PAYMENT BALANCE is a systematic assessment of economic transactions between residents of the country and non-residents related to the receipt and payments Money. The main receiving operations are receipts from the export of goods and services, income from foreign investments and the acquisition by foreign firms of the country's domestic assets, and the main payment operations are payment for the import of goods and services, payment of income on foreign investments in this country and the acquisition of foreign assets by residents. Payment balance compiled for a specific period - year, quarter, month. Residents are understood as legal and individuals operating in that country. The information contained in the balance of payments is used to assess the country's creditworthiness, predict the impact of foreign economic relations on the foreign exchange market and the exchange rate, regulate them, assess the state of the country's economy, predict possible economic, fiscal and monetary policies, calculate the gross domestic product, etc. Development of international financial relations and international comparisons required the unification of methods for compiling balances of payments in various countries and their harmonization with the system of national accounts. The latest balance of payments recommendations were published by the International Monetary Fund in 1993.
When compiling the balance of payments, the principle of double entry adopted in accounting is used. Each transaction is reflected in the debit and credit of the account, and the total debit amount must be equal to the total credit amount. Credit amounts are formed as a result of exports of goods and services and capital inflows, which lead to the inflow of foreign currency into the account, they are reflected with a plus sign. Debit amounts are generated as a result of imports of goods and services and outflows of capital, resulting in the expenditure of foreign exchange. They are displayed with a minus sign. In the balance of payments, economic transactions are recorded at market prices, i.e. at the prices at which the actual exchange of economic values took place.
It is customary to compile balance of payments in the national currency of the respective countries, with the recalculation of data at market exchange rates that are formed on the date of the transactions. If the national currency is unstable, the balance of payments may be drawn up in the hard currency of a country.
There are two sections in the balance - accounts: "current account" and "account of operations with capital and financial instruments". Current transactions (see current account balance sheet) refers to transactions in goods, services, and income. The balance of transactions with capital and financial instruments characterizes transactions related to investment activities. The balance of current operations and the balance of operations with capital and financial assets must be equal in absolute value and have opposite signs. A current account deficit means that a country spends more foreign currency on goods, services, and other current transactions than it receives from selling them. It is financed through the sale of assets to non-residents and through external loans. With limited assets and difficulty in obtaining loans, countries with persistent current account deficits are forced to reduce imports and increase exports. A positive current balance means an increase in net foreign assets. The country's overall balance of payments is positive if the balance of current operations, together with the balance of operations with capital and financial instruments, forms a positive balance. This leads to an influx of foreign currency into the country and an increase in foreign exchange reserves. In the case of a negative balance, there is a deficit in the balance of payments and the country's national bank is forced to reduce foreign exchange reserves. A country cannot for a long time spend more on the purchase of foreign goods, services and assets than it receives from the sale of its own goods, services and assets. Therefore, the balance of payments is its most important analytical concept.
active balance of payments A balance of payments in which receipts exceed payments. A surplus in the balance of payments contributes to the strengthening of the country's foreign exchange position.
Passive balance of payments A balance of payments in which payments exceed receipts. Usually, the deficit balance of payments is covered by the use of its foreign exchange reserves, either with the help of foreign loans and credits or capital imports.
Balance of payments- in payment settlements - the difference between the amounts of foreign receipts and payments. It is believed that the balance of payments should always be equal to zero. A passive or active balance reflects the imbalance of the components of the balance sheet and, as a rule, shows the amount by which the state's foreign exchange reserves have decreased or increased.
Balance of payments deficit- the passive balance of the current account and the balance of the capital account.
country's balance of payments- the ratio of cash payments coming into the country from abroad, and all its payments abroad during a certain period of time (year, quarter, month). In the balance of payments, all foreign economic transactions of the country are expressed in value. In most countries of the world, the balance of payments is compiled in the form recommended by the International Monetary Fund. Distinguish: the foreign trade balance, the balance of services and non-commercial payments and the balance of movement of capital and loans.
current balance of payments- part of the country's balance of payments, including the trade balance, the balance of services and non-commercial payments.
| Estimated balance of payments Russian Federation for January-September 2008 (billion US dollars) http://www.cbr.ru/statistics/credit_statistics/print.asp?file=bal_of_payments_est.htm | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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TRADE BALANCE- the ratio between the sum of the prices of goods exported by any country, or a group of countries, and the sum of the prices of goods imported by them for a certain period of time, for example, for a year, quarter, month. In other words, the balance of trade is the export and import of a country for a certain period or date.
If the value of a country's exports exceeds the value of its imports, then the balance of trade is active. If the value of imports exceeds the value of exports, then such a balance of trade is passive. In case of coincidence of the cost of export and import, a net balance is formed. A country with a passive trade balance must cover the deficit by spending various balance of payments receipts, in particular income from transportation on its means of transport or through its territory of foreign goods, interest and dividends from investments abroad, inflow of foreign capital, foreign loans, use of the reserve foreign currencies and the export of gold. The trade surplus largely characterizes the favorable economic situation of a given country is one of the important indicators of the degree of dependence of its economy on foreign markets, on the state of the situation, international competition, as well as political dependence on other states.
SETTLEMENT BALANCE- the ratio of claims and obligations of a given country, due to its trade and non-trade operations, credit and other relations for a certain period or on a specific date.
The authorities of any country, in order to choose the right monetary, tax, foreign exchange policy, must be well versed in the mechanisms of interaction of macroeconomic indicators at the international level. It is necessary to monitor changes in international economic relations in order to identify emerging problems in time. Information for this gives the balance of payments.
The balance of payments is a systematic record of all economic transactions between the residents of a given country and the rest of the world over a specified period of time, usually a year.
An economic transaction is an act of exchange in which ownership of a good is transferred or a service is provided by a resident of one country to a resident of another. Any transaction has two sides - credit and debit.
From the point of view of a given country, the parties to a transaction are defined as follows: the movement of goods and services abroad,
Fundamentals of the theory of the world economy 479
accompanied by the oncoming movement of money (export), and hence the inflow of capital from other countries, is a loan (cash comes with a plus sign); the movement of goods and services from abroad, for which the residents of the country must pay (imports), therefore, the outflow of capital to other countries is a debit (cash comes with a minus sign).
The balance of payments consists of two streams: a) real resources - exports and imports of goods and services; b) financial resources corresponding to them, which are a payment for the acquisition or payment for the sale of financial resources.
To understand and analyze the balance of payments, it is necessary first of all to recall the basic principles of its construction:
Every international transaction is automatically reflected in the balance of payments twice: once as a credit and once as a debit. This principle of accounting for the balance of payments is correct because every transaction has two sides: if you buy something from a foreigner, you must pay him in one way or another, and this will definitely be reflected in your country's balance of payments. One can never be sure in advance exactly where the “free end” of a given transaction will manifest itself, but somewhere it will certainly manifest itself;
the establishment of economic territory is important for the balance of payments. Economic territory is a geographical area under the jurisdiction of the government of a given country, within which labor, goods and capital move freely. In addition to the territories defined state border, it includes: adjacent islands (if their economy is subject to the same monetary and fiscal authorities as the economy of the mainland); territorial waters within which the country has the exclusive right to fish and extract natural resources; territorial enclaves located in other countries (for example, free economic zones);
the balance of payments reflects transactions carried out by residents of a given country. Residents are considered households or legal entities that have been in the country for more than a year and have their center of economic interest in it. They do not include tourists, staff international organizations, personnel of foreign embassies, military personnel and their families, foreign students. In contrast, foreign entrepreneurs and foreign workers are considered residents;
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4) for registration in the balance of payments, only market prices are used, i.e. prices at which transactions are concluded between an independent buyer and an independent seller. These prices should be distinguished from exchange quotations, world market prices and any other generalized price indicators;
it is necessary that the time of registration of credit and debit records coincide;
when preparing the balance of payments, the country must use the unit of account that it uses in internal settlements and accounting. For conversion into foreign currency, the exchange rate of the national currency is used, which actually operated on the market on the date of the balance of payments compilation.
The sources of information for compiling the balance of payments are:
customs statistics (transactions with goods registered by the customs authorities);
money sector statistics (data on foreign assets and liabilities of the central and commercial banks);
external debt statistics (data on stocks, flows and payments on public and private external debt of residents to non-residents, accumulated by the ministry of finance or the central bank);
statistical surveys (data on international trade services, labor income, migrant remittances, information on direct and portfolio investment);
statistics of operations with foreign currency.
Transactions between countries and the rest of the world are divided into two groups: current transactions and capital transactions. These groups are reflected in the balance of payments in the current account and capital account.
Transactions recorded in the current account are the sale AND purchase of goods and services (balance of trade), as well as unilateral payments (transfers) made by one country to another without receiving a good or service in return (for example, money transfers that a citizen one country, who went to work in another, sends his family, or foreign aid).
The capital account records the sale and purchase of assets, as well as borrowing and lending.
There is also an official reserve account. It reflects the change in the reserve assets of the government of a given country and foreign governments.
Fundamentals of the theory of the world economy 481
Each account in the balance of payments has a balance. If the absolute value of the loan is greater than the absolute value of the debit, then the balance will be positive, if vice versa, it will be negative. The trade balance is important. If export earnings exceed import costs, then the trade balance has a positive balance, otherwise it is negative.
There is a link between the balance of payments accounts. The current account and the capital account are reflections of each other. A current account deficit indicates that a country's exports of goods and services are insufficient to pay for imports of goods and services. How to finance this deficit? The country must either borrow from a foreign partner or give up ownership of some assets, which will be reflected in the capital account with a plus sign.
Example. Let's assume that in some period of time your expenses will exceed your income. To finance the deficit, you can sell some of the assets (for example, a music center) or borrow. So does a country: to finance its current account deficit, it sells assets or borrows. This is what finds expression in the positive balance of the capital account.
In the opposite situation, when the country has a positive current account balance, i.e. its export earnings exceed its import costs, it can lend (not without benefit to itself) money to other countries, which means an outflow of capital and finds expression in a negative balance of the capital account.
As a result, the sum of the balance of the current account and the capital account should give zero. However, in practice, most often the balance of payments of countries have either a negative or a positive balance. A deficit means a net outflow of money from a country, and a surplus or surplus means a net inflow of money from abroad. In this regard, the question arises: is a deficit always a bad thing, and an excess always a good thing? There is no single answer, it all depends on the specific circumstances.
Example. Japan had the world's largest current account surplus in mid-1990, grew at 5%, and grew at half the rate of other industrialized countries, but the yen weakened and the stock market tumbled . The problem was the state of the country's basic balance sheet. The current account surplus in the balance of payments was largely offset by capital outflows. Great Britain in the same period was in the worst position of all industrialized countries, since its current account deficit exacerbated-
482 Title IV
Xia outflow of capital, resulting in a negative balance of payments amounted to 10% of GNP - this is the highest deficit balance in the group of industrially developed countries. The US current account deficit was balanced by capital inflows, which did not solve the problem in the long term. Germany was in the best position, it had a huge current account surplus compared to other countries (like Japan) and low capital outflow, so its balance of payments surplus was the largest in the world.
There are three main ways to eliminate the surplus or deficit of the balance of payments:
stop the flow of trade and capital;
correct domestic economic distortions;
forced or permissive to achieve a change in the exchange rate.
The system of accounts of the balance of payments is somewhat similar to a movie camera: both cannot show us what is going well and what is bad, they simply record what is happening, thereby helping to draw conclusions (in our case, about economic policy).
There are three situations in which the information contained in the balance of payments is especially needed:
records of the results of exchanges between countries make it easier to judge the stability of the floating exchange rate system; the balance of payments helps to reveal the accumulation of currency by people who are interested in owning it (residents of the currency of a given country), and those who are inclined to get rid of this currency (foreigners);
in the conditions of fixed exchange rates, the balance of payments helps to determine the size of the accumulated currency in the hands of foreigners in order to make a timely decision on maintaining a fixed exchange rate if it is threatened by a crisis;
balance of payments accounts provide information on accumulated debt, interest and principal payments, and a country's ability to earn currency for future payments. This information makes it possible to estimate how difficult (or more expensive) it is for the debtor country to repay debts to foreign creditors.
The balance of payments of the Republic of Belarus is a statistical report, which contains in a systematic way data on the country's foreign economic operations for the reporting period. The balance of payments is compiled by the National Bank of the Republic of Belarus on a quarterly basis according to the methodology developed by the International Monetary Fund.
Fundamentals of the theory of the world economy 483
The information basis of the balance of payments of the Republic of Belarus is the reporting data on all foreign economic transactions of residents of the Republic of Belarus, provided by the Ministry of Statistics and Analysis, the Ministry of Finance, the Ministry of Internal Affairs, the State Customs Committee, the Belarusian Railways, the concerns "Belenergo", "Belneftekhim", the state enterprise " Beltransgaz”, as well as estimates from the National Bank.
At present, the analytical and standard presentation of the balance of payments is practiced.
Balance of payments items are grouped by exemplary scheme recommended by the IMF. Therefore, the balance of payments of any country looks like this:
Section A. Current operations (balance of current operations).
1 Goods (trade balance).
2 Services (balance of services).
3 Income from investments (balance of interest payments).
4 Private one-way transfers.
5 State unilateral transfers.
6 Other services and income.
Section B. Direct investment and other long-term capital.
1 Direct investment.
2 Portfolio investment.
3 Other long-term capital.
Section C. Other short-term capital.
Section D. Errors and Omissions.
Section E. Compensatory Articles.
Section F. Extraordinary sources of coverage (financing) of the balance.
Section G. Required Reserves of Foreign Authorities at the Central Bank.
Section H. Total change in reserves.
Each section (item) of the balance of payments indicates the movement of funds (receipts or payments) for each group of foreign economic transactions.
Section A:
1 Item “Goods” (trade balance) reflects the balance of payments for export, import and re-export transactions. Moreover, the balance of payments includes only actually made or immediately made payments on foreign transactions.
The balance of trade clearly reflects the role of foreign trade in achieving the macroeconomic balance of the national economy, since it is based on the difference between merchandise exports and merchandise imports. A positive or negative trade balance largely determines the state of the balance of payments as a whole. For most countries, the equilibrium of the balance of payments is more dependent on the equilibrium of the trade balance.
2 The item “Services” (balance of services) includes receipts and payments from exports and imports of a country's services on the world market. This includes services such as transport, financial, computer, communication, construction, insurance and other services provided by residents to non-residents and vice versa. The importance of the balance of services is increasing, especially in developed countries, due to the accelerated development of the non-manufacturing or service sector in them.
3 The item “Income from investments” (balance of interest payments) shows the difference between payments for loans granted by the country and interest payments on loans received, as well as the ratio between income from investments exported and imported into the country.
Investment income includes:
– income from direct investment, i.е. income of a direct resident investor from capital invested by him in a non-resident enterprise, and vice versa;
– income from portfolio investments, which are cash flows between residents and non-residents arising from the sale and purchase of securities;
– income from other investments, i.e. receipts and payments on any other financial claims of residents against non-residents, and vice versa.
If foreign capital invested in a given country yields less returns than domestic capital invested abroad, then net investment returns are positive, otherwise they are negative.
4 The item “Private unilateral transfers” (transfers) reflects the intercountry transfer of material resources without a cost equivalent. This includes current transfers from the government and other sectors. The former reflect current transfers for international cooperation, different kinds humanitarian aid, etc. The second is money transfers between individuals and non-governmental organizations (residents and non-residents), for example, transfers to relatives, wage employees, alimony, etc.
The value of private transfers depends on which of the counter flows of transfers will be more intense: from the country or to the country.
5 The article “State unilateral transfers” includes subsidies paid and received, income (expenses) from the maintenance of military bases, embassies, consulates, representative offices (trade, military), etc.
6 The article “Other services and incomes” is not subject to deciphering, since this most often includes the purchase and sale of weapons by the country, the financing of military-political actions, etc.
Sections B and C reflect the balance of capital movement, i.e. the ratio of import and export of state and private capital. Depending on the timing of movement, there are:
– long-term operations(acquisition and construction of enterprises, purchase and sale of securities, obtaining and providing long-term loans and government loans, etc.). Such operations are carried out for a period of more than 2 years;
– short-term operations(loans in cash and commodity form for up to 1 year, movement of funds on current accounts in foreign banks, import and export of capital, national currency and currency values, etc.).
Section D groups articles that correct statistical errors from sections A, B, C, and also includes data on the volume of GDP and the size of central bank reserves.
The balance of sections A, B, C, D in some countries is regarded as the result of the balance of payments. The IMF recommends including in the final balance also sections E, F, G for greater reliability. They include reserve (compensating) items that characterize the sources and methods of paying off the balance of payments: the movement of gold and SDRs, the state of the country's reserve position in the IMF, the central bank's gold and foreign exchange reserves, IMF loans, etc.
Section H shows the final state of the listed sources after the compensation of the balance of payments.
The country's balance of payments can have both a positive and a negative balance: in the first case, it shows that the country received more various assets, and in the second, that their outflow from the country exceeded the inflow. And this, in turn, can have both positive and negative consequences for the country's economy. Thus, a permanent negative current account balance leads to the depreciation of the national currency and encourages the attraction of foreign capital. At the same time, it is important for the economy in what form the inflow will take place, since in this case, particular importance is attached to foreign direct investment.
An influx of long-term entrepreneurial investment can help revive the economy, although it will require further payment of income from them to foreign investors. Long-term public and private bank loans will increase the country's external debt,
and its maintenance will become more and more expensive over time.
A stable current account surplus creates a basis for capital outflow and strengthens the position of the national currency. Negative consequences for the national economy can also cause sharp fluctuations in the current account balance - an increase in the negative balance destabilizes foreign economic operations, as it provokes inflation and depreciation of the national currency.
In any case, the state of the balance of payments most clearly characterizes the general state of any national economy.
Conclusions:
1 Balance of payments is the ratio between payments received in the country from abroad and payments paid by the country abroad. The final balance of payments can be positive or negative, which reflects either the excess of inflow over the outflow of payments into the country, or the excess of outflow over the inflow of payments from the country.
2 Balance of payments consists of several sections that reflect the movement of assets for certain groups of foreign economic transactions.
Sections A, B, C are the main ones, as they reflect the international movement of real material values. Sections E, F, G, show reserve, offsetting assets used to pay off a negative balance of payments. Section H reflects the final state of the reserve sections after the compensation of the balance.
Payment balance - it is a systematized record of all economic transactions made by residents of a given country with its non-residents during a given period.
Resident country is any person who has a main residence in a given country, regardless of his citizenship and passport status, as well as national companies operating in the country. The credit of the balance of payments accounts reflects the outflow of goods (goods, services, capital) from the country, for which the residents of this country receive payments.
Another definition is: payment balance - it is the ratio of payments received to a given country from abroad and payments made by it abroad during a certain period of time. It includes payments for foreign trade operations (i.e. the balance of trade), services (international transportation, insurance, etc.), non-trade operations (maintenance of representative offices, secondment of specialists, international tourism), as well as payments in the form of interest on loans and in the form of investment income. The balance of payments includes the movement of capital: investments and loans.
Trade balance - This is a document that reflects the movement of exports and imports of goods between a country and other states. It is compiled for the month, quarter and year and reflects the actual payments between the country and other states for the movement of goods; it is also called the "Visible" trade balance.
Active balance of payments - a country's balance of payments in which the amount of foreign receipts exceeds the amount of its foreign expenditures and payments.
Passive balance of payments - a balance sheet in which the amount of the country's foreign receipts is less than the amount of capital outflows abroad.
Balance of international settlements - the ratio of monetary claims and liabilities, receipts and payments of one country in relation to other countries. The main types of balance of international payments are: balance of payments, settlement balance, balance of international debt.
Account balance - In accounting, the balance of an account is the difference between the amount of credit entries and the amount of debit entries. It is determined at fixed intervals: monthly or weekly - for debits or credits, annually - for the annual report.
Structure of the balance of payments
Under benefits in this case, not only goods and services are understood, but also the obligations of residents, therefore loans abroad are also reflected in the credit of the balance of payments. In the structure of the balance of payments, there are three types: 1) trade balance; 2) balance of current operations; 3) total balance , or balance of official accounts. Each of these balances can be reduced to a positive or negative balance.
Trade balance represents the value of exports of goods minus their imports - it is thus only tabulated under trade flow items.
Current account balance summarizes information not only on the trade balance, but also on exports and imports of services, as well as on unilateral transfers (pensions, gifts, money transfers abroad or gratuitous assistance to foreign states). A positive current account balance indicates that the country is a net investor in relation to other countries. Conversely, a current account deficit means that a country's foreign investment abroad is reduced and it becomes a net debtor to pay for additional, or net, imports of goods and services. In other words, the current account balance is the difference between national income and national spending."Under the line" of the balance of current operations reflects information about the flows of capital and reserves. Capital flows into and out of the country, i.e. purchases of long-term assets by non-residents, which may give rise to direct claims abroad (in the form of restrictions on the use of profits from the operation of these assets), are given in balance of capital movements. By debit accounts of the balance of payments is reflected inflow of financial resources to this country, for which its residents will have to make payments. Lending to foreigners is also treated as a debit transaction, i.e. as an import of international obligations. For the same reason, an increase in a country's official reserves is reflected by debit , and the decrease on credit. The total amount of credit must be equal to the total debit of the balance of payments. Then the state is reached equilibrium of the balance of payments.
Information on the current balance of payments and the balance of capital movements is summarized in balance of official accounts , which compares accumulated reserves with growth in liquid liabilities to foreign authorities. A deficit in the balance of official settlements leads to an increase in foreign exchange inflows into the country, and a surplus leads to a decrease. The balance sheet of official accounts is usually referred to as balance of payments balance.
Links between the budgetary, financial and external sectors of the economy and the world economy
The external sector is directly related to the state budget of any country. The sum of all types of budget revenues must be equal to the sum of all types of budget expenditures. Budget revenues typically include current tax revenues, capital investment income, and government grants, while expenditures include current government spending, capital investment, and net lending. Net loans can also be considered financing, which blurs the distinction between financing that is the target public policy, and financing carried out for the purpose of managing public liquidity. Taxes and other fees that go to budget revenue reduce aggregate demand in the economy by reducing the purchasing power of the private (non-state) sector. Government spending, carried out at the expense of the budget, increases aggregate demand and, along with the consumption of enterprises and households, is the most important part of gross consumption in the economy. Government consumption includes government spending on goods and services, including the income of workers and employees in the public sector of the economy. Budget balance (fiscal balance) - the difference between the amount of revenues to the budget and the total amount of its expenditures. The balance can be positive or negative.
Institutional units are divided into two main groups:
- 1) governing monetary bodies or "financial authorities" (monetary authorities) - this is how the central (state, national) bank and ministries of finance are currently called, i.e. decision-making bodies of the state in the financial and banking sector. This includes:
- - assets (assets) - the sum of net foreign assets of the banking system (including net state reserves), valued in national currency, and net domestic credit provided by the banking system,
- - Liabilities - liabilities of the banking system to the private and public sectors. They represent the money supply, consisting of cash in circulation, deposits and other monetary instruments;
- 2) net international reserves held by the central bank and controlled by the state, and net international assets of commercial banks and other financial institutions: they constitute the total volume of net foreign assets.
All this complex financial and economic subsystem of the countries of the world is woven into the fabric of the world economy (including its financial subsystem), the movement of goods and services, and financial flows. At the same time, one significant pattern emerged: the more open and developed economically and technologically a country is, the more it internationalizes and the more "tightly" enters the world economy and the world financial system.
Since the formation of the first states in the history of mankind, trade has gone beyond the boundaries of one country. At first, it could have been the exchange of goods, but after the advent of money, the scale of trade operations changed significantly.
concept
For too long, international trade transactions between countries have not had a name. For the first time, such a concept as the balance of payments was introduced into financial terminology in 1767 by James Denem-Stewart, a British economist. In his understanding, this term meant the expenditure by citizens of money abroad and the payment of debts to foreigners.
In a modern interpretation, the balance of payments is payments made from one country to another. Let us consider in more detail its structure and history of occurrence.
Conditions and necessity for the emergence of international balance sheets
As history has shown, the emergence of such a financial category as the balance of payments significantly changed the national economy of most countries.
If at the end of the 19th and at the beginning of the 20th centuries the cost of currencies was at the same level for a sufficiently long period of time, supported by the “gold standard”, which, in fact, formed their rate (which suited everyone), then in the conditions of a “floating” rate, this approach became unprofitable.
Previously, the financial item “Reserve Assets” participated in the regulation of any changes in the exchange rate. In our time, it is the country's balance of payments, or rather, its condition, that affects the fall or rise of the exchange rate. This financial category had to go through several transformations to reach the structure that the International Monetary Fund represents today.
Main financial approaches
Currently active are:
- The theory proposed by David Hume is considered classical. It is called "automatic balance". It was in it that the main work on the settlement of exchange rates was carried out by the Reserve Assets.
- The next step was the neoclassical approach, called elastic. Such financial geniuses as J. Robinson, A. Lerner, L. Metzler took part in its development. According to their theory, the backbone of the country's balance of payments is its foreign trade, the balance of which is determined by the level of prices for exported goods in relation to imported goods and multiplied by the underlying exchange rate. With this approach, the balance of the balance is ensured by a change in the exchange rate. That is, its devaluation will reduce the prices in foreign currency for export goods, while the revaluation will “force” foreign buyers to purchase the products of this country at a higher cost.
- The next theory is the absorption approach, in which the balance of payments (namely, its trade part) is "tied" to the main elements of the country's GDP. The founder of this approach was S. Alexander, who took as a basis the ideas put forward by J. Mead and J. Tinbergen. The regulation of the balance of payments in this case is carried out by stimulating exports while restraining imports. This should stimulate domestic producers to produce competitive products and provide the same high level services, and not depend solely on currency devaluation, as in the previous approach.
- The monetarist theory of balance is tied to monetary factors, namely, how the balance affects the circulation of money in the country. Here the approach is as follows: in order to avoid a deficit in the balance of payments, it is necessary to strictly control the amount of money circulating in the country. If there are too many of them, then they should be disposed of by purchasing foreign goods or services.
All of these approaches were used at different times and remain relevant today. Depending on which of the bottoms is currently used in the country, the types of operations carried out by it depend.
Structure
As a rule, many countries use trade operations as a balance of payments regulation in an effort to achieve a positive balance. In fact, there may be several such operations.
The International Monetary Fund has compiled a balance of payments scheme, which includes 112 items divided into 7 blocks. This scheme is extremely complicated for people who are not knowledgeable in financial areas, so it has been simplified to three parts, reducing everything to the following sections:
- current account;
- accounts related to capital transactions (financial instruments);
- transactions that regulate the balance of payments.
Let's take a closer look at what they are.
Main payment transaction accounts
Current accounts of the balance of payments include:
- import of products.
And together they make up the balance of trade. It is also necessary to mention:
- services (included in the article of the balance of trade and services);
- investment income;
- transfers.
As a rule, the current accounts of the balance of payments reflect all the cash receipts that come from the sale of goods and services to non-residents, as well as net income from investment projects. All export proceeds are taken into account in the column with a plus, since in these transactions the treasury is replenished with foreign currency. When import operations are carried out, they are taken into account as a minus in the debit column, since there is an outflow of currency from the country.
All over the world, the basis of the balance of payments of countries is. It occupies up to 80% of the volume in international economic relations. If, at the same time, the balance sheet is positive, then this is a sign that high-quality competitive products are produced in this country.
Balance of payments accounts for capital
The capital and instrument accounts include:
- direct capital account;
- financial accounts, which include the following instruments: direct investments, portfolio and other investments.
Capital accounts include all types of sales and purchases and transactions, capital transfers, debt cancellation, investment grants, transfer of property rights, cancellation of debt to the government, transfer of rights to both tangible (for example, subsoil) and intangible licenses etc.) assets.
When there is an inflow of currency into the treasury through these accounts, we can talk about a positive balance. And vice versa.
Financial accounts are associated with transactions for the transfer of ownership of the financial assets of a given country. The loans provided can take the form of both direct and portfolio investments.
in payment transactions
These concepts are the basis of any financial transactions, as they determine their quality. The balance of payments is a group of accounts that should ideally be positive after those financial transactions that were carried out in the country or abroad (export-import).
These operations, in turn, are divided into primary (that is, they are independent and have stable growth trends) and secondary (short-term, are under external influence, for example, the Central Bank or the Government of the country).
All countries in the world are striving to achieve an active, in the extreme case, zero balance of payments. If at some economic stage of a country's development its balance is in the red for a long time, then the reserves of gold and foreign currency in the Central Bank are reduced until the devaluation of its domestic currency occurs.
Payment Methods
Any payments made between countries are shown in two columns: credit and debit, and the difference between them is taken into account either as a positive or negative balance.
For example, when a country exports goods, labor, services, information or knowledge, and its treasury receives an inflow of foreign currency, then all proceeds from the operations performed will be entered in the column with the “+” sign of the balance of payments on the loan.
The same operations, but only for imports, entailing an outflow of currency from the country, are entered in the "debit" column with a "-" sign.
If a country is purchasing (currency, securities) abroad, then such financial transactions are also recorded in the "debit", so there is an outflow of currency. In the event that, on the contrary, it sells domestic capital or writes off debt to non-residents (individual companies or the whole country), then this will be recorded under the “loan”. For example,
In this case, the balance of payments is a document that records the foreign economic relations and operations of the country, and since it has an international format, everything cash flows counted in dollars.
in balance
These two concepts are associated with actions in which either the financing of a negative balance or the use of its positive counterpart is carried out.
The deficit in the balance sheet must be covered by something, and here it is important to determine whether it will be an overseas business account or capital in the form of loans.
The first, of course, is preferable, since it ensures the inflow of currency into the country, while loans will entail its outflow, and even with interest.
As a last resort, it is possible to use the country's gold and foreign exchange reserve to cover the deficit in the balance sheet, and, well, a completely desperate step is the devaluation of the domestic currency.
If there is a surplus generated in the course of current operations, the country spends the capital received on emerging negative balances. Also, part of the money goes to the article "Pure errors and omissions."
Payment scheme for MFIs
The structure of the balance of payments, adopted in 1993 by the IMF, includes:
- Estimated balance. All financial obligations of one country in relation to another / other states and their fulfillment within the terms specified in the agreement are implied.
- Balance of international debt. This includes actual payments to other countries and the inflow of money from them.
In reports on these types of balances, the amount of credit transfer of money must match the debit one.
Russian balance sheet
If we consider the balance of payments of Russia, then the main movement of foreign currency is displayed in the following ratios of imports and exports:
- overseas transportation;
- tourism industry;
- purchase or sale of licenses (patents, brands);
- trade;
- international insurance;
- direct or portfolio investment and much more.
For the first time, according to the structure proposed by the IMF of Russia, the balance of payments was compiled back in 1992, and since then it has been drawn up according to the same schemes.
Throughout the time, the main source of foreign exchange inflow into the country was the export of oil and gas, timber, weapons, equipment, coal and other products.
The main foreign trade partners of Russia are China, the USA, Germany, Kazakhstan, Belarus and other countries of near and far abroad.
Conclusion
So, the balance of payments is a statistical report of all international transactions that take place between countries. It indicates transactions, dates of payments, debit, credit and balance on them.
All three sections of the balance of payments reflect the financial position of the country according to:
- current operations;
- capital and financial instruments;
- omissions and errors.
They are the structure of the balance of payments. These parameters are followed by all countries in the world.
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