What Are The Effects Of Foreign Reserves On The Economy Of A Country?

[Good-Person]

We known that foreign reserves are very important for any kind of country. A country may need foreign reserves, especially the United States dollar in order to trade at an international level. This is why many countries have to make sure that their foreign reserves do not decline at all. So, how can it affect the economy of a country?

 

[glitch]

I think the circulation of money ends up becoming powerful for a country. This is why the US is always giving money to other countries because it puts USD in circulation and with time, builds up the value. Not fast enough for us in the US though as inflation is quickly making the buying power dwindle.

 

[Kane]

Do you know why Srilanka went bankrupt? That's because its foreign reserve went to such a low point that the country was unable to import essentials such as food, fuel, medicines, etc.

 

[Trey]

Foreign reserve depletion can cause an upsurge in the demand for foreign currency especially if it is an import dependent economy. And this would lead to a fall in the local currency which would ultimately lead to inflation.

 

[Heatman]

It is very important that any country's government makes all the necessary preparation to ensure that their foreign reserve are very high because it is going to help them to have a financial purchasing power in the international market and it s also going to help the country to fight against inflation.

 

[Frank]

It is very important that any country's government makes all the necessary preparation to ensure that their foreign reserve are very high because it is going to help them to have a financial purchasing power in the international market and it s also going to help the country to fight against inflation.

Having huge foreign reserves without having the basic infrastructures and industries that will be of good help to reduce unemployment will still bring about weak purchasing power and a poor standard of living. So, making the right investments with the foreign reserves is also a good way to handle it.

 

[Heatman]

Do you know why Srilanka went bankrupt? That's because its foreign reserve went to such a low point that the country was unable to import essentials such as food, fuel, medicines, etc.

Yeah, that's very correct and to make the matters worst, they can't even produce those essentials commodities in enough quantities they would be enough for their citizens. This is why whenever I ended up seeing myself in the government, I will be heavily invested in agriculture. Even if we don't have money, we can produce what we can eat.