Why there should be sufficient foreign exchange reserves kept within a country?
Answer & explanation
Correct answer: option 1
The correct answer is option 1: To import products like petroleum
Sufficient foreign exchange reserves are essential for a country to pay for its imports, especially crucial goods like petroleum. These reserves are also used to stabilize the currency, pay off international debt, and maintain confidence in the country's financial system.
The reserves are not directly linked to compliance with World Bank mandates or ensuring political stability.