Balance of Payment for Country Alpha

Question: Discuss about the Balance of Payment for Country Alpha. Answer: Introduction: It can be observed that the above-discussed current account is indicating a deficit of 220 million Singapore dollars. It indicates that economy of the Country Alpha is a net debtor to the rest of the world. It essentially reveals that Country Alpha is more focused on investing rather than saving. The current account of Country Alpha also disclosed that it is using resources from rest of the worlds economies in order to meet its requirement of investment as well as domestic consumption. The current account indicates that country alpha would effectively experience a major depletion in its foreign-exchange assets. It also indicates that country Alpha has been experiencing a greater foreign investment in local market. It has been also identified that the major contributor of deficit in Current Account of country Alpha is the greater amount of imported merchandised goods. Therefore, the country needs to enhance its export in near future (Agarwal Gangal, 2015). It can be observed that the above-discussed financial account is indicating a surplus of 260 million Singapore dollars. It indicates that the buyers of the rest of the world is purchasing greater amount of current assets in comparison with the expense to rest of the world buyers by the buyers in domestic economy. The financial account depicted that the reserve account is inflowing in a very large amount (Scitovsky, 2016). Official Settlement of Balance Credit (+) Singapore $ in millions Debit (-) Singapore $ in millions Trade Balance - 190 Total Income - 30 Total Transfers in Capital - 95 Total Monetary Flow + 355 Statistical Discrepancy + 40 It has been observed that the currently the country Alpha is gaining foreign reserve worth of 40 million Singapore dollars from balancing the financial as well as capital account. Depreciation or Appreciation of the country Alphas currency: The depreciation or appreciation of any given currency is highly dependent on the demand of the respective currency in rest of the world. While the rise in the demand of foreign currencies provides the opportunity to increase the rate of valuation for the currency, the drop in demand will force the country to devaluate respective currency to maintain its competitiveness (Krugman, 2014). The above financial account statements of country Alpha effectively disclosed that the domestic product has been used in a greater fashion in comparison with the expense of domestic buyers for the global products. Therefore, it can be easily assumed that the foreigner finds the currency more cost-effective for purchasing domestic product as well as investment. In this context, country Alpha has no need to depreciate its currency valuation, rather it is most likely that it can appreciate its currency value in the near future. It will also help the country to maintain an overall trade balance (Raza, Lar ik Tariq, 2013). Reference List: Agarwal, A., Gangal, V. K. (2015). Current account balance, external debts and foreign direct investment: empirical evidences from India.ZENITH International Journal of Business Economics Management Research,5(8), 51-60. Krugman, P. (2014). Currency regimes, capital flows, and crises.IMF Economic Review,62(4), 470-493. Raza, A., Larik, A., Tariq, M. (2013). Effects of Currency Depreciation on Trade Balances of Developing Economies: A Comprehensive Study on South Asian Countries.IOSR Journal Of Humanities And Social Science,14(6), 101-106. Scitovsky, T. (2016).Money and the Balance of Payments. Routledge.