Balance of Payments: External

Sector
Business Economics
North South University
 Accounts under Balance of Payments
Current Account Balance
Trade Balance
Exports
Imports
Services (including treatment, education, tourism)
Income
Transfer (mainly remittances)
Capital Accounts Balance
Capital Transfer
(Contd.)
 Accounts under Balance of Payments
(contd.)
Financial Accounts Balance
Portfolio
FDI
Other investments (mainly development
cooperation)
Errors and Omissions
Overall Balance
Reserves
 Lets discuss it
in details
 Whats in the Balance-of-Payments
Accounts?
Three sub-accounts: Current Account, Capital
and Financial Account, Net errors and
omissions
Transactions Within the Current Account

Merchandise Trade Income receipts:

Services (treatment, Income derived from ownership of
education, tourism- assets, such as dividends on
Hajj) holdings of stock and interest on
securities
Transfers
(remittances) Page 5
Transactions Within the Capital and
Financial Account
Classification of transactions according to the
5th Edition of the Balance of Payments
Manual (characteristics of transactions)

Capital Account:
Capital transfers
Transfer of title to fixed assets, debt forgiveness, etc.

Financial Account:
Direct Investment:

Page 6
 Transactions Within the Capital and
Financial Account
Financial Account(continued):
Portfolio investment:
Other investment:
Trade credits and all other types of soft and hard term (long-term
and short-term borrowing abroad (except securities), including IMF
credits
International monetary reserves:
Foreign assets under the control of the central bank
Monetary gold
SDR assets
Reserve position of the country in the IMF

Page 7
 Errors and Omissions
Complete recording of transactions is impossible
Errors and omissions reflect the statistical discrepancy of recording
the BOP transactions:
Difference between recorded credit statements and recorded debit
statements
Reasons for errors and omissions:
Incomplete recording of transactions between residents and non-
residents
Tax evasion
Time discrepancy between the occurrence of the transaction and its
settlement
Unregistered international merchandise trade
Incomplete data about the escape of capital and about the financial
transactions in offshore centers

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 5. What Are Balance-of-Payments
Surpluses and Deficits?
Sum of the BOP statements is always zero :
Autonomous transactions:
Goals unrelated to the balance of payments
Accommodating (compensatory) transactions:
Finance the difference between autonomous credits and
autonomous debits in BOP
Autonomous credits > autonomous debits: surplus
Which Merchandise trade balance
transactions Current account balance
are
autonomous? Basic balance
Overall balance

Page 9
BOP of Bangladesh FY 02 FY 03 FY 04 FY 05

Trade Balance Bangladesh

-1768 BOP
-2207 -2319 -3297

Exports, fob (including EPZ) 1/ 5929 6492 7521 8573

Imports, cif (including EPZ) 2/ -7697 -8699 -9840 -11870

Services (net) -499 -688 874 -870

Income (net) -319 -195 -374 -641

Current transfers 2826 3418 3743 4290

Current Account Balance 240 328 176 -518

Capital account (net) 410 392 196 163

Capital transfers 410 392 196 163

Financial account 71 302 78 744

Direct investment 65 92 385 540

Portfolio investment -6 2 6 0

Other investment 12 208 -313 204

Errors and omissions -356 -123 -279 -228

OVERALL BALANCE 365 899 171 161

Reserve Assets -365 -899 -171 -161