BOP always balances. does it mean a situation of ero net financial obligation for a country??

6 marks

BOP comprises of two accounts, namely current account and capital account. BOP always balances in accounting sense  such that when current account is in surplus it is always that capital account will be in deficit by the same amount and vice- versa. Suppose current account is in surplus that is, exports are more than imports. This implies that receipt from export are more than payment for imports. This surplus would be matched by a deficit in the capital account by the same amount. In this way, in accounting sense, the country has zero net financial obligations always. 

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