Special Drawing Rights SDRs
Special Drawing Rights (SDR’s)
international unconditional reserve assets in the International Monetary Fund (IMF). SDR’s take the form of subscriptions to the special accounts of the IMF member countries and are designed to cover balance-of-payments deficits and replenish currency reserves and IMF accounts. SDR’s were introduced in 1970. By 1974 nearly all IMF member countries had participated in SDR operations. SDR operations are performed with IMF consent and under IMF control.
According to IMF rules, a country with a balance-of-payments deficit and wishing to use its SDR’s may receive in exchange for its SDR’s, foreign currency from some other member country, either through direct agreement with the country or through the IMF. The IMF “designates” as creditor a country with a favorable balance of payments and—which is especially important—with sufficient currency reserves. As its balance-of-payments position improves, the debtor country is obliged to pay off the credits it has received, thus rebuilding the SDR reserves in its account. Between 1970 and 1972, about 9.4 billion SDR’s— approximately 3 billion a year—were issued and allocated to participants in proportion to their IMF quotas. The issuance of SDR’s was later suspended.
The value of an SDR was originally set at 0.888671 gr of gold, that is, the gold content of one US dollar before devaluation of the dollar in December 1971. Since July 1, 1974, the IMF has determined the SDR value indirectly, in relation to the weighted mean of the currencies of 16 major capitalist countries (the US dollar is weighted at 33 percent) on the basis of daily rates of exchange. SDR operations involve the charging and payment of interest at a rate originally set at 1–2 percent and since 1974 at as much as 5 percent.
SDR’s were created in order to strengthen the capitalist monetary system, to increase the number of international means of payment, and to remove gold from the sphere of international accounts. Several Western economists see SDR’s as the prototype for an international collective currency among the capitalist countries. Nevertheless, at the present stage of the monetary crisis, when inflation in the capitalist countries is universal and chronic, any artificial efforts to breathe new life into the capitalist monetary system, including the introduction and use of SDR’s as an international means of payment, are doomed to failure. SDR’s can play the role of world money only to a certain extent, since they in themselves have no value and no real security and since their issuance and allocation are subject to limits established arbitrarily by the IMF.
O. V. SOROKINA