Institute of Business Administration

Jahangirnagar University

Submitted to:

Md. Alamgir Hossen

Assistant Professor

Course Instructor

International Finance Management

Submitted by:

Tabassum Tasnim Sinthy

ID: 1729

Batch: 27

Date of submission: January 20, 2022.

 1. What is the balance of PMT?
2. Types of accounts in BOP?
3. Current situation of BOP?
Answer:

Balance of PMT:
The balance of payments (BOP), also known as the balance of international payments, is a
statement of all transactions made between entities in one country and the rest of the world over
a defined period, such as a quarter or a year. It summarizes all transactions that a country's
individuals, companies, and government bodies complete with individuals, companies, and
government bodies outside the country.

BOP compares the dollar difference of the number of exports and imports including all financial
exports and imports. BOP may be used as an indicator of economic and political stability. A
negative balance of payment means that more money is flowing out in the country than coming
in and vice-versa.

In the Bangladesh Balance of Payments statements are grouped under two major categories as
given below:
1. Current Account and
2. Capital Account.

1. Current Account
It is the sum of the Goods and Services, Income and Current Transfers.

● Goods and Services: Recording of goods and services imply provision or acquisition of
real resources of an economy to and from the rest of the world. Goods cover general
merchandise, goods for processing, repairs on goods, goods procured in ports by carriers
and non-monetary gold. Different types of service accounts are transportation, travel,
communication services, financial services, construction services, insurance services etc.

Net goods account= Value of goods exported - Value of goods imported.

Net services account= Value of services exported - Value of services imported.

● Income: The Income component of the Balance of Payments is restricted to income

earned from the provision of two factors of production viz, labor and capital. Accordingly
income earned from the labor is called compensation of employees while income earned
from the capital is called investment income. Income paid to Bangladeshis from overseas
 sources are credited in the income account and income paid by Bangladeshis to overseas
sources are debited in the income account.
Net Income Account= Income Credits - Income Debits

● Current Transfers: Official grants in food and commodity for immediate consumption
and technical assistance are included in the current transfers. It also includes workers'
remittances, other gifts and donations etc. Transfer of funds into Bangladesh are credited
and the transfer of funds out of Bangladesh are debited.
Net Current Transfer = Credits – Debit

2. Capital Account
Capital Account is the sum of the Capital Account and Financial Account.

● Capital Account: Money coming to Bangladesh is credited and the money coming out of
Bangladesh is debited in the capital account.

Balance of capital account = Capital transfer credited – Capital transfer debited

● Financial Account: Financial account records all transactions associated with changes of
ownership in foreign financial assets and liabilities.

Balance of Financial Account = Direct investment + Portfolio investment + Other Investment +

Reserve Assets.

Current situation of BOP in Bangladesh

● Recent Current Account of Bangladesh: Current Account in Bangladesh averaged -

104.57 USD Million from 2005 until 2021, reaching an all-time high of 3576 USD
Million in the third quarter of 2020 and a record low of -3977 USD Million in the first
quarter of 2021. Bangladesh recorded a Current Account deficit of 3887 USD Million in
the second quarter of 2021.

● Recent Capital Account of Bangladesh:

Capital Flows in Bangladesh averaged 21.69 BDT Billion from 1997 until 2021, reaching
an all-time high of 679.50 BDT Billion in March of 2007 and a record low of -12.72
BDT Billion in May of 1998.
Bangladesh recorded a capital and financial account surplus of 3.10 BDT Billion in
September of 2021.