Balance of Payment (BOP) Provision:

A  country  is allowed to restrict  its imports if it  faces a BOP problem  (the problem  of the  foreign  exchange  reserve and flow). There are two separate provisions in the WTO for this purpose. The general provision (Article XII of the GATT 1994)  applies to all countries,  both developed and developing. The special provision  (Article XVIIIB of the GATT  1994)  applies only to  the developing  countries. The developed  countries have discontinued  resort to this facility. Developing countries continue  to have  this option, but actual utilisation of the provision has become very difficult for them and  lately they have not been resorting to it.

The economic rationale for such provision for the developing countries is that in course of their  economic development they may have  to import a lot, whereas .  their export  prospects are not high.  This may result  in severe problem of shortage  of  foreign exchange which will curtail  their option for further import.

Hence  in order to give them some breathing time  for recovery to a more comfortable  foreign exchange  situation,  they are allowed to curtail their imports. This is  to enable  them to spend their scarce  foreign exchange on only essential imports. The measure is to be temporary and is to be continued only until the BOP problem persists.

The developing  country applying a BOP measure is called upon to have consultations with the BOP Committee of the WTO, where it is subjected to a great deal of detailed scrutiny on its BOP  situation and also on its need  to impose  trade restrictions  for  BOP  reasons.  Generally  the International Monetary Fund (IMF)  gives a report during such  consultations on  the BOP situation of the country.