Accounts of the Balance of Payments:

The Balance of payments has three main parts namely: the Current Account, the

Capital account and the Official Reserves Account.

Current Account

The Current account is subdivided into three main items: merchandise imports and exports, services imports and exports and unilateral transfers. Merchandise imports and exports are also referred to as visible trade and services imports and exports and unilateral transfers dubbed invisible trade.

(i) Merchandise Account or Visible Trade:

This records trade in merchandise, that is, export and import of goods. Visible goods are for example, crude oil, timber, cars, etc. The difference between merchandise exports and Merchandise imports is termed as the Balance of Trade.

When merchandise exports exceed visible merchandise import, the country is said to have trade surplus. The country has a trade deficit if merchandise imports exceed merchandise exports.