The transactions carried on by monetary authorities of a country, which causes changes in official reserves are termed as official reserve transactions. Autonomous receipts and autonomous payments give rise to either deficit or surplus on balance of payments.
The central bank may finance a deficit by :
1. Reducing reserves of foreign currency,
2. by borrowing from the IMF or monetary authorities. This will be shown as decrease in reserves. The central bank may use surplus to purchase foreign securities, foreign currency, gold etc. which may result in increase in reserves of the nation.
