balance of payments

In economics, an account of a country's debit and credit transactions with other countries. Items are divided into the current account, which includes both visible trade (imports and exports of goods) and invisible trade (services such as transport, tourism, interest, and dividends), and the capital account, which includes investment in and out of the country, international grants, and loans. Deficits or surpluses on these accounts are brought into balance by buying and selling reserves of foreign currencies.

A balance of payments crisis arises when a country's current account deteriorates because the cost of imports is greater than income from exports. In developing countries persistent trade deficits often result in heavy government borrowing overseas, which in turn leads to a debt crisis.