{"id":1861,"date":"2024-03-30T00:49:24","date_gmt":"2024-03-29T19:19:24","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1861"},"modified":"2024-04-03T07:09:42","modified_gmt":"2024-04-03T01:39:42","slug":"q-recently-which-one-of-the-following-currencies-has-been-proposed-to-be-added-to-the-basket-of-imfs-sdr","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-recently-which-one-of-the-following-currencies-has-been-proposed-to-be-added-to-the-basket-of-imfs-sdr","title":{"rendered":"Q.\u00a0Recently, which one of the following currencies has been proposed to be added to the basket of IMF\u2019s SDR?"},"content":{"rendered":"\n<ul class=\"mcq wp-block-list\">\n<li>Rouble<\/li>\n\n\n\n<li>Rand<\/li>\n\n\n\n<li>Indian Rupee<\/li>\n\n\n\n<li>Renminbi<\/li>\n<\/ul>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>Answer:<\/strong>&nbsp;<strong>(d) Renminbi<\/strong><\/p>\n<\/blockquote>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"special-drawing-right-sdr\">Special Drawing Right (SDR):<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The SDR is an&nbsp;<strong>international reserve asset<\/strong>. The&nbsp;<strong>SDR is not a currency<\/strong>, but its value is based on a&nbsp;<strong>basket of five currencies\u2014the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling<\/strong>.<\/li>\n\n\n\n<li>The SDR<strong>&nbsp;serves as the unit of account of the IMF<\/strong>&nbsp;and some other international organizations.<\/li>\n\n\n\n<li>The currency value of the SDR is determined by<strong>&nbsp;summing the values in US dollars, based on market exchange rates<\/strong>, of a SDR basket of currencies.<\/li>\n\n\n\n<li>The SDR basket of currencies includes the&nbsp;<strong>US dollar, Euro, Japanese yen, pound sterling and the Chinese renminbi (included in 2016).<\/strong><\/li>\n\n\n\n<li>The&nbsp;<strong>SDR&nbsp;currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for business)<\/strong>&nbsp;and the valuation basket is reviewed and adjusted every five years.<\/li>\n\n\n\n<li><strong>Quota (the amount contributed to the IMF) of a country is denominated in SDRs.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Members\u2019 voting power is related directly to their quotas.<\/li>\n\n\n\n<li>IMF makes the general SDR allocation to its members in proportion to their existing quotas in the IMF.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>India\u2019s quota in IMF:<\/strong>\n<ul class=\"wp-block-list\">\n<li>In 2016,&nbsp;<strong>IMF\u2019s quota and governance reforms took place.<\/strong><\/li>\n\n\n\n<li>According to which,<strong>&nbsp;India\u2019s voting rights increased by 0.3% from then 2.3% to 2.6%<\/strong>&nbsp;and China\u2019s voting rights increased by 2.2% from then 3.8% to 6%.<\/li>\n\n\n\n<li>Presently,<strong>&nbsp;India holds 2.75% of SDR quota<\/strong>, and 2.63% of votes in the IMF.<\/li>\n\n\n\n<li><strong>India\u2019s foreign exchange reserves<\/strong>&nbsp;also incorporate SDR other than gold reserves, foreign currency assets and Reserve Tranche in the IMF.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lotusarise.com\/wp-content\/uploads\/2024\/03\/Quinquennial-SDR-valuation-1024x495.png\" alt=\"Quinquennial SDR valuation\" class=\"wp-image-50394\" title=\"Upsc prelims research: indian economy 2016 2\"\/><\/figure>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"what-is-the-purpose-of-the-sdr\">What is the purpose of the SDR?<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>IMF created the SDR as a supplementary international reserve asset in 1969<\/strong>, when currencies were tied to the price of gold and the US dollar was the leading international reserve asset. The IMF defined the SDR as&nbsp;<strong>equivalent to a fractional amount of gold that was equivalent to one US dollar.<\/strong><\/li>\n\n\n\n<li>When fixed exchange rates ended in 1973, the&nbsp;<strong>IMF redefined the SDR as equivalent to the value of a basket of world currencies.<\/strong><\/li>\n\n\n\n<li>The&nbsp;<strong>SDR itself is not a currency but an asset that holders can exchange for currency<\/strong>&nbsp;when needed. The SDR serves as the&nbsp;<strong>unit of account of the IMF and other international organizations.<\/strong><\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"What is the SDR?\" width=\"720\" height=\"405\" src=\"https:\/\/www.youtube.com\/embed\/Y-wxIXRLfOk?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"who-can-hold-sdrs\">Who can hold SDRs?<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Individuals and private entities cannot hold SDRs<\/strong>.&nbsp;<strong>IMF members \u2013 and the IMF itself \u2013 hold SDRs and the IMF has the authority to approve other holders, such as central banks and multilateral development banks<\/strong>, while individuals and private entities cannot hold SDRs.<\/li>\n\n\n\n<li>As of February 2023, there were 20 organizations approved as prescribed holders. Participating members and prescribed holders can buy and sell SDRs. However,&nbsp;<strong>prescribed holders do not receive allocations of SDRs<\/strong>, and they may not request an exchange of SDRs in transactions with designation as members do.<\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\" id=\"general-allocations-of-sdrs\">General allocations of SDRs<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The&nbsp;<strong>Articles of Agreement allow the IMF to allocate SDRs to members<\/strong>&nbsp;\u2013 but not prescribed holders \u2013 under certain conditions.<\/li>\n\n\n\n<li>There have been\u00a0<strong>four general allocations, most recently in 2021<\/strong>, when the IMF\u2019s Board of Governors approved a general allocation of about SDR 456 billion, equivalent to US$650 billion,\u00a0<strong>to boost global liquidity<\/strong>.\n<ul class=\"wp-block-list\">\n<li>The distribution \u2013 the largest SDR allocation in the history of the IMF \u2013 helped countries respond to the&nbsp;<strong>COVID-19 pandemic<\/strong>.<\/li>\n\n\n\n<li>The general allocation of about SDR 161 billion in 2009, equivalent to US$250 billion, boosted liquidity amid a global financial crisis.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>A general allocation of SDRs requires broad support from the IMF\u2019s members. The&nbsp;<strong>IMF distributes a general allocation to member countries in proportion to their quota shares at the IMF.<\/strong><\/li>\n\n\n\n<li><strong>Special SDR allocation:<\/strong>\n<ul class=\"wp-block-list\">\n<li>The IMF made a special one-time allocation of SDR 21.5 billion (about US$33 billion) in 2009 to make the allocation of SDRs more equitable for countries that joined the IMF after 1981.<\/li>\n\n\n\n<li>At the time, those countries \u2013 more than one-fifth of the IMF\u2019s members \u2013 had never received an SDR allocation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/lotusarise.com\/wp-content\/uploads\/2024\/03\/SDR-allocation.png\" alt=\"SDR allocation\" class=\"wp-image-50397\" title=\"Upsc prelims research: indian economy 2016 3\"\/><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Answer:&nbsp;(d) Renminbi Special Drawing Right (SDR): What is the purpose of the SDR? Who can hold SDRs? General allocations of SDRs<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[57],"class_list":["post-1861","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-57"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":57,"label":"2016"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1861"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1861\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1861"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}