Balance of Payments
A record of all financial transactions between a country and the rest of the world.
What is Balance of Payments?
The balance of payments (BOP) is a comprehensive record of all economic transactions between a country's residents and the rest of the world over a given period. It has three main components: the current account (trade in goods and services, income, and transfers), the capital account (transfers of capital assets), and the financial account (cross-border investment flows including FDI, portfolio investment, and reserve changes). By accounting convention, the BOP always balances: a current account deficit is financed by a surplus in the financial account, meaning the country is borrowing from or selling assets to the rest of the world.
Example
The US consistently runs a current account deficit (importing more than it exports), offset by a financial account surplus — foreign investors purchase US Treasuries, equities, and real estate, financing the shortfall. In 2023, the US current account deficit was approximately $905 billion.
Source: Bureau of Economic Analysis — US International Transactions