Reserves Accumulation and Diversification: The Case of Poland

Abstract

The note provides an overview of foreign exchange reserves trends in Poland. At the end of October 2018, FX reserves reached the equivalent of USD 105.3 billion, placing Poland among the 20 largest reserves holders worldwide. Given the systematic inflow of EU funds and a crisis-driven fall in yields in major advanced economies, a consistent theme of reserves management by the Narodowy Bank Polski (NBP) over the past decade has been diversification into the so called non-traditional currencies. Along with the excursion into less traditional reserve currencies, the NBP has diversified its range of investable instruments. At present, in addition to sovereign bonds, which offer high liquidity and the lowest credit risk, the NBP invests in supranational bonds, bonds issued by local governments or agencies and corporate bonds. In 2018, the NBP made a strategic decision to expand its gold reserves by 25%. As a result, the share of gold in official reserve assets went up from 3.8% at the end of June 2018 to 4.5% in October 2018.

Full Publication: Reserve Management and FX Intervention

Keywords: National Bank of Poland, FX reserve management, FX reserve accumulation, FX reserve diversification, investment strategy, gold reserves

JEL Classification: E58, G11, G15, G32