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All countries have economic transactions with countries. These consist of Import and export of goods and services, official and private gills and donations, lending and borrowing abroad and investments abroad in financial and physical assets. Balance of Payments (BOP) IS a record of all transactions that country has with the rest of the world during a period.
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The BOP is a regular double entry accounting record with transactions that increase the availability of foreign exchange recorded as credits and those that use up foreign exchange recorded as debits. Thus, exports are a credit item. The BOP is divided into a current account consisting of transactions involving imports, exports, remittances and gifts and a capital account, which consists of all transactions that affect the country's foreign exchange asset; Or liabilities.
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The BOP data helps in analyzing whether a particular course of action is likely to be helpful or not in eliminating or reducing a current account deficit. At the same time, BOP data cannot be considered in isolation for predicting a movement in the exchange rates.
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