News on the Special Drawing Right (SDR) of the International Monetary Fund (IMF) is generally relegated to the interests of IMF watchers. Nevertheless, the recent announcement of the IMF Executive Board’s conclusion of the SDR Valuation Review on May 14, 2022, attracted more attention.
Interestingly, SDR is neither a currency nor does it represent a claim on the IMF. In its present avatar, after the fall of the Bretton Woods system, SDR is an international reserve asset created by the IMF to “supplement the official reserves of its member countries”. Moreover, the composition of the SDR basket becomes vital as it “represents the relative importance of each of the currencies as a reserve asset”. The composition of SDR has been dynamic and has undergone revision every five years.
On November 30, 2015, the IMF’s Executive Board decided to include the Chinese RMB in the SDR basket as a fifth currency; with the US dollar, the…
