Always the bridesmaid, never the bride: the history and future of IMF special drawing rights as an international reserve currency

Special Drawing Rights (SDRs), the synthetic reserve asset issued by the IMF since the 1970s, have been touted as an alternative to the dollar as the world’s primary reserve asset since 1971 and still receive vocal support today. It is striking, then, that the SDR accounts for a mere 0.5% of world reserves today and are mostly considered an irrelevant oddity. In this essay, I seek to explain the SDR’s failure to catch on using archival evidence from the US National Archives and IMF. I argue that the political compromises necessary to reach agreement on the SDR’s creation left it incapable of playing a major reserve role by design and incapable of adapting to the rapidly changing international monetary system of the 1970s. Further, the national interest of the United States in supporting the dollar’s reserve role and lack of consistent support for the SDR in Europe left it without the political support it needed during 1970s’ reform discussions; even short periods of support were conditioned on alignment with American and European objectives and evaporated when interests changed. I conclude by assessing the conditions under which the SDR might see an expanded role and argue that such conditions are unlikely to materialize in the near future.