The assets that a country’s central bank or monetary authority holds to support its liabilities and shape monetary policy are known as foreign exchange reserves. It is a vital component of a nation’s economic stability, serving as a buffer against external shocks and currency fluctuations. These reserves are primarily used to ensure the stability of the national currency and to facilitate international trade. Total foreign exchange reserves are calculated by summing up SDRs, gold reserves, foreign currency assets, and the Reserve Tranche Position. This total represents the full extent of a country’s external financial assets and is a key indicator of its economic health. Monitoring changes in total reserves helps policymakers assess the adequacy of reserves to meet potential external liabilities.