The international reserves of Russia include foreign exchange reserves, gold reserves as well as the reserve positions and special drawing rights (SDRs) in the International Monetary Fund (IMF).

Consider first the claim that the dollar s status as a reserve currency protects it, because governments around the world need to hold dollars as foreign exchange reserves. The problem is that foreign holdings of dollar securities are no longer primarily foreign exchange reserves in the traditional sense.

The growth rate has picked up and foreign reserves have crossed the US 12 billion mark.

Most have achieved a level of economic growth and have increased domestic resources and foreign exchange reserves.

Their foreign reserves grew by 378 billion in 2004, to an estimated 1.6 trillion, an all time high.

Finally, it is no longer appropriate to judge whether a country s foreign currency reserves are adequate based on how many months of imports they can cover. Instead, the question to ask is whether the reserves can comfortably service the public and private sectors debt denominated in foreign currencies.

Now that oil price has reached 80 per barrel, Russia s central bank can start buying foreign currency again. Gold and foreign currency reserves are increasing, implying appreciation of the ruble.

How can the need for large foreign exchange reserves experienced by emerging market developing countries to provide self insurance against volatility in international trade and financial flows, and the cost of those reserves, be reduced?

Furthermore, China should be allowed to convert part of its foreign exchange reserves into assets denominated in the International Monetary Fund s special drawing rights (SDRs). Of course, China should not rule out the possibility of adjusting the composition of its foreign exchange reserves to mimic the composition of the SDR.

NEW YORK A remarkable feature of the international financial system in the last decade has been the rapid and vast accumulation of foreign exchange reserves by developing countries. World foreign reserves tripled from 2.1 trillion in December 2001 to an unprecedented 6.5 trillion in early 2008, according to IMF data.

True, China, with its vast foreign exchange reserves, has the wherewithal to spend as much on countercyclical macroeconomic policy as anyone. But China s rulers know that their highly repressed banking system is vulnerable as the country continues to pursue gradual financial liberalization, and that foreign currency reserves may be needed for recapitalization.

Until recently, Russia has pursued an admirably conservative macroeconomic policy, running up huge budget and current account surpluses. It has paid off its foreign debt and built up foreign currency reserves of 450 billion.

For almost a decade, people have wondered how China would use its gargantuan foreign exchange reserves, particularly whether it would challenge the supremacy of the dollar. It now seems clear that China intends to use its foreign reserves to further its own global geopolitical strategy, not to buttress the international system that has enabled its three decade boom.

Some have thus called upon major emerging countries to step up and use their huge foreign exchange reserves to purchase the debt of crisis ravaged countries, such as Greece, Italy, and Spain. In particular, China, with its 3.2 trillion in foreign exchange reserves, is seen as a potential white knight coming to the rescue of debt ridden European nations.

A country with current account and capital account surpluses and increasing foreign exchange reserves normally sees an excessive money supply and high inflation. But, while excessive money supply is a reality for China the PBC now holds more than 2.6 trillion in foreign reserves inflation has been quite moderate so far, thanks to the sterilization policy.

The most striking development, however, was the loss of international reserves in the year following the Tahrir Square revolution. The International Monetary Fund estimates that foreign currency reserves fell by half, to 18 billion, by December 2011, owing partly to the worsening current account balance, but, more importantly, to withdrawal from Egypt by foreign and domestic investors alike.

However, these countries mostly chose to use them as a means to improve their self insurance against possible balance of payments difficulties, either by increasing their foreign exchange reserves or by reducing their foreign debt.

China ran a very large current account surplus during the early 2000s and accumulated a vast stock of foreign reserves including at least several trillion dollars worth of US Treasury debt. Although this looks impressive on paper, reserves of this magnitude are essentially useless.

Reserves

It is also true that the massive accumulation of foreign reserves that is now feeding the SWFs growth is excessive and driven by misguided exchange rate policies, with vastly undervalued currencies resulting in current account surpluses. These countries need to allow greater exchange rate flexibility and currency appreciation to reduce their external surpluses and thus the need to accumulate huge foreign reserves in the first place.

The shares of the major reserve currencies were stable, with the dollar accounting for 62 of foreign exchange reserves in 2009 and the euro 27 . Any major changes came not from deliberate decisions by central banks to reallocate reserves, but rather from the simple arithmetic of changing exchange rates a stronger dollar raised the dollar s share in total global reserves, while a weaker dollar reduced it.

Central banks can intervene in the currency markets and sell reserves, thereby offsetting the withdrawal of financing by foreign lenders. But intervention requires that the authorities first have both the reserves and the will to abandon (at least temporarily) their hands off commitment to a floating exchange rate.

(21) As regards general risk reserves, it is required to the purpose of the establishment of risk reserves, sources of preparing such reserves, standards for calculating and preparing such reserves and accounting methods, etc.

By late July 2004, foreign exchange reserves had risen to US 4.6 billion, external debt had been brought down to 68 per cent of GDP and inflation had been contained.

The final problem contributing to weakness in global aggregate demand was emerging markets massive buildup of foreign exchange reserves partly motivated by the mismanagement of the 1997 98 East Asia crisis by the International Monetary Fund and the US Treasury. Countries recognized that without reserves, they risked losing their economic sovereignty.

(iv) special risk reserves, it is required to make disclosure of the purpose of calculating and preparing special risk reserves, sources for preparing such reserves, standards for calculating and preparing such reserves and accounting methods, etc.

(l) Other reserves

(j) Operating reserves

According to one estimate, the dollar s share in central banks foreign reserves declined from about 70 in 2001 to barely 60 in 2010. During the same decade, its share in the foreign exchange market also declined the dollar constituted one side or the other in 90 of foreign exchange trades in 2001, but only 85 in 2010.

At the same time, if the world s most powerful countries stopped promoting full capital account liberalization, developing countries would feel less pressure to protect themselves by accumulating foreign exchange reserves. By investing the funds in development projects instead, they could address both savings and foreign exchange constraints.

The host, Chávez s successor Nicolás Maduro, confronts a collapsing economy and tensions within his own party. Despite relatively high oil prices, Venezuela has a large fiscal deficit and falling foreign exchange reserves.

Back then, China bought US Treasury bonds to keep the currency from rising and eroding the competitiveness of Chinese exporters. As a result, it accumulated an astounding 4 trillion of foreign reserves.

The Company shall also make brief analysis on the preparation and use of risk reserves (including general risk reserves and special purpose risk reserves) during the current period.

Call In the Reserves

(m) Separation indemnity reserves

(g) Transfers to reserves

Particularly damaging is the 17.7 billion in foreign exchange reserves that France keeps in a special Treasury account at an interest rate of only 1.5 , thereby guaranteeing the convertibility of the CFA franc, which it underwrites. In other words, France uses African reserves to finance part of its budget deficit at a concessional interest rate.

About 800 billion of China s foreign exchange reserves are invested in euro denominated assets. A disorderly default, and the resulting downward pressure on the euro, would unavoidably cause Chinese investments to lose value.

First, a significant part of the resources mobilized by developing countries has been used to finance debt servicing payments to multilateral development banks and to increase foreign exchange reserves held in developed countries.

In fact, the BRICS countries remain an economic force to be reckoned with, accounting for 25.7 of world GDP, 42 of the global population, and 17 of total trade. They attract more than 18 of the global total of foreign investment, hold 40 of all foreign exchange reserves, and account for 30 of total foreign holdings of US Treasury bonds.

And what was true of China was also true of other emerging market countries receiving capital inflows. These countries foreign reserves, mainly held in US securities, topped 8 trillion at their peak last year.

The People s Bank of China and the Bank of Japan as well as other central banks in Asia are in trouble. They have accumulated vast foreign exchange reserves, estimated at more than 2 trillion.

China s foreign exchange reserves, indeed, are facing a triple whammy a decline in the US dollar s purchasing power, a fall in the prices of US government securities, and possible inflation in the longer run.

Moreover, the US Federal Reserve is targeting a 4 annual inflation rate. This alone means that under normal circumstances the purchasing power of China s foreign exchange reserves will automatically depreciate by 4 each year.

The unprecedented increase in developing countries foreign exchange reserves is due both to their current account surpluses and large net capital inflows. Practically all developing countries reserves are invested in developed countries assets, leading to an increasing net transfer of resources from the developing to the developed world, which, according to UNDESA estimates, reached 720 billion in 2007 alone.