Abstract

The SDR was created as a result of the First Amendment of the Articles of Agreement, which became effective in 1969. It was created as a supplement to existing reserve assets as the demand for reserves was expected to grow substantially over time in line with growing world trade.80 Specifically, there were concerns that the growth in the supply of reserves (which comprised mainly gold and the U.S. dollar) would be insufficient since it depended on a diminishing supply of newly-mined gold entering into official reserves and on continued and unsustainable deficits in the balance of payments of the United States. It was also thought that U.S. gold stocks would decline relative to U.S. dollar liabilities, which would eventually make the par value of the U.S. dollar relative to gold unsustainable and precipitate an international monetary crisis. The intention was therefore to establish the SDR system to expand world reserves independently of the growth of official holdings of gold and foreign exchange. Further changes to the SDR system came about as a result of the Second Amendment of the Articles of Agreement, which had as an objective to make the SDR the principal reserve asset in the international monetary system. The SDR is also the unit of account that is used by the IMF.