BALANCE OF PAYMENTS AND ITS
COMPONENTS
By
Amir Iqbal
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Topics to be Covered
•Balance of Payments
•Components of the Balance of Payments:
Current Account
Financial Account
•Financing the Current Account
•Saving, Investment, and Current Account
•Other Balance of Payments Measures
•Balance of Payments Equilibrium
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Why Study
the Balance of Payments?
•Balance of payments issues such as trade
deficits and foreign indebtedness are
controversial topics.
•Balance of payments accounts provide
insights into the country’s economic
performance relative to the rest of the world.
•The study of the economics of balance of
payments allows proper evaluation of the
various arguments and government policies
recommended to eliminate trade imbalances.
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Balance of Payments
•Balance of Payments (BOP)—is an
accounting record of a country’s trade in
goods, services, and financial assets
with the rest of the world during a
particular time period (year or quarter).
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Features of the BOP
•BOP follows the accounting procedure
of double-entry bookkeeping (debits
& credits).
A credit entry records an item or transaction
that brings foreign exchange into the
country.
A debit entry represents a loss of
foreign exchange.
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Features of the BOP (cont.)
•BOP will always balance.
•A BOP deficit (surplus) means that the
debit entries exceed (are less than) the
credits. This imbalance applies only to
a particular account or component of
the BOP.
Who does it compile
•Statistics Department of State Bank of
Pakistan is responsible to compile
