BASIC OF

BALANCE OF PAYMENT

Prepared by :Akhilesh Tiwari

BALANCE OF PAYMENT
-----------------------------------------------------------------------------------Credits (+) Debits (-) { Receipts } { Payments } -----------------------------------------------------------------------------------Current Account
Exports (a) Goods (b) Services (c) Transfer Payments Imports (a) Goods (b) Services (c) Transfer Payments

Capital Account
(a) Borrowings from Foreign Countries (a) Lending to Foreign Countries (b) Direct Investments in Foreign Countries

(b) Direct Investments by Foreign Countries

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Official Settlements Account
(a) Increase in Foreign Official Holdings (a) Increase In Official Reserve of Gold and Foreign Currencies

Errors and Omissions

Statistical Discrepancy
 There s going to be some omissions and

misrecorded transactions so we use a plug figure to get things to balance.  Exhibit 3.1 shows a discrepancy of $0.73 billion in 2000.

BALANCE OF PAYMENT

VS

BALANCE OF TRADE

 Meaning  Items  Equilibrium/Disequilibrium  Narrow/Wide  Effect

Posting of credits and debits Financial transactions

Cash in Securities out Selling bonds and stocks

Securities in

Buying bonds and stocks

Cash out

Posting of credits and debits Goods and service transactions

Cash in Good or service out Export of a good or service

Good or service in

Import of a good or service

Cash out

Posting of credits and debits Unilateral transfers

Cash in Good will out Receiving gifts from abroad

Giving gifts abroad Good will in

Cash out

THANKS