Reconstitution

Summary of Reconstitution

A regulation of the International Monetary Fund (read this and related legal terms for further details) relating to the use of Special Drawing Rights (read this and related legal terms for further details), or SDRs, by member states. Specifically, the rules of reconstitution state that a member must, over a period of five years, maintain an average SDR holding equal to or greater than 30 percent of its average allocation within the same period; a member may be obliged to acquire SDRs to meet its 30 percent minimum. A member must also show “due regard to the desirability of pursuing over time a balanced relationship”between its holding of SDRs, gold, and other reserve assets.

(Main Author: William J. Miller)