Balance of Payment

Full (vvv important )

 Meaning
• The balance of payments, also known as balance of international
payments and abbreviated B.O.P. or BoP, of a country is the record
of all economic transactions between the residents of the country
and the rest of world in a particular period of time (over a quarter
of a year or more commonly over a year).
 Features
1. Systematic record
2. Fixed period of time
3. Comprehensiveness
4. Self balalaced
5. Double entry system
6. Adjustment of differences 7. All items of govt and non govt
 BoT
• the difference in value between a country's imports and exports.
 Types
1. Favourable BOT = E>I
2. Unfavorable BoT = I >E
3. Equilibrium in BOT = E=I
 Difference between the two
1. BoP is a broad term,latter is a narrow
2. BoT includes import and export of goods alone is visible items
only,BoP contains visible , invisible, of goods ,services and capital
3. BoT can be favourable or unfavorable but BoP always balances
4. Deficit under Bot can be made by BOP but not in other way
around
 Structure of BOP
• Two sides= 1 credit side ,2 = debit side
• Credit = All receipt
• Debit = All payment
 Forms
1. Current account
2. Capital a count
3. Overall bop
 Components of current account
• Export and import of visible goods
• Invisible items
 Items of capital account
1. Private foreign loan flow
2. Movement in banking capital
3. Official capital transaction
4. Reserves ,monetory gold and SDR
5. Miscellaneous
 Disequilibrium in BoP
• Types of Bop
1. Balanced
2. Favouravle
3. Unfavorable
 Causes of disequilibrium in BoP
1. Natural
2. Economic
3. Political