What is the official settlements account of the balance of payments? How are official settlements deficits and surpluses associated with movements in the international reserves of the balance of payments?
What will be an ideal response?
The official settlements account records the purchases and sales of the country's international reserves. Just as on the private sector's capital account, if the central bank increases its ownership of international reserves, this is recorded as a debit, whereas a sale of international reserves is a credit. Thus, if the official settlements account is in surplus, the country is losing international reserves.
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