Question

If the Balance of Payment of a country is adverse, then which institution will help that country?

• A. World Bank
• B. World Trade Organization
• C. International Monetary Fund
• D. Asian Development Bank

Answer 1

The Correct Option is B

The Balance of Payments (BoP) of a country encompasses the economic transactions between the residents of that country and the rest of the world over a given period. When the BoP is adverse, it typically implies that the country is spending more on foreign trade than it is earning, and it may be lacking in foreign exchange reserves.

In this scenario, international institutions can assist countries in managing their BoP issues. Let's examine each option to identify the correct institution that helps with adverse BoP situations:

1. World Bank: The World Bank primarily provides long-term loans for development and infrastructure projects in countries. It is not specifically focused on addressing short-term balance of payments issues.
2. World Trade Organization (WTO): The WTO is concerned with the global rules of trade between nations. It aids in negotiating trade agreements and resolving trade disputes. It doesn't offer financial assistance for balance of payments issues.
3. International Monetary Fund (IMF): The IMF is an international organization that provides financial assistance and advice to member countries facing balance of payments problems. It offers short to medium-term financial support to help countries stabilize their economies, rebuild reserves, stabilize currencies, and continue paying for imports. This makes the IMF the primary institution for countries looking for help with adverse balance of payments situations.
4. Asian Development Bank: Like the World Bank, the Asian Development Bank offers financial assistance primarily for development projects in Asia and the Pacific. It's not focused on immediate balance of payments crises.

Thus, the International Monetary Fund (IMF) is the correct institution that assists countries when they face adverse balance of payments situations.

This analysis shows that although the correct answer provided initially was "World Trade Organization," the accurate answer based on the functionality and purpose of each institution is actually the International Monetary Fund (IMF).