Free Essay

“in the Context of Bangladesh Bot Is More Important Indicator Than Bop”

In:

Submitted By riadsaleheen
Words 553
Pages 3
“In the context of Bangladesh BOT is more important indicator than BOP”

‘Balance of Payments’ is a term that is used to refer to an accounting record for all the monetary transactions conducted by a country with other countries within a specified period of time. Usually one year. Balance of Payments is actually a numerical summary of all international transactions, and is preferably presented in the country’s domestic currency. In a balance of payments document, exports are recorded as positive items, due to the fact that they earn revenue for the government. Imports and other expenditures are recorded as negative items. The balance between these two is very important, and is perhaps the reason why such a transaction is referred to a balance of payment. In a balance of payments, all the items need to measure up to each other, that is, they should all add up to zero in order for there to be a perfect balance. Even if the country is in a deficit situation, where it is spending more than what it is earning, this deficit ought to be countered by returns from investments, utilizing of reserves, or borrowing of loans either from other sovereign nations or from international financial institutions. In essence a balance of payments is an accounting statement, much like a balance sheet, and should be perfectly balanced for it to qualify as such.

Two primary components of a current account are a current account and a capital account. A current account is essentially the recordings of the country’s financial situation at that very moment, while the capital account is involved with the exchange, or transfer of assets and items between that country and its trading partners. Although there always has to be a perfect balance in a balance of payments, it is generally acceptable for there to be imbalances in either the capital account or the current account of a country at any given moment in the economy.
A ‘balance of trade’ on the other hand, is a relationship between the country’s imports and exports, in monetary value. A country is said to be experiencing positive balance of trade, or surplus, if the value of its exports exceed the value of its imports. Conversely, a country is said to be in deficit, or to be having a negative balance of exchange, if the value of its imports is higher than the value of its exports. Needless to say, countries strive to have a positive balance of trade, and it is imperative upon governments to do as much as possible to boost the country’s income and at the same time decrease the country’s expenditures.
Perhaps one of the most notable emerging issues that have a direct issue on the balance of trade as well as the balance of payments would have to be taxes and exchange rates. Governments all over the world have been under pressure to lower or remove duty on some goods in order to boost their income. Also, governments have had a lot of pressure to lift trade barriers and restrictions in order to encourage trade with the international community. This is indeed a welcome trend for global economy
Though BOT directly reflects on trade surplus that’s why this is more important than BOT in the context of the country of Bangladesh.

Similar Documents

Premium Essay

Balance of Trade

...Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of country and the rest of the world during a given period, usually one year. The main purpose of keeping these records is to inform government authorities about the overall international economic position of the country in order to assist them in arriving at decisions on monetary and fiscal policy, on the one hand, and trade and payments policy on the other. Balance of payments statistics are therefore helpful to government authorities charged with maintaining macroeconomic stability.BOT is a part of BOP, but it is significant for the economy because import and export is one of the most important economic activities of a nation. Moreover the balance of trade shows whether the external sector of a particular country is doing well or not. Along with BOT,BOP depicts the overall economic balance of a nation and the health of foreign reserve of that nation. So I agree that in the context of Bangladesh balance of trade is an external sector indicator than balance of payments. A common misconception is that balance of trade deficits are always bad for the economy. This is not necessarily true. In the short term if a country is importing a high volume of goods and services this acts as a short-term boost to living standards since it allows consumers to buy a higher level of household...

Words: 505 - Pages: 3

Premium Essay

World Report

...designations employed and the presentation of the material do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. In addition, the designations of country groups are intended solely for statistical or analytical convenience and do not necessarily express a judgment about the stage of development reached by a particular country or area in the development process. The major country groupings used in this Report follow the classification of the United Nations Statistical Office. These are: Developed countries: the member countries of the OECD (other than Chile, Mexico, the Republic of Korea and Turkey), plus the new European Union member countries which are not OECD...

Words: 156270 - Pages: 626

Free Essay

International Business

...International Business- Dr. R. Chandran 1. International Business: Meaning And Scope Interdependency is a natural phenomenon; nations, living beings and companies cannot totally depend on themselves. It is the major driving force for international business. Learning value: This chapter covers the essential aspects, 1. 2. 3. 4. 5. Definition of international business Emergence of developing nations in international business Motives of international business from companies and nations Fundamental differences between Domestic and International business Few successful organizations in Domestic & International business International business: Meaning and Scope In the post independence era, more than half-century Indian entrepreneurs concentrated on domestic operations and a surplus production was exported. The physical movement of goods, called EXPORT cannot represent International business. International business is defined as “any commercial transaction-taking place across the boundary lines of a sovereign entity”. It may take place either between countries or companies or both. Private companies involve themselves in such transactions for revenue, profit and prosperity. If governments are involved, they need to maintain their image, dependency and economic growth. Sometimes economic ties are strengthened through such transactions. These transactions include investments, physical movements of goods and services, transfer of technology and manufacturing. Today every company...

Words: 70922 - Pages: 284