Question

Discuss how important balance of payment for a country like Ghana

Answer 1

The balance of payments is a statement of all the international monetary and economic transactions of a country within a defined period. These records include transactions made by individuals, businesses and the government. Tracking these transactions helps the country monitor the flow of money and develop policies that help build a strong economy. Managing and nourishing the balance of payments is of great importance in economic development.

A major challenge for the economy of Ghana is the insistent disequilibrium in the balance of payments. Therefore, the goal of a developing country like Ghana is to stabilize the balance of payments account, which strengthens macroeconomic policies because the balance of payments is an essential document in the department or in the financial transaction, since it provides the situation of a country and its economy. The importance of the balance of payments in Ghana economy can be determined from the following points:

• Review the transaction of all exports and imports of goods and services during a specified period.

• Helps the government to analyze the sector's particular export growth potential and formulate policies to support this growth.

• Offers the government a broad perspective on a different range of import and export tariffs. The government takes steps to raise and lower taxes to discourage imports and encourage exports, respectively, and to be self-sufficient.

• If the economy requires support in the import mode, the government plans according to the BOP and transfers the cash flow and technology to the unfavorable sector of the economy and looks for future growth.

• The balance of payments also indicates that the government must detect the state of the economy and plan for expansion, monetary and fiscal policy to be determined in this regard.