AKSHAYA T

The balance of payment of a

country is a systematic record
of all economic transactions
between the residents of the
country and the rest of the
world.
It include payment for the
country’s exports and imports
of goods and services ,
financial capital and financial
transfers.
A country has to deal with
other countries in respect of 3
items :-
Visible items- It include all
types of physical goods exported
and imported.
Invisible items- It include all
those services whose exports
and imports are not visible. eg:-
Transport services, medical
services etc.
Capital transfers- It is concerned
with capital receipts and capital
payments.
DEFINITION
According to KINDLE BERGER,
“ The balance of payment of a
country is a systematic record of
all economic transactions
between the residents of the
reporting country & residents of
foreign country during a given
period of time.”
It is systematic record of all
economic transactions between
one country and the rest of the
world.
It include all transactions-
visible as well as invisible.
It relate to a period of time,
generally it is an annual
statement.
It adopts double-entry book
keeping system.
It has 2 side:- credit and debit,
receipts are recorded on credit
side and payment on debit
side.
Current account
• BOP on current account is a
statement of actual receipts and
payments in short period.
• It include the value of export &
imports of both visible and
invisible goods.
There can be surplus or deficit
in capital account.
It includes- export and import
of services , profits ,dividend
etc.
Capital account
• It is the difference between the
receipts and payment on
account of capital.
• It involves inflows & outflows
relating to investments, short
term borrowings/lending &
medium term to long term
borrowings/lending.
• There can be surplus or deficit
in current account.
• It includes- private foreign
loan flow , movement in
banking capital , reserves , gold
movement etc.
Overall BOP
• It is total of country’s current
and capital account.
• It includes errors and
omissions & official reserve
transactions.
• Errors may be due to statistical
discrepancies & omission may
due to certain transactions
which may not be recorded.
• Reserve account is the
collection of 3 accounts:- IMF,
SDR , Reserve & Monetary
Gold.
BOP equilibrium or external
balance prevails when a
country’s total money receipts
from foreigners are equal to
the total payments to
foreigners.
This is attained when sum of
current a/c and capital a/c
balances is equal to zero.
BOP disequilibrium prevails
when a country’s total money
receipts from foreigners are
not equal to total payments to
foreigners.
It is classified into 2:-
Deficit disequilibrium
If payments to foreigners are
greater than receipts from
foreigners the difference is
negative & it is termed as deficit
disequilibrium in BOP of
country.
Surplus disequilibrium
If receipts from foreigners are
greater than payments to
foreigners, the difference is
positive & it is termed as surplus
disequilibrium in BOP of
country.
Temporary causes
National income
Inflation
Economic development
Borrowing and lending
Monetary measure
Deflation
Exchange depreciation
devaluation
Non – monetary measures
o Export promotion
o Quotas
o Tariffs
THANK YOU