Special Drawing Rights - Name

Name

The SDR was purposefully given an innocuous name free of connotations due to controversy, as disagreements broke out over the nature of this new reserve asset during its creation. Some wanted it to function like money and others, credit. While the name would offend neither side of this debate, it can be argued that prior to 1981 the SDR was a debt security and so a form of credit. Member countries receiving SDR allocations were required by the reconstitution provision of the SDR articles to hold a prescribed number of SDRs. If a state used any of its allotment, it was expected to rebuild its SDR holdings. As the reconstitution provisions were abrogated in 1981, the SDR now functions less like credit than previously. Countries are still expected to maintain their SDR holdings at a certain level, but penalties for holding fewer than the allocated amount are now less onerous.

The name may actually derive from an early proposal for IMF "reserve drawing rights". The word "reserve" was later replaced with "special" because the idea that the IMF was creating a foreign exchange reserve asset was contentious.