POLICY BRIEF 09-11

Understanding Special Drawing Rights (SDRs)

by John Williamson, Peterson Institute for International Economics

June 2009

Special Drawing Rights (SDRs), the reserve asset issued by the International Monetary Fund (IMF), have lately reappeared in the news. The G-20 leaders, at their recent meeting in London, endorsed a proposal to issue $250 billion in SDRs to counteract the financial crisis, while the governor of the People's Bank of China has called for SDRs to gradually replace the dollar at the center of the international monetary system, a plan that would be facilitated by allowing countries to convert their dollar reserve holdings into SDRs.

John Williamson reviews the history of the IMF's SDRs and provides an overview of these and other proposals that would increase this synthetic currency's role in the international monetary system. The SDR was originally created to resolve a recognized flaw in the structure of the postwar Bretton Woods monetary system, but the eventual breakdown of Bretton Woods and the subsequent evolution of the current dollar-centered system have relegated the SDR mostly to the minor role of serving as a unit of account for the IMF's transactions. Recent proposals would return the SDR to greater prominence and could help to create a financial system that is free from the imbalances that have plagued the world of late.

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RELATED LINKS

Policy Brief 14-9: IMF Reform Is Waiting on the United States March 2014

Policy Brief 13-7: The Congress Should Support IMF Governance Reform to Help Stabilize the World Economy March 2013

Book: A Strategy for IMF Reform February 2006

Working Paper 11-5: Integrating Reform of Financial Regulation with Reform of the International Monetary System February 2011

Policy Brief 10-29: Strengthening IMF Surveillance: A Comprehensive Proposal December 2010

Working Paper 10-14: Reform of the Global Financial Architecture October 2010

Testimony: The Role of the International Monetary Fund and Federal Reserve in the Stabilization of Europe May 20, 2010

Op-ed: How the Fund Can Help Save the World Economy March 5, 2009

Article: Economists Seek IMF Reform January 26, 2009

Policy Brief 07-1: The IMF Quota Formula: Linchpin of Fund Reform February 2007

Op-ed: The IMF Should Heed This Resignation July 25, 2012



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