Special Drawing Rights (SDRs), used as an international reserve asset, were created by which international financial institution?

Introduction / Context:
Special Drawing Rights, often abbreviated as SDRs, are an important part of the international monetary system. They are not a currency but serve as a supplementary reserve asset that countries can hold and exchange for freely usable currencies. This question checks your knowledge of which international institution created SDRs and manages them.

Given Data / Assumptions:
- SDRs are described as an international reserve asset.
- They were created by an international financial institution.
- The options are IBRD, ADB, IMF, and WTO.
- We assume basic understanding of what each institution does.

Concept / Approach:
The International Monetary Fund is responsible for the creation and allocation of Special Drawing Rights. SDRs were introduced in 1969 to supplement member countries official reserves. They are valued based on a basket of major currencies and can be exchanged between member countries through the IMF. Knowing that the IMF handles this reserve asset makes it clear that the IMF is the correct answer.

Step-by-Step Solution:
Step 1: Recall that SDRs are linked to the International Monetary Fund and appear in IMF publications. Step 2: Remember that the IMF created SDRs in 1969 to support the Bretton Woods system and later to supplement foreign exchange reserves. Step 3: Compare this information with the list of options: IBRD, ADB, IMF, and WTO. Step 4: Recognise that IBRD and ADB are development banks and WTO deals with trade rules, not reserve assets like SDRs. Step 5: Select International Monetary Fund (IMF) as the correct answer.

Verification / Alternative Check:
Standard macroeconomics textbooks and IMF fact sheets clearly state that SDRs are created and managed by the IMF. They describe SDRs as an interest bearing international reserve asset allocated to member countries. Neither IBRD nor ADB issues such reserve assets, and WTO is not a financial institution at all. This independent evidence supports choosing the IMF.

Why Other Options Are Wrong:
International Bank for Reconstruction and Development (IBRD): Part of the World Bank Group that provides loans for development projects, but it does not create SDRs.
Asian Development Bank (ADB): A regional development bank for Asia and the Pacific, it finances infrastructure and social projects but is not responsible for SDRs.
World Trade Organization (WTO): Deals with global trade rules and dispute settlement and has no role in creating reserve assets.

Common Pitfalls:
A common mistake is to choose IBRD or ADB simply because they belong to the broader family of international financial institutions. Another error is to confuse SDRs with development loans, which can lead to picking a development bank instead of the IMF. Remembering that SDRs are part of the international monetary system rather than development finance helps steer you to the IMF.

Final Answer:
Special Drawing Rights were created by the International Monetary Fund (IMF).