Chapter

APPENDIX I International Reserves

Author(s):
International Monetary Fund
Published Date:
January 1993
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This appendix reviews recent developments in international reserves and liquidity that relate to (1) the evolution of holdings of official assets; (2) the placement of official holdings of foreign exchange reserves; and (3) the currency composition and distribution of foreign exchange reserves.

Recent Evolution of Official Reserve Assets

During 1992, total international reserves measured in SDR terms increased by 2 percent to SDR 919 billion, reflecting an increase in the holdings of non-gold reserves that was partially offset by a modest fall in the market value of official holdings of gold (Table I.1). The growth in non-gold reserves reflected a substantial increase in the holdings of foreign exchange reserves by developing countries that more than offset a reduction in holdings by industrial countries. The fall in the value of gold holdings was partly attributable to the largest decline in the quantity of gold in several years, which represented a continuation of a trend that began in 1989 and that accelerated in the first quarter of 1993. The increase in quotas under the Ninth General Review, which became effective in late 1992, resulted in a significant redistribution of Fund-related assets held by members from SDRs to reserve positions in the Fund.

Table I.1Official Holdings of Reserve Assets, End of Year 1987–March 19931(In billions of SDRs)
198719881989199019911992March

1993
All countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund31.528.325.523.725.933.933.8
SDRs20.220.220.520.420.612.913.5
Subtotal, Fund-related assets51.748.446.044.146.446.847.3
Foreign exchange456.1494.5545.2593.7625.6646.4635.0
Total reserves excluding gold507.8542.9591.1637.8672.1693.1682.3
Gold2
Quantity (millions of ounces)947.5948.0942.7940.5939.5930.3915.9
Value at London market price323.3289.0287.6254.5232.2225.5221.4
Industrial countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund20.519.619.620.022.829.529.1
SDRs16.517.617.717.617.510.510.8
Subtotal, Fund-related assets36.937.137.237.640.240.039.9
Foreign exchange287.4315.9345.0376.5360.4356.7345.5
Total reserves excluding gold324.3353.1382.2414.1400.6396.7385.4
Gold2
Quantity (millions of ounces)804.8801.1797.9795.9793.8785.3771.7
Value at London market price274.6244.2243.5215.4196.2190.3186.5
Developing countries
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund11.08.75.93.83.14.44.7
SDRs3.72.62.82.73.12.42.7
Subtotal, Fund-related assets14.711.38.76.56.26.87.4
Foreign exchange168.7178.6200.2217.2265.2289.6289.5
Total reserves excluding gold183.5189.9208.9223.7271.4296.4296.9
Gold2
Quantity (millions of ounces)142.7146.9144.8144.6145.7145.0144.3
Value at London market price48.744.844.239.136.035.134.9
Net debtors
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund2.11.51.61.11.32.82.8
SDRs2.61.61.61.82.21.72.1
Subtotal, Fund-related assets4.63.13.23.03.54.54.9
Foreign exchange90.6101.4120.5145.1184.2207.6208.1
Total reserves excluding gold95.2104.5123.7148.0187.7212.1213.0
Gold2
Quantity (millions of ounces)116.4114.8112.6112.5113.6112.8112.1
Value at London market price39.735.034.430.528.127.327.1
Countries with debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund0.60.10.10.10.10.50.5
SDRs1.30.50.50.71.01.01.2
Subtotal, Fund-related assets1.90.60.60.71.11.41.7
Foreign exchange33.230.134.245.561.578.677.5
Total reserves excluding gold35.130.734.846.262.680.079.2
Gold2
Quantity (millions of ounces)50.848.646.549.148.848.547.8
Value at London market price17.314.814.213.312.111.711.5
Countries without debt-servicing problems
Total reserves excluding gold
Fund-related assets
Reserve positions in the Fund1.51.41.61.11.22.42.3
SDRs1.31.11.11.21.20.80.9
Subtotal, Fund-related assets2.82.42.62.22.43.13.2
Foreign exchange57.471.486.399.6122.7129.0130.6
Total reserves excluding gold60.173.888.9101.8125.2132.1133.8
Gold2
Quantity (millions of ounces)65.666.266.163.564.864.464.3
Value at London market price22.420.220.217.216.015.615.6
Source: International Monetary Fund, International Financial Statistics.Note: Components may not sum to total because of rounding.

“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.Note: Components may not sum to total because of rounding.

“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 3 percent during 1992 to SDR 693 billion at the end of the year. The increase represented a continuation in the expansion of non-gold reserves that has been evident since 1987. The distribution by major country groupings in the growth of non-gold reserves in 1992 continued the pattern begun in 1991; namely, an expansion of the reserves held by developing countries increased at an annual rate of 9 percent, whereas holdings of industrial countries fell by 1 percent. All major groups of developing countries, except for oil exporters (not shown in table), increased their non-gold reserves during 1992. In particular, holdings of non-gold reserves by developing countries that have experienced recent debt-servicing problems rose by 28 percent, following increases of 33 percent and 35 percent in 1990 and 1991, respectively, and capital importing developing countries without debt-servicing problems increased their non-gold reserve holdings by 6 percent.

Foreign Exchange Reserves

Foreign exchange reserves, which accounted for most of the change in non-gold reserves, grew by 3 percent during 1992 to reach SDR 646 billion by the end of the year. Although holdings of foreign exchange reserves continued to increase, the rate of growth has slowed steadily over the past six years, and for the second year in a row, the reserves of the industrial countries declined. Total holdings of foreign exchange reserves grew by SDR 21 billion as an expansion of the holdings of developing countries, which rose by SDR 24 billion (an annual rate of growth of 9 percent), more than offset the decline in the exchange reserves of industrial countries, which fell by SDR 4 billion (a 1 percent decline). The increase in the holdings of developing countries continued the process of accumulation of foreign exchange reserves that began in 1987 after successive declines in 1985 and 1986.

Holdings of Fund-Related Reserve Assets

Holdings of Fund-related assets increased by less than 1 percent in 1992 to reach SDR 47 billion at the end of the year, reflecting only an SDR 400 million increase. However, the quota increase arising from the Ninth General Review resulted in major changes in the composition of Fund-related reserve assets, as most members used their holdings of SDRs to pay for the reserve asset portion of the quota increase. Members’ reserve positions in the Fund, which comprise their reserve tranche position and their creditor position, had fallen by SDR 8 billion between the end of 1987 and the end of 1990, but increased by SDR 8 billion in 1992 (31 percent increase). Members’ holdings of SDRs, which had remained virtually unchanged over the last several years, declined by SDR 8 billion (37 percent) in 1992. This pattern of offsetting changes in the reserve position in the Fund and SDRs was evident for both developing and industrial countries.

Gold

The market value of the global stock of gold reserves declined by 3 percent in 1992 to SDR 226 billion. In previous years the decrease in the value of gold reserves reflected predominantly changes in the price of gold; between 1987 and 1991, the quantity of gold holdings declined by a total of less than 1 percent, while the value of gold holdings fell by 28 percent. However, while the price declined by 2 percent in 1992 (falling from SDR 247 per ounce to SDR 242 per ounce), the 1 percent decline in the physical stock in 1992 was the largest fall in several years. The distribution of gold holdings between industrial and developing countries changed very little during the 1980s; at the end of 1992, industrial countries held 84 percent and developing countries 16 percent of the total physical stock of gold reserves of 930 million ounces.

Developments in the First Quarter of 1993

Total international reserves fell by SDR 15 billion in the first quarter of 1993 owing both to reduced foreign exchange holdings and to a decline in the value of gold reserves. The 2 percent (8 percent at annual rates) decline in the market value of gold was due primarily to a reduction in the physical holdings, predominantly by industrial countries. The SDR 11 billion decline in holdings of non-gold reserves was almost exclusively a result of a fall in the foreign exchange reserves of industrial countries with little change on the part of the developing countries.

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 currency composition of reserves held by industrial countries rather than by developing countries. The share of the U.S. dollar in total foreign exchange reserves had fallen from about 70 percent in the period 1983–84 to 58 percent in 1990–91, but then rebounded at the end of 1992 to 64 percent. (Table I.2). The increase in the dollar share in 1992 resulted from a large increase in the quantity of dollars held and a positive valuation change reflecting an appreciation of the dollar relative to the SDR (Table I.3). Of the identifiable reserve currencies, the dollar was the only reserve asset that experienced both quantity and valuation increases in 1992. The counterpart to the changes in the U.S. dollar share of official reserves was reflected primarily in reduced German deutsche mark, Japanese yen, and French franc shares.

Table I.2Share of National Currencies in Total Identified Official Holdings of Foreign Exchange, End of Year 1983–921(In percent)
Memorandum

ECUs Treated

Separately2
19831984198519861987198819891990199119921992
All countries
U.S. dollar71.169.964.867.067.864.660.257.558.464.455.3
Pound sterling2.52.93.02.52.42.72.73.43.63.23.1
Deutsche mark11.712.615.114.614.415.619.018.616.513.012.5
French franc0.80.80.90.80.81.01.42.32.82.52.4
Swiss franc2.32.02.32.01.91.91.51.41.41.31.3
Netherlands guilder0.80.71.01.11.21.11.11.11.10.70.7
Japanese yen4.95.88.07.87.57.77.78.89.48.17.8
Unspecified currencies36.05.44.94.13.95.46.56.96.96.816.9
Industrial countries
U.S. dollar77.273.565.269.471.467.759.656.055.864.949.9
Pound sterling0.71.41.81.31.11.51.41.92.02.32.2
Deutsche mark13.015.119.516.715.917.322.521.920.014.413.5
French franc0.00.10.10.10.40.71.22.53.23.02.8
Swiss franc1.51.52.11.71.61.71.11.10.80.60.5
Netherlands guilder0.50.61.01.11.31.11.21.31.20.50.5
Japanese yen5.16.38.98.37.17.08.19.610.47.47.0
Unspecified currencies32.01.41.41.41.33.04.85.96.56.923.5
Developing countries
U.S. dollar64.666.264.563.259.857.461.360.762.763.664.6
Pound sterling4.44.44.34.65.25.65.66.46.04.64.6
Deutsche mark10.39.010.011.011.111.611.311.610.810.910.9
French franc1.61.51.92.01.81.71.82.02.11.91.9
Swiss franc3.22.52.62.52.72.52.32.22.22.52.5
Netherlands guilder1.00.80.91.11.10.90.80.70.80.90.9
Japanese yen4.75.26.97.18.59.26.97.37.79.09.0
Unspecified currencies410.39.69.08.59.711.110.09.07.76.76.7
Note: Shares may not sum to 100 because of rounding.

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 17 percent for industrial countries and 9.4 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.

Note: Shares may not sum to 100 because of rounding.

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 17 percent for industrial countries and 9.4 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.3Currency Composition of Official Holdings of Foreign Exchange, End of Year 1986–921(In millions of SDRs)
1986198719881989199019911992
U.S. dollar
Change in holdings3,05438,70017,22711,12516,89115,02937,965
Quantity change22,12670,9634,7095,40037,47017,24025,857
Price change–19,072–32,26312,5185,726–20,580–2,21112,108
Year-end value187,168225,867243,094254,220271,110286,140324,104
Pound sterling
Change in holdings–1,3761,2202,3511,1985,0212,010–1,069
Quantity change–6674892,1642,3483,5222,5612,610
Price change–708732187–1,1501,499–551–3,679
Year-end value7,5728,79211,14412,34117,36319,37218,304
Deutsche mark
Change in holdings–1,9049,83010,58523,4848,633–6,608–16,043
Quantity change–7,7586,95614,28317,0683,955–4,638–14,626
Price change5,8542,874–3,6986,4164,678–1,970–1,417
Year-end value43,46653,29663,88087,36495,99789,38973,346
French franc
Change in holdings–2965891,2172,3665,4463,156–818
Quantity change–4244821,4811,9275,0913,155–608
Price change129107–2644383541–210
Year-end value2,3982,9874,2046,57012,01615,17214,354
Swiss franc
Change in holdings–8591,141745–1,00744457209
Quantity change–1,8254981,490–958–235412434
Price change965644–745–49680–356–225
Year-end value6,0317,1737,9186,9117,3557,4127,621
Netherlands guilder
Change in holdings4251,273–249778523192–1,918
Quantity change311,02053439289267–1,916
Price change393253–302339234–76–1
Year-end value3,2824,5544,3055,0835,6065,7983,881
Japanese yen
Change in holdings–6204,3523,7564,03910,0505,276–5,257
Quantity change–3,7331,7342,7247,70110,2212,038–7,388
Price change3,1132,6181,032–3,662–1703,2382,131
Year-end value23,41827,76931,52535,56445,61550,89145,634
European currency unit
Change in holdings2,67716,521–5,9853644924,0464,455
Quantity change–37214,049–3,296–1,878–2,1074,9508,713
Price change3,0492,472–2,6892,2422,600–905–4,258
Year-end value40,72057,24151,25751,62152,11356,15960,614
Sum of the above2
Change in holdings1,10273,62629,64742,34747,50123,15817,525
Quantity change7,37996,19123,60832,04858,20625,98613,076
Price change–6,277–22,5656,03810,299–10,705–2,8294,449
Year-end value314,055387,681417,327459,674507,175530,332547,858
Total official holdings3
Change in holdings15,86391,98838,37550,67548,53131,92620,720
Year-end value364,135456,124494,498545,173593,704625,630646,350
Note: Components may not sum to total 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.

Include 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 total 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.

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

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 the trend in the currency composition of foreign exchange reserves is similar if ECUs—introduced in 1979 and accounting for 11 percent of the value of total identified official holdings of foreign exchange at the end of 1992—are treated separately. In particular, the U.S. dollar share (excluding holdings of ECUs) in total identified reserve holdings fell from 64 percent at the end of 1984 to 54 percent at the end of 1991 before rising to 59 percent at the end of 1992.

ECU official reserves are in the form of claims on both private sources and the European Monetary Cooperation Fund (EMCF).1 The EMCF backed reserves are issued 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.2 Quantity changes in ECU holdings depend, therefore, partly on the evolution of the two components of the EMCF swap.3 The SDR 4.5 billion increase in holdings of ECUs that occurred in 1992 resulted from an SDR 8.7 billion quantity increase that was partially offset by an SDR 4.2 billion negative valuation effect.

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 1992, total identified foreign exchange reserves increased by SDR 17 billion as a result of a positive quantity change of SDR 13 billion and a valuation gain of SDR 4 billion.

There are significant differences in the currency diversification of reserve holdings between industrial and developing countries (see Table I.2). For example, during the period 1983–86, 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 8 percentage points during this period, whereas the developing countries’ share fell by only 1 percentage point. Since 1987, moreover, the share of the U.S. dollar in the total reserve holdings by developing countries has risen by 4 percentage points, compared with a decrease of 7 percentage 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 7 and 5 percentage points, respectively, from 1983 to 1991, developing countries’ share of reserves denominated in deutsche mark remained roughly unchanged while the share of the Japanese yen increased by 3 percentage points.

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