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reserves of foreign currency and gold at the disposal of government bodies or of the central bank of a given country for payment of international debts associated with foreign trade, investments, and other operations. Gold, as the world currency, has played the part of a basic foreign-exchange reserve because it can be freely converted into any foreign currency in which payments are to be made. As a rule, however, direct payments with gold do not take place since accounts between contractors in international business deals are usually arranged in some national currency. The valuta included in the official foreign-exchange reserves of a country is mainly in the form of free balances in accounts in foreign banks and belonging to the central bank, treasury or other state bodies, and, to a lesser degree, in the form of foreign banknotes and coins. In addition to this, the total foreign-exchange reserves of a country include the foreign currency belonging to commercial banks that square accounts with other countries. The International Monetary Fund (IMF), which publishes statistical data on the foreign-exchange reserves of its member countries, also includes under the official foreign-exchange reserves sums contributed to the capital of the IMF in gold since, as long as the balances of these sums remain available, each country has the right to request automatically the amount of foreign currency that it needs. Since the beginning of 1970 the IMF includes among its official reserves Special Drawing Rights (SDR).
Each country creates foreign-exchange reserves in order to cover temporary increases in payments over receipts in international trade. The dimensions of the foreign-exchange reserves required by a country depend on the dimensions and patterns of occurrences of the gap between expenditures and income of foreign currency. The presence of foreign-exchange reserves determines the so-called international liquidity of a country, that is, its ability to make payments on foreign accounts regularly. Conditionally this is defined by the correlation between foreign-exchange reserves and the amount of imports of a country as the main item in the international circulation of payments: the lowering of this correlation testifies to a worsening of the liquidity and vice versa. A comparison of the total foreign-exchange reserves of all capitalist countries with total world imports shows that, since the middle 1950’s, general international liquidity has declined, since the rate of growth of foreign-exchange reserves has lagged significantly behind the growth of world trade. At the same time, however, the liquidity of some countries has improved and that of others has declined, giving rise to a problem of international liquidity. Sharp variations in the distribution of foreign-exchange reserves between different capitalist countries reflect the operation of the law of the uneven development of capitalism. After World War II (1939-45) the foreign-exchange reserves of the capitalist countries increased from $53.1 billion in 1948 to $76.6 billion in 1968, that is, by 43 percent; but the turnover of foreign trade for the same period grew from $114.1 billion to $437.6 billion, that is, by almost four times. The foreign-exchange reserves of the USA, which amounted to $24.4 billion (in gold) in 1948, had declined by the end of 1969 to $ 16.9 billion (including $ 11.8 billion in gold). For the same period, the foreign-exchange reserves of the capitalist countries of continental Europe increased from $6.1 to $35.4 billion. The decrease in the foreign-exchange reserves of the USA, caused by the deficit in its balance of payments, seriously weakened the international currency position of the USA and has resulted in dollar devaluations.
In the socialist countries, foreign-exchange reserves are used for the planned regulation of foreign economic relations and monetary accounts with capitalist countries. For trade among themselves, foreign-exchange reserves are usually not required, since the commodities and services obtained by one socialist country from another socialist country are paid for by the delivery of other goods and services. However, in certain instances, foreign-exchange reserves are used by socialist countries for granting credits to other socialist countries in gold or in foreign convertible currency.
M. G. POLIAKOV