Advantages of Balance of Payments to International Businessmen and Bankers:

The study of balance of payments has become a matter of great interest to all concerned. It has been said that Balance of Payments is just like a financial statement of a bank or a business that reveals the financial condition of the country.

The document is so important that it is considered as an economic barometer of a country’s health. It can furnish the key to an understanding of a country’s economic problems.

Other use of payments are as follows:

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1. It is of great value in forecasting and evaluating its business and economic conditions:

The more accurate the material in the balance of payments, the more valuable it becomes as a basis for the study of the economic and business conditions of a country.

2. Balance of payments can also serve as a basis to evaluate a country’s solvency:

It is to determine the appropriateness of the exchange value of its currency.

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3. It also reveals the nature, size, composition and direction of a country’s international trade:

Trade of visible and invisible items which form part of balance of payments. A close study of it will give an idea of a country’s industrial production and its internal and external demands.

4. It clarifies the foreign exchange position of a country:

This can be used as a basis for businessmen in selecting markets for their products.

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5. It also helps to decide the trade, industrial and economic policies of the Government:

If balance of payments is favourable, the Government will take liberal view of imports otherwise different types of restrictions (tariff and non-tariff measures) will be imposed as corrective measures. It will naturally affect the International Trade. Thus it can be said that the study of Balance of Payments position of a country is very useful for an international business as it helps to decide that his domestic or foreign trade policies, programmes, procedures and strategies. It is a basic document that gives a direction to Government Policies and Programmes.