Balanceofpayments

The balance of payments (BoP) is a statistical statement that summarizes a country’s economic transactions with the rest of the world over a specific period, typically a quarter or a year. It records all payments and receipts between residents and nonresidents.

It is organized into three main components: the current account, the capital account, and the financial account. The current account records trade in goods and services, plus income receipts and payments (primary and secondary), such as wages, profits, dividends, and remittances. The capital account covers capital transfers and the acquisition or disposal of nonproduced nonfinancial assets. The financial account records financial flows, including direct investment, portfolio investment, other investments, and reserve assets, reflecting claims and liabilities.

The BoP uses double-entry bookkeeping: each transaction is recorded as a credit and a debit, and in principle the sum of the three accounts is zero. Statistical discrepancies may exist.

Deficits or surpluses indicate whether an economy is a net borrower or lender to the rest of the world. Persistent deficits may be financed by drawing down reserves, attracting foreign investment, or incurring debt, and can influence exchange rates and policy.

BoP data help macroeconomic analysis and policy, including exchange-rate management, external debt sustainability, and assessment of external vulnerabilities. International standards are published by the IMF (BPM6) and countries publish BoP statistics accordingly.