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UK international reserves

21 February 2020: ICAEW chart of the week

Chart research by Martin Wheatcroft FCA and design by Sunday, Feb 2020. Source: Bank of England, 'UK international reserves', 31 December 2019. IMF SDR assets and Liabilities of £16bn have been allocated to underlying currencies.

The UK’s official holdings of foreign government debt, central bank deposits, IMF Special Drawing Rights (SDRs) and gold are the subject matter for the #icaewchartoftheweek, being the foreign currency assets and liabilities used in monetary operations.

The UK Government and the Bank of England together held £149bn in foreign currency assets as of 31 December 2019, equivalent to approximately two months’ public spending or just under 7% of gross national income. However, these assets were offset by £108bn in foreign currency liabilities, comprising £59bn in net financial derivatives (currency forwards, interest rate and cross-currency swaps), £23bn due on repo transactions and £26bn in other liabilities.

Even though the official reserves are an extremely important tool used to help ensure the smooth operation of financial markets, provide confidence in the UK’s financial stability and (if needed) support the value of sterling, the net balance of £41bn is relatively small, with £12bn invested in the Euro, £13bn in the US dollar and £6bn in the Yen and other currencies, together with £10bn of gold.