The balance of payments (BoP) is a comprehensive record of all financial transactions between a country and the rest of the world over a specific period. It's crucial for understanding a country's international economic position.
The BoP is divided into two main accounts: The Current Account covers trade in goods (imports/exports), services, investment income, and unilateral transfers (like remittances). The Capital and Financial Account covers capital transfers and financial asset transactions (like FDI, portfolio investment, and loans).
A country's BoP always balances in accounting terms. If there's a current account deficit, it must be offset by a capital account surplus or a decline in foreign reserves. This is a key indicator of international financial health and currency stability.
Bangladesh's BoP has been volatile recently due to current account deficits. However, in FY2024-25, the situation improved somewhat thanks to increased remittances and import controls. Remittances play a massive role in Bangladesh's BoP, helping offset the current account deficit.