CURRENT ACCOUNT OF
BALANCE OF PAYMENTS
By: Lusi Martha
The Meaning
of Balance of
Payments
The balance of payments is a record of all
economic transactions between the
residents of a country and all other
countries in a particular period
These transactions are made by individuals,
firms and the government
Money coming into the country (export) is
recorded as credit items and money
leaving the country (import) as debit items
02
The
Functions of
Balance of
Payments
• To know the economic condition of a country
• To know the steps that must be taken in the field of
economic transactions
• To know domestic economic problems
• To assess the ability to meet foreign debts
03
01.
Component
Balance of
Payments
02.
03.
Current Account
a record of the income received and expenditure
made by a country in its dealings with other
countries.
Capital Account
balance sheet/records containing transactions of
capital inflow and capital outflow from a country, ex:
investment, debt
Monetary Account
contains records of changes in monetary transactions
and records changes in foreign exchange reserves
foreign exchange reserves: reserves in other currencies03
The Meaning of Current Account : a record of the income received and
expenditure made by a country in its dealings with other countries. It
has several components:
01.
Trade in goods (balance
of trade)
The value of exported
goods and the value of
imported goods.
Including cars, food
and machinery
Balance of Trade=
Export - Import
02.
Trade in services
(balance of
services)
The value of
exported services
and the value of
imported services.
Including banking,
tourism
03.
04.
Primary Income
Secondary Income
income earned by
people working in
different countries
and
investment income
which comes into
and goes out of the
country.
This is transfers of
money,
which is sent out of the
country or come into
the country, not in
return
for anything else
04
Deficit & Surplus in Trade/Services
If revenue from the export of goods/services exceeds
the expenditure from import of goods, the country is
said to have a trade in goods/services deficit.
In contrast, a trade in goods/services
surplus occurs when export revenue exceeds import
expenditure
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UNIVERSITAS
FRADEL & SPIES
Deficit & Surplus
UNIVERSITAS
FRADEL & SPIES
Deficit & Surplus
Changes in exports and imports
There are a number of factors that influence the value of a country’s exports and imports.
These include
The country’s inflation
rate
Marketing
Productivity
Domestic GDP
Quality
Foreign GDP
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Policies to correct a current deficit
Policies to correct a current account surplus
Thank You