What constitutes a reserve currency

Reserves are the currency that countries use as foreign exchange reserves.

It must be a freely convertible currency that is widely used internationally for valuation and settlement of payments.

According to the statistical criteria set by the IMF for Member countries, a country’s reserve currency composition includes: (1) monetary gold reserves held by the government;

(2) freely convertible currency held by the government;

¢Û Reserve positions at the International Monetary Fund;

(4) The unspent allocation of the International Monetary Fund to the country.