Why do countries need “foreign currency” reserves? Why not just buy things with their own currency?

Question

I was reading about Bolivia running out of US Dollars and the government is shitting their pants.

Why is this a problem?

I don’t have any US dollars and I’m fine. If I buy something from an American website, I don’t need US dollars. I only have Euros in my bank account. I will use my Euro bank card to buy something from the American website.

Same if I buy something from a Japanese website. I don’t need Japanese Yen. I just use my bank card.

I can survive my entire life without worrying about having “foreign reserves”.

So why do countries like Bolivia need foreign reserves to buy some oil or whatever?

In: Economics

Answer 1

I’m not seeing this among the few answers I skimmed, but countries also want to diversify their holdings for the same reason you might diversify yours. The US Dollar is relatively stable versus many other currencies and as such is attractive to hold, but you wouldn’t want to necessarily hold ONLY USD. Same for any one currency.

So when they have a variety of currencies but run out of USD, that’s like having a fridge full of stuff but missing eggs (or whatever you consider to be pretty important, I eat a lot of eggs)