Prepared by William Lindquist.
According to the BPM6 Manual, reserve assets are those “external assets that are readily available to and controlled by monetary authorities for meeting balance of payment financing needs… Reserve assets must be foreign currency assets and assets that actually exist.”
See IMF (2015), “Assessing Reserve Adequacy – Specific Proposals.”
IMF (2016), “Guidance Note on the Assessment of Reserve Adequacy and Related Considerations”
Data gaps, including the difficulty of estimating currency in circulation, have prevented the publication of the IIP. The CBM has received technical assistance from the IMF and hopes to begin publication of IIP data later in 2018.
According to IMF (2016), “the ARA EM metric may provide a conservative starting point as an adequate liquidity buffer” but could be modified according to country circumstances. The IMF’s guidelines also do not clarify whether dollarized/euroized economies should use the metric for fixed or floating exchange rate systems, but in practice, Fund analysis for such economies has followed the fixed exchange rate metric.
Discussions with these banks suggests that future support is also very likely.
IMF (2016), “Guidance Note on the Assessment of Reserve Adequacy and Related Considerations.”
Staff projects a large increase in government deposits at the CBM in 2018, based on the disbursement of a syndicated bank and Eurobond issuance which exceed 2018 fiscal financing needs. The authorities intend to maintain large deposits at the CBM to pre-finance Eurobond maturities in 2019 and 2020.
Wiegand (2013), “Euroization, Liquidity Needs, and Foreign Currency Reserves.” Chapter 3 in Republic of Kosovo 2013 Selected Issues Papers (IMF Country Report 12/223).
The CBM’s definition of liquid assets includes banks’ excess reserves and 50 percent of excess reserves.
The interest rates charged on such loans should be set as a margin to a market-based interest rate such as Euribor.
This decision should be reviewed, since it is generally not optimal to set firm limits on specific debt instruments, especially in nominal terms. Limits on total debt, by contrast, are more justifiable.