a. Causes of Adverse BoP

♤ Disequilibrium may take place either in the form of deficit or in the form of surplus

o Political uncertainty

o Domestic factors

o Large scale development expenditure, leading to an increase in aggregate demand and prices resulting in excess imports. It must be noted that large scale increase in capital goods imports results in a BoP deficit

o Events such as global recession

o Market fluctuations

o Disasters that may stall a country’s progress