Special Drawing Rights is a reserve created by the IMF to help countries that have Balance of payments problem. The member countries have to contribute to this account in proportion to their IMF quota (membership fee).
The member countries are entitled to get loan from IMF’s Special drawing account up to 200% of the members quota with IMF. It is also called paper gold.
SDR also acts as an international type of monetary reserve asset.
The value of SDR is determined on the basis of a basket of currencies. SDR basket of currencies includes the U.S. dollar, Euro, Japanese yen, pound sterling and the Chinese renminbi (included in 2016).
Each currency is assigned different weightage as per their importance in the world economy and value of the SDR is determined daily based on market exchange rates.
The SDR basket is reviewed every 5 years.
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