What in meant by adverse balance of payments . How does adverse balance of payment creates the requirement of economic reforms?
Dear Student
Balance of payments is a statement of the inflows of foreign exchange into the country and outflows of foreign exchange out of the country.
Adverse Balance of payments implies that the outflows of the foreign exchange exceed the inflows. This situation arises when imports exceed the exports. It is a very detrimental situation for the country as external debts have to be raised to bridge the gap between the inflows and the outflows.
Economic reforms are needed to correct the Balance of Payments situation.
Hope this information clarifies your doubts. Keep posting :-)
Regards
Balance of payments is a statement of the inflows of foreign exchange into the country and outflows of foreign exchange out of the country.
Adverse Balance of payments implies that the outflows of the foreign exchange exceed the inflows. This situation arises when imports exceed the exports. It is a very detrimental situation for the country as external debts have to be raised to bridge the gap between the inflows and the outflows.
Economic reforms are needed to correct the Balance of Payments situation.
Hope this information clarifies your doubts. Keep posting :-)
Regards