IMF governors approved an outline plan for a new international reserve asset, Special Drawing Rights (SDRs). The plan aimed to supplement global reserves in a system that depended heavily on U.S. dollars and gold. This decision started the legal and institutional work needed before SDRs could be created and allocated.
An amendment to the IMF’s Articles of Agreement entered into force, creating the legal foundation for the SDR system and the IMF’s SDR Department. This step mattered because SDRs required treaty-level authority and agreed rules for allocation and use among members.
The IMF’s Board of Governors adopted a formal resolution to begin allocating SDRs. This converted the earlier legal authority into a concrete decision to create reserve assets and distribute them to participating members, setting the stage for the first “basic period” of allocations.
The first allocation of SDRs was made, marking the practical start of SDRs as an international reserve asset. Members received SDRs in proportion to their IMF quotas, meaning larger economies generally received more. The goal was to add liquidity to official reserves without relying only on gold or U.S. dollar holdings.
The IMF continued the first basic period by making a second annual SDR allocation installment. Spreading allocations across yearly installments was designed to phase in new reserves gradually and predictably. This helped members plan their reserve management under the still-fixed (but increasingly stressed) Bretton Woods exchange-rate framework.
The United States announced it would no longer freely convert dollars into gold for official settlements. This move undermined two pillars of the Bretton Woods system—fixed par values and dollar convertibility—and intensified the transition toward a new international monetary order. SDRs, created to supplement reserves under Bretton Woods, now had to function in a rapidly changing system.
Major countries agreed to realign exchange rates and widen trading bands in an effort to stabilize the system after the gold window closure. The IMF also established a temporary regime using central rates and wider margins. This episode showed how difficult it had become to maintain fixed exchange rates, affecting how reserve assets like SDRs would be viewed and used.
The IMF made the third yearly installment, completing the initial three-year general allocation. In total, SDR 9.3 billion were allocated across 1970–1972. This closed the first creation phase of SDRs and set the baseline for how the new reserve asset would be distributed and recorded.
The IMF’s Board of Governors created a high-level committee (the “Committee of 20”) to work on reforming the international monetary system. The committee’s creation signaled that incremental fixes were not enough and that broader redesign was needed after the breakdown of earlier rules. SDRs were part of the reform discussions because they were intended to support global liquidity in a cooperative way.
After the collapse of the gold-based convertibility framework, the IMF moved the SDR’s value away from a gold definition toward a currency-basket approach. This mattered because SDRs needed a stable valuation method that fit a world of changing exchange rates and reduced gold’s central role. The change helped SDRs remain usable as an accounting and reserve asset despite the end of Bretton Woods’ gold anchor.
By the mid-1970s, it was evident that the initial SDR allocations had not prevented the shift away from Bretton Woods fixed exchange rates. However, SDRs established a durable mechanism for creating a reserve asset through international agreement, rather than through one country’s deficits or gold production. That institutional innovation remained important even as the system’s original context changed.
Creation and first allocations of Special Drawing Rights (1969–1974)