Listen to a Business English Dialogue About Special drawing rights
Peyton: Hi Olivia, have you heard of “special drawing rights” in finance?
Olivia: No, I haven’t. What are they?
Peyton: Special drawing rights, or SDRs, are an international monetary reserve currency created by the International Monetary Fund (IMF) to supplement its member countries’ official reserves.
Olivia: That sounds interesting. How do special drawing rights work?
Peyton: SDRs are allocated to IMF member countries based on their quotas, and they can be used by countries to settle international transactions or exchange them for other currencies.
Olivia: I see. Are special drawing rights widely used in international trade?
Peyton: While SDRs are not commonly used in day-to-day transactions, they serve as a supplementary reserve asset and can help stabilize the global financial system during times of economic instability.
Olivia: That’s good to know. How are the values of special drawing rights determined?
Peyton: The value of SDRs is determined by a basket of major international currencies, including the US dollar, euro, Chinese yuan, Japanese yen, and British pound.
Olivia: Got it. Are there any advantages to using special drawing rights?
Peyton: One advantage is that SDRs provide liquidity and diversification for countries’ reserve assets, reducing their reliance on any single currency.
Olivia: Thanks for explaining, Peyton. Special drawing rights seem like an important tool for promoting monetary stability globally.
Peyton: You’re welcome, Olivia. They’re an integral part of the international monetary system and help facilitate cooperation among IMF member countries.