## b2 — Standardized definition of Net International Reserves (SECTION I: THE ISSUE)

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### Background and motivations
- Reserve adequacy assessments are important for understanding external vulnerabilities; IMF Article IV staff reports generally include an assessment of adequacy (IMF (2016) Guidance Note for Surveillance Under Article IV Consultations; IMF (2016) Guidance Note on the Assessment of Reserve Adequacy and Related Considerations).  
- Reserve assets on a gross basis (RA or GIR) are defined in BPM6 and the IRFCL Guidelines (BPM6 paragraph 6.64).  
- Gross reserves alone may be misleading where there are large predetermined short-term drains; Net International Reserves (NIR = gross reserves minus short-term foreign currency drains) is useful to guide macroeconomic policy advice.  
- The ARA Guidance Note emphasizes accounting for significant short-term FX liabilities and potential drains relative to gross reserves; NIR could also be compared with reserve adequacy metrics.  
- In Fund-supported programs, NIR definitions are often used for performance criteria (PC) and specified in Technical Memoranda of Understanding (TMU); program definitions can differ from definitions tailored only for reserve adequacy assessments.  
- No standardized statistical definition of NIR currently exists; a standardized definition consistent with reserve adequacy frameworks could provide operational clarity and a comparable measure of external resilience across countries.

### Current concepts of NIR: sources and conceptual differences
- Three source concepts described: (i) the ARA Guidance Note; (ii) IRFCL Guidelines (relying on BPM6 reserve-related liabilities); and (iii) operational guidance to IMF staff on defining NIR in Fund-supported program documents.  
- Key conceptual differences concern: liabilities to residents, liability maturities, off-balance-sheet items, IMF credits and loans, and other items. BPM6 does not define NIR.  
- ARA Guidance Note excerpt: “Measures of net reserves subtract predetermined short-term drains (due to both non-residents as well as residents) from the official reserve position. The drains can arise from on-and-off balance sheet activities, where the latter could take the form of activated swaps, forward positions that unwind, and the former could be short-term FX liabilities (e.g., FX deposits, including cash outflows derived from repos) that are used to fund the reserve asset position.”  
- BPM6 defines reserve-related liabilities (RRL) as direct claims by non-residents on an economy’s reserve assets; BPM6 RRL includes the value of the SDR allocation and loans from the IMF to monetary authorities but excludes liabilities to residents and off-balance-sheet items (e.g., forward leg of a FX swap).  
- IRFCL Guidelines suggest an NIR concept based on BPM6 RRL: “often defined to refer to reserve assets net of outstanding reserve-related liabilities (usually, only short-term liabilities are included in the calculation) … representing the monetary authorities’ readily available claims on and liabilities to nonresidents.” This concept includes only liabilities to nonresidents.  
- The IRFCL concept of foreign currency liquidity is broader than NIR: (i) foreign currency resources (official reserve assets and other foreign currency assets) readily mobilized by the authorities, and (ii) predetermined and contingent inflows/outflows over the coming 12 months; it “takes account of foreign currency drains on existing foreign currency resources arising from the authorities’ financial activities vis-à-vis residents and nonresidents in the coming 12-month period.”  
- The IMF Note “Sample Definition of NIR Performance Criteria” (August 1, 2003) defines reserve assets broadly and reserve liabilities as all foreign exchange liabilities to residents and nonresidents, including derivative commitments and “all credit outstanding from the Fund.”  
- TMU practice varies significantly to fit country circumstances.

### Survey of TMU practice (37 arrangements; January 2015–July 2020)
- Sample: 37 Fund-supported arrangements with an NIR performance criterion, approved between January 2015 and July 2020.  
- IMF credit: All 37 arrangements include all IMF credit in reserve liabilities; outstanding liabilities to other international financial institutions are mentioned in many cases.  
- Maturity of liabilities to nonresidents (except IMF credit): 26 arrangements include short-term only in RL; 9 arrangements include all maturities in RL; 2 arrangements consider country-specific factors.  
- Liabilities to residents: 19 arrangements include all maturities in RL (some exclude government deposits); 10 arrangements include short-term only in RL (some exclude government deposits); 8 arrangements do not cover claims on residents.  
- Central bank and government liabilities: All arrangements include central bank liabilities in RL; none include central government liabilities except two that include central government derivatives.  
- Financial derivatives: 18 arrangements include commitment to sell FX in RL; 10 arrangements do not mention derivatives; the remainder are country specific.  
- SDR allocation: 15 arrangements exclude SDR allocation in RL (a couple exclude SDR allocations received after the start of the arrangement); 21 arrangements do not mention SDR allocations; 1 arrangement includes SDR allocation.

### Proposed statistical definition (Guidance Note)
- Core formula: NIR = Reserve assets – Short-term net foreign currency drains  
- Definition components:
  - Reserve assets (RA) are defined as in BPM6 (paragraph 6.64), adjusted for FX financial derivatives in FCD as discussed in paragraphs 15–16.  
  - Short-term net foreign currency drains (FCD) are the predetermined contractual foreign currency obligations (foreign currency outflows net of inflows) scheduled to come due during the 12 months ahead, as defined in the IRFCL Template (Section II).  
- Treatment of derivatives to avoid double counting:
  - Where short-term FX outflows/inflows from forwards and futures are scheduled in FCD (IRFCL Section II, 2), corresponding market values of those derivative contracts recorded in Section I.A (5) of the IRFCL template should be excluded from RA in the NIR calculation. Only market values of FX forwards/swaps for which notional values are recorded in Section II.2 should be excluded; market values of other derivatives (e.g., options) remain in the NIR calculation.  
  - If notional values of non-deliverable forwards (NDFs) are included in FCD, they should be excluded from NIR calculation because payment at expiration involves only the market value (and the market value is included in RA if settled in foreign currency).  
  - The exclusion applies only to the NIR calculation; recording of RA in the balance of payments, IIP, or IRFCL Template should not change. BPM6 paragraph 6.91 describes treatment of financial derivatives in reserve assets.

### Rationale, alignment with existing frameworks, and key conceptual choices
- Rationale:
  - The proposed definition is broadly consistent with the ARA Guidance Note and intended to inform policymakers on usable reserves to respond to adverse macroeconomic events.  
  - The definition aligns with the majority of TMU conditions analyzed.  
- Key conceptual choices (summary):
  - Asset side: RA per BPM6 excludes foreign currency assets with residents because such claims are not reliably available in adverse circumstances and using them would transfer external stress to domestic sectors.  
  - FCD scope: short-term on- and off-balance-sheet foreign currency obligations to residents and nonresidents—including short-term obligations of the central government—are included because drains limit monetary authorities’ ability to meet balance of payments needs irrespective of creditor residency. Guarantees are not included.  
  - Maturity: only short-term drains are deducted (12-month horizon consistent with IRFCL Section II); unlike the Sample Definition of NIR Performance Criteria, long-term liabilities and all Fund credit and loans are not automatically deducted though they could be for program design and monitoring.  
  - Valuation and timing: FCD treatment follows the cash-flow value when the flows take place, consistent with Section II of the IRFCL Template; short-term scheduled debt service (principal and interest) is deducted from RA in the GN’s proposed approach.

### Key divergences from alternative concepts
- ARA Guidance Note: deducts predetermined short-term drains arising from both residents and nonresidents and on- and off-balance-sheet items.  
- Sample Definition of NIR PCs (August 1, 2003): deducts a broader set of reserve liabilities including all FX liabilities to residents and nonresidents, commitments arising from derivatives, and “all credit outstanding from the Fund.”  
- BPM6-based RRL approach: deducts only claims by nonresidents (reserve-related liabilities), excludes liabilities to residents and off-balance-sheet items commonly deducted operationally.  
- Proposed GN definition: deducts short-term net foreign currency drains to residents and nonresidents on a remaining maturity basis over the coming 12 months; RA per BPM6 is adjusted only to avoid double counting with FCD (notably for FX forwards/swaps).

### Proposed inclusion in BPM7 and data considerations
- Proposal for BPM7:
  - BPM7 could discuss the NIR definition in a box or appendix so the topic is understood as additional guidance beyond general balance of payments concepts.  
  - The GN notes the proposed NIR definition goes beyond the residence scope of the BPM framework because it includes positions with residents.  
- Data coverage and interaction with existing frameworks:
  - Concepts and data are already covered in BPM6 and the IRFCL Guidelines; RA on a gross basis is based on BPM6.  
  - FCD goes beyond the residency concept of BPM6, but Section II of the IRFCL Template already covers FCD data.  
  - Compilation of the IRFCL Template is a requirement to subscribe to the IMF’s Special Data Dissemination Standard (SDDS); some non-SDDS countries also compile these data.  
  - Even if countries do not compile the IRFCL Template, IMF country teams can request data from authorities following the IRFCL Guidelines and calculate NIR.  
  - Introduction of the NIR concept in BPM7 does not entail new data collection by extending the current BPM framework; BPM7 could accommodate the NIR concept flexibly while data collection would remain limited to cross-border positions and transactions based on the residency concept.  
  - Avoiding duplication of data collection with the IRFCL Template is important to prevent increasing data compilation and reporting burdens.  
  - The IRFCL Template reporting frequency (monthly) is more frequent than balance of payments and IIP reporting (quarterly for the majority of reporting economies).

### Use of the standardized statistical definition and flexibility for country-specific adjustments
- Intended benefits:
  - Offer a standardized approach to support careful monitoring of the build-up of potential short-term drains on reserves.  
  - Provide guidance to authorities and others for analysis of external vulnerability.  
- Flexibility and permissible country-specific adjustments:
  - Country-specific considerations remain paramount; the standardized statistical definition should not limit flexibility to adjust measurement of NIR for reserve adequacy assessments or Fund-supported program design.  
  - Examples of permissible modifications (including but not limited to):
    - For establishing and monitoring Fund-supported programs, all outstanding IMF credit and loans, regardless of their maturity, should be deducted from RA to measure NIR for program purposes.  
    - Long-term foreign exchange liabilities to residents and nonresidents could also be deducted, as well as other deductions to reflect country circumstances.  
    - There may be a case to exclude from FCD certain central bank FX liabilities to some residents (for example, central government deposits and some liabilities to commercial banks).  
    - The treatment of contingent liabilities (e.g., guarantees, credit lines, and sold options) could vary among countries.

### Outcomes of the written consultation with the Committee
- Committee support:
  - A wide majority of IMF Committee on Balance of Payments Statistics members fully supported the proposed statistical definition of NIR.  
  - A wide majority agreed with the proposed standardized statistical definition of NIR as presented in Table 2 even though some items go beyond the balance of payments framework (i.e., including foreign currency liabilities to residents).  
  - It was agreed that BPM7 should explain the concept/statistical definition and use of NIR (in an annex and/or a Box).  
- Data collection support:
  - Committee members fully supported that NIR data be collected from elements already collected in the IRFCL Template/framework.  
  - The IRFCL Template already includes relevant data at monthly frequency for the calculation, so the reporting burden for countries will not be increased.  
- Minority views and proposals:
  - One Committee member objected that the definition does not consider foreign-currency assets of the monetary authorities that do not qualify as reserve assets.  
  - A Committee member proposed BPM7 clarify: how the definition applies to members of decentralized currency unions; the treatment of SDR allocations (considered long-term reserve-related liabilities and thus excluded from FCD); and implicit differences in valuation between flows and stocks.  
- SDR allocation implications:
  - SDR allocations are recorded as debt liabilities and considered long-term reserve-related liabilities; therefore, they are not included in short-term foreign currency drains.  
  - When recorded at the central bank, NIR are expected to increase (while net foreign assets are not) with SDR allocations.  
  - The precise treatment depends on where the SDR holdings and cumulative allocations are recorded.

### Annex summaries (selected)
- Annex I — BPM6 definition of Reserve-Related Liabilities (RRL):
  - RRL are foreign currency liabilities of the monetary authorities that can be considered direct claims by nonresidents on reserve assets.  
  - Items included in RRL per paragraphs 6.115–6.116 include the value of the SDR allocation and loans from the IMF to monetary authorities; foreign currency loan and deposit liabilities of the monetary authorities to nonresidents; foreign currency loan liabilities associated with securities repoed out; foreign currency securities issued by the monetary authorities and owed to nonresidents; and other foreign currency liabilities to nonresidents, including foreign currency accounts payable and financial derivatives—recorded on a net basis—settled in foreign currency and associated with, but not within the definition of, reserve assets.  
  - Liabilities to residents and liabilities both denominated and settled in domestic currency are not included.  
- Annex II — IRFCL Template:
  - The IRFCL Template integrates international reserves and foreign currency liquidity and accounts for off-balance-sheet activities and potential inflows and outflows.  
  - Table II.1 summary sections (as labeled in the IRFCL Template):
    - Section I.A Official reserve assets (1) Foreign currency reserves: (a) Securities; (b) Total currency and deposits; (2) IMF reserve position; (3) SDRs; (4) Gold (including gold deposits and gold swapped); (5) Other reserve assets.  
    - Section I.B Other foreign currency assets.  
    - Section II Predetermined short-term net drains: (1) Loans, securities, and deposits; (2) Forwards, futures, and swaps; (3) Other (e.g., repos and trade credit).  
    - Section III Contingent short-term net drains: (1) Contingent liabilities (a) Collateral guarantees; (b) Other; (2) Securities with embedded options; (3) and (4) Undrawn, unconditional credit lines; (5) Short and long positions in options.  
    - Section IV Memo items: (1) (a) Short-term domestic currency debt; (b) Financial instruments denominated in foreign currency and settled by other means; (c) Pledged assets; (d) Securities lent and on repo; (e) Financial derivative assets (net) by type (e.g., forwards, swaps, options); (f) Financial derivatives that have a residual maturity greater than one year; (2) Currency composition of reserves.  
- Annex III — IMF Note “Sample Definition of NIR Performance Criteria” (August 1, 2003):
  - Sample umbrella definition: NIR = reserve assets − reserve liabilities.  
  - Reserve assets include monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country's reserve position at the Fund; excluded are pledged/collateralized/encumbered assets, claims on residents, claims in foreign exchange arising from derivatives vis-a-vis domestic currency, precious metals other than gold, assets in nonconvertible currencies, and illiquid assets.  
  - Reserve liabilities include all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives, and all credit outstanding from the Fund.  
  - Program practice notes: NIR PCs should indicate program price of gold and program exchange rates for valuation; the initial stock of program NIR should be explicitly given; relevant adjusters need specification.

*Prepared by the IMF and partners as summarized in the Guidance Note on a standardized statistical definition of Net International Reserves.*

### SECTION I: THE ISSUE

### b2 — Standardized definition of Net International Reserves (SECTION I: THE ISSUE)

### Background: role and motivations
- The assessment and analysis of the adequacy of a country’s reserves are important for understanding external vulnerabilities; IMF Article IV staff reports generally include an assessment of adequacy in view of a country's specific characteristics and vulnerabilities (IMF (2016) Guidance Note for Surveillance Under Article IV Consultations; IMF (2016) Guidance Note on the Assessment of Reserve Adequacy and Related Considerations).  
- Reserve assets on a gross basis (RA or GIR) are well defined in BPM6 and the IRFCL Guidelines (BPM6 paragraph 6.64).  
- Gross reserves alone may provide a misleading view of precautionary buffers where there are large predetermined short-term drains; the concept of Net International Reserves (NIR = gross reserves minus short-term foreign currency drains) is useful to guide macroeconomic policy advice.  
- The ARA Guidance Note emphasizes that significant short-term FX liabilities or other potential short-term drains on a central bank’s reserves should be considered in reserve adequacy assessments and that potential drains should be discussed relative to gross reserves; NIR could also be compared with reserve adequacy metrics.  
- In Fund-supported programs, NIR definitions are often used for performance criteria (PC) and are specified in the Technical Memorandum of Understanding (TMU); program definitions can differ from concepts tailored only for reserve adequacy assessments.  
- There is no standardized statistical definition of NIR; a standardized statistical definition consistent with reserve adequacy frameworks could provide operational clarity and a comparable measure of external resilience across countries.

### Current concepts of NIR: sources and differences
- The note describes NIR as elaborated in three sources: (i) the ARA Guidance Note; (ii) IRFCL Guidelines (relying on BPM6 reserve-related liabilities); and (iii) operational guidance to IMF staff on defining NIR in Fund-supported program documents.  
- Key conceptual differences across sources concern: liabilities to residents, liability maturities, off-balance-sheet items, IMF credits and loans, and other items. BPM6 does not define NIR.  
- ARA Guidance Note definition excerpt: “Measures of net reserves subtract predetermined short-term drains (due to both non-residents as well as residents) from the official reserve position. The drains can arise from on-and-off balance sheet activities, where the latter could take the form of activated swaps, forward positions that unwind, and the former could be short-term FX liabilities (e.g., FX deposits, including cash outflows derived from repos) that are used to fund the reserve asset position.”  
- BPM6 defines reserve-related liabilities (RRL) as direct claims by non-residents on an economy’s reserve assets; the BPM6 RRL definition includes the value of the SDR allocation and loans from the IMF to monetary authorities but excludes liabilities to residents and off-balance-sheet items (e.g., forward leg of a FX swap). This represents a material deviation from ARA Guidance Note and many program practices.  
- IRFCL Guidelines suggest an NIR concept based on BPM6 RRL: “often defined to refer to reserve assets net of outstanding reserve-related liabilities (usually, only short-term liabilities are included in the calculation) … representing the monetary authorities’ readily available claims on and liabilities to nonresidents.” This concept includes only liabilities to nonresidents.  
- The IRFCL concept of foreign currency liquidity is broader than NIR: (i) foreign currency resources (official reserve assets and other foreign currency assets) readily mobilized by the authorities, and (ii) predetermined and contingent inflows/outflows over the coming 12 months; it “takes account of foreign currency drains on existing foreign currency resources arising from the authorities’ financial activities vis-à-vis residents and nonresidents in the coming 12-month period.”  
- The IMF Note “Sample Definition of NIR Performance Criteria” (August 1, 2003) provides an operational umbrella definition widely used in TMUs; it defines reserve assets broadly and defines reserve liabilities as all foreign exchange liabilities to residents and nonresidents, including derivative commitments and “all credit outstanding from the Fund.”  
- TMU practice varies significantly to fit country circumstances.

### Survey of TMU practice (37 arrangements; January 2015–July 2020)
- Sample: 37 Fund-supported arrangements with an NIR performance criterion, approved between January 2015 and July 2020.  
- IMF credit: All 37 arrangements include all IMF credit in reserve liabilities; outstanding liabilities to other international financial institutions are mentioned in many cases.  
- Maturity of liabilities to nonresidents (except IMF credit): 26 arrangements include short-term only in RL; 9 arrangements include all maturities in RL; 2 arrangements consider country-specific factors.  
- Liabilities to residents: 19 arrangements include all maturities in RL (some exclude government deposits); 10 arrangements include short-term only in RL (some exclude government deposits); 8 arrangements do not cover claims on residents.  
- Central bank and government liabilities: All arrangements include central bank liabilities in RL; none include central government liabilities except two that include central government derivatives.  
- Financial derivatives: 18 arrangements include commitment to sell FX in RL; 10 arrangements do not mention derivatives; the remainder are country specific.  
- SDR allocation: 15 arrangements exclude SDR allocation in RL (a couple exclude SDR allocations received after the start of the arrangement); 21 arrangements do not mention SDR allocations; 1 arrangement includes SDR allocation.

### Proposed statistical definition (this Guidance Note)
- The GN proposes:  
  Net international reserves = Reserve assets – Short-term net foreign currency drains  
- Definition components:  
  - Reserve assets (RA) are defined as in BPM6 (paragraph 6.64), adjusted for FX financial derivatives in FCD as discussed in paragraphs 15–16.  
  - Short-term net foreign currency drains (FCD) are the predetermined contractual foreign currency obligations (foreign currency outflows net of inflows) scheduled to come due during the 12 months ahead, as defined in the IRFCL Template (Section II).  
- Treatment of derivatives to avoid double counting:  
  - Where short-term FX outflows/inflows from forwards and futures are scheduled in FCD (IRFCL Section II, 2), corresponding market values of those derivative contracts recorded in Section I.A (5) of the IRFCL template should be excluded from RA in the NIR calculation. Only market values of FX forwards/swaps for which notional values are recorded in Section II.2 should be excluded; market values of other derivatives (e.g., options) remain in the NIR calculation.  
  - If notional values of non-deliverable forwards (NDFs) are included in FCD, they should be excluded from NIR calculation because payment at expiration involves only the market value (and the market value is included in RA if settled in foreign currency).  
  - The exclusion applies only to the NIR calculation; recording of RA in the balance of payments, IIP, or IRFCL Template should not change. BPM6 paragraph 6.91 describes treatment of financial derivatives in reserve assets.

### Rationale and alignment with existing frameworks
- The proposed definition is broadly consistent with the ARA Guidance Note and intended to inform policymakers on usable reserves to respond to adverse macroeconomic events.  
- The definition aligns with the majority of TMU conditions analyzed.  
- Key conceptual choices in the proposed definition (summary):  
  - Asset side: RA per BPM6 excludes foreign currency assets with residents because such claims are not reliably available in adverse circumstances and using them would transfer external stress to domestic sectors.  
  - FCD scope: short-term on- and off-balance-sheet foreign currency obligations to residents and nonresidents—including short-term obligations of the central government—are included because drains limit monetary authorities’ ability to meet balance of payments needs irrespective of creditor residency. Guarantees are not included.  
  - Maturity: only short-term drains are deducted (12-month horizon consistent with IRFCL Section II); unlike the Sample Definition of NIR Performance Criteria, long-term liabilities and all Fund credit and loans are not automatically deducted though they could be for program design and monitoring.  
  - Valuation and timing: FCD treatment follows the cash-flow value when the flows take place, consistent with Section II of the IRFCL Template; short-term scheduled debt service (principal and interest) is deducted from RA in the GN’s proposed approach.

### Key divergences from alternative concepts (high level)
- ARA Guidance Note: deducts predetermined short-term drains arising from both residents and nonresidents and on- and off-balance-sheet items.  
- Sample Definition of NIR PCs: deducts a broader set of reserve liabilities including all FX liabilities to residents and nonresidents, commitments arising from derivatives, and “all credit outstanding from the Fund.”  
- BPM6-based RRL approach: deducts only claims by nonresidents (reserve-related liabilities), excludes liabilities to residents and off-balance-sheet items commonly deducted operationally.  
- The proposed GN definition: deducts short-term net foreign currency drains to residents and nonresidents on a remaining maturity basis over the coming 12 months; RA per BPM6 is adjusted only to avoid double counting with FCD (notably for FX forwards/swaps).

_Prepared by the IMF and partners as summarized in the Guidance Note proposing a standardized statistical definition of Net International Reserves._

### 17.      The proposed statistical definition of NIR is beyond the realms of BPM as the balance of

### b2-standardized-definition-of-net-international-reserves

### Proposed statistical definition and BPM7
- The GN proposes including a statistical definition of NIR in BPM7, acknowledging that the balance of payments (BPM) framework does not cover transactions and positions with residents and that the proposed NIR concept goes beyond BPM.
- Rationale:
  - NIR is an essential concept widely used to assess external vulnerability of a country.
  - A standardized definition is needed as a benchmark to define country-specific NIR.
- Suggested treatment in BPM7:
  - BPM7 could discuss the definition in a box or appendix so the topic is understood as additional guidance beyond general balance of payments concepts.

### Key data considerations and interaction with existing frameworks
- Existing coverage:
  - Concepts and data are already covered in BPM6 and the IRFCL Guidelines.
  - The definition of reserve assets on a gross basis is based on BPM6.
  - The concept of FCD (foreign currency denominated items/drains) goes beyond the residence concept of BPM6, but Section II of the IRFCL Template already covers FCD data.
- Data compilation and reporting:
  - Compilation of the IRFCL Template is a requirement to subscribe to the IMF’s Special Data Dissemination Standard (SDDS); some non-SDDS countries also compile these data.
  - Even if countries do not compile the IRFCL Template, IMF country teams can request data from authorities following the IRFCL Guidelines and calculate NIR.
  - BPM7 could accommodate the NIR concept flexibly, but data collection would remain limited to cross-border positions and transactions based on the residency concept.
  - Introduction of the NIR concept in BPM7 (going beyond BPM framework) does not entail new data collection by extending the current BPM framework.
  - Importance of avoiding duplication of data collection with the IRFCL Template to prevent increasing data compilation and reporting burdens.
  - The IRFCL Template reporting frequency (monthly) is more frequent than balance of payments and IIP reporting (quarterly for the majority of reporting economies).
- Role of the IRFCL Guidelines and Template:
  - The IRFCL Guidelines provide a comprehensive framework to collect data related to reserve assets encompassing:
    - Positions with residents and nonresidents,
    - On- and off-balance-sheet items,
    - Data for the monetary authorities and the central government.
  - The IRFCL Template covers contingent liabilities of monetary authorities and the central government (including guarantees, credit lines, and options), as well as financial instruments denominated in foreign currency and settled in domestic currency.
  - Some essential components for defining NIR (e.g., positions with residents and off-balance-sheet items) are not available in the BPM framework.
  - Sections II and III of the IRFCL Template cover only short-term items (i.e., items that require payments up to one year) on a remaining maturity basis; long-term liabilities/payment obligations are out of scope for those sections.
  - The IRFCL Template covers amortization and interest payments for IMF credit and loans scheduled in a year or less (short-term payments only).
  - FCD also include scheduled receipts of foreign currency (e.g., the forward leg of currency swaps).
  - For a complete list of FCD and their descriptions, refer to Chapter 3 of the IRFCL Guidelines.

### Use of the standardized statistical definition
- Intended benefits:
  - Offer a standardized approach to support careful monitoring of the build-up of potential short-term drains on reserves.
  - Provide guidance to authorities and others for analysis of external vulnerability.
- Flexibility and country-specific adjustments:
  - Country-specific considerations remain paramount; the standardized statistical definition should not limit flexibility to adjust measurement of NIR for reserve adequacy assessments or Fund-supported program design.
  - Examples of permissible modifications (including but not limited to):
    - For establishing and monitoring Fund-supported programs, all outstanding IMF credit and loans, regardless of their maturity, should be deducted from RA to measure NIR for program purposes.
    - Long-term foreign exchange liabilities to residents and nonresidents could also be deducted, as well as other deductions to reflect country circumstances.
    - There may be a case to exclude from FCD certain central bank FX liabilities to some residents (for example, central government deposits and some liabilities to commercial banks).
    - The treatment of contingent liabilities (e.g., guarantees, credit lines, and sold options) could vary among countries.

### Outcomes of the written consultation with the Committee
- Committee support:
  - A wide majority of IMF Committee on Balance of Payments Statistics members fully supported the proposed statistical definition of NIR.
  - A wide majority agreed with the proposed standardized statistical definition of NIR as presented in Table 2 even though some items go beyond the balance of payments framework (i.e., including foreign currency liabilities to residents).
  - It was agreed that BPM7 should explain the concept/statistical definition and use of NIR (in an annex and/or a Box).
- Data collection support:
  - Committee members fully supported that NIR data be collected from elements already collected in the IRFCL Template/framework.
  - The IRFCL Template already includes relevant data at monthly frequency for the calculation, so the reporting burden for countries will not be increased.
- Minority views and proposals:
  - One Committee member objected, on the grounds that the definition does not consider the foreign-currency assets of the monetary authorities that do not qualify as reserve assets.
  - A Committee member proposed that BPM7 should clarify:
    - How the definition of NIR applies to members of decentralized currency unions;
    - The treatment of SDR allocations, which are considered long-term reserve-related liabilities and thus excluded from FCD;
    - Implicit differences in valuation between flows and stocks.
- SDR allocation implications:
  - SDR allocations are recorded as debt liabilities and considered long-term reserve-related liabilities; therefore, they are not included in short-term foreign currency drains.
  - When recorded at the central bank, NIR are expected to increase (while net foreign assets are not) with SDR allocations.
  - The precise treatment depends on where the SDR holdings and cumulative allocations are recorded.

### Annex material summarized
- Annex I (BPM6 definition of Reserve-Related Liabilities):
  - RRL are defined as foreign currency liabilities of the monetary authorities that can be considered direct claims by nonresidents on the reserve assets of an economy.
  - Items included in RRL per paragraphs 6.115–6.116:
    - The value of the SDR allocation and loans from the IMF to monetary authorities.
    - Foreign currency loan and deposit liabilities of the monetary authorities to nonresidents, including those arising from foreign currency swaps with other central banks, loans from BIS, and from other deposit-takers.
    - Foreign currency loan liabilities to nonresidents associated with securities that the monetary authorities have repoed out.
    - Foreign currency securities issued by the monetary authorities and owed to nonresidents.
    - Other foreign currency liabilities to nonresidents, including foreign currency accounts payable and financial derivatives—recorded on a net basis—settled in foreign currency and associated with, but not within the definition of, reserve assets.
  - Liabilities to residents and liabilities both denominated and settled in domestic currency are not included.
- Annex II (IRFCL Template):
  - The IRFCL Template integrates international reserves and foreign currency liquidity and accounts for off-balance-sheet activities and potential inflows and outflows.
  - Table II.1 summary sections (as labeled in the IRFCL Template):
    - Section I.A Official reserve assets (1) Foreign currency reserves: (a) Securities; (b) Total currency and deposits; (2) IMF reserve position; (3) SDRs; (4) Gold (including gold deposits and gold swapped); (5) Other reserve assets.
    - Section I.B Other foreign currency assets.
    - Section II Predetermined short-term net drains: (1) Loans, securities, and deposits; (2) Forwards, futures, and swaps; (3) Other (e.g., repos and trade credit).
    - Section III Contingent short-term net drains: (1) Contingent liabilities (a) Collateral guarantees; (b) Other; (2) Securities with embedded options; (3) and (4) Undrawn, unconditional credit lines; (5) Short and long positions in options.
    - Section IV Memo items: (1) (a) Short-term domestic currency debt; (b) Financial instruments denominated in foreign currency and settled by other means; (c) Pledged assets; (d) Securities lent and on repo; (e) Financial derivative assets (net) by type (e.g., forwards, swaps, options); (f) Financial derivatives that have a residual maturity greater than one year; (2) Currency composition of reserves.
- Annex III (IMF Note “Sample Definition of NIR Performance Criteria” (August 1, 2003)):
  - Sample umbrella definition: NIR = reserve assets − reserve liabilities.
  - Reserve assets include monetary gold, SDRs, foreign currency cash, foreign currency securities, deposits abroad, and the country's reserve position at the Fund; excluded are pledged/collateralized/encumbered assets, claims on residents, claims in foreign exchange arising from derivatives vis-a-vis domestic currency, precious metals other than gold, assets in nonconvertible currencies, and illiquid assets.
  - Reserve liabilities include all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives, and all credit outstanding from the Fund.
  - Program practice notes: NIR PCs should indicate program price of gold and program exchange rates for valuation; the initial stock of program NIR should be explicitly given; relevant adjusters need specification.

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/b2-standardized-definition-of-net-international-reserves.pdf_