IMF Increases Yuan’s Weighting in SDR Basket
Posted on 05/15/2022
On May 11, 2022, the Executive Board of the International Monetary Fund (IMF) completed the quinquennial review of the method of valuation of the basket of currencies that make up the Special Drawing Right (SDR). The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. The review covered the composition and weighting of the SDR currency basket. The Executive Board also reviewed the corresponding interest rate instruments used to determine the SDR interest rate. The updated basket weights will come into effect on August 1, 2022. The last SDR valuation review was concluded in 2015. Under the existing SDR valuation method adopted by the Executive Board, the SDR currency basket is reviewed every five years unless developments in the interim justify an earlier review. The current review is taking place about one year later than originally scheduled, as the Executive Board decided in March 2021 to extend the current basket until July 31, 2022 to prioritize work on the Fund’s response to the COVID-19 pandemic, including work related to the 2021 General SDR allocation.
The value of the SDR will continue to be based on a weighted average of the values of a basket of currencies comprising the U.S. dollar, euro, Chinese renminbi, Japanese yen, and pound sterling.
Currency Weights in the SDR (and SDR Interest Rate) Basket
With effect from August 1, 2022, the IMF has determined that the five currencies that meet the selection criteria for inclusion in the SDR valuation basket will be assigned the following weights based on their roles in international trade and finance:
U.S. dollar 43.38 percent
Euro 29.31 percent
Chinese renminbi 12.28 percent
Japanese yen 7.59 percent
Pound sterling 7.44 percent
The amounts of each of the five currencies will be calculated on July 29, 2022 (the transition date) in accordance with the new weights and will go into effect on August 1, 2022. The IMF raised the yuan’s weighting to 12.28% from 10.92% in its first regular review of the SDR evaluation since the Chinese currency was included in the basket in 2016. The weighting of the U.S. dollar increased to 43.38% from 41.73%, while those of euro, Japanese yen, and Pound sterling declined.
The SDR interest rate will continue to be determined as a weighted average of the interest rates on short-term financial instruments in the markets of the currencies comprising the SDR basket.