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    Hammad

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    Samia Rasheed
    The document discusses the components of a country's balance of payments. It defines the balance of payments as recording all monetary transactions between a country and the rest of the world over a period of time, usually quarterly or annually. It has four main components: the current account, the capital and financial account, reserve accounts, and errors and omissions. The current account records exports and imports of goods and services, income from investments abroad, and transfer payments. The capital and financial account covers investment flows and borrowing. The reserve account tracks a country's foreign exchange holdings and gold reserves. Errors and omissions acts as a balancing item.

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    Hammad

    Uploaded by

    Samia Rasheed
    14 views17 pages
    The document discusses the components of a country's balance of payments. It defines the balance of payments as recording all monetary transactions between a country and the rest of the world over a period of time, usually quarterly or annually. It has four main components: the current account, the capital and financial account, reserve accounts, and errors and omissions. The current account records exports and imports of goods and services, income from investments abroad, and transfer payments. The capital and financial account covers investment flows and borrowing. The reserve account tracks a country's foreign exchange holdings and gold reserves. Errors and omissions acts as a balancing item.

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    balance of payment

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    The document discusses the components of a country's balance of payments. It defines the balance of payments as recording all monetary transactions between a country and the rest of the world over a period of time, usually quarterly or annually. It has four main components: the current account, the capital and financial account, reserve accounts, and errors and omissions. The current account records exports and imports of goods and services, income from investments abroad, and transfer payments. The capital and financial account covers investment flows and borrowing. The reserve account tracks a country's foreign exchange holdings and gold reserves. Errors and omissions acts as a balancing item.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    14 views17 pages

    Hammad

    Uploaded by

    Samia Rasheed
    The document discusses the components of a country's balance of payments. It defines the balance of payments as recording all monetary transactions between a country and the rest of the world over a period of time, usually quarterly or annually. It has four main components: the current account, the capital and financial account, reserve accounts, and errors and omissions. The current account records exports and imports of goods and services, income from investments abroad, and transfer payments. The capital and financial account covers investment flows and borrowing. The reserve account tracks a country's foreign exchange holdings and gold reserves. Errors and omissions acts as a balancing item.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 17

    Hamad Afsheen

    Roll No 20011504-024
    Contents
     What is Balance of Payment?
     Components of balance of payment
    What is Balance of Payment?
    • Balance of payments is the method that
    countries use to monetary all the monitory
    transactions in a specific period of time.
    • It can be quarterly and on the calendar
    year bases.
    • Information used in this process is from
    both private and public sector.
    • All the information of money going in and
    out of the country is used in this process to
    get the real result out of the information.
    Cont..
    • Money coming inside the country is considered as
    the income of the country and is credited.
    • It means that the Assets (credit) of the country are
    equal to its liabilities (debit) but, more credit make
    the Balance of Payment more feasible for the
    country.
    • Similarly the money going out of the country is
    considered as the expense and is debited in
    balance of payment.
    • A country either has a deficit (decreased debit) or
    surplus (increased credit). Optimum level of the
    balance of payment is the followingequation:
    • DEBIT = CREDIT
    Components of balance of payment
    1. Current account
    2. Capital and financial
    account
    3. Reserve accounts
    4. Errors and omission
    Current Account & Capital Account
    Cont..
    • There can be either surplus or deficit in current account.
    • The current account includes:
    Export & import of services
    Interests
    Profits
    Dividends receipts/payments from/to abroad
    Unilateral
    Current Account Deficit
    Current account
    • The current account records a country's imports and
    exports of goods and services, payments made to
    foreign investors, and transfers, such as foreign aid.
    • The sum of the balance of trade (exports minus
    imports of goods and services), net factor income
    (such as interest and dividends) and net transfer
    payments (such as foreign aid).
    • BOP on current account is a statement of actual receipts
    and payments in short period.
    • It includes the value of export and imports of both visible
    and invisible goods.
    Capital and financial account
    • It describes the value of financial assets transferred across country
    borders by people who move to a different country.
    • It is difference between the receipts and payments on account.
    • It refers to all financial transactions.
    • The capital account involves:
    Inflows and outflows relating to investments
    Short term borrowings/lending
    Medium term to long term borrowing/lending
    Cont..
    • There can be surplus or deficit in capital account.
    • It includes:
    • private foreign loan flow
    • movement in banking capital
    • official capital transactions
    • Reserves
    • gold movement etc.
    Cont.…
    Reserve account
    • The official reserve account records the government's current stock of
    reserves.
    • It includes:
    i. Foreign Official Holdings
    ii. Official Gold Reserves
    iii. Foreign Exchange Reserves
    iv. IMF Special Drawings Rights
    Errors and omissions
    • The entries under this head relate mainly to leads and lags in
    reporting of transactions.
    • It is a balancing entry and is needed to offset the overstated or
    understated components.
    Any question?

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