- International Monetary Fund. Statistics Dept.
- Published Date:
- May 2000
Classification and Linkages
511. Coverage of account V.III.2, the SNA financial account, is identical with that of the financial account of the capital and financial account in the balance of payments, although the level of detail is different. (See Table 4 at the end of this appendix.) In the SNA, financial assets are classified primarily by type of instrument. In the balance of payments, financial items are classified primarily by function: direct investment, portfolio investment, financial derivatives, other investment (including loans), and reserve assets. In addition to categories identifying types of financial instruments (insurance technical reserves being an exception), the balance of payments contains an abbreviated breakdowndisaggregation by sector (monetary authorities, general government, banks, and other sectors) to provide links with other bodies of economic and financial statistics such as money and banking, government finance, international banking, and external debt. Furthermore, to conform with the SNA, the Manual states that entries in the financial account of the balance of payments are recorded, in principle, on a net basis (increases less decreases in assets or liabilities). However, gross recording is included as supplementary information (for example, in the case of drawings and repayments on long-term loans).
512. As presented in the Manual, the sectorization of the balance of payments portfolio investment, financial derivatives and other investment accounts and related components of the international investment position strengthens the links between the international accounts, the SNA, and IMF statistical systems such as money and banking, government finance, and international banking. In addition, the sectorization enhances the analytic usefulness of the accounts.
556. In addition to current transactions (i.e., those involving the exchange of goods, the provision of services, and the receipt and payment of income and transfers), the flow of financial transactions (i.e., those involving changes in financial claims on, and liabilities to, the rest of the world) must be analyzed. As noted in chapters 8 and 16, these transactions have two main components: (i) narrowly defined financial transactions in direct investment, portfolio investment, financial derivatives, and other investment (including trade credits, loans, and deposits) and (ii) transactions in reserve assets. There are direct linkages between these components of a country’s international transactions. For example, imports of goods are often financed by nonresident suppliers so that an increase in imports will typically be matched by a financial inflow. At the expiration of the financing period, the payment to the nonresident supplier will involve either a drawdown of foreign assets (e.g., foreign deposits held by domestic banks) or the replacement of the liability to the nonresident supplier by another liability to nonresidents. There are also close connections between many financial account transactions. For example, the proceeds from the sale of bonds in foreign capital markets (a financial inflow) may be temporarily invested abroad in short-term assets (a financial outflow).