1. BALANCE OF PAYMENTBALANCE OF PAYMENT
ZOHAIB AMAN LASI ( 55904 )
MURTAZA HUSSAIN ( 55718 )
SAFI DAR ( 55730 )
SAJJAD HAIDER ( 56583 )
2. 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.
3. Balance of Trade V/s Balance ofBalance of Trade V/s Balance of
PaymentPayment
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
4. 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
5. TYPES OF BALANCE OFTYPES OF BALANCE OF
PAYMENTPAYMENT
The Balance of Payments statement
comprises four major categories
Current Account
Capital Account
Reserve Accounts
Errors & Omissions
6. Current AccountCurrent 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.
7. Capital AccountCapital 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.
8. Reserve AccountsReserve 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
9. Errors & OmissionsErrors & 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.
10.
11. IMPORTANCE OF BALANCE OFIMPORTANCE OF BALANCE OF
PAYMENTPAYMENT
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
12. The balance of payments analysis shows:-
whether it is paying for its import
through exporting goods, drawing down
its foreign assests or receiving donations
13. DISEQUILIBRIUM IN THEDISEQUILIBRIUM IN THE
BALANCE OF PAYMENTSBALANCE OF PAYMENTS
A disequilibrium in the balance of payment
means its condition of Surplus Or deficit
14. CAUSES OF DISEQUILIBRIUM INCAUSES OF DISEQUILIBRIUM IN
THE BOPTHE BOP
Cyclical fluctuations
Short fall in the exports
Economic Development
Rapid increase in population
Structural Changes
Natural Calamites
International Capital Movements
15. MEASURES TO CORRECTMEASURES TO CORRECT
ADVERSE BALANCE OF PAYMENTADVERSE 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
16. MEASURES TO CORRECTMEASURES TO CORRECT
ADVERSE BALANCE OF PAYMENTADVERSE BALANCE OF PAYMENT
• REDUCTION IN IMPORTS
a)Import of Only Essential Items
b)Exchange Control
c)Substitutes for Imported Items
17. MEASURES TO CORRECTMEASURES TO CORRECT
ADVERSE BALANCE OF PAYMENTADVERSE BALANCE OF PAYMENT
MISCELLANEOUS
a)Population Control
b)Decrease in Consumption
c)Control of Smuggling
