Question

What do you mean by the balance of payments?

Answer 1

BoP is a systematic record of a country’s economic and financial transactions with the rest of the world over a period of time. When a payment is received from a foreign country, it is a credit transaction while payment to a foreign country is a debit transaction. The principal items shown on the credit side are exports of goods and services, transfer receipts in the form of gifts,s, etc., from foreigners, borrowing from abroad, foreign direct investment, and official sale of reserve assets including gold to foreign countries and international agencies. The principal items on the debit side include imports of goods and services, transfer payments to foreigners, lending to foreign countries, investments by residents in foreign countries, and official purchase of reserve assets or gold from foreign countries and international agencies.