External Sector

  • Posted on: 1 December 2010
  • By: radmin

Balance of Payments is a statistical statement that summarises the economic transactions of an economy with the rest of the world.

Exports are the outward flows of goods leaving an economic territory of a country to the rest of the world.

Imports are the inward flows of goods entering the economic territory of a country from the rest of the world.

Trade Balance is the difference between total exports and total imports. Trade balance can either be favourable if exports exceed imports or unfavorable if imports exceed exports.

Services and Income
These are receipts and payments for services such as banking, insurance, freight, consultancy, etc, that economic units in an economy transact with the rest of the world. Income records receipts and payments in lieu of labour and financial assets and liabilities, e.g, interest on payments on external debt.

Current account balance is the sum of the trade balance, services & income and current transfers. It measures the change in an economy’s net foreign asset position arising from real transactions with the rest of the world.

Capital and Financial account
captures capital transfers, FDI , and other investments such as loans, securities, etc.

Overall balance
combines the Current account balance and the Capital & Financial account, items that are not considered to be financing items. It is an important indicator of the net external payments position of the economy.

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PDF icon Balance of Payments16.31 KB
PDF icon External Sector History16.53 KB
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