The Special Drawing Right (SDR) is an interest-bearing international reserve asset, not a currency, created and maintained by the International Monetary Fund (IMF). It serves as the IMF's unit of account and a supplementary foreign exchange reserve for its member countries. The SDR was established in 1969 to solve the problem of insufficient global liquidity, specifically a shortage of US dollars and gold, which were the primary reserve assets under the Bretton Woods fixed exchange rate system.
The SDR represents a potential claim on the freely usable currencies of IMF members. Its value is determined daily based on a weighted basket of five major international currencies: the US dollar, the euro, the Chinese yuan (renminbi), the Japanese yen, and the British pound sterling. SDRs are allocated to IMF members in proportion to their respective IMF quotas. A country can exchange its SDRs for hard currencies through voluntary trading arrangements with other members or, if necessary, via a mandatory designation mechanism on members with strong external positions.
The system is governed by the IMF's Articles of Agreement. A significant recent change was the largest-ever general allocation of SDR 456.5 billion (about US$650 billion) on August 23, 2021, which aimed to boost global liquidity and help countries manage the impact of the COVID-19 pandemic. The currency basket was also updated to include the Chinese yuan as of October 2016.