Which statement about SDRs is true?

Which statement about SDRs is true?

• A. SDRs allocations are allocated based on population.
• B. A country's SDR allocation is proportional to its quota.
• C. SDRs can only be used for loan repayment.
• D. SDRs replace national currencies.

Answer: (B)

Special drawing right allocations are determined by a country’s IMF quota, not by population or other measures. Quotas reflect each country’s relative economic size and its financial/prudential commitment to the IMF. Because of this, a country’s SDR allocation is proportional to its quota—the larger your quota, the larger your SDR share. SDRs are an international reserve asset, not a national currency. They represent a claim on a basket of major currencies and can be exchanged for freely usable currencies or used in IMF-related transactions. They are not restricted to loan repayments and do not replace national currencies.

Special drawing right allocations are determined by a country’s IMF quota, not by population or other measures. Quotas reflect each country’s relative economic size and its financial/prudential commitment to the IMF. Because of this, a country’s SDR allocation is proportional to its quota—the larger your quota, the larger your SDR share.

SDRs are an international reserve asset, not a national currency. They represent a claim on a basket of major currencies and can be exchanged for freely usable currencies or used in IMF-related transactions. They are not restricted to loan repayments and do not replace national currencies.