Bangladesh has been too cautious with its 'Special Drawing Rights' from the IMF

Abstract

Special Drawing Rights (SDRs) are a type of foreign exchange (forex) reserve asset, created and administered by the intergovernmental financial institution the International Monetary Fund (IMF). They are meant to help supplement other forex reserves held by the central banks of the IMF’s member countries. However, they also differ fundamentally from all other type of forex assets – be these bonds, treasuries, currencies or gold. Basically, SDRs have both an asset and a liability component. It therefore makes sense to think of SDRs as resembling a revolving credit line rather than any other type of forex reserve asset. Any country has to right to access its allocation of SDRs at any time. The IMF allocates SDRs according to a country’s quota share. The amount of allocation varies from country to country. Allocations are not made on a regular basis but they happen whenever 85% of the total voting power of all IMF members agrees on an allocation. This last happened in August 2021 when the IMF allocated USD 650 billion worth of SDRs to its members to boost global liquidity. As part of this allocation, Bangladesh received the equivalent of about USD 1.4 billion in Special Drawing Rights (SDRs) as part of the IMF’s new SDR allocation, bringing its total allocation to about USD 2.9 billion. As of April 2022, Bangladesh still has about USD 2.7 billion available for use.