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International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., and International Monetary Fund. Strategy, Policy, & Review Department
This paper provides the basis for the quinquennial review by the Executive Board of the method of valuation of the Special Drawing Right (SDR). The review covers the composition and weighting of the SDR currency basket, and the financial instruments used to determine the SDR interest rate. In the five-year period for this review (2017‒21), developments in key variables relevant for the SDR valuation suggest that there have been no major changes in the roles of currencies in the world economy. The countries and the currency union (euro area) whose currencies are currently included in the SDR basket remain the five largest exporters and their currencies continue to account for the majority of international financial transactions. Moreover, staff analysis finds that the COVID-19 pandemic and recent fintech developments have no systematic or material impact on the SDR valuation. The paper proposes to maintain the current composition of the SDR currency and interest rate baskets, as well as the method for determining the currency weights and currency amounts in the basket. In line with the Board-approved methodology, the paper proposes updated weights for the currencies in the SDR basket. These maintain the same ranking of the initial weights set in the 2015 review, with slightly higher weights for the U.S. dollar and the Chinese renminbi and, accordingly, somewhat lower weights for the British pound, the euro, and the Japanese yen. The paper also proposes to make explicit the treatment of data gaps in the SDR valuation framework. Findings from a survey of SDR department participants and prescribed holders are used to follow up on operational issues raised in earlier valuation reviews. The new SDR valuation and interest rate baskets are proposed to come into effect on August 1, 2022 for a period of five years.
International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., International Monetary Fund. Strategy, Policy, &, and Review Department

Introduction 1. The method of valuation of the Special Drawing Right (SDR) is reviewed every five years . Under the current framework for SDR valuation, this SDR valuation review covers the size of the SDR valuation basket (i.e., the number of currencies in the basket), the specific currencies to be included in the basket, and the respective weights of those currencies. At the same time the Board reviews the financial instruments to be included in the SDR interest basket. 1 On the last business day before a new SDR valuation basket becomes effective

International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., International Monetary Fund. Strategy, Policy, &, and Review Department
On March 5, 2021, the IMF’s Executive Board approved an extension of the current Special Drawing Right (SDR) valuation basket by ten months from September 30, 2021 to July 31, 2022. The IMF normally reviews the composition and valuation of the SDR basket every five years. The extension effectively resets the five-yearly cycle of SDR valuation reviews, with the next review to be completed by mid-2022 and the new basket becoming effective on August 1, 2022. The ten-month extension contributes to the Fund’s ongoing efforts to prioritize work during the COVID-19 crisis and allows for a more suitable effectiveness date of the new basket, which does not coincide with some major markets being closed. The approved extension, as well as effectiveness date of a new basket, is intended to facilitate the continued smooth functioning of SDR-related operations.
International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., and International Monetary Fund. Strategy, Policy, & Review Department

currency amounts in the basket . In line with the methodology agreed by the Board in the context of the previous SDR valuation review in 2015, the paper updates the currency weights based on relevant indicators for 2017–21, the most recent five-year period. The paper also proposes that the Executive Board formalize the established practice of dealing with data gaps for indicators used in the SDR valuation by using data that is available within the relevant five-year period as part of the SDR valuation methodology. 3. The paper further proposes that the new currency and

International Monetary Fund
This paper provides the basis for the quinquennial review of the method of valuation of the Special Drawing Right (SDR). The review considers the composition, size, and weighting of the SDR currency basket and the financial instruments used to determine the SDR interest rate. The analysis in this paper is guided by the informal discussion of Executive Directors in July on initial considerations for the review. In light of Directors’ preference, the two currency selection criteria for SDR inclusion are maintained. Since China continues to meet the export criterion, a key focus of this paper is on assessing whether the renminbi (RMB) could be determined to be a freely usable currency, which is the second criterion. The paper documents the rising international use and trading of the RMB since the 2010 SDR valuation review. A range of indicators suggests that use of the RMB in international transactions has risen substantially, albeit from a low base. The paper also finds that the RMB has become far more actively traded in foreign exchange markets, with sufficient depth to support operations of the size Fund members might undertake without an appreciable change in the exchange rate. Full Text also available in Chinese.
International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., International Monetary Fund. Strategy, Policy, &, and Review Department

for a general SDR allocation), which, unlike the SDR valuation review, has an end-June 2021 deadline set in accordance with the Articles of Agreement. This postponement is not expected to have major downsides or materially affect the outcome of the next review and would also avoid the bunching of these workstreams in the future. The proposed postponement also offers an opportunity to select a more suitable effectiveness date for a new valuation basket taking into account feedback from SDR users who face portfolio rebalancing difficulties as financial markets in