Balance of Payment

Visible and invisible trade

In economics, the exchange of physically intangible items between countries. Invisible trade can be distinguished from visible trade, which involves the export, import, and reexport of physically tangible goods. Basic categories of invisible trade include services (receipts and payments arising from activities such as customer service or shipping); income from foreign investment in the form of interest, profits, and dividends; private or government transfers of monies from one country to another; and intellectual property and patents

Services account for the vast majority of invisible trade. Such services include freight and passenger transport; banking, other financial services, and insurance; scientific-technical exchange; and international tourism. Income gained by foreign investment is the second largest contributor to invisible trade, and private and government transfer is the smallest.

In many developing countries, receipts for invisibles are exceeded by payments for them. This deficit is closely tied to the foreign debt and interest payments often made by developing countries to the developed countries. The growing external debt of some developing countries—and their inability to repay the loans and interest—not only threatens the economies of those developing countries but also threatens the foreign-investment sector of invisible-trade earnings for many developed countries. Conditions such as these have brought calls for creditor countries to offer debt relief to debtor countries.

BALANCE OF PAYMENTS (BOP)

sheet is an accounting record of all monetary transactions between a country and the rest of the world. [1] These transactions include payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. The BOP summarises international transactions for a specific period, usually a year, and is prepared in a single currency, typically the domestic currency for the...