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RECEIPT OF ALLOCATION OF SDRs: TRANSACTION 9

29 October, 2015 - 14:23

Between 1970 and 1972 the International Monetary Fund (IMF) created and distributed the first issue of special drawing rights (SDRs) in order to enlarge the stock of international reserve assets. By international agreement SDRs are to be acceptable in settlement of debts between countries. They are created in limited internationally agreed amounts and are allocated to participating countries in proportion to their quotas in the IMF. In terms of currency an SDR is defined as a "basket" containing specified quantities of five major currencies-the U.S. dollar, the German mark, the French franc, the Japanese yen, and the U.K pound.

To illustrate how the receipt of newly created SDRs is treated in the U.S. balance-of-payments accounts, assume that the IMF notified the U.S. authorities that $200 million in new SDRs had been credited to the U.S. account. A debit entry on line 14 would record the increase in this international reserve asset held by the United States. However, this transaction would involve neither a corresponding decrease in other assets nor a corresponding increase in liabilities; so to meet the requirement for an equivalent credit under the system of double-entry bookkeeping, a credit entry of $200 million would be made to a specially created account, "Allocations of special drawing rights" (line26).