A balance of payments is a double entry system of record of all economic transactions between the residents of a country and the rest of the world carried out in a specific period of time.The balance of payments takes into account the export and import of both the visible and invisible items.
BALANCE OF PAYMENTS STATEMENT PRESENT ACLASSIFIED RECORD OF: All receipts on account of goods exported Services rendered Capital received by residents Payments made by the residents due to goods imported and services received from Capital transferred to non –residents /foreigners
COMPONENTS OF BALANCE OF PAYMENTS Current account Capital account Unilateral payments account Official settlement account
CURRENT ACCOUNT The current account includes visible exports and imports and invisible items like receipts and payments for various services like banking, transportation , tourism, travel and the like. Current account contains credits and debits.Credit- Credits of current account include : merchandise exports(money income from sale of goods) and invisible exports(income from services). Invisible exports consists of transport services insurance services ,foreign tourist services and other services sold abroad and to foreigners and income received on loans and investment abroad.
DEBITS -Debits of current account include: merchandise imports ,payments for goods purchased from foreign countries and invisible imports (payments to services received from foreign countries).invisible imports consists of transport services, insuranse services, tourism abroad and other services purchased from foreign countries and payments on loans and investmens of foreigners in our country.
CAPITAL ACCOUNT Capital account is divided into three parts ,1. Private capital2. Banking capital3. Official capital Private capital is further divided into long term and short term.Long term private capital is with the maturity period of more than one year and short term capital is with the one year.
LONG –TERM PRIVATE CAPITAL INCLUDES; Foreign investments-both direct and portfolio Long term loans Foreign currency deposits
UNILATERAL TRANSFERS ACCOUNT • Giving the gift A • Government grants • Private remittances B • Disaster relief
OFFICIAL SETTLEMENTS ACCOUNTOfficial settlements account represent the official sales of foreign currencies and other reserves to foreign countries or official purchase of foreign currencies or other reserves from foreign countries.
YEAR TRADE INVISIBLE CURRENT CAPITAL RESERVE BALANCE S (NET) ACCOUNT ACCOUNT USE ( NET) (NET) (- INCREASE )1999-2000 -17841 13141 -4698 10840 61422002-2003 -10690 17035 6345 10640 169852003-2004 -15454 26015 10561 20860 314212004-2005 -33702 -31232 -2470 28629 -261592005-2006 -51841 42655 -9186 24238 -15052