Balance of Payments Crisis

A Balance of Payments (BOP) Crisis occurs when a country faces severe difficulties in covering its international financial obligations, such as paying for imports or debt repayments, due to large and sustained deficits. This situation often leads to a loss of investor confidence, causing currency devaluation and a shortage of foreign exchange reserves. Ultimately, it can result in economic instability, inflation, and measures like currency devaluation or seeking international bailouts to restore confidence and stabilize the economy.