Loading the context…
Loading the context…
An account of economic transactions between residents of an economy and non-residents over a period.
The current account includes goods, services, income and current transfers. The capital account records certain capital transfers and non-produced assets. The financial account records transactions such as foreign investment, lending and changes in reserve assets. Entries follow an accounting framework, so selling something and receiving payment are related parts of a transaction; measurement gaps appear as errors and omissions.
Consider a simplified economy with a US$10 billion current-account deficit and no capital-account transactions. Suppose foreign investors provide US$7 billion in net financing and the monetary authority sells US$3 billion of reserve assets. Those flows illustrate how the external spending gap is financed. They do not mean that every importer borrowed directly from a foreign investor.