Chapter

Appendix I International Reserves

Author(s):
International Monetary Fund
Published Date:
January 1992
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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 1991, total international reserves measured in SDR terms increased by 1 percent, to SDR 904 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 a large increase in holdings of foreign exchange reserves by developing countries that more than offset lower holdings in industrial countries.

Non-Gold Reserves

Non-gold reserves increased by 5 percent in 1991 to SDR 672 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 1991 mainly reflected an expansion of such holdings in developing countries, which increased at an annual rate of 21 percent; whereas holdings of industrial countries fell by 3 percent. All major groups of developing countries increased their non-gold reserve during 1991. The non-gold reserve holdings of those developing countries that have experienced recent debt-servicing problems rose by 26 percent, following a 34 percent increase in 1990. Capital importing developing countries without debt-servicing problems increased their non-gold reserve holdings by 27 percent.

Foreign Exchange Reserves

Foreign exchange reserves grew by 5 percent in 1991 to reach SDR 626 billion by the end of the year. Although this rise in foreign exchange reserves in 1991 continued the strong growth of the previous five years, 1991 marked the first year in that period in which the reserves of the industrial countries declined. Total holdings of foreign exchange reserves grew by SDR 32 billion as an expansion of the holdings of developing countries, which rose by SDR 48 billion (an annual rate of growth of 22 percent), more than offset the decline in the exchanges reserves of industrial countries, which fell by SDR 16 billion (a 4 percent decline). The increase in the holdings of developing countries continued the process of accumulation of foreign exchange reserves initiated in 1987 after successive declines in 1985 and 1986.

Holdings of Fund-Related Reserve Assets

Holdings of Fund-related assets increased by 5 percent in 1991 to reach SDR 46 billion at the end of the year, reflecting an SDR 2 billion increase in holdings of reserve positions in the Fund. Reserve positions in the Fund, which comprise the reserve tranche position and the creditor position, fell by SDR 12 billion between the end of 1986 and the end of 1990 before increasing in 1991. Members’ holdings of SDRs remained unchanged in 1990.

Gold

The market value of the global stock of gold reserves declined by 9 percent in 1991 to SDR 232 billion. This decrease reflected almost entirely changes in the price of gold, 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 1992

Total international reserves rose by SDR 22 billion in the first quarter of 1992 due to increases in both non-gold and gold reserves. The larger holdings of non-gold reserves reflected a rise of SDR 16 billion in the foreign exchange reserves of developing countries, while the foreign exchange reserves of industrial countries also increased by SDR 4 billion.

The market value of official holdings of gold rose slightly from SDR 232 billion at the end of 1991 to SDR 235 billion at the end of the first quarter of 1992. Since the total physical holdings of gold changed only slightly, the rise in the market value of gold was largely due to an increase in the market price of gold from SDR 247 to SDR 249 an ounce over the quarter.

Currency Composition of Reserves

During the past decade, there has been an ongoing diversification of the currency composition of foreign exchange reserves. However, this diversification has primarily reflected changes in the industrial countries rather than in developing countries. The share of the U.S. dollar in total foreign exchange reserves has fallen from about 70 percent in the period 1982-84 to 56 percent at the end of 1991 (Table I.2). The counterpart to this decline in the U.S. dollar share has been higher proportions of reserves held as deutsche mark, Japanese yen, and, to a lesser extent, French francs and sterling.

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 12 percent of total identified official holdings of foreign exchange at the end of 1991, are treated separately. In particular, the share of the U.S. 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 1991 (Table I.2)

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

Table I.1.Official Holdings of Reserve Assets, End of Year 1986-March 19921(In billions of SDRs)
198619871988198919901991March

1992
All countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund35.331.528.325.523.725.925.5
SDRs19.520.220.220.520.420.620.6
Subtotal, Fund-related assets54.851.748.446.044.146.446.0
Foreign exchange364.1456.1494.5545.2593.8625.5645.9
Total reserves excluding gold419.0507.8543.0591.1637.9672.0691.9
Gold2
Quantity (millions of ounces)953.2947.5948.0942.8940.6939.6941.2
Value at London market price304.6323.3289.0287.7254.6232.3234.5
Industrial countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund23.120.519.619.620.022.822.5
SDRs16.116.517.617.717.617.517.7
Subtotal, Fund-related assets39.236.937.137.237.640.240.2
Foreign exchange212.1287.4315.9345.0376.5360.4364.7
Total reserves excluding gold251.3324.3353.1382.2414.1400.6405.0
Gold1
Quantity (millions of ounces)809.1804.8801.1797.9795.9793.8793.2
Value at London market price258.6274.6244.2243.5215.4196.2197.6
Developing countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund12.311.08.75.93.83.12.9
SDRs3.43.72.62.82.73.12.9
Subtotal, Fund-related assets15.614.711.38.76.56.25.8
Foreign exchange152.0168.7178.6200.2217.3265.1281.1
Total reserves excluding gold167.7183.5189.9208.9223.8 ;271.3286.9
Gold1
Quantity (millions of ounces)144.0142.7146.9144.9144.7145.8148.1
Value at London market price46.048.744.844.239.236.136.9
Net debtors
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund2.32.11.51.61.11.31.3
SDRs2.32.61.61.61.82.22.0
Subtotal, Fund-related assets4.64.63.13.23.03.53.2
Foreign exchange90.490.6101.5120.5145.1184.1196.7
Total reserves excluding gold95.195.2104.5123.7148.1187.6199.9
Gold2
Quantity (millions of ounces)119.7116.4114.8112.7112.6113.7115.9,
Value at London market price38.339.735.034.430.528.128.9
Countries with debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund0.80.60.10.10.10.10.1
SDRs0.81.30.50.50.71.00.8
Subtotal, Fund-related assets1.71.90.60.60.81.10.9
Foreign exchange35.934.733.339.152.666.070.7
Total reserves excluding gold37.636.634.039.753.367.171.6
Gold2
Quantity (millions of ounces)52.353.151.048.951.451.152.4
Value at London market price16.718.115.514.913.912.613.0
Countries without debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund1.51.51.41.61.11.21.2
SDRs1.41.31.11.11.21.21.1
Subtotal, Fund-related assets2.92.82.42.62.22.42.3
Foreign exchange54.555.868.181.492.6118.1126.0
Total reserves excluding gold57.558.670.684.094.8120.5128.3
Gold2
Quantity (millions of ounces)67.563.363.863.861.262.563.5
Value at London market price21.621.619.519.516.615.515.8
Source: International Monetary Fund, International. Monetary 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. Monetary 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.

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 8 billion fall in holdings of ECUs that occurred in 1991 resulted from a negative quantity change (SDR 21 billion) and a positive valuation effect (SDR 13 billion).

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 1991, total identified foreign exchange reserves increased by SDR 19 billion as a result of a positive quantity change of SDR 22 billion and a valuation loss of SDR 3 billion.

There are significant differences in the pattern of currency diversification between industrial and developing countries (see Table 1.2). During the period 1982-36, the industrial countries experienced greater diversification of reserve holdings than the developing countries. The industrial countries’ share of U.S. dollar-denominated reserves decreased by 7 percentage points during this period, whereas the developing countries’ share fell by only 1 percentage point. Since 1986, moreover, the share of the U.S. dollar in the total reserve holdings by developing countries has risen slightly, compared with a decrease of 18 percentage points for industrial countries. In addition, while industrial countries increased the share of the deutsche mark and the Japanese yen in the reserve portfolios by 9 and 7 percentage points, respectively, since 1982, developing countries decreased the share of reserves denominated in deutsche mark by 2 percentage points and increased the share of the Japanese yen by 3 percentage points.

Table I.2Share of National Curriecies in Total Identified Official Holdings of Foreign Exchange, End of Year 1982-911(In Percent)
Memorandum ECUs

Treated Separately2
19821983198419851986198719881989199019911991
All countries
U.S.dollar70.571.470.065.067.167.864.760.257.656.250.4
Pound sterling2.32.52.93.02.52.42.72.73.43.83.6
Deutsche mark12.311.812.615.214.614.415.619.018.617.316.5
French franc1.00.80.80.90.80.81.01.42.33.63.4
Swiss franc2.72.42.02.32.02.02.01.51.41.41.4
Netherlands guilder1.10.80.71.01.11.21.11.11.11.21.1
Japanese yen4.75.05.88.07.97.57.77.78.99.99.5
Unspecified currencies35.45.45.24.64.03.85.36.36.76.714.2
Industrial countries
U.S. dollar76.777.273.565.269.471.467.759.656.051.642.8
Pound sterling0.70.71.41.81.31.11.51.41.92.11.9
Deutsche mark12.513.015.119.516.715.917.322.521.921.219.8
French franc0.10.00.10.10.10.40.71.22.54.64.3
Swiss franc1.71.51.52.11.71.61.71.11.10.90.9
Netherlands guilder0.70.50.61.01.11.31.11.21.31.41.3
Japanese yen4.55.16.38.98.37.17.08.19.611.310.6
Unspecified currencies33.12.01.41.41.41.33.04.85.96.918.5
Developing countries
U.S. dollar64.065.266.364.863.360.057.761.661.063.863.8
Pound sterling4.04.44.44.34.65.25.65.66.46.66.6
Deutsche mark12.110.510.010.111.111.111.711.311.710.710.7
French franc2.01.71.51.92.01.81.71.92.11.91.9
Swiss franc3.73.42.62.72.62.72.62.32.22.32.3
Netherlands guilder1.51.10.80.91.11.10.90.80.70.80.8
Japanese yen4.94.85.27.07.18.59.36.97.47.67.6
Unspecified currencies 47.89.09.28.48.29.510.69.68.56.56.5

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 12.1 percent for industrial countries and 7.1 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 12.1 percent for industrial countries and 7.1 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.

Table I.3.Currency Composition of Official Holdings of Foreign Exchange, End of year 1986-911(In millions of SDRs)
198619871988198919901991
U.S. dollar
Change in holdings2,82038,65417,41811,11817,12711,997
Quantity change21,91570,9394,8915,38337,73114,103
Price change-19,095-32,28512,5275,735-20,604-2,106
Year-end value187,334225,988243,406254,524271,651283,648
Pound sterling
Change in holdings-1,3851,2192,3591,1975,0132,934
Quantity change-6764872,1722,3493,5133,489
Price change-709732187-1,1521,500-555
Year-end value7,5808,79911,15812,35617,36920,303
Deutsche mark
Change in holdings-1,9959,81010,65723,4808,638-3,265
Quantity change-7,8586,93314,36117,0573,954-1,417
Price change5,8632,877-3,7046,4244,684-1,848
Year-end value43,52453,33463,99287,47296,11092,845
French franc
Change in holdings-3245851,2142,3955,4347,059
Quantity change-4544781,4791,9535,0786,891
Price chanqe130108-265442356168
Year-end value2,4173,0024,2166,61112,04519,104
Swiss franc
Change in holdings-9441,120814-1,008412286
Quantity change-1,9194721,567-959-276638
Price change975648-753-49688-352
Year-end value6,0867,2068,0197,0117,4237,709
Netherlands guilder
Change in holdings4051,268-234778501625
Quantity change101,01569437267679
Price chanqe395253-303341234-54
Year-end value3,2944,5624,3285,1065,6076,231
Japanese yen
Change in holdings-6704,3613,7954,02310,1407,609
Quantity change-3,7891,7392,7607,69410,3094,334
Price change3,1192,6221,035-3,670-1693,276
Year-end value23,45027,81131,60735,63045,77053,379
European currency unit
Change in holdings2,67716,521-5,985364492-8,379
Quantity change-37214,049-3,296-1,878-2,107-7,068
Price chanqe3,0492,472-2,6892,2422,600-1,311
Year-end value40,72057,24151,25751,62152,11343,734
Sum of the above2
Change in holdings58573,53830,03942,34847,75618,867
Quantity change6,85796,11224,00332,03658,46721,649
Price chanqe-6,272-22,5746,03510,312-10,711-2,782
Year-end value314,407387,945417,984460,331508,087526,954
Total official holdings3
Change in holdings15,85591,99638,38250,67448,59722,736
Year-end value364,128456,124494,506545,180593,777616,513

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.

1In 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.
2The 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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