The balance of a payment is a systematic record of all its monetary transections with other countries of the world in a given period of time. i.e 1 year

1. Balance of
Payment(BOP)

2. BALANCE OF
PAYMENT
Waqas Ahmed
Umar Jalil
Ali Irfan Shah
10070621-044
10070621-053
10070621-031

3. 10070621-044
WAQAS AHMED

4.  The
balance of a payment is a systematic
record of all its monetary transections with
other countries of the world in a given
period of time. i.e 1 year

when we say “a country’s balance of
payments” we are referring to the
transactions of its citizens and
government.

5. Balance of Trade V/s Balance
of Payment
 The
Balance of Payment takes into
account all the transaction with the rest
of the worlds
 The
Balance of Trade takes into account
all the trade transaction with the rest of
the worlds

6. BCA + BKA + BRA = 0
where
BCA = balance on current account
BKA = balance on capital account
BRA = balance on the reserves account
Under a pure flexible exchange rate
regime,
BCA + BKA = 0

7. TYPES OF BALANCE OF
PAYMENT
 The
Balance of Payments statement
comprises four major categories
 Current
Account
 Capital Account
 Reserve Accounts
 Errors & Omissions

8. Current Account
 Includes
all imports and exports of goods
and services.
 Includes unilateral transfers of foreign aid.
 If the debits exceed the credits, then a
country is running a trade deficit.
 If the credits exceed the debits, then a
country is running a trade surplus.

9. Capital Account
 on
receipts side, short term and long-term
capital inflow receipts of foreign direct
investment and foreign debts are posted
 Same items are written in payment side
while making payment.

10. 10070621-053
UMAR JALIL

11. Reserve Accounts
 It
shows the foreign exchange position of
a country
 Official reserve account has the records
of foreign official holding and increase
reserves of gold and foreign currencies

12. Errors & Omissions
 The
entries under this head relate mainly
to leads and lags in reporting of
transactions

It is of a balancing entry and is needed to
offset the overstated or understated
components.

14. IMPORTANCE OF BALANCE OF
PAYMENT
 It
helps
 1) State of International economic
relationship of country
 2) A guide to its monetary.fiscal.exchange
& other polices.
 3) Inform govt about the international
economic position of the country, to assist
in reaching decissions on the monetary
and fiscal polices

15.  The
balance of payments analysis shows:-
whether it is paying for its import through
exporting goods, drawing down its foreign
assests or receiving donations

16. DISEQUILIBRIUM IN THE
BALANCE OF PAYMENTS
Types of BOP Disequilibrium:
 There
are three main types of BOP
Disequilibrium which are discussed below:
 Cyclical Disequilibrium,
 Secular Disequilibrium,
 Structural Disequilibrium.

17. General Measures to
Correct BOP Disequilibrium
To correct the different types of
disequilibrium in BOP the following general
measures are used:
Exchange depreciation (price effect) or
devaluation (by government)
Deflate the currency
Tariffs
Import quotas
Export duties

18. 10070621-031
ALI IRFAN SHAH

19. CAUSES OF DISEQUILIBRIUM IN
THE BOP
 Cyclical
fluctuations
 Short fall in the exports
 Economic Development
 Rapid increase in population
 Structural Changes
 Natural Calamites
 International Capital Movements

20. MEASURES TO CORRECT ADVERSE
BALANCE OF PAYMENT
 EXPORT
LED GROWTH
a) Instead Of exporting Raw material should
export Finished Goods
b) Reduction in Export Duties
c) Export Quality Products

21. MEASURES TO CORRECT ADVERSE
BALANCE OF PAYMENT
•
REDUCTION IN IMPORTS
a) Import
of Only Essential Items
b) Exchange Control
c) Substitutes for Imported Items

22. MEASURES TO CORRECT ADVERSE
BALANCE OF PAYMENT
 MISCELLANEOUS
a) Population
b) Decrease
c) Control
Control
in Consumption
of Smuggling

23. THANKS