## ppea2023037 ## Source details **Canonical URL:** [ppea2023037](https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023037.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2023/english/ppea2023037.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2023/english/ppea2023037.pdf.json) --- ### EXECUTIVE SUMMARY — Overview - Paper provides an update on the status of the SDR trading market and operations covering the period September 1, 2022 to August 31, 2023. - For more than three decades, SDRs have been exchanged for freely usable currencies in transactions by agreement, primarily through Voluntary Trading Arrangements (VTAs). A small fraction of transactions by agreement have been arranged directly between parties. - VTAs are bilateral arrangements between the Fund and SDR department participants or prescribed holders in which the VTA participants agree to buy and sell SDRs within certain limits. - If transactions by agreement cannot provide exchanges of SDRs into currencies, the Articles of Agreement provide for an annual Designation Plan; such plans have remained precautionary and have not been activated since 1987. ### SDR Trading Summary (September 1, 2022–August 31, 2023) - Total SDR sales through VTAs: SDR 17.9 billion (140 sales transactions). - Of this, SDR 8.9 billion were exchanged by 29 participants into currencies. - SDR 8.0 billion were sold by the Poverty Reduction and Growth Trust (PRGT) and the Resilience and Sustainability Trust (RST) for liquidity management and to facilitate the investment of SDR contributions. - Purchases (acquisitions) of SDRs: SDR 5.3 billion (195 acquisitions), up from SDR 2.9 billion (90 transactions) in the prior 12 months. - Since January 1, 2018 (cumulative to August 31, 2023): - Total SDR sales through VTAs: SDR 47,795 million (439 transactions; average size SDR 108.9 million), by 75 SDR participants and 6 prescribed holders. - VTA market has supported the conversion of SDR 37.0 billion into currencies (SDR 26.9 billion by 66 SDR department participants, SDR 8.3 billion by the Trusts, and SDR 1.8 billion by prescribed holders). - Since January 2018, Fund assisted 73 participants and 2 prescribed holders in over 500 purchase transactions through VTAs amounting to SDR 8.9 billion; additionally, 193 purchase transactions (SDR 4.1 billion) were handled through the General Resources Account (GRA). ### SDR Sales Through VTAs — Details and Trends - Number and volume of participant sales decreased versus prior 12 months: 140 sales (SDR 17.9 billion) compared with 148 sales (SDR 18.3 billion) in the previous 12 months. - Average SDR sales per month in the current period: SDR 740 million; previous 12-month average: SDR 1.4 billion. - All participant sales in the current period were made by Emerging Markets and Developing countries (EMDCs). - Individual participant sale requests ranged from SDR 1.6 million to SDR 600 million. - Low Income Countries (LICs) accounted for 43 percent of total SDR sales volume in the period. - Sales by Trusts were elevated: Trusts converted SDR 8.0 billion (about 45 percent of total SDR sales volume) into currencies through the VTA market in the reporting period; prior 12 months Trust exchanges amounted to about 1 percent of total sales volume. - Prescribed holders’ activity remained limited: exchanged SDR 1.0 billion in the current period vs. SDR 823 million in prior period; prescribed holders’ SDR holdings remain about 0.3 percent of total SDR holdings. - Five official institutions were prescribed as new holders of SDRs on February 8, 2023, bringing total prescribed holders to twenty; staff onboarded the new entities to the SDR Department. ### Voluntary Trading Arrangements (VTAs) — Capacity and Participation - Number of VTA participants increased from 38 to 40 in the reporting period. - As of August 31, 2023, the buying and selling capacities of these VTAs stood at about SDR 208 billion and SDR 165 billion, respectively. - VTAs’ trading capacities consider the minimum and maximum SDR amounts a VTA participant is willing to hold and the actual SDR holdings of each VTA participant. - Since the 2021 SDR general allocation, staff onboarded eight new VTAs: Algeria, Brazil, Estonia, Lithuania, Luxembourg, Mauritius, Oman, and Singapore. - All 40 VTAs have been used (up from 37 last year). - Discussions with potential new entrants continue in the broader context of SDR channeling, which involves a strong expectation that contributors have VTAs. ### Acquisitions of SDRs Through VTAs and GRA — Drivers and Concerns - Total acquisitions (VTAs + GRA) in the period: SDR 5.3 billion (195 transactions). - Key factors behind the increase in acquisitions: - Increased requests by SDR department participants to replenish SDR holdings to cover IMF charges, reflecting the rise in the SDR interest rate from 1.566 percent to 4.067 percent between end-August 2022 and end-August 2023. Acquisitions from the GRA to cover charges increased from SDR 345 million to SDR 2,051 million during the 12-month period. - Contributions in currencies to the Administered Account for Ukraine that were subsequently converted into SDRs totaled about SDR 1.7 billion (compared with SDR 1.6 billion in the prior reporting period). - Since January 1, 2018 (to August 31, 2023): - Requests through VTAs: 538 (68 in Sep 2021–Aug 2022; 123 in Sep 2022–Aug 2023). - Transactions through VTAs: 554 (74 in Sep 2021–Aug 2022; 130 in Sep 2022–Aug 2023). - Amount of acquisitions through VTAs: SDR 8,879 million (SDR 2,531 million in Sep 2021–Aug 2022; SDR 3,223 million in Sep 2022–Aug 2023). - Requests through GRA: 179; transactions through GRA: 193; amount through GRA: SDR 4,065 million (SDR 345 million in Sep 2021–Aug 2022; SDR 2,051 million in Sep 2022–Aug 2023). - Total number of transactions since January 1, 2018: 747 (90 in Sep 2021–Aug 2022; 195 in Sep 2022–Aug 2023). - Total amount of acquisitions since January 1, 2018: SDR 12,946 million (SDR 2,875 million in Sep 2021–Aug 2022; SDR 5,274 million in Sep 2022–Aug 2023). ### Participants’ SDR Holdings and Policy Guidance - A significant number of SDR participants have largely drawn down their SDR holdings and will need acquisitions going forward: 33 participants currently have SDR holdings of less than five percent of their cumulative allocation, compared to 24 participants at end-August 2022. - Participants are strongly encouraged to proactively manage SDR balances to ensure sufficient SDRs to meet upcoming IMF obligations payable in SDRs. - Staff will continue to monitor SDR balances and prompt participants to ensure timely acquisition of SDRs, particularly given rising interest rates and increasing charges on SDR-denominated obligations. ### While most transactions are channeled through VTAs, SDR transactions can also be conducted bilaterally between participants and/or prescribed holders — Bilateral SDR transactions findings - Historically, bilateral transactions have not been significant, with an average annual amount over the last five years of only SDR 0.2 billion. - These transactions primarily relate to the settlement of financial obligations between counterparties or between participants and their regional central banks. - A moderate increase in volume was observed in 2022 due to a settlement of financial obligation between a participant and prescribed holder. - The volume rose further in 2023, due to a settlement of financial obligations between a participant and a prescribed holder, as well as the extension of an SDR loan between participants which was fully settled in SDRs during the same reporting period. - Cumulatively since 2018, 204 bilateral transactions have been conducted in the amount of SDR 3.0 billion. ### SDR interest rate context - The quarterly average SDR interest rate has increased from 1.846 percent as of end-August 2022 to 4.045 percent as of end-August 2023 reflecting the global increase in interest rates. ### VTAs — capacity and market functioning - The VTAs continue to have ample capacities to support the liquidity of the SDR. - The aggregate purchasing and selling capacities at end-August 2023 remained large at about SDR 208 billion and SDR 165 billion, respectively. - These capacities reflected updated trading ranges of VTAs, the cumulative effect of the absorption of SDR sales by VTAs, and the effect of additional capacity provided by new VTAs joining the market. - The robust trading capacities, together with the broad regional representation of the VTAs, is expected to support the continued smooth functioning of the SDR market. - Representative trading ranges (in percent of Net Cumulative Allocations): - Standard: 50 – 150 - Eurosystem: 65 – 135 - Other various ranges: 25 – 200 - Total VTAs reported: 40. ### Distribution of sale and purchase requests across VTAs — allocation criteria - Staff considers a range of criteria aiming to ensure equitable use over time, including: - The relative dispersion of SDR holdings across VTAs (based on the ratio of SDR holdings-to-allocation of individual VTAs). - The scope of VTAs to absorb a given transaction (deviation of SDR holdings from the mid-point VTA trading range). - Other considerations: relative use of each VTA as a share of allocation of total VTAs, individual transaction and counterparty limits, currency preferences, notification periods and holidays, and the need to split large requests among multiple VTAs. ### VTA participation and transaction statistics (September 1, 2022–August 31, 2023) - All 40 VTAs were utilized and each VTA participated on average in 7 SDR trades. - VTA participants’ SDR holdings are clustered tightly around the median holdings-to-allocation ratio of 103.6 percent. - Reflecting the commitment of VTA participants to facilitate increased sales of SDRs after the 2021 SDR allocation, the SDR holdings-to-allocation ratio of VTA participants increased on average by about 1.7 percentage points during the reporting period (and cumulative by 4.5 percentage points since the SDR allocation). - SDR sales (VTAs): - Number of VTAs available: 40 - Number of VTAs used: 39 - Number of sales: 140 - Amount of SDR sales (millions): 17,934 - Percent of sales: 100 - SDR acquisitions (VTAs): - Number of VTAs available: 40 - Number of VTAs used: 33 - Number of acquisitions: 130 - Amount of SDR acquisitions (millions): 3,223 - Percent of acquisitions: 100 - Regional breakdown highlights (sales): - Asia and Pacific: 31 sales, 4,437 million SDR, 25 percent of sales, 32 percent by purchasing capacity. - Europe: 73 sales, 8,928 million SDR, 50 percent of sales, 32 percent by purchasing capacity. - Western Hemisphere: 24 sales, 4,381 million SDR, 24 percent of sales, 32 percent by purchasing capacity. - Regional breakdown highlights (acquisitions): - Asia and Pacific: 22 acquisitions, 1,187 million SDR, 37 percent of acquisitions, 24 percent by selling capacity. - Europe: 76 acquisitions, 1,207 million SDR, 37 percent of acquisitions, 53 percent by selling capacity. - Western Hemisphere: 13 acquisitions, 743 million SDR, 23 percent of acquisitions, 19 percent by selling capacity. ### SDR reporting, publications, and assessments - The Fund continues to publish a wide range of information about the SDR and its uses: - The IMF’s annual and quarterly financial reports include holdings and allocations by participants and holdings by prescribed holders and aggregate data about SDR flows. - The quarterly financial reports that include individual participant’s SDR holdings also provide net changes in those holdings split in two broad categories: (i) those related to IMF operations; and (ii) SDR trading and other uses. - The IMF Finances webpage publishes monthly information on SDR holdings and allocations of participants. - The periodic IMF Financial Operations publication provides extensive information on the functioning of the voluntary SDR trading market and includes details on the operating modalities, capacity, trading by region, and aggregate transaction volumes. - Information on SDR channeling pledges and delivery of these pledges is now published on the IMF SDR webpage. - The Fund has issued a comprehensive ex-post assessment report on the 2021 SDR allocation. In line with commitments made at the time of the allocation, staff has prepared a report two years after the allocation covering the impact of the allocation for the global economy, members’ use of the allocation, economic implications at the country level, and voluntary channeling of SDRs from economically strong members to the most vulnerable ones. *Source: IMF staff calculations and reporting in the Annual Update on SDR Trading Operations (January 1, 2018–August 31, 2023).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Overview - Paper provides an update on the status of the SDR trading market and operations covering the period September 1, 2022 to August 31, 2023. - For more than three decades, SDRs have been exchanged for freely usable currencies in transactions by agreement, primarily through Voluntary Trading Arrangements (VTAs). A small fraction of transactions by agreement have been arranged directly between parties. - VTAs are bilateral arrangements between the Fund and SDR department participants or prescribed holders in which the VTA participants agree to buy and sell SDRs within certain limits. - If transactions by agreement cannot provide exchanges of SDRs into currencies, the Articles of Agreement provide for an annual Designation Plan; such plans have remained precautionary and have not been activated since 1987. ### SDR Trading Summary (September 1, 2022–August 31, 2023) - Total SDR sales through VTAs: SDR 17.9 billion (140 sales transactions). - Of this, SDR 8.9 billion were exchanged by 29 participants into currencies. - SDR 8.0 billion were sold by the Poverty Reduction and Growth Trust (PRGT) and the Resilience and Sustainability Trust (RST) for liquidity management and to facilitate the investment of SDR contributions. - Purchases (acquisitions) of SDRs: SDR 5.3 billion (195 acquisitions), up from SDR 2.9 billion (90 transactions) in the prior 12 months. - Since January 1, 2018 (cumulative to August 31, 2023): - Total SDR sales through VTAs: SDR 47,795 million (439 transactions; average size SDR 108.9 million), by 75 SDR participants and 6 prescribed holders. - VTA market has supported the conversion of SDR 37.0 billion into currencies (SDR 26.9 billion by 66 SDR department participants, SDR 8.3 billion by the Trusts, and SDR 1.8 billion by prescribed holders). - Since January 2018, Fund assisted 73 participants and 2 prescribed holders in over 500 purchase transactions through VTAs amounting to SDR 8.9 billion; additionally, 193 purchase transactions (SDR 4.1 billion) were handled through the General Resources Account (GRA). ### SDR Sales Through VTAs — Details and Trends - Number and volume of participant sales decreased versus prior 12 months: 140 sales (SDR 17.9 billion) compared with 148 sales (SDR 18.3 billion) in the previous 12 months. - Average SDR sales per month in the current period: SDR 740 million; previous 12-month average: SDR 1.4 billion. - All participant sales in the current period were made by Emerging Markets and Developing countries (EMDCs). - Individual participant sale requests ranged from SDR 1.6 million to SDR 600 million. - Low Income Countries (LICs) accounted for 43 percent of total SDR sales volume in the period. - Sales by Trusts were elevated: Trusts converted SDR 8.0 billion (about 45 percent of total SDR sales volume) into currencies through the VTA market in the reporting period; prior 12 months Trust exchanges amounted to about 1 percent of total sales volume. - Prescribed holders’ activity remained limited: exchanged SDR 1.0 billion in the current period vs. SDR 823 million in prior period; prescribed holders’ SDR holdings remain about 0.3 percent of total SDR holdings. - Five official institutions were prescribed as new holders of SDRs on February 8, 2023, bringing total prescribed holders to twenty; staff onboarded the new entities to the SDR Department. ### Voluntary Trading Arrangements (VTAs) — Capacity and Participation - Number of VTA participants increased from 38 to 40 in the reporting period. - As of August 31, 2023, the buying and selling capacities of these VTAs stood at about SDR 208 billion and SDR 165 billion, respectively. - VTAs’ trading capacities consider the minimum and maximum SDR amounts a VTA participant is willing to hold and the actual SDR holdings of each VTA participant. - Since the 2021 SDR general allocation, staff onboarded eight new VTAs: Algeria, Brazil, Estonia, Lithuania, Luxembourg, Mauritius, Oman, and Singapore. - All 40 VTAs have been used (up from 37 last year). - Discussions with potential new entrants continue in the broader context of SDR channeling, which involves a strong expectation that contributors have VTAs. ### Acquisitions of SDRs Through VTAs and GRA — Drivers and Concerns - Total acquisitions (VTAs + GRA) in the period: SDR 5.3 billion (195 transactions). - Key factors behind the increase in acquisitions: - Increased requests by SDR department participants to replenish SDR holdings to cover IMF charges, reflecting the rise in the SDR interest rate from 1.566 percent to 4.067 percent between end-August 2022 and end-August 2023. Acquisitions from the GRA to cover charges increased from SDR 345 million to SDR 2,051 million during the 12-month period. - Contributions in currencies to the Administered Account for Ukraine that were subsequently converted into SDRs totaled about SDR 1.7 billion (compared with SDR 1.6 billion in the prior reporting period). - Since January 1, 2018 (to August 31, 2023): - Requests through VTAs: 538 (68 in Sep 2021–Aug 2022; 123 in Sep 2022–Aug 2023). - Transactions through VTAs: 554 (74 in Sep 2021–Aug 2022; 130 in Sep 2022–Aug 2023). - Amount of acquisitions through VTAs: SDR 8,879 million (SDR 2,531 million in Sep 2021–Aug 2022; SDR 3,223 million in Sep 2022–Aug 2023). - Requests through GRA: 179; transactions through GRA: 193; amount through GRA: SDR 4,065 million (SDR 345 million in Sep 2021–Aug 2022; SDR 2,051 million in Sep 2022–Aug 2023). - Total number of transactions since January 1, 2018: 747 (90 in Sep 2021–Aug 2022; 195 in Sep 2022–Aug 2023). - Total amount of acquisitions since January 1, 2018: SDR 12,946 million (SDR 2,875 million in Sep 2021–Aug 2022; SDR 5,274 million in Sep 2022–Aug 2023). ### Participants’ SDR Holdings and Policy Guidance - A significant number of SDR participants have largely drawn down their SDR holdings and will need acquisitions going forward: 33 participants currently have SDR holdings of less than five percent of their cumulative allocation, compared to 24 participants at end-August 2022. - Participants are strongly encouraged to proactively manage SDR balances to ensure sufficient SDRs to meet upcoming IMF obligations payable in SDRs. - Staff will continue to monitor SDR balances and prompt participants to ensure timely acquisition of SDRs, particularly given rising interest rates and increasing charges on SDR-denominated obligations. *International Monetary Fund — Annual Update on SDR Trading Operations, September 19, 2023.* ### 11. While most transactions are channeled through VTAs, SDR transactions can also be ### While most transactions are channeled through VTAs, SDR transactions can also be conducted bilaterally between participants and/or prescribed holders ### Bilateral SDR transactions — findings - Historically, bilateral transactions have not been significant, with an average annual amount over the last five years of only SDR 0.2 billion. - These transactions primarily relate to the settlement of financial obligations between counterparties or between participants and their regional central banks. - A moderate increase in volume was observed in 2022 due to a settlement of financial obligation between a participant and prescribed holder. - The volume rose further in 2023, due to a settlement of financial obligations between a participant and a prescribed holder, as well as the extension of an SDR loan between participants which was fully settled in SDRs during the same reporting period. - Cumulatively since 2018, 204 bilateral transactions have been conducted in the amount of SDR 3.0 billion. ### SDR interest rate context - The quarterly average SDR interest rate has increased from 1.846 percent as of end-August 2022 to 4.045 percent as of end-August 2023 reflecting the global increase in interest rates. ### VTAs — capacity and market functioning - The VTAs continue to have ample capacities to support the liquidity of the SDR. - The aggregate purchasing and selling capacities at end-August 2023 remained large at about SDR 208 billion and SDR 165 billion, respectively. - These capacities reflected updated trading ranges of VTAs, the cumulative effect of the absorption of SDR sales by VTAs, and the effect of additional capacity provided by new VTAs joining the market. - The robust trading capacities, together with the broad regional representation of the VTAs, is expected to support the continued smooth functioning of the SDR market. - Representative trading ranges (in percent of Net Cumulative Allocations): - Standard: 50 – 150 - Eurosystem: 65 – 135 - Other various ranges: 25 – 200 - Total VTAs reported: 40. ### Distribution of sale and purchase requests across VTAs — allocation criteria - Staff considers a range of criteria aiming to ensure equitable use over time, including: - The relative dispersion of SDR holdings across VTAs (based on the ratio of SDR holdings-to-allocation of individual VTAs). - The scope of VTAs to absorb a given transaction (deviation of SDR holdings from the mid-point VTA trading range). - Other considerations: relative use of each VTA as a share of allocation of total VTAs, individual transaction and counterparty limits, currency preferences, notification periods and holidays, and the need to split large requests among multiple VTAs. ### VTA participation and transaction statistics (September 1, 2022–August 31, 2023) - All 40 VTAs were utilized and each VTA participated on average in 7 SDR trades. - VTA participants’ SDR holdings are clustered tightly around the median holdings-to-allocation ratio of 103.6 percent. - Reflecting the commitment of VTA participants to facilitate increased sales of SDRs after the 2021 SDR allocation, the SDR holdings-to-allocation ratio of VTA participants increased on average by about 1.7 percentage points during the reporting period (and cumulative by 4.5 percentage points since the SDR allocation). - SDR sales (VTAs): - Number of VTAs available: 40 - Number of VTAs used: 39 - Number of sales: 140 - Amount of SDR sales (millions): 17,934 - Percent of sales: 100 - SDR acquisitions (VTAs): - Number of VTAs available: 40 - Number of VTAs used: 33 - Number of acquisitions: 130 - Amount of SDR acquisitions (millions): 3,223 - Percent of acquisitions: 100 - Regional breakdown highlights (sales): - Asia and Pacific: 31 sales, 4,437 million SDR, 25 percent of sales, 32 percent by purchasing capacity. - Europe: 73 sales, 8,928 million SDR, 50 percent of sales, 32 percent by purchasing capacity. - Western Hemisphere: 24 sales, 4,381 million SDR, 24 percent of sales, 32 percent by purchasing capacity. - Regional breakdown highlights (acquisitions): - Asia and Pacific: 22 acquisitions, 1,187 million SDR, 37 percent of acquisitions, 24 percent by selling capacity. - Europe: 76 acquisitions, 1,207 million SDR, 37 percent of acquisitions, 53 percent by selling capacity. - Western Hemisphere: 13 acquisitions, 743 million SDR, 23 percent of acquisitions, 19 percent by selling capacity. ### SDR reporting, publications, and assessments - The Fund continues to publish a wide range of information about the SDR and its uses: - The IMF’s annual and quarterly financial reports include holdings and allocations by participants and holdings by prescribed holders and aggregate data about SDR flows. - The quarterly financial reports that include individual participant’s SDR holdings also provide net changes in those holdings split in two broad categories: (i) those related to IMF operations; and (ii) SDR trading and other uses. - The IMF Finances webpage publishes monthly information on SDR holdings and allocations of participants. - The periodic IMF Financial Operations publication provides extensive information on the functioning of the voluntary SDR trading market and includes details on the operating modalities, capacity, trading by region, and aggregate transaction volumes. - Information on SDR channeling pledges and delivery of these pledges is now published on the IMF SDR webpage. - The Fund has issued a comprehensive ex-post assessment report on the 2021 SDR allocation. In line with commitments made at the time of the allocation, staff has prepared a report two years after the allocation covering the impact of the allocation for the global economy, members’ use of the allocation, economic implications at the country level, and voluntary channeling of SDRs from economically strong members to the most vulnerable ones. *Source: IMF staff calculations and reporting in the Annual Update on SDR Trading Operations (January 1, 2018–August 31, 2023).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023037.pdf_