Foreign reserves refer to the assets held by a country's central bank or monetary authority in foreign currencies. These reserves are essential for managing a nation's exchange rate and ensuring financial stability. Typically, foreign reserves consist of foreign currencies, gold, and special drawing rights (SDRs) from the International Monetary Fund (IMF).
The primary purposes of maintaining foreign reserves include:
Foreign reserves are a critical indicator of a country's economic health and its ability to repay international debts.
Start your personalized study experience with acemate today. Sign up for free and find summaries and mock exams for your university.