If official reserves are the part of capital a/c bop, bop always balances. If not, it may show surplus or deficit. Can bop balance in that case also when official reserves are not the part of bop capital a/c?
Lavanya, let me at first rectify your question. Look, official reserves (also regarded as accommodating items or below the line items) are not a part of capital account of BOP. These are separate. Whenever, we have BOP disequilibrium, say surplus or deficit in BOP Account, then government chips into the picture to rectify the disequilibrium. It is then, when these official reserves are either sold-off or purchased to wipe-out the surplus or deficit in BOP A/c and to restore the BOP back to equilibrium.
The answer given by your peer below is perfectly right, you can refer to it.
The answer given by your peer below is perfectly right, you can refer to it.