Global forex reserves hit $8.4 trillion: IMF

Global foreign currency reserves swelled to $8.42 trillion by the end of the first half of this year, more than replacing the amount drawn down during the depths of the recession, according to IMF statistics.

Before the worst phase of the financial crisis in 2008, global reserves had peaked at $7.5 trillion. Between September 2008 and March 2009, they declined by 4.3 per cent, largely as a result of countries’ efforts to stem currency depreciation.

Some countries also used a portion of their reserves to fund stimulus programmes. Russia’s reserves showed the biggest decline, dropping $120.1 billion over a seven-month period. Nearly all major reserve-holding economies resumed building stockpiles starting in April 2009.

According to IMF data, global foreign exchange holdings have gone up by more than 3 per cent in the first six months of 2010, from $8.17tn at the end of 2009 to $8.42tn at the end of June 2010.

There are no hard and fast rules for how much a country should hold in reserves. Commonly-used benchmarks include a sufficient amount to cover external debt coming due within 12 months, or enough to cover three to four months of imports.

Countries hold reserves for a variety of reasons, including for day-to-day transactions like debt repayment. Some governments also hold reserves as a form of self-insurance against sudden loss of investment flows that could cause a financial crisis.