Balance Of Payments Definition

Definition: It refers to a record of all visible and non-visible transactions (exports, imports, borrowing, lending) of a country with rest of the world in a given period (quarterly and yearly), expressed in monetary terms (usually the domestic currency for the country concerned). These transactions are made among individuals, firms and governments.

Balance of payments is divided into three main groups: 1) current account (inflow and outflow of goods and services into a country,and earnings on investments); 2) capital account (acquisition or disposal of non-financial assets and non-produced assets); 3) financial account (international monetary flows related to investment in business, real estate, bonds and stocks).