The current account balance is an accounting document that details the way in which a country relates to abroad. This balance is divided, in turn, into a series of subtypes: the balance of goods and services, the income balance and the balance of current transfers, which is the one that includes current transactions that do not require a counterpart (that is, donations, public or private aid, etc.) Finally, you should know that the balance of current transfers understands as ingresos transfers received from abroad and as payments those sent abroad.
What is recorded in the balance of current transfers?
In this type of current account balance, unilateral income and payments between two or more countries are recorded; that is, those revenues that for the host country do not imply any obligation to contraprestación of goods and services. They are public or private operations that do not involve any counterpart.
The evolution of this balance over the years reflects the state of deficit or surplus in which the country in question can find itself.
Types of current transfers
Given that the balance of current transfers, also known as the private income distribution account, includes income and payments from current transfers between residents and non-residents, whether they are public or private, we are faced with two different classifications:
- Current transfers from the public sector; that is to say, those income received from the employment assistance and professional training or payments such as VAT Resources or the Gross National Income Resource.
- Current transfers from the private sector; that collects the payment of impuestos, benefits and Social Security contributions, pensions, inheritances and scientific or literary awards, among other possible transfers.