Balance of Payments

The balance of payments is a term used in the field of economics to indicate the balance of monetary payments between a particular country and the rest of the world. The balance of payments expresses the total exports and imports of a particular country during a specific period of time, and includes all financial and trade transactions between the country and its international partners.

The balance of payments consists of several sections, including:

• Trade balance (trade balance): It expresses the difference between the value of exports and imports of goods
• Services (Services): Related to financial transactions related to services, such as financial and tourism services.
  
  
• Income from foreign investment (income from foreign investments): expresses the profits achieved by national companies from their investments abroad or vice versa.
  
  
• Current account: includes the trade balance, services and income from foreign investment.
  
  
• Capital Account: Related to long-term financial transfers, such as capital transfers and large projects.
  
  
• Financial account: includes short- and long-term financial transfers, such as cash flows for external investment.
    
• If the balance of payments is in balance, there is a balance between money flowing into the country and money flowing out of it. In the case of a surplus, there is an inflow of money into the country, while in the case of a deficit, there is an inflow of money out of the country.

Classification of economic deals:

Economic transactions can be classified in various ways according to several criteria. Here are some common classifications:

• • According to the two participating parties

• • Inside Deals (Local Offers)

• • International deals (global offers)

• • Depending on the scope of the deal

• • Big Deals (Big Deals)

• • Small deals (minor deals): These are smaller in size and generally have less impact

• • By type

• • Business deals (business offers)

• • Investment deals

• • Financial deals

• • According to the economic goal

• • Development deals

• • Technology deals

• • Depending on the means used

• • Cash deals

• • Credit deals (credit offers)

These are some common ways of classifying economic transactions, and the classification can change depending on the context and requirements of the study or debate.

Recording transactions in the balance of payments:

Recording transactions in the balance of payments is done according to the type of deal and how it affects financial flows between the country in question and the rest of the world. The balance of payments consists of several accounts that include a variety of transactions and cash transfers. Here are some examples of how some common transactions are recorded in the balance of payments:

Trade balance

If there is an export of goods, the financial value of this export is recorded in the Exports category in the Trade Balance Account If there is an import of goods, the financial value of this import is recorded in the Imports category in the Trade Balance Account Services, the value of services provided by the country abroad is recorded in In the exports category in the services account, the value of services imported from abroad is recorded in the imports category in the services account

Income from foreign investment

If a national company makes profits from its investments abroad, this income is recorded in the export category (Credit) in the calculation of income from foreign investment.

Capital account

It includes long-term transfers and capital investments. These transactions are recorded in the capital account, whether they are long-term financial transfers or investments in large projects.

Financial account

Financial transactions such as short-term investments and foreign investment cash flows are recorded in the financial account

The balance of payments must be an accurate recording of all cash flows between a country and its international partners to ensure that accounts are balanced and to understand how transactions affect a country's financial position.

Health factors and imbalances in the balance of payments:

The balance of payments is an important indicator that measures cash flows between a country and the rest of the world. The balance of payments is affected by several factors, and there are several factors that can affect the health or cause an imbalance in this balance, including:

Trade balance

Maintaining a healthy balance in trade between exports and imports contributes to enhancing the health of the balance of payments

direct foreign investment

The inflow of foreign direct investment into a country can enhance financial health and contribute to improving the balance of payments.

Cash transfers

The inflow of cash remittances from expatriate workers can contribute to enhancing cash resources and improving the balance of payments.

Infrastructure improvements

Improving infrastructure can increase a country's ability to export and increase foreign investment opportunities.

Monetary and financial policies

Effective monetary and fiscal policies can play a role in improving currency stability and achieving balance of payments.

Factors of imbalance Payments

• Trade deficit
  When the value of imports is greater than exports, a trade deficit occurs, leading to an imbalance in the balance of payments

• High cost of external debt
  High external debt servicing costs can negatively affect the balance of payments

• Exchange rate fluctuations
  Fluctuations in exchange rates can affect exports and imports and cause fluctuations in the balance of payments

• Fast turnover of capital
  Rapid shifts in foreign investments can lead to fluctuations in the balance of payments

Economic crises

Sudden economic crises can cause disturbances in the balance of payments

Understanding these factors and maintaining balance in the balance of payments is vital to the stability of a country's economy.

Adjustment and financing mechanisms in the balance of payments:

The balance of payments can be affected by many changes, and there are adaptation and financing mechanisms that can be used to deal with challenges and changes in this context. Here are some mechanisms and financing that can be used

1. Coping mechanisms

• • Search for new sources of income
    Searching for opportunities to generate new revenues from other sources outside the traditional balance of payments

Mechanisms and financing are proportionate to the economic conditions and challenges of each country. Using a variety of policies and procedures can have a positive impact on balance of payments health and economic stability.