For example, when a country exports certain commodities the country’s resources are depleted to the extent of goods exported. BoP, on the other hand, includes all the financial transactions that a country does with other countries.Now that you know, what both these terms mean, let’s see the differences between Balance of Trade vs Balance of Payment.BoP could be for a quarter, six months or a year. A country’s global business doesn’t amount to just trading phosphate and taffy or cell phones and blue jeans. Tracking all these payments provides another way to measure the size of a country’s international trade: the balance of payments.Let’s look at the balance of trade for “Imagine Nation.”At this point it’s tempting to make judgments about these different types of trade measurements and conclude that trade surpluses and favorable balance of payments are always indicators of a strong economy, but unfortunately it’s not so cut and dried. How the numbers are interpreted and viewed by the country’s leaders, other countries, and the world depends on many factors, such as where a country is in its economic development, the factors contributing to the balance of trade or payments, the health of the overall global economy, what the country is doing with its imports, and so on. Balance of payments is the overall record of all economic transactions of a country with the rest of the world. As a result of its comparative advantages, Imagine Nation imports phosphate from Christmas Island (it’s a real place in Australia—look it up!) Balance of Payment is a statement that keeps track of all economic transactions done by the country with the remaining world. A positive balance of trade or trade surplus occurs when the export value is more than the import value. The following table shows Imagine Nation’s imports and exports with Morocco in 2018.Let’s examine Imagine Nation’s balance of payments in 2018. Did you need to borrow money from your parents to buy books or clothes? It's easy to measure since all goods and many services pass through the customs office. Do you have a large positive balance in your bank account as a result of receiving a financial aid check? The balance of trade (BOT) is defined as the country’s exports minus its imports. Balance of Payment Balance of Payment (BoP) includes all the transaction that entities (people, companies, and government) in a country make with the rest of the world within a definite period of time. If there is a surplus in the current account there would be a deficit in the capital account for the same amount and vice versa. Balance of payments includes balance of trade and other invisible items of foreign trade.
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