Q) In the third point, why does decrease in foreign exchange reserves lead to capital receipts - Economics - Open Economy Macroeconomics

Question

Q) In the third point, why does decrease in foreign exchange
reserves lead to capital receipts?

Shvetika Sharma · Accepted Answer

Dear student,

Foreign exchange reserves are held by the Central Bank as the
financial assets of the government A change in foreign exchange
reserves act as financing items in the BOP

Accordingly, withdrawal from the reserves are recorded on credit
side in the capital account of BOP

Q). In the third point, why does decrease in foreign exchange reserves lead to capital receipts?