Question 23 from UPSC CSE 2016 - Current
Affairs

Question

Recently, which one of the following currencies has been proposed to be added to the basket of IMF's SDR?

IASCODEX · Accepted Answer

Correct Option: D. Renminbi

Strategy: This is a direct factual recall question. The key is to remember significant international financial developments, specifically the addition of major currencies to crucial international reserve assets. The inclusion of the Chinese Renminbi (Yuan) into the IMF's Special Drawing Rights (SDR) basket was a globally prominent event, which aligns with the term 'recently proposed' in the context of UPSC Prelims questions from that period.

Key Info: **Special Drawing Rights (SDR)**
- The SDR is an international reserve asset created by the International Monetary Fund (IMF) in 1969 to supplement member countries' official reserves.
- It is neither a currency nor a claim on the IMF, but rather a potential claim on the freely usable currencies of IMF members.
- SDRs can be exchanged for these currencies to manage balance of payments needs.

**SDR Basket**
- The value of the SDR is determined daily based on a basket of five major currencies.
- To be included in the basket, a currency must be issued by a large exporter and be 'freely usable' (widely used for international transactions and widely traded in major exchange markets).
- The currencies in the SDR basket are reviewed every five years by the IMF Executive Board to ensure they reflect their relative importance in the world's trading and financial systems.
- The current basket comprises the U.S. dollar, the Euro, the Chinese Renminbi, the Japanese Yen, and the British Pound Sterling.

**Renminbi's Inclusion**
- The Chinese Renminbi (Yuan) was formally included in the SDR basket with effect from October 1, 2016, following a decision by the IMF Executive Board in November 2015.
- Its inclusion marked a significant recognition of China's growing role in the global financial system and international trade.
- The Renminbi was added as the fifth currency, joining the existing four: US Dollar, Euro, Japanese Yen, and British Pound Sterling.

**International Monetary Fund (IMF)**
- Established in 1944 at the Bretton Woods Conference, the IMF's primary purpose is to ensure the stability of the international monetary system.
- It promotes international monetary cooperation, exchange rate stability, and provides financial assistance to countries facing balance of payments problems.

IASCODEX · Answer

Option A: Rouble

IASCODEX · Answer

Option B: Rand

IASCODEX · Answer

Option C: Indian Rupee