Chapter

Appendix I. International Reserves

Author(s):
International Monetary Fund
Published Date:
October 1997
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This appendix reviews recent developments in official measures of international reserves and liquidity. Changes in the main components of official reserves are briefly examined. The currency composition of foreign exchange reserves and their distribution across different groups of countries are also analyzed.

Recent Evolution of Official Reserve Assets

During 1996, total international reserves increased by 11 percent and stood at SDR 1,320 billion at the end of the year (Table I.1). Nongold reserves increased by 15 percent to SDR 1,088 billion, while the market value of the official holdings of gold declined marginally to SDR 232 billion. The rates of increase for both total and nongold reserves were similar to those observed in 1995 and much higher than the rates of increase in the early 1990s. The growth of nongold reserves tan be attributed primarily to increases in foreign exchange reserves held by both industrial and developing countries. Fund-related assets remained essentially unchanged during 1996.

Table I.1Official Holdings of Reserve Assets, End of Year 1991–March 19971(In billions of SDKs)
199119921993199419951996March

1997
All countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund25.933.932.831.736.738.036.2
SDRs20.612.914.615.819.818.518.7
Subtotal, Fund-related assets46.446.847.447.556.456.554.9
Foreign exchange625.4646.9718.4776.9893.51,301.51,078.2
Total reserves excluding gold671.8693.7765.9824.4949.91,088.01,133.0
Gold2
Quantity (in millions of troy ounces)938.0927.5921.7917.7908.4904.6892.8
Value at London market price231.9224.8262.1240.9236.3232.3224.1
Total reserves including gold903.7918.51,028.01,065.31,186.31,320.31,357.1
Industrial countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund22.829.528.327.431.632.631.0
SDRs17.510.511.512.515.014.514.7
Subtotal, Fund-related assets40.240.039.839.946.647.145.7
Foreign exchange360.4356.8373.7393.9441.1501.7515.3
Total reserves excluding gold400.7396.7413.4433.8487.7548.8561.0
Gold2
Quantity (in millions of troy ounces)793.7785.2770.8768.0755.1747.7736.1
Value at London market price196.2190.3219.2201.6196.5192.0184.8
Total reserves including gold596.9587.1632.7635.5684.1740.8745.8
Developing countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund3.14.44.54.35.05.45.2
SDRs3.12.43.23.34.84.04.0
Subtotal, Fund-related assets6.26.87.77.69.89.49.2
Foreign exchange264.9290.2344.8383.0452.5529.8562.8
Total reserves excluding gold271.2296.9352.4390.5462.3539.1572.0
Gold 2
Quantity (in millions of troy ounces)144.3142.3150.8149.6153.3156.9156.7
Value at London market price35.734.542.939.339.940.339.3
Total reserves including gold306.8331.4395.3429.8502.1579.4611.4
Net debtors
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund1.22.82.72.93.53.93.8
SDRs2.41.72.32.43.82.92.9
Subtotal, Fund-related assets3.64.55.05.27.36.96.7
Foreign exchange166.2184.9233.1264.8329.3400.2428.5
Total reserves excluding gold Gold 2169.8189.4238.1270.0336.6407.0435.2
Quantity (in millions of troy ounces)118.1116.1124.6123.4127.6131.3131.0
Value at London market price29.228.135.432.433.233.732.9
Total reserves including gold199.0217.6273.5302.4369.8440.7468.1
Countries without debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund1.12.32.32.43.13.53.4
SDRs1.51.11.21.32.81.81.8
Subtotal, Fund-related assets2.73.43.53.75.95.35.2
Foreign exchange116.7119.2155.4179.8234.6280.3304.3
Total reserves excluding gold119.4122.6158.9183.5240.4285.5309.4
Gold 2
Quantity (in millions of troy ounces)72.570.278.677.179.883.383.1
Value at London market price17.917.022.420.320.821.420.9
Total reserves including gold137.3139.6181.3203.8261.2306.9330.3
Note: Components may not sum to totals because of rounding.Source: International Monetary Fund, International Financial Statistics (various issues).

“Fund-related assets” comprise reserve positions in the Fund and SDR holdings of all Fund members. The entries under “Foreign exchange” and “Gold” comprise official holdings of those Fund members for which data are available and certain other countries or areas.

One troy ounce equals 31.103 grams. The market price is the afternoon price fixed in London on the last business day of each period.

Note: Components may not sum to totals because of rounding.Source: International Monetary Fund, International Financial Statistics (various issues).

“Fund-related assets” comprise reserve positions in the Fund and SDR holdings of all Fund members. The entries under “Foreign exchange” and “Gold” comprise official holdings of those Fund members for which data are available and certain other countries or areas.

One troy ounce equals 31.103 grams. The market price is the afternoon price fixed in London on the last business day of each period.

Foreign Exchange Reserves

Foreign exchange reserves constitute the largest component of nongold reserves, accounting for 91 percent of total nongold reserves for industrial countries and 98 percent for developing countries. Total foreign exchange reserves were valued at SDR 1,032 billion at the end of 1996, representing an increase of 15 percent relative to the level at the end of 1995. Developing countries held 51 percent of total foreign exchange reserves in 1996. During 1996, the stock of foreign exchange reserves rose by SDR 61 billion (an increase of 14 percent since 1995) for industrial countries and by SDR 77 billion (an increase of 17 percent) for developing countries. Net debtor countries accounted for about 75 percent of foreign exchange reserves held by developing countries. Reflecting private capital inflows, the stock of foreign exchange reserves held by net debtor countries grew by 22 percent in 1996, an increase similar to the average annual rate of increase for these countries since 1990. Foreign exchange reserves of countries without debt-servicing problems, which represent 70 percent of net debtor countries’ reserves, increased by 20 percent. Foreign exchange reserves of oil exporting developing countries rose by SDR 11 billion during 1996 (a 26 percent increase), after remaining essentially unchanged over the previous four years, Non-oil exporting developing countries increased their foreign exchange reserves by SDR 67 billion (16 percent).

Holdings of Fund-Related Assets

The ratio of Fund-related reserve assets to total nongold reserves has declined steadily during the 1990s. Fund-related reserves represented about 5 percent of total nongold reserve assets at the end of 1996 compared with an average ratio of about 11 percent over the previous decade. Total holdings of Fund-related assets remained unchanged during 1996 and stood at SDR 56 billion at year end. Industrial countries currency hold about 83 percent of total Fund-related reserves. Members’ reserve positions at the Fund, which comprise their reserve tranche positions and their creditor positions, increased by about SDR 1 billion to SDR 38 billion at the end of 1996, representing an increase of about 4 percent during 1996.

Members’ holdings of SDRs, which had been drawn down substantially during 1992 to pay for the reserve asset portions of quota increases under the Ninth General Review, appear to have stabilized after a sharp increase from 1992 to 1995 resulting from the Fund’s policy of decreasing its SDR holdings in order to replenish members’ holdings. Fund member countries now hold 18.5 billion of the total of 21.4 billion SDRs allocated by the Fund in two allocations since 1970. At the end of 1996, the Fund held 1.7 billion SDRs, compared with 8.6 billion SDRs at the end of 1992, and other prescribed institutions held the remaining 1.2 billion SDRs.

Gold Reserves

The market value of the stock of official gold reserves declined by 2 percent during 1996 and stood at SDR 232 billion at the end of the year. The stock of gold reserves declined by 3.8 million troy ounces during 1996. In addition, the SDR market price of gold declined marginally during this period. The share of gold as a ratio to total reserves has declined steadily since the 1980s, when the average for the decade was 44 percent, to 18 percent in 1996. Industrial countries hold 83 percent of the world’s gold reserves; gold holdings accounted for about 26 percent of their total reserves in 1996. Gold holdings accounted for only 7 percent of the total reserves of developing countries in 1996.

Developments in the First Quarter of 1997

In the first quarter of 1997, total international reserves increased by SDR 37 billion. Nongold reserves rose by SDR 45 billion, almost entirely attributable to an increase in foreign exchange reserves. Fund-related assets fell by SDR 2 billion, reflecting a decline in industrial countries’ reserve positions at the Fund. Foreign exchange reserves rose by 3 percent for industrial countries and by 6 percent for developing countries since the end of 1996. The market value of official gold holdings fell by SDR 8 billion, reflecting a 1 percent decline in the quantity of gold holdings and a 6 percent decline in the SDR price of gold.

Currency Composition of Reserves

During the past ten years there have been few significant changes in the degree of diversification in the currency composition of foreign exchange reserves (Table I.2). The U.S. dollar remains the dominant international reserve currency, accounting for 59 percent of the identified foreign exchange reserves in 1996.1 The U.S. dollar share of total foreign exchange reserves declined from 1987 through 1990; this decline had been reversed by 1993, and the share has remained relatively stable since then. The shares of the deutsche mark and the Japanese yen in total foreign exchange reserves have declined gradually from their respective peaks of 18 percent and 9 percent in the early 1990s to 14 percent and 6 percent, respectively, in 1996. The increases in the share of unspecified currencies in foreign exchange reserves in 1995 and 1996 principally reflect data problems.2 In particular, many transition economies that have become members of the Fund in recent years report only their total holdings of foreign exchange reserves and do not provide information on the currency composition of those reserves. The unspecified currency component of foreign exchange reserves stood at 10 percent at the end of 1996, indicating that the evolution of currency shares discussed below needs to be interpreted with considerable caution.

Table I.2Share of Currencies in Total Identified Official Holdings of Foreign Exchange, End of Year 1987–961(In percent)
1987198819891990199119921993199419951996Memorandum:

ECU-Dollar

Swaps

Included

with Dollars2

1996
All countries
U.S. dollar55.755.151.850.150.654.756.156.056.658.963.7
Pound sterling2.12.52.53.13.43.23.13.33.23.43.5
Deutsche mark13.314.518.017.315.913.714.214.313.713.614.0
French franc0.81.01.42.32.82.52.22.12.01.61.6
Swiss franc1.81.81.41.31.21.01.10.90.80.70.8
Netherlands guilder1.21.01.11.01.00.60.60.50.40.30.4
Japanese yen6.97.07.38.18.77.77.77.96.56.06.2
ECU13.611.710.810.110.610.18.68.17.05.9
Unspecified currencies34.65.45.86.75.76.36.36.99.89.59.8
Industrial countries
U.S. dollar54.854.548.445.743.748.950.351.052.155.564.9
Pound sterling1.01.31.31.71.82.42.22.32.12.02.1
Deutsche mark14.115.620.719.818.315.116.416.316.416.417.5
French franc0.30.71.12.33.02.82.52.12.11.61.7
Swiss franc1.51.51.10.90.80.40.30.20.10.10.1
Netherlands guilder1.11.01.11.11.10.40.40.20.20.20.2
Japanese yen6.36.47.68.89.77.67.98.36.75.96.2
ECU19.016.315.314.516.616.715.214.613.311.5
Unspecified currencies32.02.83.55.24.95.74.85.07.16.87.3
Developing countries
U.S. dollar58.256.760.060.162.763.863.762.061.662.562.5
Pound sterling5.15.55.66.46.24.54.24.74.54.94.9
Deutsche mark11.211.611.411.711.711.511.211.810.710.610.6
French franc2.02.02.12.32.52.11.92.22.01.51.5
Swiss franc2.62.32.22.02.02.02.21.81.51.41.4
Netherlands guilder1.21.00.90.81.01.00.90.80.60.50.5
Japanese yen8.38.66.66.67.07.97.67.56.46.26.2
ECU
Unspecified currencies411.312.211.210.07.07.38.39.312.712.312.3
Note: Components may not sum to totals because of rounding.

Note that European currency units (ECUs) are treated as a separate currency except in the last column. Only Fund member countries that report their official holdings of foreign exchange are included in this table.

This column is for comparison and indicates the currency composition of reserves when ECUs issued against dollars are assumed to be dollars and all other ECUs are ignored.

The residual is equal to the difference between total foreign exchange reserves of Fund member countries and the sum of the reserves held in the currencies listed in the table.

The calculations here rely to a greater extent on Fund staff estimates than do those provided for the group of industrial countries.

Note: Components may not sum to totals because of rounding.

Note that European currency units (ECUs) are treated as a separate currency except in the last column. Only Fund member countries that report their official holdings of foreign exchange are included in this table.

This column is for comparison and indicates the currency composition of reserves when ECUs issued against dollars are assumed to be dollars and all other ECUs are ignored.

The residual is equal to the difference between total foreign exchange reserves of Fund member countries and the sum of the reserves held in the currencies listed in the table.

The calculations here rely to a greater extent on Fund staff estimates than do those provided for the group of industrial countries.

At the end of 1996, the share of U.S. dollars in the foreign exchange reserves of the industrial countries was 56 percent, representing an increase of 12 percentage points since 1991. The U.S. dollar share of developing country foreign exchange reserves has been relatively stable during the 1990s and stood at 63 percent at the end of 1996. The shares of the deutsche mark and the Japanese yen in foreign exchange reserves have declined gradually during the 1990s for both industrial and developing countries. Their combined share in industrial country foreign exchange reserves stood at 22 percent in 1996 compared with 29 percent in 1990; their combined share in foreign exchange reserves of developing countries stood at 17 percent in 1996. The shares of other identifiable national currencies in total foreign exchange reserves have not changed significantly during the past ten years.

In the calculation of currency shares in Table I.2, the European currency unit (ECU) is treated as a separate currency. Official ECU reserves, which are held mainly by European countries, are in the form of claims both on the private sector and the European Monetary Institute (EMI). The ECU reserves that represent claims on the EMI are issued in exchange for deposits equal to 20 percent of both gold and dollar reserves. These swaps are renewed even three months, and changes in member’s holdings of dollars and gold, as well as changes in the market price of gold and in the foreign exchange value of the dollar, affect the amount of ECUs outstanding.3 Quantity changes in ECU holdings therefore depend in part on the evolution of the two components of the EMI swaps.4 The other component of ECU foreign exchange reserves is official claims on the private sector, usually in the form of ECU deposits and bonds.

The share of ECUs in total foreign exchange reserves of industrial countries has declined gradually from 19 percent in 1987 to 12 percent at the end of 1996. Most of the recent fall in the share of ECUs is a result of the decline in official ECU reserves in the form of claims on the private sector.

In the last column of Table I.2, the SDR value of ECU swaps issued against dollars is counted as a part of the dollar component of foreign exchange reserves. This increases the share of U.S. dollars to 64 percent of total foreign exchange reserves for all countries and to 65 percent for industrial countries. However, the broad trends in the currency composition of Foreign exchange reserves are unaffected by this alternative treatment of ECU reserves.

Changes in the SDR value of foreign exchange reserves can be decomposed into quantity and valuation (price) changes for each of the major currencies as well as the ECU (Table I.3). In 1996, total official holdings of reserves in the major identifiable currencies increased by SDR 127 billion, reflecting a quantity increase of SDR 119 billion and a valuation increase of SDR 8 billion.

Table I.3Currency Composition of Official Holdings of Foreign Exchange, End of Year 1988–961(In millions of SDRs)
198819891990199119921993199419951996
U.S. dollar
Change in holdings18,21811,35018,39615,82233,94647,47630,46371,971100,608
Quantity change5,8645,71639,00318,12021,92146,11153,74076,59583,658
Price change12,3545,634–20,607–2,29812,0241,365–23,277–4,62416,950
Year-end value242,194253,543271,940287,762321,708369,184399,647471,617572,225
Pound sterling
Change in holdings2,2631,5004,5462,477–6241,3463,7792,9536,152
Quantity change2,0782,6533,0453,0063,0711,7063,9133,5242,263
Price change185–1,1531,502–529–3,695–360–134–5713,889
Year-end value10,90212,40316,94919,42618,80220,14823,92726,88033,032
Deutsche mark
Change in holdings10,04924,3416,265–3,798–9,76812,6378,96211,95618,030
Quantity change13,75517,8621,649–1,846–8,08118,5134,3325,77123,925
Price change–3,7066,4804,616–1,952–1,687–5,8754,6296,186–5,894
Year-end value63,54587,88694,15190,35380,58593,223102,184114,141132,171
French franc
Change in holdings1,2352,4945,4783,545–1,321–585721,726–1,818
Quantity change1,5192,0265,1043,528–1,11287731612–1,279
Price change–28446937418–209–9355411,114–539
Year-end value4,4976,99212,46916,01514,69414,63515,20816,93415,116
Swiss franc
Change in holdings576–776–51–137–6261,345–1,054112685
Quantity change1,333–764–728232–4531,433–1,490–6051,543
Price change–757–12677–369–173–87436717–858
Year-end value7,7466,9696,9196,7826,1567,5016,4476,5597,244
Netherlands guilder
Change in holdings–237866331294–2,237300–519–258129
Quantity change7351593370–2,240559–704–471285
Price change–310351238–763–258186213–157
Year-end value4,4015,2675,5985,8923,6553,9553,4373,1783,307
Japanese yen
Change in holdings3,2404,7618,4825,449–4,1725,5975,548–2,0783,890
Quantity change2,2278,7788,7162,243–6,2624342,7458058,854
Price change1,013–4,018–2343,2072,0905,1622,803–2,882–4,964
Year-end value30,85735,61844,10049,55045,37750,97456,52254,44458,334
European currency unit
Change in holdings–3,0821,2071,9745,360–498–2,8209571,147–1,132
Quantity change–419–1,079–7246,2833,8451,503–1,037–1,654–294
Price change–2,6632,2872,697–923–4,342–4,3231,9942,801–838
Year-end value51,43152,63854,61159,97159,47356,65457,61058,75857,626
Sum of the above2
Change in holdings32,26145,74345,42329,01314,69965,82448,70887,530126,543
Quantity change26,42935,70556,15731,93510,68871,13661,53084,576118,955
Price change5,83210,038–10,735–2,9224,011–5,312–12,8222,9547,589
Year-end value415,573461,316506,738535,751550,450616,274664,982752,512879,055
Total official holdings3
Change in holdings38,39950,76348,58431,76021,54371,52658,426116,638136,849
Year-end value494,271545,034593,618625,378646,921718,447776,873893,5111,030,361
Note: Components may not sum to totals because of rounding.

The currency composition of foreign exchange is based on the Fund’s currency survey and on estimates derived mainly, but not solely, from official national reports. The numbers in this table should be regarded as estimates that are subject to adjustment as more information is received. Quantity changes are derived by multiplying the changes in official holdings of each currency from the end of one quarter to the next by the average of the two SDR prices of that currency prevailing at the corresponding dates. This procedure converts the change in the quantity of national currency from own units to SDR units of account. Subtracting the SDR value of the quantity change so derived from the quarterly change in the SDR value of foreign exchange held at the end of two successive quarters and cumulating these differences yields the effect of price changes over the years shown.

Each item represents the sum of the eight currencies above.

Includes a residual whose currency composition could not be ascertained, as well as holdings of currencies other than those shown.

Note: Components may not sum to totals because of rounding.

The currency composition of foreign exchange is based on the Fund’s currency survey and on estimates derived mainly, but not solely, from official national reports. The numbers in this table should be regarded as estimates that are subject to adjustment as more information is received. Quantity changes are derived by multiplying the changes in official holdings of each currency from the end of one quarter to the next by the average of the two SDR prices of that currency prevailing at the corresponding dates. This procedure converts the change in the quantity of national currency from own units to SDR units of account. Subtracting the SDR value of the quantity change so derived from the quarterly change in the SDR value of foreign exchange held at the end of two successive quarters and cumulating these differences yields the effect of price changes over the years shown.

Each item represents the sum of the eight currencies above.

Includes a residual whose currency composition could not be ascertained, as well as holdings of currencies other than those shown.

Official reserves held in U.S. dollars increased by SDR 101 billion in 1996, attributable to an increase of SDR 84 billion in the quantity of dollar holdings and an increase of 4 percent in the SDR value of the U.S. dollar during 1996. The quantity of reserves held in deutsche mark increased by SDR 24 billion during 1996, although this was partially offset by a decrease of SDR 6 billion in the value of those reserves. An increase of SDR 9 billion in the quantity of Japanese yen reserves was partially offset by a 9 percent decline in the SDR value of the Japanese yen. Of the other major currencies, only the pound sterling rose in value relative to the SDR during 1996; the quantity of pound sterling reserves rose by SDR 2 billion. French franc and ECU reserves experienced both quantity and valuation decreases during 1996, resulting in total declines of SDR 2 billion and SDR 1 billion, respectively.

Table I.2 includes European currency units (ECUs) as a separate currency except in the last column, where the dollar-swap component of ECU liabilities of the European Monetary Institute (EMI) is classified as dollars and all other ECUs are omitted from the calculation.

Unspecified currencies include currencies other than those listed in Table I.2 as well as foreign exchange reserves for which no information on currency compoisition is available from the reporting country or from other sources. For developing countries as well as transition economies that have recently become members of the Fund, a large share under this classification probably indicates a lack of information on currency composition.

In calculating the value of the gold holdings of the EMI in terms of ECUs, the ECU swap price is set equal to the lower of two values: the average of the prices recorded daily at the two London price fixings during the previous six calendar months, and the average price at the two price fixings on the penultimate working day of the period.

The quarteriy swaps are arranged at the end of the first weeks of January-, April, July, and October. Changes in the number of EC Us outstanding thus depend on the exchange rate and the gold price on these dates, whereas changes in the SDR value of HCU holdings are calculated at the SDR-F.CU exchange rate at the end of each quarter.

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