UNDERSTANDING BALANCE OF PAYMENTS (BOP)

Balance of Payments (BOP) is a record of all economic transactions between a country and the rest of the world.

It includes transactions related to goods, services, income, and financial assets.

BOP is divided into two accounts - Current Account and Capital Account.

Current Account includes transactions related to trade in goods and services, income from investments, and unilateral transfers.

Capital Account includes transactions related to capital transfers and acquisition or disposal of non-produced, non-financial assets.

BOP is an important indicator of a country's economic health and helps in understanding the flow of money in and out of a country.

A surplus in BOP indicates that a country is earning more from its exports than it is spending on imports, while a deficit indicates the opposite.