## Reserve Requirementson Foreign Currency Deposits in Sub-Saharan Africa: Main Features and Policy Implications

_IMF Working Papers, April 1, 2002_

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## Bibliographic details
- Authors: Arto Kovanen
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451848694.001

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### Summary and scope
- Reviews reserve requirement arrangements in sub-Saharan Africa, with a focus on differences between reserve requirements on domestic- and foreign-currency deposits.
- Emphasizes the implications of reserve requirement design for banks and for macroeconomic policy under changing conditions.

### Major findings
- Reserve requirement systems in sub-Saharan Africa are relatively simple and transparent.
- In some countries, high unremunerated reserve ratios impose a significant implicit tax on the banks.
- The currency denomination of foreign-currency reserve deposits raises concern in countries undergoing large macroeconomic changes or experiencing exchange rate volatility.

### Policy implications and concerns
- High unremunerated reserve ratios can create implicit taxation of banking intermediation, with potential effects on lending, financial intermediation, and bank behavior.
- The choice of currency denomination for foreign-currency reserve deposits matters for countries facing large macroeconomic adjustments or exchange rate volatility; such denomination can amplify balance-sheet and liquidity risks.
- Distinguishing reserve requirements on domestic- versus foreign-currency deposits is important for liquidity management and monetary policy implementation.

### Subject areas and keywords
- Subject: Bank deposits; Banking; Central banks; Currencies; Financial services; Monetary base; Monetary policy; Money; Open market operations; Reserve requirements.
- Keywords: Africa; Bank deposits; central bank bank deposit; Currencies; deposit; deposit inflow; deposit liability; fiscal policy decision; foreign currency; foreign currency deposits; liquidity management; Monetary base; money multiplier; Open market operations; reserve requirements; Sub-Saharan Africa; WP.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/reserve-requirementson-foreign-currency-deposits-in-sub-saharan-africa-main-features-and-15732_