Explain the concept of Surplus in the Balance Of Payments account. How does the central bank use this surplus?

The surplus of the balance of payment arises when the Total Receipts of foreign exchange is greater than the total expenditure. At that time the central bank transfers this surplus to the foreign exchange reserves. It will help the central bank to control the mechanism of the exchange rate. At this time if the central bank feels that the exchange rate is very high using the surplus it can liquidate thee reserves and increase the supply, as a result, the exchange rate will reduce. Thus, Surplus in BOP helps the central bank in managing the rate of foreign exchange.