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The reserve tranche position is the difference between the subscription (quota) paid by a country and the IMF's holding of the country's currency. A country pays part of its quota in reserve assets, i.e. in foreign currencies which are widely accepted in international payment transactions and can be exchanged in currency markets without restrictions ("hard" currency). The remainder of the quota is paid in the country's own currency.
The reserve tranche position is affected negatively if the country draws on the IMF's resources, since the borrowing country pays its own currency to the IMF in exchange for "hard" currency. The IMF's holding of the relevant country's currency thus increases. The reserve tranche position is positively affected if the IMF uses a country's currency as hard currency when another country draws on the IMF's resources. This means that the IMF's holding of the relevant currency declines.
Denmark's reserve tranche position is mainly affected by the IMF's use of Danish kroner, since Denmark does not draw on the IMF's resources. At the end of October 2012, the reserve tranche position, which is included in the foreign-exchange reserve, was kr. 5.2 billion.
The reserve tranche position accrues interest at a short-term market rate, the SDR interest rate, less an administration fee. |
