SDR Interest Rate

The SDR interest rate (SDRi) is the rate of return and cost of borrowing associated with the Special Drawing Right, the IMF's international reserve asset created in 1969. It is determined weekly by the IMF and serves as the basis for calculating interest charged on regular IMF loans, interest paid to members on their reserve positions, and remuneration on SDR holdings above or below a member's cumulative allocation.

The rate is computed as a weighted average of three-month money market instruments from the economies whose currencies make up the SDR basket. Since the most recent basket review took effect on 1 August 2022, the basket comprises the US dollar, euro, Chinese renminbi, Japanese yen, and pound sterling, with weights of roughly 43.4%, 29.3%, 12.3%, 7.6%, and 7.4% respectively. The reference instruments are typically three-month Treasury bills (or equivalent) for each currency, with the renminbi represented by the three-month China Treasury bond yield.

A floor of 0.05% has applied since October 2014, preventing the rate from going negative or near-zero during periods of ultra-loose monetary policy. The rate was very low (often at the floor) through much of 2015–2021 but rose sharply as major central banks tightened policy in 2022–2023, exceeding 4% by mid-2023.

The SDRi matters because it determines the carrying cost of IMF programs: a country drawing on Fund resources pays the SDRi plus a margin and, where applicable, surcharges. It also affects the value of the 2021 general SDR allocation of about SDR 456 billion (roughly US$650 billion), since countries that on-lend or do not use their allocation still earn or pay interest based on the SDRi. For low-income borrowers under the Poverty Reduction and Growth Trust, however, lending is typically concessional and not tied directly to the prevailing SDRi.