Balance of Payments

Statement

The balance of payments (BOP) of a country is a record of all economic transactions between residents of a country and the rest of the world, usually over a year.

Notes

The balance of payments tracks the payments that flow between one country and all others. For the 9570 syllabus it has two relevant components — the current account and the financial account (a third, the capital account, is outside the syllabus):

• the current account records trade flows and net flows of primary and secondary income;

• the financial account records transactions that change the ownership of financial assets and liabilities across borders — foreign direct investment, portfolio investment and short-term capital flows, set out in the financial account.

The single most examined component is the balance of trade, which sits inside the current account.