The balance of payments account is a key account as it depicts the resource endowments, financial health and economic worthiness of a country. According to the definition, balance of payments is always balance due to its double accounting entry but in actual the composition of its various components does matter. There are mainly two arguments regarding the balance of payments adjustment mechanism that defines balance of payments a real or monetary phenomenon. According to the former, bop is a real phenomenon, focusing on goods and real sectors of the economy. Disequilibrium in the balance of payments is the consequences of disparities in expenditure decision by the economic agents, arises when imports payments exceed the export receipts. To address this disequilibrium expenditure reducing and expenditure switching policies has been prescribed. So here, in the Keynesian analysis the main focus is on the relative prices, relative income and exchange rate devaluations. The main shortcoming in the Keynesian analysis is it totally excludes the role of money however this market is the mirror image of the transactions that has been taken place in the goods and services market. Secondly the main focus is on only trade balance and current account balance i.e.,“ above the line transactions”, but no attention has been paid to the overall foreign exchange reserves i.e.,“ below the line transactions” treated them as a residual accounts. Monetarist argue that balance of payments is a purely monetary phenomenon; accordingly balance of payments problem is a result of the disequilibrium in the money market. This approach specifically deals with the money market and totally exclude the real accounts and their composition, or we can say it takes into account that side of the picture which is absent in the Keynesian analysis. According to this approach balance of payments is a self-correcting that require no policy action and inherently temporary in that when desired portfolio balance is attained; the deficit or disequilibrium will cease. It is observed that both analyses are relevant one represents the goods and services market while the other takes the money market as a key account. Since both analysis focuses on different aspects; and should be treated as complementary rather than substitutes. Hence both analyses are very necessary and worthwhile to be taken together from the policy perspective. The present study approaches the balance of payments problem under both Keynesian and Monetary approaches separately as well as to address this issue under the synthesis framework of balance of payments. The beauty of synthesis framework is that it takes into account both transmission mechanism devised under Keynesian and monetary analyses alternatively, in a unified framework that presents both money and real goods market together. The study finds that balance of payments is a monetary phenomenon in the long run, but inconsistencies have been found in the short run dynamics. Keynesian analysis helps in understanding the adjustment mechanism of the two accounts :trade balance and the current account balance. The exchange rate, relative prices and relative income are the main determinants of trade balance and the current account balance. The exchange rate devaluation can be used as a policy tool as it has a positive impact on both the accounts in the long run as well as in the short run. the relative price level has a negative impact on both accounts, thus implying that to improve the balance of payments increase in the price level must be less than the increase in the foreign price level. Therefore while taking any policy action to deal with the trade deficit and current account deficit in case of Pakistan, real factors (relative prices and exchange rate) need to be addressed. However for the overall international liquidity position the money market equilibrium should resorted first. The synthesis framework also highlights the validity of monetary approach in the long run and in contrast in the short run it follows that path as described by the Keynesian school of thought. Therefore, it is concluded that synthesis model has the capability to address both markets together and captures the market forces at work. The study concludes that “Balance of Payments is both a real and monetary phenomenon in Pakistan”.