## 7 Things You Need to Know About SDR Allocations

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**Canonical URL:** [7 Things You Need to Know About SDR Allocations](https://www.imf.org/en/topics/special-drawing-right/seven-things-you-need-to-know-about-sdr-allocations)

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### What an SDR is
- The International Monetary Fund describes Special Drawing Rights (SDRs) as an asset, though not money in the classic sense because they can’t be used to buy things.
- The value of an SDR is based on a basket of the world’s five leading currencies – the US dollar, euro, yuan, yen and the UK pound.
- The SDR is an accounting unit for IMF transactions with member countries and a stable asset in countries’ international reserves.

### Why SDRs matter for international reserves and crisis resilience
- International reserves are likened to large national savings accounts in foreign currencies, typically managed by the central bank, that ensure a country has the foreign currencies needed to trade with the world (e.g., to pay for imports).
- Adding SDRs to a country’s international reserves makes it more resilient financially.
- In times of crisis, a country can dip into its savings for urgent needs (e.g., to pay for importing vaccines).

### How a new SDR allocation helps countries
- The IMF notes the world is going through the worst economic crisis in peacetime since the Great Depression; in around 150 countries, income per capita this year will be lower than in 2019.
- A new SDR allocation supplements countries’ reserves, using the collective strength of the Fund’s membership to make all 191 member countries a little stronger.
- It would provide liquidity support to many developing and low-income countries that are struggling, allowing them to pay for healthcare and support vulnerable people.
- The IMF emphasizes that all countries will benefit from a quick eradication of the virus, and it is important to make sure they all have the financial resources to do that.

### How countries can use SDRs
- Countries can exchange their SDRs for hard currencies with other IMF members; this has historically been done on a voluntary basis, with countries in a stronger financial position agreeing to help others when needed.
- Countries can use their SDRs in a range of operations with other countries or to settle financial obligations to the Fund.
- Many member countries that don’t need the support have used SDRs to support concessional financing to low-income countries.

### Size and distribution of proposed allocations (key statistics)
- Of a possible US$650 billion SDR allocation, $274 billion would go to emerging and developing countries.
- The IMF states this would be a 10% boost to their international reserves, and in some cases, doubling them.
- Low-income countries would receive about $21 billion, in some cases more than 6% of their GDP.

### Mobilization and recent use since the pandemic
- Since the start of the pandemic, the IMF has already mobilized $15 billion in SDRs voluntarily pledged by some members that can be lent to low-income countries at zero interest rate.
- The IMF notes that while $15 billion might not sound like much to the largest economies, it can be very significant for the poorest countries, particularly during a devastating crisis.

### History of SDR general allocations
- The IMF states there have been three prior general allocations.
- The most recent general allocation was in 2009, during the Global Financial Crisis, when the IMF allocated the equivalent of $250 billion in new SDRs to its membership.
- The 2009 allocation is widely seen as having contributed to stabilizing financial conditions around the world.

### Cost and fiscal implications
- An SDR allocation is described as cost free.
- Allocating SDRs does not require contributions from donor countries’ budgets.
- SDRs are characterized as a reserve asset, not foreign aid.
- An SDR allocation does not add to any country’s public debt burden.

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## References

- [Tracker on the Use of Allocated SDRs](https://www.imf.org/en/topics/special-drawing-right/sdr-tracker)
- [Special Drawing Rights](https://www.imf.org/en/topics/special-drawing-right)

_Source: https://www.imf.org/en/topics/special-drawing-right/seven-things-you-need-to-know-about-sdr-allocations_