When a country has a surplus in its balance of payments, it means that it is exporting more goods and services than it is importing.

This leads to an inflow of foreign currency into the country. The excess foreign currency is typically used to increase the country's foreign reserves.

Foreign reserves are assets held by a country's central bank, usually in the form of foreign currencies and other internationally accepted assets.

These reserves serve as a buffer to support the country's currency and maintain stability in the foreign exchange market.