Foreign reserves are used to

help foreigners who need additional funds.
provide military support to foreign operations, e. g., the French Foreign Legion, UN peacekeepers.
cover foreign debt, import purchases, and other demands for foreign currency that banks might encounter.
support foreign operations that are branches but not subsidiaries.

cover foreign debt, import purchases, and other demands for foreign currency that banks might encounter.

Explanation:

Foreign reserves are reservoirs of cash that a government keeps through its central bank or a monetary authority. The main aim of foreign reserves is to maintain balance of trade with other countries, maintain exchange rate, and to control economy in such a way that there is confidence in financial institutions.

For example a country may want to fix it's exchange rate and not make it vary with demand and supply. The federal reserve will be used to account for market fluctuations.

Also these reserves are used in international trade when imports are done, to settle foreign debt, and to meet foreign currency needs of banks.

answerangel investor;

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