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Balance of Payment Disequilibrium

By balance of payment disequilibrium, we mean a condition where the total receipts of a country is greater or smaller than payments. This means that there is an imbalance between a country’s receipts and payments in its combined current and capital accounts. Therefore, disequilibrium in balance of payment could be surpluses or deficits. It is a surplus when a country’s receipts are greater than the country payments.

This is the situation of favourable balance of payment. A deficit balance of payment occurs when the country’s receipts are less than the country’s payments. In other words, this is a situation of unfavourable balance of payment. Equilibrium also exists when the total receipts from other countries equals total payments to other countries.

It should be noted that when a country suffers from balance of payment deficit, such a country will have a weak financial standing in international trade transactions, especially if the deficit persists for a long time.