International Reserves and Foreign Currency Liquidity

International reserves (reserve assets) are those foreign (external) highly liquid assets of country that are readily available to and controlled by monetary authorities (central bank) for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate. International reserves also can be used to maintain confidence in the national currency and serving as a basic for external borrowing.     

An asset is considered as a reserve if it meets the following criteria: assets must be claims on nonresidents (other than gold bullion); assets must be denominated and settled in convertible foreign currency; assets actually exist and are controlled by monetary authorities; assets can be converted into convertible foreign currency with minimal costs and in a minimal time period.

Reserve assets consist of monetary gold, special drawing rights holdings (SDRs), reserve position in the IMF and other assets in foreign currency that meet the criteria for reserve assets.

Monetary gold is gold with a purity of at least 995/1000, belonging to the official authorities of the country, which can be sold at any time for foreign currency in world markets or to international organizations.

Special drawing rights (SDRs) are international reserve assets created by the International Monetary Fund (IMF) to renewal the reserves of IMF members, which are distributed among countries in proportion to their quotas. The value of such assets is estimated based on the dollar value of five leading currencies basket: US dollar, Euro, Chinese yuan, Yen and Pound sterling.

Reserve position in the IMF is the amount of foreign currency that a member country may draw from the IMF at short notice, (“the reserve tranche” is 25% of the country’s contribution to the IMF’s) and an IMF’s debt to a member country (if the country provides resources to the IMF to maintain lending policy of the Fund in other countries).

Reserves in foreign currency are foreign currency in circulation, foreign currencies on current and deposit accounts in foreign banks and securities.

Other reserve assets are foreign assets that are liquid assets of country that are readily available by monetary authorities, but are not included in other categories of reserve assets.

Foreign currency liquidity is a broader concept than “international reserves”. Presentation of foreign currency liquidity data includes (1) foreign currency resources (international reserves and other assets in foreign currency) that are available to the authorities of the country, which can be used to meet foreign currency requirements at any time and (2) known in advance (planned or potential) inflows and outflows of foreign currency due to short-term liabilities in foreign currency of the country’s authorities and off-balance transactions.

Comparison of data on foreign currency resources owned by the country’s authorities with forthcoming net short-term foreign currency costs on their liabilities, can be used, among other data, to analyze the external vulnerability of the country.

The frequency of the report is on monthly basis. The publication period is the last working day of the next month.

Compliance with international guidelines

“Balance of Payments and International Investment Position Manual”, Sixth edition (BPM6), IMF, 2009 and “International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template”, IMF, 2013 provide methodological guidance on the compilation data.

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