Holding excess foreign reserves versus infrastructure finance: What should Africa do? - AfDB


This paper is a contribution to the debate on the use of excess foreign exchange reserves from different African countries as one of the funding sources for financing infrastructure.The study has shown that: (i) African countries have held excess reserves in the range of $ 165.5 and $ 193.6 billion on average per year between 2000 and 2011. This is more than the infrastructure financing gap identified at $ 93 billion per year; and (ii) the social cost of holding these excess reserves amount to up to 1.65% in GDP terms on average.In addition, the study provides some suggestions on how central banks can innovate in their reserves management. A close collaboration between the central banks and the debt management offices on the alignment of foreign reserves and foreign debt is deemed crucial. 

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