- International Monetary Fund
- Published Date:
- March 1995
Purpose of This Guide
1. The Balance of Payments Compilation Guide (Guide) is a companion document to the fifth edition of the Balance of Payments Manual (BPM) published by the International Monetary Fund (IMF or the Fund) in 1993. The primary purpose of the BPM is to set out the conceptual framework underlying balance of payments and international investment position statistics. The purpose of the Guide is to show how the conceptual framework described in the BPM may be implemented in practice. Key elements of the framework are described in paragraphs 12-30 of this introductory chapter.
2. The important relationship between the BPM and the System of National Accounts 1993 (SNA) is explained, in some detail, in the BPM and outlined in chapter 10 of this Guide. Apart from a few minor differences, the balance of payments statement may be considered synonymous with the rest of the world accounts of the SNA, and the international investment position statement may be considered a component of the sectoral balance sheet accounts of the SNA. Therefore, in describing how balance of payments and international investment position statements may be compiled, the Guide also illustrates how the rest of the world account of the SNA may be compiled.
3. The balance of payments, the international investment position, and reconciliation accounts linking the two can be described as integrated international accounts. Although this document might have been entitled the “International Accounts Compilation Guide,” the more widely recognized term balance of payments was used for the publication title. Unless text or notes indicate otherwise, the term balance of payments refers to balance of payments (BOP), international investment position (IIP), and related reconciliation accounts in the Balance of Payments Compilation Guide.
4. The Guide was prepared to assist experienced BOP compilers/statisticians and aspiring compilers in understanding the various BOP compilation methods employed throughout the world. The Guide should also be useful to national accounts compilers who prepare the rest of the world account by using the BOP statement or sources and methods similar to those used in BOP compilation. Throughout the Guide, the terms BOP compiler or compiler refer to BOP compilers and national accounts compilers responsible for preparation of international accounts.
5. The Guide should also be of considerable interest to users of BOP and national accounts statistics who wish to understand the nature and quality of data sources and methods underlying BOP accounts and related national accounts tables. The Guide should be especially helpful in instances when documents on national concepts, sources, and methods are not published.
Scope of This Guide
6. Preparation of the Guide included consideration of all the tasks that a BOP compiler normally performs. While such tasks vary from country to country, the following list represents a fairly typical set:
extraction of data from collections (international trade statistics, migration statistics, and other official sources, for example) over which the compiler may have some influence but no day-to-day control;
extraction of data from collections (such as reporting systems for foreign exchange and other international transactions and surveys of businesses) managed, either solely or jointly with other statistical compilers such as national accountants, by the BOP compiler;
compilation of the BOP accounts, supplementary BOP series, the IIP statement, and the rest of the world account of the national accounts;
BOP data management, publication, and dissemination;
BOP projections (forecasting);
evaluation and development of data sources and compilation methods as necessary;
assessment of data quality.
7. The Guide covers all of the tasks or functions in the preceding list. For example, the Guide includes descriptions of data sources used by the BOP compiler, For sources that the compiler typically manages, a discussion of design and management of data collection is also included. Similarly, the Guide describes topics relevant to BOP projections—but only insofar as the compiler is likely to be involved.
8. Articulating state-of-the-art BOP compilation methodology is difficult because countries have developed procedures independently, and each national methodology may be considered unique. Obviously, the Guide cannot describe all methodologies in detail. Some patterns emerge, but different national experiences have created different schools of thought as to the most appropriate methodology. Consequently, it is not possible to present a single methodology suitable in all cases. Instead, the Guide outlines various options that may be available. In addition, for countries that have well- developed BOP compilation systems, the Guide contains criteria against which developed statistical systems may be compared and evaluated. For countries that may need to modify parts of their compilation systems, the Guide presents information on approaches used elsewhere. For countries that do not have well-developed systems or any systems at all, the Guide contains directions for compiling all BOP items and a set of model collection forms that can be used as a starting point to develop a BOP collection system.
9. Preparations for the Guide included a survey of national BOP compilers, who were asked about data sources and methods used to compile BOP statistics. Questionnaire responses were of great assistance, and results from the survey are presented in appendix 1.
Organization of This Guide
10. Chapters 2 through 9 describe sources that can be used to compile BOP statistics; these sources are summarized in the latter part of chapter 1. Chapters 10 through 17 deal with the compilation of BOP, IIP, and related statistics. Chapters 18 through 21 discuss the processes undertaken to produce these statistics. An overview of chapters 10 through 21 is subsequently provided in chapter 1.
11. The Guide has three appendices. Appendix 1 presents a summary of national compiler responses to the survey on BOP sources and methods. Appendix 2 presents a set of model BOP questionnaires, and appendix 3 provides a set of model BOP publication tables.
The BOP Conceptual Framework
12. A brief outline of the conceptual framework underlying BOP statistics must precede discussion of data sources and methods used to compile the BOP statement. The following outline provides a summary of the Balance of Payments Manual. For a more complete presentation, please consult the BPM.
Definition of BOP and Basic Concepts
13. The BOP is a statistical statement designed to provide, for a specific period of time, a systematic record of an economy’s transactions with the rest of the world.
14. An economy is comprised of economic entities (residents) who have closer associations with that specific economy than with any other. Economic entities who have closer associations with other economies are nonresidents.1
15. Economic transactions include:
transactions in goods, services, and income;2
transactions in financial assets and liabilities;
transfers in which real or financial resources are provided by one party to another with no quid pro quo.
16. A basic convention of a BOP statement is the double entry accounting system in which every transaction is represented by two entries of equal value.3 If, for example, an exporter receives foreign currency in payment for goods, a credit entry would be recorded in the BOP accounts for the export of goods and an offsetting debit entry would be recorded for the exporter’s increase in foreign currency bank balances (or other form of foreign currency asset).4 In traditional BOP accounting form, these entries would be recorded as:
|Foreign currency assets||…||100|
17. In this example, there is an exchange of assets (goods) for cash (foreign exchange). However, not all transactions involve cash payments. The BPM includes noncash transactions in the BOP statement because such transactions are important in economic analysis. The essential difference in transactions may be described as BOP on a cash basis and BOP on an accrual (or transactions) basis.
18. Compilation of the BOP on an accrual basis is necessary for complete understanding of economic transactions taking place between residents and nonresidents. The treatment of noncash transactions may be further illustrated by two examples. In the first example, an importer acquires goods abroad and borrows abroad to finance the purchase. It is unlikely that the importer would receive foreign exchange directly; instead, the nonresident financier would pay the nonresident exporter directly. The transaction would be recorded as:
|External liabilities, loans||100||…|
19. In the second example, a government acquires goods valued at 100 via a foreign aid program. Something of economic value is being provided by one party to another without anything of value being received in return. To preserve the double entry accounting system, a notional entry would be made in the BOP to offset the actual transaction. These notional entries are called transfers. Thus, for the example, the following BOP entries would be recorded:
20. The BOP accounting system requires that both entries for a transaction be recorded at uniform values and in the same time period. To satisfy this requirement, transactions are recorded at market value, and the time of recording is typically the point at which a change of ownership occurs.6 In practice, it may be difficult to achieve these theoretical ideals. Different data sources may be used to measure the two entries in a transaction, and these data sources may not reflect uniform valuations and times of recording. In addition, coverage of transactions by data sources may be incomplete, a factor that may lead to omissions in the BOP accounts.
21. Income on external financial assets and liabilities is recorded on an accrued (earned) basis. This concept, which is broader than the actual payment of dividends and interest, covers dividends due for payment, interest accrued, and unremitted profits of direct investment enterprises. The recording of income is discussed in detail in chapter 14 of the BPM and in chapter 13 of the Guide.
22. An important issue for the BOP compiler is the conversion of transactions and stock positions data expressed in one currency to the currency (unit of account) in which the BOP accounts are compiled.7 The BPM recommends that conversion take place at the midpoint exchange rate applicable to the transaction and, for the stock position, at the midpoint rate applicable to the date on which the position is measured.
23. Incomplete or overlapping coverage, non-uniform prices, inconsistent times of recording, and inconsistent conversion practices will result in errors and omissions in the BOP. As the BOP accounts are compiled on the basis of double entry accounting, the difference between credit and debit entries will be included in the BOP statement as net errors and omissions. While there are likely to be errors and omissions that affect both credit and debit items, it is typically not possible, in practice, to measure gross errors. Therefore, only net errors and omissions are recorded.
Classifications Used in BOP Statistics
24. The two major classifications of transactions in the BOP statement are the current account and the capital and financial account. In brief, the current account shows transactions in real resources (goods, services, income) and current transfers; the capital and financial account shows the financing (generally by way of capital transfers or transactions in financial instruments) of real resource flows. For example, if an economy were a net importer of real resources and had net transfers of zero, the economy would be defined as a net borrower from the rest of the world.
25. The major classifications within the current account are:
26. The capital account records an economy’s capital transfers and transactions in non-produced, nonfinancial assets (such as patents and copyrights). The financial account records an economy’s transactions in external financial assets and liabilities. The major classifications in the financial account are:
functional type of investment (direct investment, portfolio investment, other investment, and reserve assets);
assets (residents’ financial claims on nonresidents) and liabilities (nonresidents’ financial claims on residents);
instrument of investment (e.g., equity, debt);
sector of the domestic transactor (general government, monetary authorities, banks, and other sectors).
27. The BOP classifications are described in more detail in chapters 10 through 16 and in appropriate chapters of the BPM.
International Investment Position (IIP)
28. An IIP statement shows the value and composition of an economy’s stock of financial claims on, and liabilities to, nonresidents at a point in time.
29. Between two points of time, changes in stock positions result from financial flows (e.g., drawings and repayments of loans, issues of shares), price movements (e.g., those due to currency and market price fluctuations), and other changes (e.g., bad debt write-offs). Financial flows are recorded in the financial account of the BOP, and non-transactional changes in stocks (including price changes) are recorded in reconciliation accounts.
30. The relationship between financial transactions (flows) and stock positions is shown in the statement presented in Illustration 1.1. The example includes a column for investment income to illustrate that the categories used to classify stock positions, financial transactions, valuation and reconciliation items (other changes), and investment income should be comparable.
Illustration 1.1Reconciliation of Financial Transactions and Stock Positions and Investment Income
1 In the full BOP reconciliation accounts, other changes are subclassified into price changes, exchange rate changes, and other adjustments.
2 Net IIP equals assets less liabilities
Data Sources Used to Compile BOP Statistics
31. Table 1.1 shows data sources covered in chapters 2 through 9. International trade statistics (ITS) are described in chapter 2, the international transactions reporting system (ITRS) in chapter 3, enterprise surveys (ES) in chapter 4, collections from persons and households in chapter 7, other official sources in chapter 8, and sources for partner countries and international institutions in chapter 9. These chapters describe types of data that may be collected from these sources and how such data may be used to compile BOP and IIP statements. Special features of the sources are noted. Collection designs for an ITRS or ES are presented in chapter 18. Because of the complexity of international transportation surveys and surveys of international activity in securities (both are types of enterprise surveys), chapters 5 and 6, respectively, are devoted to these topics. Electronic data interchange (the transfer, from computer to computer, of data from certain sources) is discussed in the chapter on ITRS.
|International trade statistics (ITS)||ITS measure the quantities and values of goods that add to or subtract from a nation’s stock of goods as a result of movement into or out of a country. These data are compiled from forms submitted (by exporters, importers, or their agents) to customs officials or directly to the ITS compiler.|
|International transactions reporting system (ITRS)||An ITRS measures individual BOP cash transactions (passing through the domestic banks and foreign bank accounts of enterprises) and noncash transactions and stock positions. Statistics are compiled from forms submitted to domestic banks and from forms submitted by enterprises to the compiler.|
|Enterprise surveys (ES)||ES collect data on BOP activity from enterprises. In comparison with an ITRS, ES collect aggregate enterprise data rather than individual transactions data.|
|Collections from persons and households||These collections obtain information from individuals and households (for example, migration statistics and surveys of travelers).|
|Official sources n.i.e.||Official sources n.i.e. cover official sources not mentioned elsewhere in this table and include (a) sources that measure activities of the official sector and (b) sources that are by-products of administrative systems.|
|Partner country and international organizations||These sources cover data available from foreign government agencies or international organizations.|
Compiling and Disseminating BOP Statistics
32. Chapters 10 through 17 cover topics relevant to preparation of the BOP statement. chapter 10 discusses compilation and estimation processes and items of general interest. chapter 10 also introduces a coding system for the standard components set out in the BPM and the SNA. Chapters 11 through 16 focus on individual BOP categories: goods (chapter 11), services (chapter 12), income (chapter 13), current transfers (chapter 14), the capital account (chapter 15), and the financial account and IIP statement (chapter 16). chapter 17 discusses compilation of BOP and IIP statements by partner country.
33. When relevant data are either untimely or unavailable, the compiler may estimate certain BOP series in order to compile the BOP statement. Methods of estimation are summarized in chapter 10 and described in more detail in chapters 11 through 16. These methods may involve procedures that assume relationships between certain BOP series, use complex data models developed from many sources and assumptions, or extrapolate data from earlier periods. Compilation of data for historic periods is defined as compilation; estimation of BOP data for future periods is defined as BOP projection. The latter is also covered in chapters 10 through 16.
34. Chapters 18 and 19 address collection and form design, respectively. Good BOP statistics are predicated upon a well-organized BOP database and appropriate procedures. These topics are the subjects of chapter 20, which describes the design and characteristics of a good BOP system.
35. The presentation and dissemination of BOP and related statistics are covered in chapter 21, which also includes a discussion of the periodicity of BOP series, timetable targets, and the level of detail and accompanying material to be released.