Question

Write the meaning of Special Drawing Rights.

Answer 1

Special Drawing Rights (SDRs): The Fund has succeeded in establishing a scheme of Special Drawing Rights (SDRs) which is otherwise called ‘Paper Gold’. They are a form of international reserves created by the IMF in 1969 to solve the problem of international liquidity. They are allocated to the IMF members in proportion to their Fund quotas. SDRs are used as a means of payment by Fund members to meet the balance of payments deficits and their total reserve position with the Fund. Thus SDRs act both as an international unit of account and a means of payment. All transactions by the Fund in the form of loans and their repayments, its liquid reserves, its capital, etc., are expressed in the SDR.