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Notable Changes In Balance Of Payment Stats For September Quarter 2018

When it comes to evaluating a country’s economic performance, there are multiple macro to micro indicators which are simultaneously referred to for making general inferences. As such, the Balance of
26 Jan 2019 10:00
Notable Changes In Balance Of Payment Stats For September Quarter 2018

When it comes to evaluating a country’s economic performance, there are multiple macro to micro indicators which are simultaneously referred to for making general inferences.

As such, the Balance of Payment is one such indicator which can provide valuable insight into a country’s financial transactions with the rest of the world.

The Balance of Payment is a system of recording transactions that happen between countries.

It allows one to evaluate how much is being spent by consumers and firms on imported goods and services, and how successful firms have been in exporting to other countries.

The BOP is composed of current account, capital account and the financial account.

The current account generally measures the flow of goods and services; the capital account consists of capital transfers and the acquisition and disposal of non-produced, non-financial assets; and the financial account records investment flows.

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.

A balance of payment deficit means the country imports more goods, services and capital than it exports.

Similarly, a balance of payments surplus means the country exports more than it imports.

If the overall balance of payments is in a surplus, this means that the level of foreign reserves that a country holds increases and it decreases when it’s a deficit.

In the latest release by the Fiji Bureau of Statistics, the Current and Capital account balance stood at a deficit of $80.6 million in the September quarter of 2018, when compared to a surplus of $22.1 million a year earlier.

This is due to increases in the import of mineral fuels, import of travel services and outflows of other current transfers.

Similarly, the balance on financial account resulted in a deficit of $171.1 million in the September quarter of 2018, when compared to a surplus of $37.8 million a year earlier.

This is due to increase in the outflows of currency and deposits.

 

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 $82.0 million for the September quarter of 2018.

The net current account balance improved by 50.6 per cent ($84.1 million) when compared to the June quarter of 2018.

The net current account balance fell by 502.0 per cent ($102.4 million) when compared a year ago.

The balance on goods and services was a deficit of $86.1 million in the September quarter of 2018.

This represents a fall by 219.3 per cent ($158.3 million) when compared to the September quarter of 2017.

Import of goods increased by $172.0 million mainly due to the increase in mineral fuels.

Import of services increased by $51.5 million mainly due to the increase in personal travel services.

The balance on primary income was a deficit of $145.1 million in the September quarter of 2018. This represents a fall by 33.0 percent ($71.6 million) when compared to the September quarter of 2017 as a result of the decrease in reinvested earnings paid abroad.

The balance on secondary income was a surplus of $149.2 million in the September quarter of 2018.

This represents a fall by 9.5 percent ($15.7 million) when compared to the September quarter of 2017 due to an increase in the outflows of other current 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 $1.4 million for the September quarter of 2018.

The net inflow capital account balance fell by 50.0 per cent ($1.4 million) when compared to the June quarter of 2018.

The net inflow capital account balance fell by 17.6 per cent ($0.3 million) when compared to the September quarter of 2017.

 

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 $171.1 million which consisted of net outflows of $90.5 million in equity and $80.6 million in debt for the September quarter of 2018.

The financial account net borrowing fell by 59.9 percent ($255.6 million) when compared to the June quarter of 2018.

The net financial account balance fell by 552.6 per cent ($208.9 million) when compared to the September quarter of 2017.

Given all these flows in the balance of payment account, our foreign reserves level however at the end of 2018, was sufficient at $2 billion.

Although the total of payments and receipts for a country are supposedly equal, there will be inequalities—excesses of payments or receipts, called deficits or surpluses—in particular kinds of transactions. Therefore, the statement that a country has a deficit or surplus in its “balance of payments” must refer to some particular class of transactions.

The BOP data highlights the direction of economic growth or otherwise of any country and is a ground on which many important policy decisions are based. It is affected by vital macroeconomic variables such as exchange rate, price levels, interest rates, employment, and GDP. As such, regulatory bodies make reference to these statistics when deciding on government policies. Monetary and fiscal policies are formed in a way to achieve very specific objectives, which generally exert a significant impact on the BOP. Policies can be formed with the objectives to induce or curb foreign inflows or outflows.

Feedback:  maraia.vula@fijisun.com.fj

 

 

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