1. International financial crises in the late 1990s underscored the importance of disseminating comprehensive information on countries’ international reserves and foreign currency liquidity1 on a timely basis. Deficiencies in such information have made it difficult to anticipate and respond to crises by obscuring financial weaknesses and imbalances. (See Box 1.1) Moreover, both the complexity and the importance of such information have increased as a result of the ongoing globalization of financial markets and financial innovations. The international financial activities2 that countries’ central banks and government entities undertake now occur in myriad forms, involve multiple domestic and foreign entities, and span locations around the globe. To assess countries’ foreign currency liquidity requires supplementing traditional data on international reserves that cover largely cross-border and balance-sheet activities with those on foreign currency positions and off-balance-sheet activities.
58. This chapter provides guidelines to assist countries in reporting data on the authorities’ foreign currency resources (comprising reserve assets and other foreign currency assets) in Section I of the template. Items I.A.(1) through I.A.(5) are used to report information on reserve assets and item I.B., on other foreign currency assets. All items in Section I refer to outstanding assets (stock) on the reference date. As noted in para. 42, to facilitate liquidity analysis, it is recommended that information on special features of the reporting country’s reserves management policy and major sources of funds for reserve assets and other foreign currency assets be described in country notes accompanying the template data. To enhance data transparency, it is also important to indicate in country notes specific changes in the reporting country’s exchange rate arrangements (for example, the implementation of dollarization) and their impact on the level of the country’s reserve assets.
138. Section II of the template is used to report the authorities’ predetermined short-term net drains on foreign currency assets. “Predetermined” drains are the known or scheduled contractual obligations in foreign currencies. Contractual obligations of the authorities can arise from on-balance-sheet and off-balance-sheet activities. On-balance-sheet obligations include predetermined payments of principal and interest associated with loans and securities. (See also footnote 6 of the data template.) Off-balance-sheet activities that give rise to predetermined flows of foreign currency include commitments in forwards, swaps, and futures contracts.
180. Section III of the template covers contingent short-term net drains on foreign currency resources. As discussed in Chapter 3, net drains refer to outflows net of inflows. Contingent inflows and outflows simply refer to contractual obligations that give rise to potential or possible future additions or depletions of foreign currency assets. Contingent drains are by definition off-balance-sheet activities, since only actual assets and liabilities are to be reflected on balance sheets. Section III of the template differs from Section II because foreign currency flows to be reported in Section III are contingent upon exogenous events. As with predetermined foreign currency flows covered in Section II of the template, contingent flows can arise from positions with residents and nonresidents.
236. Section IV of the template provides supplementary information covering (1) positions and flows not disclosed in Sections I—III but deemed relevant for assessing the authorities’ reserves and foreign currency liquidity positions and risk exposure in foreign exchange; (2) additional details on positions and flows disclosed in Sections I—III; and (3) positions and flows according to a breakdown or valuation criteria different from those found in Sections I—III.
The IMF’s Special Data Dissemination Standard (SDDS) was established by the Fund’s Executive Board in March 1996, with the aim of enhancing the availability of timely, reliable, and comprehensive economic and financial statistics. The SDDS was intended to guide member countries that have, or might seek, access to international capital markets in their provision of economic and financial data to the public. It was anticipated that the SDDS would contribute to the pursuit of sound macroeconomic policies and aid the functioning of financial markets.
All options should, if necessary, first be converted into puts and calls in foreign currency. For this conversion, the strike price is used. For example, the central bank has written a call option whereby the purchaser of the option has the right to buy LC100 million at a strike price of LC90 = $1.00.2 As it is written, this is a local currency call option. In converting it into a foreign currency option, the right to buy LC100 million at a price of LC90 = $1.00 is equivalent to the right to sell $1.11 million (100 million/90) at the same strike price of LC 90 = $1.00. In terms of the template, this will be treated as a put option that the central authorities have written with a notional value of $1.11 million. Similarly, if the central bank has purchased a put option with a notional value of LC200 million and a strike price of LC110 = $1.00, this will be treated as a purchased call option with a notional value of $1.818 million (200 million/110).
The IMF’s Executive Board in March 2000 approved the establishment of a database showing countries’ template data on international reserves and foreign currency liquidity on the IMF’s website. The data are presented in a common format and in a common currency, thereby enhancing the comparability of the template data among countries, facilitating access by market participants and other users, and fostering greater transparency. The common format is that developed by the IMF as shown in Appendix II of this document. The common currency is the U.S. dollar. Countries participating in this endeavor do so on a voluntary basis.