Structure of the balance of payments

   There are various methods of balance of payments. Currently, the most famous being the classification of balance of payments proposed by the International Monetary Fund.

   The basis of this method is a reflection of objective reality - the need for two large sections of the balance of payments. This is due primarily to the fact that each transaction has two sides - commercial and financial, which in terms of cost accounting are essentially mirror images of each other.

   Exports of goods and services mean increased requirements for non-residents (as recorded in the balance of payments with the sign "+") and, consequently, reducing the financial obligations to non-residents (which is fixed with the sign «-»). In principle, the summation of the two accounts should give zero. As a result, exports of goods and services in the country's accumulated foreign exchange reserves, of which shall, inter alia, payment of import.

   In the absence of sufficient foreign reserves to pay for imports of a country may resort to foreign borrowing, which is not mediated by the export of goods and services (but who continue to be met by increasing domestic exports). In this case, the trade side of the transaction (import of goods or services) means the emergence of the debt owed to foreigners, requiring repayment (which is fixed with a sign «-»), and involvement of residents means the growth of credit obligations to foreigners (that is fixed with a sign «+»).

   That is why the balance of payments is divided into two large sections: the current account (current account balance) and the capital account and financial account (capital and financial account). The IMF publishes balance of payments on the two schemes: aggregate and more detailed balance.

    Although in practice using different schemes reporting balance of payments, drafted by the method of the IMF, but by and large they are the same.

1. Trade Account Balance

It is the difference between exports and imports of goods, usually referred as visible or tangible items. Till recently goods dominated international trade. Trade account balance tells as whether a country enjoys a surplus or deficit on that account. An industrial country with its industrial products comprising consumer and capital goods always had an advantageous position. Developing countries with its export of primary goods had most of the time suffered from a deficit in their balance of payments. Most of the OPEC countries are in better position on trade account balance.

The Balance of Trade is also referred as the 'Balance of Visible Trade' or 'Balance of Merchandise Trade'.

2. Current Account Balance

It is difference between the receipts and payments on account of current account which includes trade balance. The current account includes export of services, interests, profits, dividends and unilateral receipts from abroad, and the import of services, interests, profits, dividends and unilateral Payments to abroad. There can be either surplus or deficit in current account. The deficit will take place when the debits are more than credits or when payments are more than receipts and the current account surplus will take place when the credits are more than debits.