A Special Drawing Right (SDR or XDR) is a reserve asset issued by the International Monetary Fund (IMF). Established in 1969, SDRs act as a supplement to conventional reserve assets like gold and U.S. dollars.
The value of SDRs is based on the average values of the U.S. dollar, Chinese renminbi, British pound, Japanese yen and the euro.
SDRs facilitate the clearing of loans, the repaying of loans and the transfer of debt and value between governments. SDRs also the default unit used by the IMF for accounting purposes.
SDRs give their holders the right to claim assets in fiat currency from IMF members. They depend on the existence of the IMF to ensure their value in much the same way that fiat currencies depend on backing by a central bank or monetary authority to guarantee their value.
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