Academic MBA Question:
IGNOU MBA Assignments: Write short notes: (a) Special Drawing Rights (SDRs) and (b) EPRG Framework
IGNOU MBA Assignments Solution:
Special
Drawing Rights (SDRs)
The SDR (Special
Drawing Right) is an artificial “basket” currency used by the IMF
(International Monetary Fund) for internal accounting purposes. SDRs are
reserve assets created by the International Monetary Fund (IMF). SDRs are
allocated to IMF member countries in proportion to their quotas, which are
based on a country’s relative weight in the global economy. The value of SDRs
is derived from a mix of four major currencies: the U.S. dollar, the Euro, the
Japanese yen, and the U.K. pound. SDRs were created in 1969 during a shortage
of both dollars and gold, but they have been used more recently in response to
the global financial and economic crisis that struck in 2008.
The SDR is neither a
currency, nor a claim on the IMF. Rather, it is a potential claim on the freely
usable currencies of IMF members. Holders of SDRs can obtain these currencies
in exchange for their SDRs in two ways: first, through the arrangement of
voluntary exchanges between members; and second, by the IMF designating members
with strong external positions to purchase SDRs from members with weak external
positions. In addition to its role as a supplementary reserve asset, the SDR,
serves as the unit of account of the IMF and some other international
organizations.
Academic Assignment Answer:
