Balance of Payments: Q&A
How incoming and outgoing economic flows are recorded by the National Bank
– What is the balance of payments?
The balance of payments is a statistical report reflecting the volumes of incoming and outgoing economic flows to and from a country.
In this context, economic flows generally consist of different 4 types of transactions:
- goods (exports and imports),
- services (exports and imports),
- income (received from and paid to other countries),
- capital (inflows from other countries and outflows from Kazakhstan).
In other words, the balance of payments reflects current and financial relationships between Kazakhstan and the rest of the world, i.e. residents of the country and non-residents. It covers data for a specific period of time: a quarter, half-year, and a year.
– Why is the balance of payments important?
By studying the balance of payments,
– What does the balance of payments consist of?
The balance of payments consists of three components:
- current account,
- financial account,
- capital account.
– What is the current account of the balance of payments?
The current account is part of the balance of payments that includes current transactions: export and import of goods, export and import of services, income received by residents from abroad, and income received by non-residents in Kazakhstan.
Therefore, the current account of the balance of payments is the aggregate balance of trade, services, and income.
“Since exports imply an inflow of export currency revenue and imports involve payment abroad, exports have a 'plus' sign, and imports have a 'minus' sign. The sum of all operations is totaled – the result is the current account. If the result is positive, the country has a current account surplus,” explains Azat Uskenbayev, Director of the Balance of Payments Department.
Export of goods and services, as well as income of Kazakhstan received abroad, contributes to the inflow of foreign currency into the country, while import of goods and services, along with income of foreigners received from Kazakhstan sources, lead to outflow.
An example related to Kazakhstan. The inflow of currency is primarily provided by the export of oil, gas, and metals. Outflow, to a greater extent, is driven by payments for various imported goods (such as cars, phones, household appliances, equipment) and the payment of income to foreign direct investors.
What transactions are reflected in the financial account of the balance of payments?
The financial account of the balance of payments reflects operations with financial assets: direct, portfolio and other investments, including foreign currency.
The financial account demonstrates how much Kazakhstan invests in foreign assets and how much investments are received from the rest of the world..
– How is the balance of payments compiled?
The National Bank uses various sources of information to compile the balance of payments. For instance, data from the National Statistics Bureau and the State Revenue Committee are used for international trade in goods, while data for trade in services is collected by the central bank.
In fact, there are lots of sources of information. For example, in addition to statistical reports, second-tier bank reports are also utilized.
