What is included in the current account of the BOP?

The current account of the Balance of Payments (BOP) captures the country's transactions related to trade in goods and services, along with primary income (like investment income) and secondary income (like remittances and foreign aid).

The inclusion of receipts and payments for goods and services in the current account is crucial because it reflects the economic activity related to exports and imports. When a country exports goods or services, it earns foreign currency, contributing positively to the current account. Conversely, imports represent payments made to foreign entities, which detracts from the country’s current account balance.

Understanding the structure of the current account helps clarify why financial investments, government transfers, and capital investments are not part of it. Financial investments belong to the capital account, where transactions involving assets like stocks and bonds are recorded. Government transfers, while an aspect of secondary income, represent a specific component rather than the broader category of goods and services. Similarly, all forms of capital investment concern the movement of financial resources rather than the exchange of goods and services, which is the focus of the current account.

Thus, the definition and scope of the current account strongly support the inclusion of receipts and payments for goods and services as its primary elements.