Balance of Payments Manual, Sixth Edition

International Monetary Fund

• Publisher: INTERNATIONAL MONETARY FUND
• Year: 2010
• ISBN:
  9781589068124

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CHAPTER 1 Introduction

A. Purposes of the Manual

1.1 The sixth edition of the Balance of Payments and International Investment Position Manual (BPM6, the Manual) serves as the standard framework for statistics on the transactions and positions between an economy and the rest of the world.

1.2 The main objectives of this Manual are as follows:

• (a) To provide and explain concepts, definitions, classifications, and conventions for balance of payments and international investment position statistics;
• (b) To enhance international comparability of data through the promotion of guidelines adopted internationally;
• (c) To show the links of balance of payments and international investment position statistics to other macroeconomic statistics and promote consistency between different data sets; and
• (d) To provide a brief introduction to uses of data on balance of payments, other changes in financial assets and liabilities, and international investment position, as the international accounts of an economy.

1.3 Data collection and other compilation procedures and dissemination are not generally within the scope of a conceptual manual such as this one. Decisions on such issues should take into account circumstances, such as practical and legal constraints, and relative size, that need to be judged in each economy and that may explain departures from guidelines. The IMF’s Balance of Payments Compilation Guide provides information on these issues.

1.4 The Manual provides a framework that is applicable for a range of economies, from the smallest and least developed economies to the more advanced and complex economies. As a result, it is recognized that some items may not be relevant in all cases. It is the responsibility of national compilers to apply international guidelines in a way appropriate to their own circumstances. In implementing this Manual, compilers are encouraged to assess the materiality and practicality of particular items according to their own circumstances and are further encouraged to revisit these decisions from time to time to see whether circumstances have changed. Such decisions necessarily rely on the professionalism and knowledge of the compilers.

1.5 Factors to take into account when determining the items to be collected and the techniques used include whether or not exchange controls exist, the relative importance of particular types of economic activities, and the diversity of institutions and the range of instruments used in financial markets. In addition, data collection for some items in the framework may be impractical if the item is small and the data collection cost is high. Conversely, compilers may wish to identify other items of particular economic interest in their economy for which additional detail may be required by policymakers and analysts.

1.6 This Manual is harmonized with the System of National Accounts 2008 (2008 SNA), which was updated in parallel. Relevant elements of the Monetary and Financial Statistics Manual 2000 and Government Finance Statistics Manual 2001 will be revised to maintain their harmonization with the two updated manuals. Conceptual interlinkages mean that balance of payments and international investment position compilers should consult with other statisticians to ensure consistent definitions and provide data that can be reconciled where they overlap.

1.7 The definitions and classifications in this Manual do not purport to give effect to, or interpret, various provisions (which pertain to the legal characterization of official action or inaction in relation to such transactions) of the Articles of Agreement of the International Monetary Fund.

B. Structure of the Manual

1.8 The Manual has 14 chapters and 9 appendixes. The introductory chapters deal with issues that cut across the accounts (Chapters 1–6) and are followed by chapters that cover respectively each main account (Chapters 7–13), closing with a chapter on analysis of data. The Manual states general principles that are intended to be applicable in a wide range of circumstances. As well, it applies the principles to some specific topics that have been identified as needing additional guidance. Definitions are given throughout the text, shown in italics.

1.9 Consistent with this structure, different aspects of a topic are dealt with in different chapters to minimize repetition. For example, the classification of portfolio investment is a cross-cutting issue (Chapter 6), as are valuation and timing issues (Chapter 3). The position, transaction, other changes, and income aspects are dealt with in Chapters 7, 8, 9, and 11, respectively. Linkages are emphasized by extensive cross-references. In addition, for direct investment, insurance, and financial leases, appendixes have been included to allow the reader to see the linkages among the different accounts for that topic.

1. Introductory chapters

1.10 The introductory chapters (Chapters 1–6) cover the following:

• (a) Chapter 1 gives background to the Manual.
• (b) Chapter 2 covers the accounting and dissemination frameworks.
• (c) Chapter 3 deals with accounting principles.
• (d) Chapters 4 deals with issues associated with units, sectors, and residence.
• (e) Chapter 5 deals with the classification of assets and liabilities.
• (f) Chapter 6 explains the functional categories.

2. Chapters for each account

1.11 Chapters 7–13 deal with the accounts of the framework. Each account reflects a single economic process or phenomenon and has a single chapter. The order of chapters is a matter of convention; in this edition, the international investment position appears first to reflect the increased emphasis on its compilation and analysis since the release of the fifth edition (BPM5) and to explain financial assets and liability positions before dealing with the investment income they generate.

1.12 Each chapter starts with a statement of general economic principles. A simplified table designed to give an overview of the account is also included in each chapter. The text provides general definitions of items in the account. Specific cases are given as examples of the application of the general definitions and to clear up ambiguities. A full understanding of each account also requires applying the wider principles that apply across several accounts, such as valuation, timing, residence, and classification, as covered in the introductory chapters.

3. Analysis

1.13 Chapter 14 provides an introduction to the analysis of data, with particular reference to macroeconomic relationships as a whole.

4. Appendixes

1.14 Appendixes provide more details on specific issues that go across several accounts, including changes from BPM5, currency unions, exceptional financing, debt reorganization, and a listing of standard components.

5. Standard components and memorandum items

1.15 A list of standard items for presenting and reporting the balance of payments and international investment position is given in Appendix 9. Standard items consist of standard components and memorandum items.

• (a) Standard components are items that are fully part of the framework and contribute to the totals and balancing items.
• (b) Memorandum items are part of the standard presentation, but are not used in deriving totals and balancing items. For example, whereas nominal value is used for loans in the standard components, memorandum items provide additional information on loans at fair value, as discussed in paragraphs 7.45–7.46.

In addition,

• (c) Supplementary items are outside the standard presentation, but are compiled depending on circumstances in the particular economy, taking into account the interests of policymakers and analysts as well as resource costs (see the items in italics in Appendix 9).

1.16 The list of standard items should not inhibit compilers from publishing additional data of importance to their economy. IMF requests for information will not be limited to standard items when further details are required to understand the circumstances of particular economies or to analyze new developments. IMF staff occasionally will consult with authorities to decide on the reporting of additional details. Few economies are likely to have significant information to report for every standard item. Furthermore, data for several components may be available only in combination, or a minor component may be grouped with one that is more significant. The standard items should nevertheless be reported to the IMF as completely and accurately as possible in accordance with the compilation framework. Compilers are in better positions than IMF staff to make estimates and adjustments for items that do not exactly correspond to the basic series of the compiling economy.

C. History of the Manual

1.17 Each new edition of the Manual is introduced in response to economic and financial developments, changes in analytical interests, and accumulation of experience by compilers.

1.18 The IMF showed early interest in statistical methodology with its publication of the first edition of the Balance of Payments Manual in January 1948. The major objective of that first Manual was to provide a basis for regular, internationally standardized reporting to the IMF. The Manual was a continuation of work started by the League of Nations to develop guidelines for balance of payments statistics. Economists and other specialists from many countries contributed to the Manual, and representatives of some 30 countries and international organizations met in Washington, D.C., in September 1947 to finalize the first draft of the Manual.

1.19 The first edition of the Manual consisted primarily of tables for reporting data and brief instructions for completing them. No general discussion of balance ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Content Page
• Foreword
• Preface
• List of Abbreviations
• Chapter 1. Introduction
• Chapter 2. Overview of the Framework
• Chapter 3. Accounting Principles
• Chapter 4. Economic Territory, Units, Institutional Sectors, and Residence
• Chapter 5. Classifications of Financial Assets and Liabilities
• Chapter 6. Functional Categories
• Chapter 7. International Investment Position
• Chapter 8. Financial Account
• Chapter 9. Other Changes in Financial Assets and Liabilities Account
• Chapter 10. Goods and Services Account
• Chapter 11. Primary Income Account
• Chapter 12. Secondary Income Account
• Chapter 13. Capital Account
• Chapter 14. Selected Issues in Balance of Payments and International Investment Position Analysis
• Appendix 1. Exceptional Financing Transactions
• Appendix 2. Debt Reorganization and Related Transactions
• Appendix 3. Regional Arrangements: Currency Unions, Economic Unions, and Other Regional Statements
• Appendix 4. Statistics on the Activities of Multinational Enterprises
• Appendix 5. Remittances
• Appendix 6a. Topical Summary—Direct Investment
• Appendix 6b. Topical Summary—Financial Leases
• Appendix 6c. Topical Summary—Insurance, Pension Schemes, and Standardized Guarantees
• Appendix 7. Relationship of the SNA Accounts for the Rest of the World to the International Accounts
• Appendix 8. Changes from BPM5
• Appendix 9. Standard Components and Selected Other Items
• Boxes
• Index
• Footnotes