UPSC Prelims 2016 · Question 39 of 98
UPSC Prelims 2016 question on Renminbi IMF SDR
- ExamUPSC CSE
- Year2016
- PaperGeneral Studies Paper I
- SubjectInternational Relations
- TopicCurrent Affairs
- DifficultyEasy
- TypeDirect
Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR?
Show answer
Answer: D. Renminbi
Verdict
The answer is the Renminbi. The Chinese currency was added to the IMF's Special Drawing Right basket.
Analysis
The Executive Board of the International Monetary Fund decided to include the renminbi in the basket of currencies making up the Special Drawing Right, a decision taken during the Fund's five yearly review. The SDR is an artificial reserve asset created to augment international liquidity; it is neither a currency nor a claim on the Fund but supplements the reserves of member countries. Inclusion requires that a currency be widely used in international transactions and freely usable, a test the rouble, rand and Indian rupee did not meet.
Source
The Hindu report on the IMF naming the renminbi a global reserve currency.
How to crack it
The SDR basket is small and its composition changes rarely, so learn the five members and the criterion for entry once. The criterion, free usability in international transactions and foreign exchange markets, does the work: ask which of the offered currencies is actually traded and held at global scale, and only one qualifies. Note also that inclusion is decided at five yearly reviews, which tells you when to expect the topic to return.
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