Influence supply and demand on the foreign exchange market. Such intervention is bound to be of

limited duration, but can serve a role as a signalling device, letting the markets know what the intention

of the authorities is. The official published figures of reserves, however, do not necessarily reflect

the total amount of gold and foreign currency which could be used to meet obligations, any more

than does an individual’s current account at the bank. The reserves exclude, for instance, the credit

facilities available through the International Monetary Fund and portfolio foreign investments.

Commentary and Notes to Text 7.7.1.4

1. Pressure on the reserves — давление на резервы

2. underlying trading problems — лежащие в основе торговые проблемы

3. private transactions — частные сделки

4. a tool for influencing the exchange rate — инструмент влияния на обменный (валютный) курс

5. to meet obligations — удовлетворять (обеспечивать) обязательства

102

6. an individual’s current account — текущий частный счет

7. the credit facilities — кредитные средства (денежные)

8. portfolio foreign investments — портфельные иностранные инвестиции

7.7.1.5. Read and translate the text “Evolution of Special Drawing Rights (SDRs).” Make

a synopsis of it in written form.

Evolution o f Special Drawing Rights (SDRs)

Special Drawing Rights (SDRs) is the term which came into being after the Second World War.

Within half a century SDRs have undergone a considerable evolution. Let us see for what purposes

SDRs were designed.

By SDRs we mean the instruments for financing international trade, predominantly the reserve

currencies, such as dollars and sterling, and gold. Dependence on the latter, as Keynes pointed

out, was an anachronism which had been successfully terminated as far as domestic economies

were concerned. The problem of depending on the former was that the supply of these currencies

was regulated by their countries’ balance of payments deficits or surpluses. The deficit on the US

balance of payments had been an important source of the flow of liquidity into central bank reserves.

The difficulty was that persistent deficits led to doubts about the maintenance of the currency’s

exchange rate and made central banks less willing to hold dollars. This problem came to a head

In August 1971, when the us government imposed various measures to correct its balance-ofpayments

deficit. In December 1971 the dollar was devalued by about 10 per cent.

Keynes put forward the idea of an international currency, to be called Bancor, regulated by a

central institution (Keynes Plan). This idea was turned down then for fear that the creation of

Squidity would generate inflation. In 1969 the “Group of Ten” agreed to establish SDRs, which

are similar in principle to Keynes’s original idea, and their agreement was ratified by the IMF. The

SDR was linked to gold and equivalent to $1 US at the gold rate of exchange of $35 per oz. Until

December 1971 an SDR was equivalent to $1; but, with the effective devaluation of the dollar

f ollowing the Smithsonian Agreement, the rate became 1 SDR = $1,08571. With the subsequent

breakdown of the fixed-parity system, the IMF valued the SDR in terms of a “basket” of sixteen

currencies, so that, as from July 1974, the rate in relation to the dollar “floated.” By 1996 SDR 30

billion had been created. These sums were distributed to each member country in proportion to its