PRESENTATION OF INTERNATIONAL
BALANCE OF PAYMENTS
The total
balance of international payments is customarily divided into section;
(1) The balance of international payments on current account.
(2) The balance of international payments on capital account.
The movement of gold coins and bullion is sometimes shown separately in the
next section.
(1) THE
BALANCE OF INTERNATIONAL PAYMENTS ON CURRENT ACCOUNT:
The balance of
payment, as we know, is built lip inn terms of credit and debit entries. On the
side of credit account, the amount which a country has to receive from the
other country is shown, while on the debt side of the account, the payment
which has to be made to other countries is entered. In the balance of payment
of current account only those item are entered which do not create a new item
or cancel a previously existing capital claim.
THE MAIN CREDIT ITEM IN THE BALANCE ON CURRENT ACCOUNT ARE AS FOLLOW:
(1) Value of merchandise exports
(2) Payments received from foreigners for rendering banking
and shipping services.
(3) Travel expenditure of the foreign tourists in the
country.
(4) Expenditure of foreign students.
(5) Remittances of money by the nationals of the country
living in other country.
(6) Income on investment (interest and dividend, etc.) from
abroad.
(7) Charity contributions made to the institutions by the
foreigners.
(8) Miscellaneous government transactions such as sale as of
diplomatic representative, repatriation, military and payments, etc.
THE MAIN DEBIT ITEMS IN THE BALANCE OF PAYMENTS ON THE CURRENT ACCOUNT
ARE:
1. Value on merchandise imports.
2. Payments made to the foreigners for rendering banking and
insurance and shipping services for the country.
3. Travel expenditure of country’s tourists in other
countries.
4. Payments made to country’s students studying abroad.
5. Remittance by immigrants to their home country.
6. Interest and dividend payment by the foreigners to their
home countries.
7. Donations sent to other countries.
8. Miscellaneous government transaction such as salaries of
diplomatic representatives, repatriation; military aid payments, ect, To other
countries.
(2) THE BALANCE OF INTERNATIONAL PAYMENTS ON CAPITAL ACCOUNT:
The balance
of international payments on capital account is split up into two
parts,
(i) The balance of
payment on long term capital account
(ii) The balance of
payment on short term capital account in the balance of international payment
on long term capital account, we include the net private and government long term
loans and net long term foreign investment. The short term capital account is
composed of (1) private or government short term loans and (2) net investment
in short term debts.
The movement of capital from one country to
another country takes place due to three reasons; firstly, when country has to
make investment abroad, Secondly when it has to advance loans to another
country, Thirdly when the capital has to shifted due to safety reasons, The movement
of capital from one country to another has a serious repercussion on the
international payment on current account when the capital is shifted to another
country, a payment is to be made. Therefore, it is a debit entry and when we
borrow from abroad, we receive payment, therefore it is credit entry. If we have
a favourable balance on current account, it may be offset by a debit account
balance on capital account.
GOLD MOVEMENTS:
Gold is
sometimes an important balancing item. If the deficit on international account
exists, it is covered by shipping gold from one country to another. U.S.A
received large quantity of gold from other countries in the 1930’s.
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