The United States dollar (USD) and the South African rand (ZAR) represent the biggest share of the Bank of Namibia’s overall foreign exchange reserves. The Special Drawing Rights basket, which includes the euro (EUR), British pound sterling (GBP), Japanese yen (JPY) and Chinese yuan renminbi (CNY), represents a smaller share. The reserves are further divided into the following three tranches (or sub-portfolios) based on their objectives (in order of priority):

• Working capital tranche: This sub-portfolio is designed to meet the estimated daily liquidity requirements or the expected payments and outflows. The foremost objective of this tranche is to safeguard all principal investments.
• Liquidity tranche: This sub-portfolio is designed to meet short-term external debt obligations and import coverage, both payable within 12 months. To maintain sufficient liquidity, reserves are mostly invested in securities with an active secondary market.
• Investment tranche: This sub-portfolio caters for the medium- and long-term payment needs of the country. Subject to capital preservation and liquidity constraints, the reserves are invested to achieve a reasonable return that is consistent with the investment objectives and risk constraints.