Balance of payments/Addendum

Definition

According to the IMF Balance of Payments Manual[1] the balance of payments is made up of transactions involving: goods, services and income; financial claims and liabilities; and gifts classified as transfers, and comprises two main groups of accounts:

• a current account pertaining to goods and services, income, and current transfers; and
• a capital and financial account pertaining to capital transfers and assets and financial assets and liabilities.

Policy implications

In principle the balance of payments can be influenced by four possible policy measures

• the use of domestic currency reserves;
• action to alter the rate of inflation;
• exchange rate changes ;
• restrictions upon domestic access to foreign exchange (exchange controls).