Special Drawing Rights (SDRs) are an IMF monetary unit created in 1969, defined as a weighted average of four major currencies and recalculated every five years. SDRs serve as an accounting unit and aim to replace gold and silver in international transactions, offering benefits such as stability and reduced risk for lending countries. However, they also face criticisms regarding liquidity, limited currency representation, and associated geopolitical risks.

1. Submitted to
DR.N.Sree Rajani madam

2. Special Drawing Rights
• SDR’s are the monetary unit of the reserve assets of IMF.
• Created in 1969.
• SDR unit is defined as a weighted average sum of
contributions of 4 major currencies, revaluated and adjusted
every 5yrs and computed daily in terms of USD.
• Major currencies are US dollars(₴), Euro(€), Pounds
sterling (£) and Japanese Yen(¥).

3. Purpose of SDR’s
• Used as a unit of account by IMF and several
other international organizations.
• They are originally created to replace gold and
silver in large international transactions and
provide cost free alternative to member states
for building reserves.

4. Pro’s of SDR:
• Stable.
• No “exorbitant privilege” for USA.
• A way of developing countries.
• Less risk for countries while lending.

5. Cons of SDR:
• Liquidity
• Shifting the problem from USD to SDR’s.
• Advantage of SDR over a diversified reserve
basket.
• Contains only 4 currencies.
• Geographical risks.
• IMF voting power.