Reforming the interest rate system for special drawing rights to incentivize reallocation

Abstract

SDRs are an international reserve asset issued by IMF and allocated to its member countries to help to supplement their official reserves. IMF unconditionally allocates SDRs to all or some of its membership when it determines that there is a need to boost global liquidity. Since its creation in 1969, the SDR has been the unit of account of IMF and several other multilateral organizations, such as the African Development Bank. Under its Articles of Agreement, IMF is entitled to proceed with allocations of SDRs when it determines that there is a long-term global need to supplement the official reserves of countries. An allocation of SDRs does not add to the public debt burden of any country.