Foreign reserve is the share of public and liquid national assets held in foreign currencies. The Bank of Albania endeavours to hold its foreign reserve at adequate levels of the implementation of the monetary policy and foreign exchange in the Republic of Albania, as well as for timely settlement of cross-border payments and transactions.
The main reasons for foreign reserve holding may be summarised as follows:
Foreign reserves meet government needs for foreign currency to settle foreign debt;
Foreign reserves support international trade, meeting the importersí demand for foreign currency
Foreign reserves help the central bank to intervene in the market, to prevent and mitigate sharp exchange rate fluctuations.
In other words, the foreign reserve serves to ensure exchange rate stability.