Reserve Requirements on Foreign Currency Deposits in Sub-Saharan Africa-Main Features and Policy Implications

Abstract

This paper reviews the reserve requirement arrangements of sub-Saharan Africa, focusing on the differences between reserve requirements on domestic- and foreign-currency deposits. The reserve requirement systems in sub-Saharan Africa are relatively simple and transparent, but in some countries high unremunerated reserve ratios impose a significant implicit tax on the banks. The currency denomination of the foreign-currency reserve deposits raises concern in countries undergoing large macroeconomic changes or experiencing exchange rate volatility.

Keywords: reserve requirements, foreign currency deposits, liquidity management

JEL Classification: E5