The balance of payment accounts is the set of accounts that keeps record of the economy’s transactions with the rest of the world. Every economy’s balance of payments must be organized in conformity with the International Monetary Fund Balance of Payment Manual.
The balance of payments has two parts:
1. The Current account (CA) that records current
transactions, it has three parts:
·
Balance of goods
and services which records exports and imports of goods and services.
·
Balance of
primary incomes which records not only labor income, but also investment income
on holding of assets like dividends on shares, and interest on bonds or loans.
·
Balance of
current transfers which includes workers remittances, international aid,
payments to and from the EU budget.
The Capital Account (KA): Records capital
transactions (capital transfers, direct investment, portfolio investment and it
covers transactions in financial assets and liabilities)