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Balance of Payment – Annual 2016

Balance of Payment – Annual 2016
Shoran Devi
October 07
11:00 2017

The Balance of Payments (BOP) accounts for a coun­try’s international transac­tions for a particular time period.

Any transaction that causes mon­ey to flow into a country is a credit, and any transaction that causes money to flow out of a country is a debit to its BOP account.

The BOP is made up of current ac­count, which generally measures the flows of goods and services; the Capital account, which consists of capital transfers and the acquisi­tion and disposal of non-produced, non-financial assets; and the Finan­cial account, which records invest­ment flows.

Fiji’s Balance of Payments statis­tics shows the value of Fiji’s trans­actions with the rest of the world in goods, services, primary income, secondary income and capital ac­counts.

It also shows changes in Fiji’s fi­nancial claims on (assets) and (li­abilities) to the rest of the world.

In the latest release by the Fiji Bu­reau of Statistics, our annual cur­rent and capital account balance stood at a deficit of $480.8 million and financial account balance stood at a deficit of $443.0 million.

The balance on current and capi­tal account deficit widened in 2016 to $480.8 million due to increases in the import of goods, import of services charged for the use of in­tellectual property and an increase in the reinvestment of profits by foreign owned companies.

The balance on financial account deficit narrowed in 2016 to $443.0 million due to a decrease in the out­flow of currency and deposit and trade credit and advances.

Current account

Records the value of Fiji’s trans­actions with the rest of the world in goods, services, primary income and secondary income.

The current account balance is the sum of all current account cred­its less all current account debits. When the sum of debits is greater than the sum of credits we have a current account deficit.

The current account balance showed a net outflow of $489.9 mil­lion for 2016.

When compared to 2015, the net outflow current account balance rose by 50.7 per cent ($164.8 mil­lion).

  • The balance on goods and services recorded a deficit of $615.2 million in 2016. This represents a rise by 36.0 per cent ($163.0 million) when compared to 2015. Import of goods increased by $79.3 mil­lion mainly due to increase in machinery and transpor­tation equipment and crude materials.
  • The balance on primary in­come recorded a deficit of $437.3 million in 2016. This represents a rise by 1.5 per cent ($6.6 million) when com­pared to 2015 as a result of an increase in the outflow of re­invested earnings.
  • The balance on secondary in­come saw a surplus of $562.7 million in 2016. This repre­sents a rise by 0.9 per cent ($4.8 million) when compared to 2015 due to an increase in the inflows of personal trans­fers.

 

Capital account

Has two components – capital transfers and the acquisition or disposal of non-produced, non-fi­nancial assets.

Capital transfers involve the transfer of ownership of fixed as­sets, or the transfer of funds linked to them, without any counterpart transaction.

The capital account balance showed a net inflow of $9.0 million for 2016.

The capital account balance rose by 40.6 per cent ($2.6 million) when compared to 2015.

Financial Account

Records financial transactions in­volving Fiji claims on assets and li­abilities to non-residents.

The financial account is classified into assets and liabilities, which are broken down by type of investment (direct, portfolio, other investment and reserve assets) and instrument of investment.

The financial account balance showed a net borrowing of $443.0 million which consisted of net out­flows of $529.5 million in equity and inflows of $86.4 million in debts for 2016.

When compared to 2015, the finan­cial account net borrowing fell by 14.5 per cent ($75.1 million).

  • Direct investment showed a net outflow of $621.0 million in 2016. This represents a fall by 13.0 per cent ($92.6 million) when compared to 2015.
  • Portfolio investment showed a net inflow of $61.6 million in 2016. This represents a fall by 67.2 per cent ($126.2 million) when compared to 2015.
  • Other investment showed a net inflow of $130.8 million in 2016. This represents a rise by 201.4 per cent ($259.8 million) when compared to 2015.
  • Reserve assets showed a net outflow of $14.4 million in 2016. This represents a fall by 110.5 per cent ($151.1 million) when compared to 2015.

 

Similarly, for the December quar­ter 2016, our

Current and Capital account bal­ance stood at a deficit of $117.0 mil­lion and Financial account balance stood at a deficit of $13.7 million.

The current account balance showed a net outflow of $120.6 mil­lion, the capital account balance showed a net inflow of $3.6 mil­lion for the December quarter 2016, and the financial account balance showed a net borrowing of $13.7 million which consisted of net out­flows of $168.7 million in equity and inflows of $155.0 million in debts for the December quarter of 2016.

A comprehensive interpretation of balance of payments statistics requires a thorough examination of the three components of the BOP: Current, Capital and Finan­cial Accounts.

The Balance of Payment statistics are used to analyse the economic and financial conditions of the economy.

It provides economists and other financial market participants with their tools for interpretation of eco­nomic behaviour.

This data is also used by agencies responsible for the formulation of economic policies addressing is­sues such as causes of payments imbalances, adjustment measures, merchandise trade, trade in servic­es, financial flows, financial stabil­ity and foreign direct investment, and so on.

It helps the Government in taking decisions on monetary and fiscal policies on the one hand, and on external trade and payments issues on the other.

As such, BOP is seen as one of the important economic indicators and widely anticipated data in the financial market.

Feedback: maraia.vula@fijisun.com.fj

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