Balance Of Payments (BOP)

The Balance of Payments (BOP) is a record of all financial transactions between a country’s residents, individuals, businesses, and government, and the rest of the world over a set period. It tracks money flowing in and money flowing out, giving a complete picture of a country’s economic relationship with other nations.

In theory, the BOP should net to zero: every outflow has a corresponding inflow somewhere in the accounts. The system works like double-entry accounting, where each transaction generates both a debit and a credit entry.

In practice, the BOP tells you whether a country is running a surplus or a deficit. When exports exceed imports, more money is coming in than going out, and the BOP is in surplus. When imports exceed exports, the reverse is true, and the country is running a deficit.