The International Monetary Fund yesterday announced a number of key decisions designed to enhance the attractiveness of the SDR and its acceptance as a "fully fledged international reserve asset."
SDR stands for Special Drawing Rights, a monetary asset created by the IMF for its 140 member nations and the unit of account in which the IMF does business.The decisions announced yesterday, all of which take effect May 1, are viewed by the agency as a major landmark along the road to making SDRs -- rather than dollars -- the principal asset in the international monetary system.
Perhaps the most important step taken by the Fund is to provide SDR holders as much interest as they would receive on the typical shortterm obligation of major nations. The rate will be 100 percent (raised from 80 percent) of a combined weighted average in the five largest industrial nations. For the May-June quarter, the rate will be 12.58 percent instead of the prevailing 10.125 percent.
Interest rates on SDRs have steadily been advanced from the initial 1.5 percent in 1969. In the early years, the SDR yield was usually 30 percent or more below market rates and until 1979 was set at a maximum of 60 percent of the market averages.
Other techniques announced yesterday to encourage member nations to deal in and hold SDRs include junking of the requirement that a holder of SDRs keep on hand a daily average balance of at least 15 percent of its net allocations over a five-year period. This so-called "reconstitution requirement" was 30 percent at one time.