Identify the correct statement from the following.

Any current account deficit must be financed by a capital account surplus.

The correct answer is Option (4) → Any current account deficit must be financed by a capital account surplus.

In the Balance of Payments (BoP), the current account and the capital account together make up the total BoP. If there is a current account deficit (i.e., payments for imports, interest, or transfers exceed receipts), it must be offset by a capital account surplus (inflow of capital through borrowing, investment, etc.) to keep the overall BoP in balance.

Explanation of other options:

• A balance of trade surplus always implies a balance of payments surplus — False. A trade surplus (exports > imports of goods) may still coexist with an overall BoP deficit if there are large outflows in services, income, or capital.

• Balance of current account is always greater than balance of trade — False. The current account includes balance of trade plus net income from abroad and current transfers; it can be greater or smaller, depending on these components.

• A balance of payments deficit implies a current account surplus — False. Usually, a BoP deficit occurs when the current account is in deficit and capital inflows are insufficient to offset it.