{"id":9517,"date":"2022-05-16T00:00:00","date_gmt":"2022-05-16T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/16-05-2022\/special-drawing-rights-sdr\/"},"modified":"2022-05-16T00:00:00","modified_gmt":"2022-05-16T00:00:00","slug":"special-drawing-rights-sdr","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/16-05-2022\/special-drawing-rights-sdr","title":{"rendered":"Special Drawing Rights (SDR)"},"content":{"rendered":"<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>In News\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Recently, the IMF lifted the yuan\u2019s weighting in the<\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong> Special Drawing Rights<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> currency basket.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>About the recent changes\u00a0\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p style=\"text-align:center\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/HoXX4LRm_EzXdiRLPE1MHg7TjM-aGirQldXzLP0ZGzdGTrk5JCm1H3K8QFFRsi_ZTwLq2FAE06z9yg0TYdQrYpx8rCQYtKvtlapU3eqkvdHsJoMheTcTL8XKz_l2IKinYvpt18l4m_IdO-HImw\" style=\"height:191px; width:439px\" \/><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Recent change in Weightage<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: The IMF raised the yuan\u2019s weight to 12.28% from 10.92% in its first regular review of the SDR evaluation since the Chinese currency was included in the basket in 2016.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The weighting of the US dollar rose to 43.38% from 41.73%, while those of the euro, Japanese yen and British pound declined.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Implications:<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> It will prompt the Chinese central bank to pledge to push for a further opening of its financial markets.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The change came amid a sharp depreciation of the yuan.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The Chinese currency is expected to play a rising role in global payments, settlements and foreign exchange reserves over the long term.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>What are Special Drawing Right (SDR)?\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">This is a kind of <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>reserve of foreign exchange assets<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> comprising leading currencies globally and was created by the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>International Monetary Fund<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> in the year 1969.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">SDR is often regarded as a<\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong> &#8216;basket of national currencies&#8217;<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> comprising major currencies of the world &#8211; the US dollar, Euro, British Pound, Yen (Japan) &#038; the Chinese renminbi (included in 2016).\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The composition of this basket of currencies is reviewed every five years wherein the weightage of currencies sometimes gets altered.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">SDR can be <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>freely exchanged between the member countries<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> instead of relying on the currency of any one particular country.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Quotas<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Quota (the amount contributed to the IMF) of a country is denominated in SDRs.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Members\u2019 voting power is related directly to their quotas.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">IMF makes the general SDR allocation to its members in proportion to their existing quotas in the IMF.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">India&#8217;s foreign exchange reserves also incorporate SDR other than gold reserves, foreign currency assets and Reserve Tranche in the IMF.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Reserve Tranche<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It is a portion of the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>required quota of currency each member country<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> must provide to the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>International Monetary Fund (IMF)<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> that can be utilized for its own purposes.<\/span><\/span><\/span><\/li>\n<\/ul>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; width:591px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fabf8f; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top; width:591px\">\n<p><span style=\"font-size:13pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>International Monetary Fund<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It was established in <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>1944 <\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">in the aftermath of the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Great Depression of the 1930s<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>IMF and the World Bank<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> are also known as the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Bretton Woods twins<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> because both were agreed to be set up at a conference in <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Bretton Woods in the US<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It is <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>governed by and accountable to the 190 countries<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> that make up its near-global membership.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>India <\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">became a <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>member <\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">in<\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong> December 1945<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Aim: <\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">To ensure the stability of the international monetary system (the system of exchange rates and international payments) which enables countries and their citizens) to transact with each other.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Its <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>mandate was updated in 2012<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> to include all macroeconomic and financial sector issues that bear on global stability.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Financing:<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> The IMF&#8217;s resources mainly come from the <\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>money that countries pay as their capital subscription<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> (quotas) when they<\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong> become members<\/strong><\/span><\/span><\/span><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Each member of the IMF is assigned a quota, based broadly on its relative position in the world economy.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Countries can then borrow from this pool when they fall into financial difficulty.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Publications:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">World Economic Outlook<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Global Financial Stability Report<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Fiscal Monitor<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Global Policy Agenda\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size:12pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Source: TH<\/strong><\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News\u00a0 Recently, the IMF lifted the yuan\u2019s weighting in the Special Drawing Rights currency basket. About the recent changes\u00a0\u00a0 Recent change in Weightage: The IMF raised the yuan\u2019s weight to 12.28% from 10.92% in its first regular review of the SDR evaluation since the Chinese currency was included in the basket in 2016. The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":9518,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[30,26,50,46],"class_list":["post-9517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-2","tag-gs-3","tag-important-international-institutions","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/6740653Screenshot_6.png","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/9517","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=9517"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/9517\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/9518"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=9517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=9517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=9517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}