{
  "title": "The Future of the IMF’s Special Drawing Right (SDR)",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2019/12/future-of-the-imf-special-drawing-right-sdr-ocampo",
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  "summary": "Rethinking the Special Drawing Right could bolster the IMF’s role in the global financial safety net, says José Antonio Ocampo, Colombia’s former minister of finance and public credit and a professor at Columbia University",
  "sections": [
    {
      "heading": "Overview and central argument",
      "content": "- The SDR—created 50 years ago to supplement IMF member countries’ official reserves—is characterized as “the only true global money, backed by all IMF members.”\n- The SDR has been underutilized; a more active use could substantially strengthen the IMF’s role as the center of the global financial safety net.\n- Rethinking SDR use could involve systematic, countercyclical issuance and structural reform to allow SDRs to finance IMF programs."
    },
    {
      "heading": "Origins, historical allocations, and current holdings",
      "content": "- Three issues of SDRs:\n  - initial issue in 1970–72: 9.3 billion SDRs\n  - second issue in 1979–81: 12.1 billion SDRs\n  - third issue in 2009: 182.7 billion SDRs (which included 21.5 billion approved in 1997 but never in effect, plus a new allocation of SDR 161.2 billion equivalent to $250 billion)\n- Historical share of global reserves:\n  - 8.4 percent of nongold reserves at its peak in 1972\n  - less than 3 percent in recent years\n- Practical use limitations:\n  - Only central banks and a few international organizations can hold SDRs.\n  - SDRs are mainly used by central banks from developing countries to pay other IMF members and as the IMF’s unit of account."
    },
    {
      "heading": "Proposals for reform and mechanisms",
      "content": "- Consolidate IMF accounts:\n  - The division between the IMF’s general resources and SDR accounts limits SDR use to payments among central banks.\n  - If consolidated, SDRs could be treated as “deposits” in the IMF, which the institution could lend to countries in need—enabling global monetary creation analogous to central banks’ creation of domestic money.\n  - Such a change would require an amendment to the Articles of Agreement and continued commitment by central banks to accept the SDR as a means of payment.\n- Systematic issuance and scale estimates:\n  - Various economists have estimated that, as a supplement to other reserve assets, the IMF could issue $200 billion–$300 billion in SDRs annually.\n- Financing IMF instruments:\n  - SDRs could complement quota increases and eliminate dependence on “arrangements to borrow” and bilateral credit lines.\n  - SDRs could be used to finance a global swap arrangement and other precautionary facilities."
    },
    {
      "heading": "Expected benefits of more active SDR use",
      "content": "- Spread seigniorage from issuing a global currency across all countries.\n- Reduce emerging markets’ and developing economies’ demand for foreign exchange reserves as “self-insurance.”\n  - These gains would be enhanced by taking into account factors besides quota contributions to increase developing economies’ share in SDR allocations.\n- Make the international monetary system more independent of US monetary policy.\n- Strengthen IMF precautionary instruments and help overcome borrowing stigma."
    },
    {
      "heading": "Private use, digital options, and intermediate approaches",
      "content": "- Proposals to enable private use of SDRs include:\n  - Denominating private or government bonds in SDRs.\n  - Using SDRs as a unit of account in commercial transactions (for example, commodity pricing).\n  - Creating a virtual SDR to facilitate private transactions—a global cryptocurrency circulating alongside national or regional central bank-backed cryptocurrencies.\n- The author notes preference for a market SDR over current volatile crypto-assets or privately backed proposals like Libra.\n- Intermediate solutions could allow limited private use while preserving SDRs’ reserve role, for example:\n  - Permitting financial institutions’ deposits in central banks to be held in SDRs (as reserve requirements or excess reserves)."
    },
    {
      "heading": "Institutional and political considerations",
      "content": "- Major reform (e.g., lending IMF programs funded by SDRs) requires changing the Articles of Agreement.\n- Any expansion of SDR use must preserve central banks’ commitment to accept SDRs as a means of payment to maintain its character as global money.\n- The 75th anniversary of Bretton Woods and the SDR’s half-century milestone in 2019, along with leadership changes at the IMF, create an opportunity to pursue ambitious SDR reform.\n\nSource: The Future of the IMF’s Special Drawing Right (SDR) – IMF F&D | DECEMBER 2019\n\n---\n\n Content in this bundle\n\n- وجهة نظر\n  - وجهة نظر (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - وجهة نظر (PDF){rel=\"external\" type=\"application/pdf\"}\n- Ha llegado la hora del DEG ● Finanzas y Desarrollo ● Diciembre de 2019\n  - Ha llegado la hora del DEG ● Finanzas y Desarrollo ● Diciembre de 2019 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Ha llegado la hora del DEG ● Finanzas y Desarrollo ● Diciembre de 2019 (PDF){rel=\"external\" type=\"application/pdf\"}\n- L’heure du DTS est venue\n  - L’heure du DTS est venue (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - L’heure du DTS est venue (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Future of the IMF’s Special Drawing Right\n  - The Future of the IMF’s Special Drawing Right (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Future of the IMF’s Special Drawing Right (PDF){rel=\"external\" type=\"application/pdf\"}\n- Настало время СДР – Финансы и развитие – декабрь 2019 года\n  - Настало время СДР – Финансы и развитие – декабрь 2019 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Настало время СДР – Финансы и развитие – декабрь 2019 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Future of the IMF’s Special Drawing Right\n  - The Future of the IMF’s Special Drawing Right (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Future of the IMF’s Special Drawing Right (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2019/12/future-of-the-imf-special-drawing-right-sdr-ocampo"
    }
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    "Authors: JOSE ANTONIO OCAMPO",
    "Published: December 1, 2019",
    "The SDR—created 50 years ago to supplement IMF member countries’ official reserves—is characterized as “the only true global money, backed by all IMF members.”",
    "The SDR has been underutilized; a more active use could substantially strengthen the IMF’s role as the center of the global financial safety net.",
    "Rethinking SDR use could involve systematic, countercyclical issuance and structural reform to allow SDRs to finance IMF programs.",
    "Three issues of SDRs:",
    "Historical share of global reserves:",
    "Practical use limitations:",
    "Consolidate IMF accounts:",
    "Systematic issuance and scale estimates:",
    "Financing IMF instruments:",
    "Spread seigniorage from issuing a global currency across all countries.",
    "Reduce emerging markets’ and developing economies’ demand for foreign exchange reserves as “self-insurance.”",
    "Make the international monetary system more independent of US monetary policy.",
    "Strengthen IMF precautionary instruments and help overcome borrowing stigma.",
    "Proposals to enable private use of SDRs include:",
    "The author notes preference for a market SDR over current volatile crypto-assets or privately backed proposals like Libra.",
    "Intermediate solutions could allow limited private use while preserving SDRs’ reserve role, for example:",
    "Major reform (e.g., lending IMF programs funded by SDRs) requires changing the Articles of Agreement.",
    "Any expansion of SDR use must preserve central banks’ commitment to accept SDRs as a means of payment to maintain its character as global money.",
    "The 75th anniversary of Bretton Woods and the SDR’s half-century milestone in 2019, along with leadership changes at the IMF, create an opportunity to pursue ambitious SDR reform.",
    "**وجهة نظر**",
    "**Ha llegado la hora del DEG ● Finanzas y Desarrollo ● Diciembre de 2019**",
    "**L’heure du DTS est venue**",
    "**The Future of the IMF’s Special Drawing Right**",
    "**Настало время СДР – Финансы и развитие – декабрь 2019 года**",
    "**The Future of the IMF’s Special Drawing Right**"
  ],
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