International Reserves and Foreign Currency Liquidity
I. Methodological Framework, Concepts, Definitions, and -Classifications
- Concept: The concept of reserve assets is based on the concepts of “control” and “availability for use” by the monetary authorities. Reserve assets are highly liquid foreign currency assets that actually exist. Potential assets are excluded.
- Definition: International reserves are external assets that are freely available and controlled by the National Bank in order to meet balance of payments financing needs, to intervene in foreign exchange markets to influence the exchange rate and other relevant purposes (such as maintaining confidence in the national currency and economy, as well as a basis for foreign borrowing).
- Classification: International reserves include the following assets:
- Reserve assets in foreign currency:
- cash foreign currency,
- balances of funds on correspondent accounts;
- deposits with foreign central banks, with the Bank for International
Settlements (BIS) and with foreign banks,
- debt securities issued by non-residents,
- other financial claims on non-residents
- Special Drawing Rights (SDRs) are international reserve assets issued by the International Monetary Fund and held on the account of the Republic of Kazakhstan with the Fund's SDR Department;
- The reserve position in the IMF is the sum of the position on the reserve tranche (the currency component of the Republic of Kazakhstan's quota in the fund) and the country's requirements for the fund under borrowing agreements;
- Other reserve assets - includes derivative financial instruments and other receivables;
- Monetary gold is defined as standard gold bars and coins belonging to the National Bank, made of gold with a fineness of metal not lower than 995/1000, as well as impersonal gold accounts abroad.
The assessment of upcoming changes in international reserves and foreign currency liquidity of the monetary authorities includes 4 sections:
1) The first section provides information on the composition of international reserves of the Republic of Kazakhstan and provides data on non- reserve assets of the National Bank in foreign currency;
2) The second section describes the main directions of spending foreign currency, including payments on external debt and sources of its replenishment;
3) The third section contains information on the upcoming changes in the next 12 months in the currency reserves of the National Bank in connection with the fulfillment of contingent assets and liabilities;
4) The fourth section provides background information to clarify the accounting for individual items in the first section.
- Compliance with international guidelines: The methodological framework for data generation is the sixth edition of the International Monetary Fund's “Balance of Payments and International Investment Position Manual” (BPM6) and “International Reserves and Foreign Currency Liquidity. Guidelines for a Data Template” (2013).
II. Data coverage
- Institutional coverage: International reserves of the Republic of Kazakhstan include only those assets that are effectively controlled (can be used at any time) by the National Bank. The assets of the national fund are assets of the public sector transferred to the management of the National Bank. Therefore, claims associated with investing in national reserves are not included in international reserves.
- Instrument coverage: All reserve assets in the form of correspondent and deposit accounts with foreign banks, highly liquid and tradable in the securities market, short-term loans, liquid assets in the form of repo, monetary gold, special drawing rights, and reserve position in the IMF. Claims in foreign currency related to financial derivative instruments are also included in the international reserves of the country.
III. Accounting principles
- Valuation: International reserves are valued based on the balance sheet of claims on nonresidents. In accepted accounting practice, the value of assets is recorded at market prices. Monetary gold in the vaults of the National Bank is valued daily using the morning fixing of the London Bullion Market Association (LBMA) of the previous day.
- Exchange rates:Reserve assets are converted into US dollars at the exchange rate equivalent to the exchange rates of international markets on the relevant day.
Frequency of calculation and revaluation: International reserves data are calculated and compiled on a daily basis. Revaluation of securities under the National Bank's own management is carried out daily, and revaluation of securities under external management is carried out monthly.
IV. Main sources of information
- Sources of data: balance sheet and other internal reports of the National Bank, reports of external managers and data of state bodies.
V. Practical features of data development
- Statistical adjustments: No
VI. Other Aspects
- Other problems: no
- Another way to calculate reserves: no