Balance Of Payment
Balance of Payment
Balance of Payment is the recording system of economic and financial flows that take place over a specified time period between residents and non-residents of a given country. The residents of a country compromise of the general government, individual, private and non- profitable bodies serving individuals and enterprises. The Balance of Payment will consist mainly with three sections.
1. Current Account- This shows all the inflows and outflows of a country.
2. Capital Account- This records all the capital flows of the country.
3. Financial Accounts- This shares public and private investments and lending activities
The current account, the capital account and the financial account make up a country's balance of payments (BOP). Together, these three accounts tell a story about the state of an economy, its economic outlook and its strategies for achieving its desired goals. A large volume of imports and exports, for example, can indicate an open economy that supports free trade. On the other hand, a country that shows little international activity in its capital or financial account may have an underdeveloped capital market and little foreign currency entering the country in the form of foreign direct investment.
Current Account
This is the account which shows all the inflows and outflows of merchandise (goods, financial and non-financial services) with private and official transfers. This is an important account of the Balance of Payment and highly influence the total deficit or surplus of Balance of Payment.
Format of the current account- Total exports ( FOB ) xxxx (-)Total imports ( FOB )
(xxxx)
Trade Balance xxxx Exports of non-financial services xxxx (-) Imports of non-financial services
(xxxx)
Investment incomes xxxx (-) Investment expenses
(xxxx)
(+) / (-) Private unrequited transfers xxxx (+) / (-) Public unrequited transfers (Total) xxxx Current account balance xxxx Trade surplus = exports >
Balance of Payment is the recording system of economic and financial flows that take place over a specified time period between residents and non-residents of a given country. The residents of a country compromise of the general government, individual, private and non- profitable bodies serving individuals and enterprises. The Balance of Payment will consist mainly with three sections.
1. Current Account- This shows all the inflows and outflows of a country.
2. Capital Account- This records all the capital flows of the country.
3. Financial Accounts- This shares public and private investments and lending activities
The current account, the capital account and the financial account make up a country's balance of payments (BOP). Together, these three accounts tell a story about the state of an economy, its economic outlook and its strategies for achieving its desired goals. A large volume of imports and exports, for example, can indicate an open economy that supports free trade. On the other hand, a country that shows little international activity in its capital or financial account may have an underdeveloped capital market and little foreign currency entering the country in the form of foreign direct investment.
Current Account
This is the account which shows all the inflows and outflows of merchandise (goods, financial and non-financial services) with private and official transfers. This is an important account of the Balance of Payment and highly influence the total deficit or surplus of Balance of Payment.
Format of the current account- Total exports ( FOB ) xxxx (-)Total imports ( FOB )
(xxxx)
Trade Balance xxxx Exports of non-financial services xxxx (-) Imports of non-financial services
(xxxx)
Investment incomes xxxx (-) Investment expenses
(xxxx)
(+) / (-) Private unrequited transfers xxxx (+) / (-) Public unrequited transfers (Total) xxxx Current account balance xxxx Trade surplus = exports >