BoP Related Numerical Problems – Practice

In exams, you may be given a list of transactions and asked to prepare the BoP Statement. Let's practice.

Problem 1: Prepare the BoP Statement

Question: From the following data for Country X (Figures in $ Million), prepare the Balance of Payments statement and determine the Surplus/Deficit.

1. Export of Goods: 500
2. Import of Goods: 700
3. Income from foreign investments: 100
4. Export of Services: 200
5. Import of Services: 150
6. Unilateral Transfers Received: 50
7. FDI Inflow: 300
8. External Loans Received: 200
9. Repayment of Loans: 100

Solution 1

Step 1: Classify Items

• Current Account: Goods, Services, Income, Transfers.
• Capital Account: FDI, Loans.

Analysis:

• Trade Deficit is $200M.
• Current Account is Balanced (0).
• Capital Surplus is $400M.
• Result: Country X has a Net Surplus of $400M. This will increase its Forex Reserves.

Problem 2: Missing Figure Calculation

Question: Calculate the Current Account Balance from the following:

• Balance of Trade: Deficit of ₹ 5,000 Cr.
• Net Invisibles: Surplus of ₹ 3,000 Cr.

Solution:

• Current A/c = Trade Balance + Net Invisibles
• Current A/c = (-5000) + (+3000)
• Current A/c = -2000
• Answer: Current Account Deficit of ₹ 2,000 Cr.

Exam Notes: Common Mistakes

1. Sign Error: Forgetting that Imports are Minus (-) and Exports are **Plus (+)`.
2. Classification Error: Putting "Loans" in Current Account (It belongs in Capital Account).
3. Terminology: "Trade Deficit" is NOT the same as "BoP Deficit".

Quiz Time! 🎯