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Abstract
Participants pay charges on their net cumulative allocations, and all holders of SDRs earn interest on their daily holdings. Because the rate for charges is the same as the rate of interest, a participant whose daily holdings equal its net cumulative allocations (i.e., who makes no use of SDRs and does not receive any in transactions) receives interest exactly equal to the charges it pays. Participants whose daily holdings are less than their net cumulative allocations pay net charges, and holders whose holdings exceed their net cumulative allocations receive net interest from the Fund. When a participant fails to pay charges fully and on time, the payment of charges to the Fund is less in aggregate (by the amount of the overdue charges) than the transfer of interest from the Fund. To transfer the full amount of interest owed, the Fund creates SDRs temporarily and cancels them once the overdue charges are paid.
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