The SDR's Time Has Come

Author:José Antonio Ocampo
Position:JOSÉ ANTONIO OCAMPO is Colombia's former minister of finance and public credit and a professor at Columbia University. Currently a board member of Colombia's central bank, he is the author of Resetting the International Monetary (Non)System.
62 FINANCE & DEVELOPMENT | December 2019
The SDRs Time Has Come
Rethinking the Special Drawing Right could bolster the IMF’s role in
the global financial safety net
José Antonio Ocampo
Woods conference that created the IMF and World
Bank coincided with the ha lf-century celebration of
the inclusion of the Special Drawing R ight (SDR)
in the IMF Articles of Agreement.
We also saw in 2019 the spread of crypto-assets
and the launch of Facebook’s proposal to create
Libra, a global digita l currency based on blockchain
technology. Central banks are actively discu ssing
issuing digita l national currencies, and former IMF
Managing Director Christine Lagarde raised the
possibility of launching a d igital version of the SDR.
In this brave new world, is it time to rethink
the SDR’s role?
e SDR—created 50 years ago to supplement
IMF member countries’ ocial reserves—is
the only true global money, backed by all IMF
members. e IMF’s Articles of Agreement envi-
sioned it as “the principal reserve asset in the
international monetary s ystem.” But the SDR
has turned out to be one of the most underutili zed
instruments of international c ooperation. A more
active use of this tool would signi cantly strengthen
the IMF’s role as the center of the global nancia l
safety net.
Origins of the SDR
e idea of a global currency goes back to John
Maynard Keynes’s bancor, the unit of account of
his proposed International Cleari ng Union. ere
have been three issues of SDRs: the initial one,
in 1970–72, of 9.3 billion SDRs; the second, in
1979–81, of 12.1 billion; and a third, in 2009, of
182.7 billion SDRs. e latter included 21.5 billion
that had been approved in 1997 but had never gone
into eect, as well as a ne w allocation of SDR 161.2
billion (equivalent to $250 billion) as one of the
measures to mana ge the international nancial cr isis.
Historically, the SDR has represented only a small
fraction of global reserve s: 8.4 percent of nongold
reserves at its peak i n 1972 and less than 3 percent in
recent years. Only central banks and a few i nterna-
tional organiz ations can hold SDRs. In practice, SDRs
are mainly used by c entral banks from developing
countries to pay other IMF members, in add ition to
serving as t he IMF’s unit of account.
A basic advantage of the SDR is that it can
be deployed during global nancia l crises as a n
instrument of international monetar y policy, as was
done in 2009. But SDRs could also be issued more
systematical ly in a countercyclical way. Various
economists have estimated t hat, as a supplement
to other reserve assets, the IMF could issue $200
billion–$300 bi llion in SDRs an nually.
e major limitation on the use of SDRs is the
division between the IM F’s general resources and
SDR accounts, which limits the use of SDRs to
payments among central ban ks. If the two accounts
were consolidated, it would be possible to go one

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