South Africa’s gross gold and foreign exchange reserves returned to growth in December after declining for four consecutive months, but the country’s net forex reserves kept on shrinking and reached their lowest level since September 2010, central bank data showed.

The gross gold and foreign exchange reserves advanced 1.2% m/m to $49.1bn following a 0.3 m/m decrease in November. The South African Reserve Bank (SARB) attributed the increase to the maturing of foreign exchange swaps conducted for liquidity management purposes and higher gold prices, partly offset by the appreciation of the US dollar and by foreign payments made by the Treasury.

Among the components of gross reserves, foreign exchange reserves grew 1.3% m/m to $41.7bn at end-December (-0.4% m/m in November), gold reserves rose 1.3% m/m to $4.8bn (+1.4% m/m in November), while SDR holdings fell 1.1% m/m to $2.6bn (-1.1% m/m in November).

Worryingly, South Africa’s international liquidity position (ILP), which represents its net forex reserves, fell 0.5% m/m to $42.7bn as of end-December, declining for the sixth month in a row. The decline was caused mainly by a 32% drop to $2bn in the forward position, which represents SARB’s unsettled spot or swap transactions, partly offset by the growth in gross reserves and a 1.6% fall to $8.4bn in the received foreign currency deposits. In November, the net reserves narrowed by 0.3% m/m after a 0.6% m/m decline in October.

SARB has been building foreign currency reserves to act as a buffer against currency volatility. Compared to the end of 2013, gross reserves were 1.0% lower at end-2014, whereas net reserves were 6.1% lower.