Definition: The phrase "balance of payments" refers to a system that records all the financial transactions a country has with other countries over a specific time period, usually one year. It includes money coming into the country (imports and investments) and money going out (exports and expenses). A favorable balance of payments means that a country is receiving more money than it is spending.
The "balance of payments" is crucial for understanding a country’s financial interactions with the world. It helps in determining whether a country is financially stable or facing deficits.