Merits of balance of payments

The BoP statement provides a clear picture of the economic relations between different countries. It is an integral aspect of international financial management. Now that you have understood BoP and its components, let’s look at why it is important.

To begin with, the BoP statement provides information pertaining to the demand and supply of the country’s currency. The trade data shows a clear picture of whether the country’s currency is appreciating or depreciating in comparison with other countries. Next, the country’s BoP determines its potential as a constructive economic partner. In addition, a country’s BoP indicates its position in international economic growth.

By studying its BoP statement and its components closely, a country would be able to identify trends that may be beneficial or harmful to the economy and take appropriate measures.