Retaining monetary targets in IMF programs is an obstacle to the progressive reform of monetary policy in SSA. Floors on net international reserves Targets for international reserves are clearly needed for countries facing BOP crises in which protecting the international reserves from further depletion is a policy priority.
But it is difficult to understand why such targets should be accorded the same priority for countries which have accumulated large holdings of international reserves, equivalent to five or six months of imports and which face no immediate threat to their BOP. In these circumstances the targets constrain the country’s capacity to use its own foreign exchange reserves for purposes of exchange rate management.