This is a presentation by me.

1. A PRESENTATION ON
BALANCE OF PAYMENT
Presented by
Tanvir Sadik
ID: 2014020106006
Batch: 20th
Department of
Economics,
Southeast University.
Course Teacher:
Madiha Khan
Lecturer
Department of Economics,
Southeast University

2. DEFINITION OF BALANCE OF
PAYMENT
• The balance of payments is the record of all international financial transactions
made by a country's residents. A country's balance of payments tells us whether it
saves enough to pay for its imports.
• It also reveals whether the country produces enough economic output to pay for its
growth. The BOP is reported for a quarter or a year.

3. TWO IMPORTANT SITUATIONS OF
BALANCE OF PAYMENT
• 1. Balance of payment deficit.
• 2. Balance of payment surplus.

4. BALANCE OF PAYMENT DEFICIT &
ITS IMPACT
• A balance of payments deficit means the country imports more goods, services and
capital than it exports. It must borrow from other countries to pay for its imports.
• In the short-term, it fuels the country's economic growth.
• In the long-term, the country becomes a net consumer, not a producer, of the
world's economic output. It will have to go into debt to pay for consumption instead
of investing in future growth.
• If the deficit continues long enough, the country may have to sell off its assets to
pay its creditors. These assets include natural resources, land and commodities.

5. BALANCE OF PAYMENT SURPLUS &
ITS IMPACT
• A balance of payments surplus means the country exports more than it imports. Its
government and residents are savers. They provide enough capital to pay for all
domestic production. They might even lend outside the country.
• A surplus boosts economic growth in the short term. That's because it's lending
money to countries that buy its products. That boosts its factories, allowing them
to hire more people.
• In the long run, the country becomes too dependent on export-driven growth. It
must encourage its residents to spend more. A larger domestic market will protect
the country from exchange rate fluctuations. It also allows its companies to develop
goods and services by using its own people as a test market

6. COMPONENT OF BALANCE OF
PAYMENT
• The balance of payments has three components. They are;
• 1. Financial account,
• 2. Capital account,
• 3. Current account.

7. FINANCIAL ACCOUNT
• The financial account describes the change in international ownership of assets.
• The financial account measures:
• 1) Changes in domestic ownership of foreign assets and
• 2) Foreign ownership of domestic assets.
• If foreign ownership increases more than domestic ownership does, it creates a
deficit in the financial account. This means the country is selling off its assets,
like gold, commodities and corporate stocks, faster than it is acquiring foreign
assets.

8. CAPITAL ACCOUNT
• The capital account measures financial transactions that don't affect a country's
income, production or savings. For example, it records international transfers of
drilling rights, trademarks and copyrights.
• Many capital account transactions happen infrequently, such as cross-border
insurance payments. The capital account is the smallest component of the balance
of payments.

9. CURRENT ACCOUNT
• The current account measures international trade, the net income on investments
and direct payments.
• When the activities of a country's people provide enough income and savings to
fund all their purchases, business activity and government infrastructure spending,
then the current account is in balance.

11. THANK YOU