5 African countries with the largest foreign exchange reserve
Foreign exchange reserves as defined by the International Monetary Fund (IMF) are “official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payments imbalances, and directly regulating the magnitude of such imbalances, through intervention in the foreign exchange markets to affect the currency exchange rate and/or for other purposes.”
In other terms, it is a foreign currency deposit that is managed and controlled by a country’s central bank. Many African countries by law are required to have an external asset in the form of gold reserves, IMF’S special drawing rights, foreign short-term treasury bills, and bonds amongst numerous others
These assets owned by a country should have a liquidity feature that makes it convertible to cash easily.
IMPORTANCE OF HAVING A FOREIGN EXCHANGE RESERVES
Foreign exchange reserves are an important aspect of a country’s economic strength. A country that does not have enough foreign reserves will find it difficult to import some essential commodities like crude oil. The importance of having a foreign exchange includes the following
- Foreign exchange reserves act as back up a fund in case the value of the country’s currency depreciates
- Having a large foreign exchange serves as a source of economic prestige because such countries are respected for their strong economic standing.
- Again, having a large foreign exchange reserve makes the country attractive for foreign trade and investment opportunities.
- They help influence the monetary policies of the country.
AFRICAN COUNTRIES THAT HAVE THE LARGEST FOREIGN EXCHANGE RESERVES
1 . Firstly, SOUTH AFRICA
According to the South African Reserve Bank, the country has a foreign exchange of $60.2 billion
2 . Secondly, ALGERIA
Algeria has a foreign exchange reserve of $43.5 billion. This is according to the bank of Algeria. The country’s total reserve includes gold. In the latest report by the International Monetary Fund, Algeria’s Foreign Exchange Reserves were equal to 15.7 Months of Import in Dec 2020, also its Money Supply M2 increased to 143.1 USD bn in Sep 2021.
Algeria’s Domestic Credit reached 152.7 USD bn in Feb 2022, representing an increase of 9.0 % YoY. The country’s Non-Performing Loans Ratio stood at 12.7% in December.
3 . Thirdly, NIGERIA
As of May 2022, Nigeria’s foreign exchange reserve was measured at 38.5 USD bn, when compared to 39.6 USD bn in the previous month. The country’s foreign reserves do not include SDRs, Gold, and IMF positions.
4 . Also, EGYPT
Egypt’s foreign reserve measures up to 37 USD bn as stated by the Central Bank of Egypt.
5 . Lastly, MOROCCO
This country’s foreign exchange reserves currently measure at $33.3 billion according to Bank Al-Maghrib, the Central Bank of Morocco.
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