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Balance of Payment(BOP)

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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 …

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

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  • 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.
  • 13. 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
  • 14.  The balance of payments analysis shows:- whether it is paying for its import through exporting goods, drawing down its foreign assests or receiving donations
  • 15. 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.
  • 16. 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
  • 17. 10070621-031 ALI IRFAN SHAH
  • 18. 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
  • 19. 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
  • 20. MEASURES TO CORRECT ADVERSE BALANCE OF PAYMENT • REDUCTION IN IMPORTS a) Import of Only Essential Items b) Exchange Control c) Substitutes for Imported Items
  • 21. MEASURES TO CORRECT ADVERSE BALANCE OF PAYMENT  MISCELLANEOUS a) Population b) Decrease c) Control Control in Consumption of Smuggling
  • 22. THANKS