1. The balance of payments is a statistical report in which the summary data on the foreign economic operations of a given country with other countries of the world for a certain period of time are presented in a systematic form. The construction of the balance of payments is based on a double entry system, determines the country’s economic territory, makes a distinction between residents and non-residents, is based on market prices that existed at the time of the transaction, and uses the unit of account, used in the national economy, followed by conversion to US dollars at the current market rate. Balance of payments integrates the accounts of many sectors and is therefore based on customs statistics, monetary sector statistics to the extent that it takes into account international operations, external debt statistics, statistical surveys conducted primarily, in the services sector, and statistics on foreign currency transactions. The standard balance of payments consists of two sections: the current account, showing the international movement of real material assets (primarily goods and services), and the capital account and financial transactions, showing sources of financing the movement of real material values.
2. The current account is a key concept of the balance of payments and the international economy as a whole, showing, on the one hand, the result of the country’s interaction with the rest of the world for a certain period of time, and on the other, a balance of domestic investment and savings. Current balance of payments operations consist of four main groups: operations with goods, services, revenue movements and current transfers. Operations with goods are a current account group of items of the balance of payments, summing up on the basis of fob at market prices the export and import of ordinary goods, goods for further processing, repair of goods, acquisition of goods in ports by transport organizations and non-monetary gold. Services – the next group of items on the current account of the balance of payments – include transport services, trips and a number of other services (communications, construction, insurance, financial, computer and personal services, etc.), provided by residents to non-residents and vice versa. Revenues are a less significant group of current account items for most countries of the balance of payments, including payments between residents and non-residents related to non-residents’ wages, and transactions related to investment income. Finally, current transfers combine all transfers, with the exception of those that provide for the transfer of ownership of fixed assets or cancellation of debt by a creditor.
3. The capital account and financial transactions is a group of balance of payments items that record the international capital movement, with which the export and import of goods and services are financed. Structurally, it includes a capital account (a group of balance of payments items that record capital transfers and the acquisition / sale of non-produced non-financial assets) and a financial account (a group of balance of payments items covering all transactions, as a result of which there is a transfer of ownership of external financial assets and liabilities of a given country). Capital transfers include the transfer of ownership of fixed assets related to the acquisition or use of fixed capital or providing for the cancellation of debt by the creditor. Direct investments include capital investments that lead to a steady influence on the part of an institutional unit – a resident of one economy (direct investor) on an institutional unit – a resident of another economy (direct investment enterprise). Portfolio investments show the relationship between residents and non-residents regarding the trade in financial instruments that do not give the right to control the object of investment. Other investments combine the rest of the international capital flows in the form of commercial loans, loans, cash and deposits.
4. “Under the line” of the balance of payments, reserve assets are shown – the country’s international highly liquid assets, which are under the control of its monetary authorities or government and at any time can be used by them to finance the balance of payments deficit and regulate the national currency. The main criterion for classifying an asset as a reserve is to determine whether the government or the Central Bank can exercise real and direct control over it. The country’s reserve assets include monetary gold, SDR, reserve position in the IMF, foreign exchange and other assets. Countries experiencing difficulties in financing the negative balance of payments may resort to its exclusive financing – operations carried out by agreement and with the support of their foreign partners in order to reduce the negative balance to the level, which can be financed by traditional means. Among them – cancellation of external debt, exchange of debt on shares, borrowing to settle the balance of payments, re-issuance of debt and late payments on debt. The statistical report produced from the balance of payments is the balance of international investments, showing the accumulated reserves of external financial assets and liabilities of the country. The balance of international investment at the end of a certain period, called the investment position, reflects the combination of financial transactions, cost changes and other adjustment procedures that took place during the period under review, and determines the amount of external assets and liabilities of the country. A net investment position shows the ratio of international financial resources available to the country and its debt to other countries.