Balance of Accounts, Foreign
Balance of Accounts, Foreign
a balance reflecting the volume and ratio of claims and liabilities of a given country, which arise as a result of that country’s trade, credit and other ties with foreign countries. The basic total of claims results from the export of commodities and provided foreign credits, and the basic total of liabilities results from the import of commodities and used foreign credits. The claims are shown on the credit side of the balance of accounts and the liabilities are shown on the debit side.
The balance of accounts operates in two forms: as of a certain date (for example, as of the start of the year) or over a certain period (for example, over the course of a year). A balance of accounts for a certain date, or a balance of international indebtedness, reflects the total movement of capital and credits and indicates whether, in relations with other countries, the given country is a creditor (with a positive balance and claims exceeding liabilities) or a debtor (with a negative balance and liabilities exceeding claims). The balance is divided into long-term and short-term operations. Operations of a long-term character include the buying and selling of securities (stocks and bonds); the new issuance of, and payment for, securities; the direct placement of capital and the sale of enterprises, land, and houses abroad; and the granting and repayment of long-term credits. Operations of a short-term character include commodity credits (supplier and broker), bank credits, short-term placements of capital (current, commercial-correspondents and clearing accounts and foreign exchange purchases), and the export and import of money.
The balance of accounts over a certain period includes the trade balance, the export and import of gold, the balance of services, the income from capital investments abroad, the payment of interest and dividends on capital investments abroad and noncommercial transfers. These same items are part of the balance of payments, which shows only the completed payments. Unlike the balance of payments, the balance of accounts includes the value of exports and imports of goods and services, regardless of whether the goods and services have been granted on credit or whether payment is to be made in the given period. Often when a balance of accounts is negative, the balance of payments is positive; conversely, when a balance of accounts is positive, the balance of payments is often negative. The balances periodically published by the International Monetary Fund and called balances of payments include elements of both the balance of accounts and the balance of payments.
In the capitalist countries, the balance of accounts develops spontaneously as a result of the numerous private transactions involved in the export and import of goods and capital and other international payments. The balance of accounts, like the balance of payments, is extremely unstable. The sharp fluctuations in the ratio of claims and liabilities are caused chiefly by movements of enormous amounts of short-term capital between the countries. The claims and liabilities are devalued as a consequence of inflation and devaluation of currencies.
Until recently, the balance of accounts for a number of imperialist states was favorable. This was related to the granting of credits to dependent or lesser-developed countries for the purpose of subjecting these countries to the imperialist states’ influence and also to the growth of dividends and profit obtained by the monopolistic associations in the debtor countries. All of this led to acute indebtedness on the balance of accounts of the debtor nations. By the middle of the 1970’s, the indebtedness of the developing countries to the United States had reached $100 billion. At the same time, the energy crisis, the sharp increase in the prices for oil and raw materials on the world market, and certain other factors produced a deficit for many industrially developed capitalist countries; a positive balance of accounts, however, arose for a number of developing countries, primarily the oil-producing ones.
The balances of accounts of the socialist countries differ fundamentally from those of the capitalist countries both in economic content and methods of compilation. These balances reflect international economic ties of a new type, characterized by complete equality, cooperation, and mutual aid. The balances of accounts are planned in accordance with balanced balances of payments and are compiled for all the countries, both together and individually. In terms of compilation for a certain date, they include payments for trade operations (unpaid accounts for dispatched commodities); payments for nontrade operations; balances in clearing, commercial-correspondents and other accounts; credits and loans; and property abroad. Because of the absence of commercial credit in the relations between the socialist countries, the balances of accounts basically reflect the claims and liabilities for long-term and medium-term credits and clearing accounts. The balance of accounts of the USSR shows the amount of aid granted in the form of credits and loans to other socialist states and to developing countries.
REFERENCESKomissarov, V. N., A. N. Popov. Mezhdunarodnye valiutnye i kreditnye otnosheniia. Moscow, 1965.
Frei, L. I. Valiutnye i finansovye raschety kapitalisticheskikh stran. Moscow, 1969.