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Explain why “a building up of official reserves measures a BOP surplus, while a drawing down...

Explain why “a building up of official reserves measures a BOP surplus, while a drawing down of official reserves measures a nation’s BOP deficit.”
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The official reserves increase when there is trade surplus and decreases when there is trade deficit. When the country exports more than it imports , then it is trade surplus. It provides enough to pay for all the domestic production and also increase the reserve. This increase in reserves leads to surplus in balance of payment account.

Where as when the import of the country is more than its exports, then it is trade deficit. It means that more money is going out of the country than what would be coming in the country. This decreases the official reserve of the country, leading to deficit in the BOP of the country.

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