SDR was a debt security and so a form of credit. Member countries receiving SDR allocations were required by the reconstitution provision of the SDR articles to hold a prescribed number of SDRs. If a state used any of its allotment, it was expected to rebuild its SDR holdings. As the reconstitution provisions were abrogated in 1981, the SDR now functions less like credit than previously. Countries are still expected to maintain their SDR holdings at a certain level, but penalties for holding fewer than the allocated amount are now less onerous.The name may actually derive from an early proposal for IMF "reserve drawing rights". The word "reserve" was later replaced with "special" because the idea that the IMF was creating a foreign exchange reserve asset was contentious.
History
Special Drawing Rights were created by the IMF in 1969 and were intended to be an asset held in foreign exchange reservesForeign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
under the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...
of fixed exchange rates. After the collapse of that system in the early 1970s the SDR has taken on a far less important role. Acting as the IMF's unit of account
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
has been its primary purpose since 1972.
The IMF itself calls the current role of the SDR "insignificant". Developed countries
Developed country
A developed country is a country that has a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue...
, who hold the greatest number of SDRs, are unlikely to use them for any purpose. The only actual users of SDRs may be those developing countries
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...
that see them as "a rather cheap line of credit".
One reason SDRs may not see much use as foreign exchange reserve assets is that they must be exchanged into a currency before use. This is due in part to the fact private parties do not hold SDRs: they are only used and held by IMF member countries, the IMF itself, and a select few organizations licensed to do so by the IMF. Basic functions of foreign exchange reserves, such as market intervention and liquidity provision, as well as some less prosaic ones, such as maintaining export competitiveness via favorable exchange rates, cannot be accomplished directly using SDRs. This fact has led the IMF to label the SDR as an "imperfect reserve asset".
Another reason they may see little use is that the number of SDRs in existence is relatively few. As of January 2011, SDRs represented less than 4% of global foreign exchange reserve assets. To function well a foreign exchange reserve asset must have sufficient liquidity, but SDRs, due to their small number, may be perceived to be an illiquid asset. The IMF says, "expanding the volume of official SDRs is a prerequisite for them to play a more meaningful role as a substitute reserve asset".
Alternative to US dollar
The SDR comes to prominence when the US dollar is weak or otherwise unsuitable to be a foreign exchange reserve asset. This usually manifests itself as an allocation of SDRs to IMF member countries. Distrust of the US dollar is not the only stated reason allocations have been made, however.One of its first roles was to alleviate an expected shortfall of US dollars c.
Circa
Circa , usually abbreviated c. or ca. , means "approximately" in the English language, usually referring to a date...
1970. At this time, the US had a conservative monetary policy and did not want to increase the total amount of US dollars in existence. If the US had continued down this path, the dollar would have become a less attractive foreign exchange reserve asset: it would not have had the necessary liquidity to serve this function. Soon after SDR allocations began, the US reversed its former policy and provided sufficient liquidity. In the process a potential role for the SDR was removed. During this first round of allocations, 9.3 billion SDRs were distributed to IMF member countries.
The SDR resurfaced in 1978 when many countries were wary of taking on more foreign exchange reserve assets denominated in US dollars. This suspicion of the dollar precipitated an allocation of 12 billion SDRs over a period of four years.
Concomitant with the financial crisis of 2007–2010, the third round of SDR allocations occurred in the years 2009 and 2011. The IMF recognized the financial crisis as the cause for distributing the large majority of these third-round allotments, but some allocations were couched as distributing SDRs to countries that had never received any and others as a re-balancing of IMF quotas, which determine how many SDRs a country is alloted, to better represent the economic strength of emerging markets
Emerging markets
Emerging markets are nations with social or business activity in the process of rapid growth and industrialization. Based on data from 2006, there are around 28 emerging markets in the world . The economies of China and India are considered to be the largest...
. In total, 203.4 billion SDRs were allocated in this round.
During this time China, a country with large holdings of US dollar foreign exchange reserves, voiced its displeasure at the current international monetary system promoting measures that would allow the SDR to "fully satisfy the member countries' demand for a reserve currency". These comments, made by a chairman of the People's Bank of China, Zhou Xiaochuan
Zhou Xiaochuan
Zhou Xiaochuan is a Chinese economist, banker, reformist and bureaucrat. As governor of the People's Bank of China since December 2002, he has been in charge of the monetary policy of the People's Republic of China....
, drew media attention, and the IMF showed some support for China's stance. It produced a paper exploring ways the substance and function of the SDR could be increased. China has also suggested the creation of a substitution account to allow exchange of US dollars into SDRs. When substitution was proposed before, in 1978, the US appeared reluctant to allow such a mechanism to become operational. It is likely just as reluctant today.
Use by developing countries
In 2001, the UN suggested allocating SDRs to developing countriesDeveloping country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...
for use by them as cost-free alternatives to building foreign exchange reserves though borrowing or running current account
Current account
In economics, the current account is one of the two primary components of the balance of payments, the other being the capital account. The current account is the sum of the balance of trade , net factor income and net transfer payments .The current account balance is one of two major...
surpluses. In 2009, a SDR allocation was made to countries that had joined the IMF after the 1979-1981 round of allocations was complete (and so had never been allocated any). First proposed in 1997, many of the beneficiaries of this 2009 allocation were developing countries.
Value definition
The value of the SDR is determined by the value of several currencies important to the world’s trading and financial systems. Initially its value was fixed, so that 1 SDR = 1 US dollar, but this was abandoned in favor of a currency basketCurrency basket
A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used to minimize the risk of currency fluctuations. An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of...
after the 1973 collapse of the Bretton Woods system of fixed exchange rates. Composed of the Japanese yen
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...
, the US dollar, the British pound and the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
, the basket of currencies used to value the SDR is "weighted" meaning that the more important currencies have a larger impact on the SDR's value. Currently, the value of one SDR is equal to the sum of 0.423 Euros, 12.1 Yen, 0.111 pounds, and 0.66 US Dollars.
This basket is re-evaluated every five years, and the currencies included as well as the weights given to them can then change. A currency's importance is currently measured by the degree to which it is used as a foreign exchange reserve asset and the amount of exports sold in that currency.
Current valuation:
Due to fluctuating exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
s, the relative value of each currency varies continuously, and so does the value of the SDR. The IMF fixes the value of one SDR in terms of US dollars daily. The latest US dollar valuation of the SDR is published on the IMF web site.
| Period |  USDUnited States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... |
 DEM |
 FRFFrench franc The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money... |
 JPYJapanese yen The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling... |
GBP Pound sterling The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence... |
|---|---|---|---|---|---|
| 1981–1985 | 0.540 (42%) | 0.460 (19%) | 0.740 (13%) | 34.0 (13%) | 0.0710 (13%) |
| 1986–1990 | 0.452 (42%) | 0.527 (19%) | 1.020 (12%) | 33.4 (15%) | 0.0893 (12%) |
| 1991–1995 | 0.572 (40%) | 0.453 (21%) | 0.800 (11%) | 31.8 (17%) | 0.0812 (11%) |
| 1996–1998 | 0.582 (39%) | 0.446 (21%) | 0.813 (11%) | 27.2 (18%) | 0.1050 (11%) |
| Period | USD United States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... |
 EUREuro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... |
JPY Japanese yen The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling... |
GBP Pound sterling The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence... |
|
| 1999–2000 | 0.5820 (39%) | 0.2280 (21%) | 0.1239 (11%) | 27.2 (18%) | 0.1050 (11%) |
| = 0.3519 (32%) | |||||
| 2001–2005 | 0.5770 (44%) | 0.4260 (31%) | 21.0 (14%) | 0.0984 (11%) | |
| 2006–2010 | 0.6320 (44%) | 0.4100 (34%) | 18.4 (11%) | 0.0903 (11%) | |
| 0.6600 (41.9%) | 0.4230 (37.4%) | 12.1000 (9.4%) | 0.1110 (11.3%) | ||
Interest rate
Special Drawing Rights carry a weekly determined interest rate, but no party pays interest if an IMF member country maintains the amount of SDRs allocated to it. Based on "a weighted average of representative interest rates on short-term debt in the money markets of the SDR basket currencies", interest is paid by an IMF member country if it holds less SDRs than it was allocated, and interest is paid to a member country if it holds more SDRs than the amount it was allocated.Allocations
Special Drawing Rights are allocated to member countries by the IMF. A country's IMF quota, the maximum amount of financial resources that it is obligated to contribute to the fund, determines its allotment of SDRs. Any new allocations must be voted on in the IMF's SDR Department and pass with an 85% majority. All IMF member countries are represented in the SDR Department, but this is not a one country, one vote system. Voting power is determined by a member country's IMF quota. For example, the US has 16.7% of the vote as of 2 March 2011.Allocations are not made on a regular basis and have only occurred on several occasions. The first round took place due to a situation that was soon reversed, the possibility of an insufficient amount of US dollars because of US reluctance to run the deficit necessary to supply future demand. Extraordinary circumstances have, likewise, led to the other SDR allocation events.
| Date | Amount |
|---|---|
| 1970-1972 | XDR 9.3 billion |
| 1979–1981 | XDR 12.1 billion |
| August 28, 2009 | XDR 161.2 billion |
| September 9, 2009 | XDR 21.4 billion |
| Sometime after March 3, 2011 | XDR 20.8 billion |
Exchange
In order to use its SDRs, a country must find a willing party to buy them. The IMF acts as an intermediary in this voluntary exchange; it also has the authority under the designation mechanism to ask member countries with strong foreign exchange reservesForeign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
to purchase SDRs from those with weak reserves. The maximum obligation any country has under this mechanism is currency equal to twice the amount of its SDR allocation. As of 2011, SDRs may only be exchanged for Euros, Japanese yen, UK pounds, or US dollars. The IMF says exchanging SDRs can take "several days".
It is not, however, the IMF that pays out foreign currency in exchange for SDRs: the claim to currency that SDRs represent is not a claim on the IMF.
Other uses
The SDR is used as a unit of accountUnit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
by some international organizations including the IMF. A few countries peg their currencies to SDRs, too. And charges, liabilities, or fees prescribed by some international treaties are denominated in SDRs.
Unit of account:
Some international organizations use the SDR as a unit of account
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
. The IMF says using the SDR in this way "help[s] cope with exchange rate volatility". As of 2001, organizations that use the SDR as a unit of account, besides the IMF itself, include: African Development Bank
African Development Bank
The African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...
, Arab Monetary Fund
Arab Monetary Fund
The Arab Monetary Fund is a regional Arab organization, founded 1976, and operational from 1977. It is a working sub-organization of the Arab League.-Objectives:...
, Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
, Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
, Common Fund for Commodities
Common Fund for Commodities
The Common Fund for Commodities is an inter-governmental financial institution established within the framework of the United Nations. It is a vestige of the proposed New International Economic Order.-External links:*...
, East African Development Bank
East African Development Bank
East African Development Bank is a development finance institution with the objective of promoting development in East Africa.-Overview:...
, Economic Community of West African States
Economic Community of West African States
The Economic Community of West African States is a regional group of fifteen West African countries. Founded on 28 May 1975, with the signing of the Treaty of Lagos, its mission is to promote economic integration across the region....
, International Center for Settlement of Investment Disputes, International Fund for Agricultural Development
International Fund for Agricultural Development
The International Fund for Agricultural Development , a specialized agency of the United Nations, was established as an international financial institution in 1977 as one of the major outcomes of the 1974 World Food Conference. IFAD is dedicated to eradicating rural poverty in developing countries...
, and Islamic Development Bank
Islamic Development Bank
The Islamic Development Bank is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded by the first conference of Finance Ministers of the Organisation of the Islamic Conference , convened 23 Dhu'l Qa'dah 1393 AH.The bank officially began its activities on...
. And it is not only international organizations that use the SDR in this way. JETRO
JETRO
is an independent government agency established by Japan Export Trade Research Organization as a nonprofit corporation in Osaka in February 1951, and reorganized as the Ministry of International Trade and Industry in 1958 to consolidate Japan's efforts in export promotion...
uses SDRs to price foreign aid and the Reserve Bank of New Zealand
Reserve Bank of New Zealand
The Reserve Bank of New Zealand is the central bank of New Zealand and is constituted under the Reserve Bank of New Zealand Act 1989. The Governor of the Reserve Bank is responsible for New Zealand's currency and operating monetary policy. The Bank's current Governor is Dr. Alan Bollard...
, foreign reserves.
Use in international law:
In some international treaties and agreements, SDRs are used to value penalties, charges or prices. For example, the Convention on Limitation of Liability for Maritime Claims caps personal liability for damages to ships at XDR 330,000. The Montreal Convention
Montreal Convention
The Montreal Convention, formally the Convention for the Unification of Certain Rules for International Carriage by Air, is a treaty adopted by a Diplomatic meeting of ICAO member states in 1999. It amended important provisions of the Warsaw Convention's regime concerning compensation for the...
, and other treaties also uses SDRs in this way.
Currency peg:
The IMF says, "the SDR may not be any country’s optimal basket
Currency basket
A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used to minimize the risk of currency fluctuations. An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of...
", but a few countries do peg their currencies to the SDR. One possible benefit to nations with SDR pegs is that they may be perceived to be more transparent. As of 2000, the number of countries that did so was four. This is a substantial decrease from 1983, when 14 countries had SDR pegs. As of 2007, Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
pegs its pound
Syrian pound
-Use of 10 Syrian pound coins in Norway:The shape of the 10 Syrian pound coin has been found to so resemble the 20 Norwegian krone coin that it can fool vending machines, coins-to-cash machines, arcade machines, and any other coin-operated, automated service machine in the country...
to the SDR.