SDR Basket Review

The Special Drawing Right (SDR) is an international reserve asset created by the IMF in 1969 to supplement member countries' official reserves. Its value is derived from a basket of major currencies, and the SDR basket review is the formal process through which the IMF Executive Board evaluates the composition and weighting of that basket.

Reviews are normally conducted every five years, though the Board can defer or accelerate them. The review examines two main questions: (1) which currencies qualify for inclusion, and (2) how much weight each should carry. To qualify, a currency must be issued by an IMF member (or monetary union) whose exports rank among the largest in the world, and the currency must be deemed "freely usable" — widely used to make payments for international transactions and widely traded in principal exchange markets.

Weights are determined by a formula that combines the issuer's share of world exports with financial indicators such as official reserve holdings, foreign exchange turnover, international bank liabilities, and international debt securities denominated in the currency.

Key historical outcomes include:

• The 2015 review added the Chinese renminbi to the basket effective 1 October 2016, making it the fifth currency alongside the US dollar, euro, Japanese yen, and pound sterling.
• The 2022 review retained the same five currencies but adjusted weights, increasing the shares of the US dollar and renminbi while reducing those of the euro, yen, and sterling.

The review matters beyond accounting: SDR weights influence the interest rate on SDR holdings and borrowings, the valuation of IMF lending, and serve as a symbolic benchmark of a currency's international status. For developing economies, allocations of SDRs — such as the US$650 billion general allocation approved in August 2021 — provide unconditional reserve support, making the basket's composition politically consequential.