Chapter

Appendix I: International Reserves

Author(s):
International Monetary Fund
Published Date:
January 1991
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This appendix reviews recent developments in international reserves and liquidity as represented by (1) the evolution of holdings of official assets; (2) the currency composition and distribution of foreign exchange reserves; and (3) the placement of official holdings of foreign exchange reserves.

Recent Evolution of Official Reserve Assets

In 1990, total international reserves measured in SDR terms increased by 2 percent, to SDR 892 billion, reflecting an increase in the holdings of non-gold reserves partially offset by a significant fall in the market value of official holdings of gold (Table I.1). The growth of non-gold reserves reflected larger holdings of foreign exchange reserves by both industrial and developing countries. At the same time, holdings of Fund-related assets by developing countries declined slightly.

Table I.1.Official Holdings of Reserve Assets, End of Year 1985-March 19911(In billions of SDRs)
198519861987198819891990March

1991
All countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund38.735.331.528.325.523.725.0
SDRs18.219.520.220.220.520.420.8
Subtotal, Fund-related assets56.954.851.748.446.044.145.8
Foreign exchange348.3364.1456.1494.5545.0593.7595.5
Total reserves excluding gold405.2419.0507.8542.9591.0637.8641.3
Gold2
Quantity (millions of ounces)953.2952.9947.2947.8942.5940.3939.3
Value at London market price283.8304.5323.2288.9287.6254.5239.8
Industrial countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund25.323.120.519.619.620.021.4
SDRs14.916.116.517.617.717.617.9
Subtotal, Fund-related assets40.239.236.937.137.237.639.2
Foreign exchange189.2212.1287.4315.9345.0376.5375.5
Total reserves excluding gold229.4251.3324.3353.1382.2414.1414.7
Gold2
Quantity (millions of ounces)810.8809.1804.8801.1797.9795.9795.5
Value at London market price241.4258.6274.6244.2243.5215.4203.1
Developing countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund13.412.311.08.75.93.83.6
SDRs3.33.43.72.62.82.72.9
Subtotal. Fund-related assets16.715.614.711.38.76.56.5
Foreign exchange159.0152.0168.7178.5200.0217.2220.0
Total reserves excluding gold175.8167.7183.5189.9208.8223.7226.6
Gold2
Quantity (millions of ounces)142.3143.8142.4146.6144.6144.4143.8
Value at London market price42.445.948.644.744.139.136.7
Net debtors
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund2.52.32.11.51.61.11.2
SDRs2.12.32.61.61.61.81.8
Subtotal, Fund-related assets4.64.64.63.13.23.03.0
Foreign exchange106.890.490.6101.4120.3144.8147.9
Total reserves excluding gold111.495.195.2104.5123.5147.7150.9
Gold2
Quantity (millions of ounces)118.5119.5116.1114.5112.4112.3111.7
Value at London market price35.338.239.634.934.330.428.5
Countries with debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund0.80.80.60.10.10.10.1
SDRs0.70.71.30.50.60.70.7
Subtotal. Fund-related assets1.51.51.80.60.70.80.8
Foreign exchange45.735.935.433.739.951.451.9
Total reserves excluding gold47.337.337.234.440.552.152.7
Gold2
Quantity (millions of ounces)54.154.153.151.350.052.652.1
Value at London market price16.117.318.115.615.314.213.3
Countries without debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund1.71.61.51.41.51.01.1
SDRs1.41.61.31.11-01.21.1
Subtotal, Fund-related assets3.13.12.82.42.62.22.2
Foreign exchange61.154.655.267.780.593.496.0
Total reserves excluding gold64.257.758.070.183.095.698.2
Gold2
Quantity (millions of ounces)64.365.363.063.262.459.759.6
Value at London market price19.220.921.519.319.016.115.2
Source: International Monetary Fund, International Financial Statistics.

“Fund-related assets” comprise reserve positions in the Fund and SDR holdings of all Fund members and Switzerland. Claims by Switzerland on the Fund are included in the line showing reserve positions in the Fund. 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, including Switzerland.

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.

Source: International Monetary Fund, International Financial Statistics.

“Fund-related assets” comprise reserve positions in the Fund and SDR holdings of all Fund members and Switzerland. Claims by Switzerland on the Fund are included in the line showing reserve positions in the Fund. 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, including Switzerland.

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.

Non-Gold Reserves

Non-gold reserves increased by 8 percent in 1990 to SDR 638 billion at the end of the year. This increase represented a continuation in the expansion of non-gold reserves that has been evident since 1986. The growth of non-gold reserves in 1990 mainly reflected an expansion of such holdings in the industrial countries, which increased at an annual rate of 8 percent. As in 1989, all groups of developing countries also increased their non-gold reserves during 1990. The non-gold reserve holdings of those developing countries that have experienced recent debt-servicing problems rose by 29 percent, a distinctly faster rate of increase than that of previous years. Capital importing developing countries without debt-servicing problems increased their non-gold reserve holdings by 15 percent.

Foreign Exchange Reserves

Foreign exchange reserves increased by 9 percent in 1990 to reach SDR 594 billion by the end of the year. This rise in foreign exchange reserves in 1990 continued the strong growth of the previous three years. While total holdings of foreign exchange reserves grew by SDR 49 billion, the expansion of the holdings of the industrial countries accounted for a substantial part of this increase as their holdings rose by SDR 32 billion, which represented an annual rate of growth of 9 percent. Developing countries also increased their holdings of foreign exchange reserves by 9 percent. This increase continued the process of accumulation of foreign exchange reserves by developing countries initiated in 1987 after successive declines in 1985 and 1986.

Of capital importing developing countries, those without debt problems increased their foreign exchange reserve holdings by 16 percent, while the foreign exchange reserves of those countries with recent debt-servicing problems grew by 29 percent. Indeed, the foreign exchange reserves of the latter group of countries exceeded their 1985 level for the first time in 1990.

Holdings of Fund-Related Reserve Assets

Holdings of Fund-related assets decreased by 4 percent in 1990 to reach SDR 44 billion at the end of the year, reflecting an SDR 2 billion decline in holdings of reserve positions in the Fund. Reserve positions in the Fund, which comprise the reserve tranche position and the creditor position, increased by SDR 16 billion between the end of 1982 and the end of 1984 but then declined by SDR 18 billion in the period 1984-90. Members’ holdings of SDRs remained unchanged in 1990.

Gold

The market value of the global stock of gold reserves declined sharply by 12 percent in 1990, to SDR 255 billion. This decrease reflected almost entirely changes in gold prices although a small decline in the physical stock of official gold reserves also occurred. The physical stock has remained fairly constant since 1972, except for a 9 percent decline in 1979, which occurred mainly because members of the European Monetary System swapped 20 percent of their gold holdings with the European Monetary Cooperation Fund (EMCF) for European currency units (ECUs). Both the physical holdings of gold and its distribution between industrial and developing countries changed very little during the 1980s. Industrial countries held 85 percent and developing countries 15 percent of the total physical stock of gold reserves of 940 million ounces at the end of 1990.

Developments in the First Quarter of 1991

Total international reserves fell by SDR 11 billion in the first quarter of 1991 as an increase in non-gold reserves was more than offset by a decrease in the market value of gold. The larger holdings of non-gold reserves reflected a rise of SDR 3 billion in the foreign exchange reserves of developing countries, while the foreign exchange reserves of industrial countries fell by SDR 1 billion.

The market value of official holdings of gold decreased from SDR 255 billion at the end of 1990 to SDR 240 billion at the end of the first quarter of 1991. Since the total physical holdings of gold changed only slightly, the reduction in the market value of gold was largely due to the fall in the market price of gold from SDR 271 to SDR 255 an ounce over the quarter.

Currency Composition of Reserves

Since the mid-1970s, there has been a continuing diversification of the currency composition of foreign exchange reserves. Whereas that composition had remained relatively stable during 1975-77, the sharp depreciation of the dollar between 1977 and 1980 was accompanied by a decline in the share of the dollar in total foreign exchange reserves from 79 percent at the end of 1977 to 69 percent at the end of 1980. This diversification away from the dollar was partly reversed in the early 1980s, when the dollar appreciated strongly relative to the other major currencies. As a result, the share of the dollar in reserves rose to 71 percent by the end of 1983 (Table I.2). But by 1985, the share had declined by 6 percentage points, as monetary authorities again diversified the currency composition of their foreign exchange reserves and the proportion of foreign exchange reserves denominated in the deutsche mark, the Japanese yen, and, to a lesser extent, sterling increased. The extensive foreign exchange market intervention by some major industrial countries that occurred during 1986 and 1987 was accompanied by a rise in the proportion of reserves held as dollar-denominated assets (to 68 percent in 1987) and, as a counterpart, the shares of the deutsche mark, the Japanese yen, and sterling declined slightly. However, the share of reserves held as dollar-denominated assets fell to 56 percent at the end of 1990. The counterpart of the fall in the share of the dollar was a sharp increase in the share of the deutsche mark (which increased from 15 percent at the end of 1987 to 20 percent at the end of 1990).

Table I.2.Share of National Currencies in Total Identified Official Holdings of Foreign Exchange, End of Year 1981-90 1(In percent)
1981198219831984198519861987198819891990Memorandum:

ECUs Treated

Separately2

1990
All countries
U.S. dollar71.470.571.470.165.067.167.964.760.356.449.6
Pound sterling2.12.32.52.93.02.62.42.82.73.23.1
Deutsche mark12.712.311.812.615.214.614.515.719.119.718.7
French franc1.31.00.80.80.90.80.81.01.42.12.0
Swiss franc2.72.72.42.02.32.02.01.91.51.51.5
Netherlands guilder1.11.10.80.71.01.11.21.11.21.21.1
Japanese yen4.24.75.05.88.07.97.57.77.89.18.6
Unspecified currencies34.45.45.35.14.63.93.85.16.06.815.4
Industrial countries
U.S. dollar78.576.877.373.565.269.571.467.859.754.144.5
Pound sterling0.70.70.71.41.91.31.11.61.41.81.7
Deutsche mark13.012.513.015.219.516.815.917.422.723.621.9
French franc0.50.10.10.10.10.10.40.71.22.22.1
Swiss franc1.71.71.51.52.11.71.61.71.11.21.1
Netherlands guilder0.80.70.50.61.01.11.31.11.31.31.2
Japanese yen3.64.55.16.38.98.37.17.08.19.99.2
Unspecified currencies31.23.01.91.31.31.21.22.74.55.918.4
Developing countries4
U.S. dollar64.164.065.266.364.863.360.057.761.661.361.3
Pound sterling3.44.04.44.44.34.65.25.65.66.26.2
Deutsche mark12.512.110.510.010.111.111.111.711.411.511.5
French franc2.12.01.71.51.92.01.81.71.91.91.9
Swiss franc3.73.73.42.62.72.62.72.62.32.32.3
Netherlands guilder1.41.51.10.80.91.11.10.90.80.80.8
Japanese yen4.94.94.85.27.07.18.59.37.07.47.4
Unspecified currencies37.97.89.09.28.48.29.510.59.48.78.7

The SDR value of ECUs issued against dollars is added to the SDR value of dollars, but the SDR value of ECUs issued against gold is excluded from the total distributed here. Only selected countries that provide information about the currency composition of their official holdings of foreign exchange are included in this table.

This column is for comparison and indicates the currency composition of reserves when holdings of ECUs are treated as a separate reserve asset, unlike the earlier columns as is explained in the preceding footnote. The share of ECUs in total foreign exchange holdings was 12.9 percent for industrial countries and 8.2 percent for all countries.

The residual is equal to the difference between total identified reserves and the sum of the reserves held in the seven 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.

The SDR value of ECUs issued against dollars is added to the SDR value of dollars, but the SDR value of ECUs issued against gold is excluded from the total distributed here. Only selected countries that provide information about the currency composition of their official holdings of foreign exchange are included in this table.

This column is for comparison and indicates the currency composition of reserves when holdings of ECUs are treated as a separate reserve asset, unlike the earlier columns as is explained in the preceding footnote. The share of ECUs in total foreign exchange holdings was 12.9 percent for industrial countries and 8.2 percent for all countries.

The residual is equal to the difference between total identified reserves and the sum of the reserves held in the seven 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.

In the calculation of these shares, the SDR value of ECUs issued against gold is not counted as part of foreign exchange reserves, but the SDR value of ECUs issued against dollars is counted as part of the holdings of dollars. The overall picture of changes in the trend in the currency composition of foreign exchange reserves is similar if ECUs, which were introduced in 1979 and accounted for 8 percent of total identified official holdings of foreign exchange at the end of 1990, are treated separately. In particular, the share of the dollar (excluding holdings of ECUs) in total identified reserve holdings fell from 56 percent at the end of 1987 to 50 percent at the end of 1990 (Table I.2).

Changes in the SDR value of foreign exchange reserves can also be decomposed into valuation (or price) and quantity changes for each of the major currencies (including the ECU) and for the total of the identified foreign exchange reserves (Table I.3). In 1990, total identified foreign exchange reserves increased by SDR 46 billion as a result of a sharp positive quantity change of SDR 57 billion and a valuation loss of SDR 11 billion.

Table I.3.Currency Composition of Official Holdings of Foreign Exchange, End of Year 1985-901(In millions of SDRs)
198519861987198819891990
U.S. dollar
Change in holdings-19,2412,85338,63817,61310,85614,762
Quantity change2,87621,95770,9395,0845,15235,239
Price change-22,118-19,105-32,30112,5305,704-20,477
Year-end value184,606187,459226,097243,710254,566269,328
Pound sterling
Change in holdings190-1,3721,2132,5621,0484,263
Quantity change-737-6604762,3712,2182,769
Price change927-712736191-1,1701 494
Year-end value8,9997,6278,84011,40112,45016>13
Deutsche mark
Change in holdings6,935-1,9839,80410,98723,87513,267
Quantity change1,337-7,8516,92514,69117,4018,444
Price change5,5985,8682,879-3,7046,4744,823
Year-end value45,55143,56853,37264,35988,235101,502
French franc
Change in holdings408-3215841,2142,4424,185
Quantity change62-4524761,4802,0003,839
Price change346131108-266442347
Year-end value2,7492,4283,0124,2256,66710,853
Swiss franc
Change in holdings826-9421,118751-1,017951
Quantity change114-1,9184701,506-968273
Price change713976648-755-49678
Year-end value7,0366,0947,2137,9646,9487,898
Netherlands guilder
Change in holdings7294071,268-124879640
Quantity change406111,014178525390
Price change323396254-302354250
Year-end value2,8923,2994,5664,4425,3215,960
Japanese yen
Change in holdings6,489-6684,3603,5644,38211,166
Quantity change4,232-3,7881,7382,5328,06811,344
Price change2,2573,1202,6231,032-3,686-178
Year-end vaiue24,12623,45827,81931,38335,76446,930
European currency unit
Change in holdings-1452,67716,521-5,985364-3,076
Quantity change-4,425-37214,049-3,296-1,878-5,638
Price change4,2803,0492,472-2,6892,2422 562
Year-end value38,04340,72057,24151,25751,62148,544
Sum of the above2
Change in holdings-3,80865173,50630,58342,82946,157
Quantity change3,8656,92996,08824,54632,51956,660
Price change-7,673-6,278-22,5826,03710,311-10,503
Year-end value314,002314,653388,159418,742461,571507,728
Total official holdings3
Change in holdings-1,17115,85591,99638,35150,55548,648
Year-end value348,273364,128456,124494,475545,030593,678

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.

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

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.

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

ECUs are issued by the EMCF to the central banks of the members in exchange for the deposit of 20 percent of the gold holdings and 20 percent of the gross dollar holdings of these institutions. These swaps are renewed every three months, and changes in the member’s holdings of dollars and gold, as well as changes in the market price of gold and the foreign exchange value of the dollar, affect the amount of ECUs outstanding.1 Quantity changes in ECU holdings depend, therefore, partly on the evolution of the two components of the EMCF swap.2 The SDR 2 billion fall in holdings of ECUs that occurred in 1989 resulted from a negative quantity change (SDR 4 billion) and a positive valuation effect (SDR 2 billion).

There are significant differences in the pattern of currency diversification between industrial and developing countries (see Table I.2). During the period 1981-86, the industrial countries experienced greater diversification of reserve holdings than the developing countries. The industrial countries’ share of dollar-denominated reserves decreased by 9 percent during this period, whereas the developing countries’ share fell by 1 percentage point. Since 1986, moreover, the share of the dollar in the total reserve holdings by developing countries has fallen by 1 percentage point, compared with a decrease of 15 points for industrial countries. In addition, while industrial countries increased the share of the deutsche mark and the Japanese yen in their reserve portfolios by 11 and 6 percentage points, respectively, since 1981, developing countries decreased the share of reserves denominated in deutsche mark by 1 percentage point and increased the share of the Japanese yen by 3 percentage points.

Placement of Official Holdings of Foreign Exchange

Total official holdings of foreign exchange reserves increased during 1990 by SDR 47 billion (Table I.4). The increase was largely due to a sharp rise in the residual which could reflect either higher reserves on the part of nonreporting countries or an increase in the reserves of reporting countries held in currencies not listed in the table.

Table I.4.Placement of Official Holdings of Foreign Exchange Reserves, End of Year 1983-90 1(In billions of SDRs)
198319841985198619871988198919902
Liabilities of residents of the

United States to foreign

official institutions
163178159172183222237238
Items not included in reported

official U.S. dollar holdings3
-52-46-41-34-33-35-43-42
Reported official U.S. dollar

claims on residents of the

United States
111132118138150187194196
Reported official claims on

residents of other countries

denominated in the debtor’s

own currency
404656617988110123
Subtotal151178174199229275304320
Identified official holdings

of Eurocurrencies

Eurodollars
5766605460575857
Other currencies3338413548556068
Subtotal9010410189108112118125
ECUs4238384054515249
Residual42529353664557198
Total official holdings

of foreign exchange
308349348364455493545592
Sources: International Monetary Fund, International Financial Statistics; U.S. Treasury Department, Bulletin; Bank of England, Quarterly Bulletin; BIS, International Banking and Financial Market Developments.

Official foreign exchange reserves of Fund members and certain other countries and areas, including Switzerland. Beginning in April 1978,, Saudi Arabia holdings exclude the foreign exchange cover against a note issue, which amounted to SDR 4.3 billion at the end of March 1978.

The upward revision in the residual for 1989 and the higher level noted in 1990 reflect a change in compilation procedures to adhere more closely to reported rather than estimated data.

Mainly dollars deposited with the European Monetary Cooperation Fund in connection with the issuance of ECUs, U.S. obligations to official institutions in countries not reporting to the Fund, and U.S. obligations that are not classified as foreign exchange reserves in the reports provided to the Fund by the holders.

Part of this residual occurs because some member countries do not classify all the foreign exchange claims that they report to the Fund. Includes identified official claims on the International Bank for Reconstruction and Development, on the International Development Association, and the statistical discrepancy.

Sources: International Monetary Fund, International Financial Statistics; U.S. Treasury Department, Bulletin; Bank of England, Quarterly Bulletin; BIS, International Banking and Financial Market Developments.

Official foreign exchange reserves of Fund members and certain other countries and areas, including Switzerland. Beginning in April 1978,, Saudi Arabia holdings exclude the foreign exchange cover against a note issue, which amounted to SDR 4.3 billion at the end of March 1978.

The upward revision in the residual for 1989 and the higher level noted in 1990 reflect a change in compilation procedures to adhere more closely to reported rather than estimated data.

Mainly dollars deposited with the European Monetary Cooperation Fund in connection with the issuance of ECUs, U.S. obligations to official institutions in countries not reporting to the Fund, and U.S. obligations that are not classified as foreign exchange reserves in the reports provided to the Fund by the holders.

Part of this residual occurs because some member countries do not classify all the foreign exchange claims that they report to the Fund. Includes identified official claims on the International Bank for Reconstruction and Development, on the International Development Association, and the statistical discrepancy.

Identified official Eurocurrency holdings apart from Eurodollar reserves showed an increase of SDR 8 billion between 1989 and 1990, representing a 13 percent rise. In addition, official claims on residents of countries other than the United States, denominated in the debtor’s currency, grew by SDR 13 billion from 1989 to 1990, an increase of 12 percent.

In calculating the value of the gold holdings of the EMCF 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 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 quarterly swaps are arranged at the end of the first weeks of January, April, July, and October. Changes in the number of ECUs outstanding thus depend on the exchange rate and the gold price on these dates, whereas changes in the SDR value of ECU holdings are calculated at the SDR/ECU exchange rate at the end of each quarter.

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