Definition
Special Drawing Rights, or SDRs, are an international reserve asset created by the International Monetary Fund in 1969 to supplement the official reserves of its member countries. An SDR is not a currency and not a claim on the IMF itself — it is a potential claim on the freely usable currencies of IMF members.
The value of one SDR is set from a weighted basket of major currencies, currently the US dollar, euro, Chinese renminbi, Japanese yen, and British pound. Because it blends several currencies, the SDR is more stable than any single one of them.
Why it matters
How it works
The IMF allocates SDRs to member countries in proportion to their quotas — their financial stake in the Fund. A country holding SDRs can exchange them for hard currency with another member, either by voluntary agreement or through IMF-arranged transactions.
A member that draws down its SDRs pays interest; one that holds more than its allocation earns interest. This makes the SDR a low-cost source of liquidity that strengthens the global financial safety net without expanding any nation's debt.