BALANCE

OF PAYMENTS

Definitionan accounting record of transactions concluded between all domestic and foreign entities (individuals, businesses, government agencies) over a defined period of time

compares the amount of foreign currency taken in to the amount of domestic currency paid out

HOME FOREIGN

Structure of BoP

Current Account

Capital Account

Reserves

Errors and Ommitments

+

+

+

Structure of BoP (cont.)

Current Account

Exports

-

HOME FOREIGN

Imports

+

Structure of BoP (cont.)

Current Account

Exports

HOME FOREIGN

Imports

Income

Income of nationals gained in Foreign (+) and income of foreigners gained in Home (-):- salary, pension- interests- dividends

-+

+ -

Structure of BoP (cont.)

Current Account

Exports

HOME FOREIGN

Imports

Income

-+

+ -C.A. balance

Capital Account

Foreign Direct Investments

Those of Home-based businesses in Foreign

(-) and those ofForeign-based businesses in Home (+):- purchase of shares (>25%)- business set-up- take-overs

+ -

Structure of BoP (cont.)

Current Account

Exports

HOME FOREIGN

Imports

Income

-+

+ -C.A. balance

Capital Account

Foreign Direct Investments + -

Those of Home-based businesses in Foreign (-) and those ofForeign-based businesses in Home (+):- equities- bonds- other securities

Portfolio Investments + -

Structure of BoP (cont.)

Current Account

Exports

HOME FOREIGN

Imports

Income

-+

+ -C.A. balance

Capital Account

Foreign Direct Investments + -Portfolio Investments + -

Those of Home-based businesses in Foreign (+ or -) and those ofForeign-based businesses in Home (+ or -):- bank deposits (net change)- credits and loans

Other Investments

Including change of Reserve Assets and Errors

Structure of BoP (cont.)

Current Account

Exports

HOME FOREIGN

Imports

Income

-+

+ -Current A. balance

Capital Account

Foreign Direct Investments + -Portfolio Investments + -Other Investments

Capital A. balance

Balance of Payments