Balance of Payment (BoP) statistics
has been one of the core reports of external sector statistics. From the
beginning of FY 2081/82, in monthly Current Macro-Economic and Financial
Situation data series published by Nepal Rastra Bank (NRB), BoP table appears
to be in different presentation template discontinuing the format used since
2000/2001. This article aims to familiarize the newly adopted presentation
style, highlight the key features and changes, and explore the rationale behind
these changes.
Brief of Balance of Payment
The Balance of Payments (BoP)
is a statistical statement that summarizes transactions between residents and
nonresidents during a period
The current account consists
of three subaccounts - namely goods and service account, primary income account
and secondary income account. All the transactional flows of goods and services
are recorded into the goods and service account. Payment (receivable or
payable) for the use of factors of productions such as labor, financial
resources, non-produced non-financial assets are included in the primary income
account. The secondary income account records transfers (of economic value without
corresponding return of economic value) of current nature.
The capital account records
transfers of capital nature, transactions of non-produced non-financial assets.
The financial account records transactions that involve financial assets and
liabilities and that take place between residents and nonresidents
BPM6 and earlier development
The new presentation of BoP
in monthly current macroeconomic and financial situations published starting
from Fiscal year 2081/82 is BPM6 standard template. To standardize presentation
for international comparison and to facilitate policy makers/research for
economic analysis out of BoP statement, IMF
issues guidelines and manual on BoP Transaction compilations. The sixth
edition of Balance of Payments and International Investment Position Manual
published in 2009 by IMF is commonly referred to by the acronym BPM6. The BPM6
format used by NRB is the standard BPM6 presentation format prescribed in BPM6 companion
document BPM6 Compilation Guide.
The evolution of the
Balance of Payments Manual dates to 1948, when the first edition of BoP Manual
was introduced, aimed to establish internationally standardized reporting to
the IMF, primarily focusing on tables for data reporting. Subsequent editions
expanded the content, with BPM2 (1950) providing more detailed descriptions of
concepts and BPM3 (1961) offering a complete set of principles for balance of
payments compilation. The fourth edition (1977) introduced flexibility in
presenting the data. BPM5 (1993) marked a significant milestone by harmonizing
balance of payments concepts with the 1993 System of National Accounts (SNA),
which facilitated better integration of macroeconomic data. It introduced new
account structures, such as the renaming of the capital account to the
financial account and introduced the International Investment Position (IIP) as
well.
BPM6 stays on same framework
of BPM5 but strengthens the conceptual framework and its linkages to other
macroeconomic statistics. BPM6 incorporates new development in globalization,
balance sheet issues and financial innovation and identifies methodologies for
identification and recording financial
transactions , and enhancing the measurement of financial derivatives. It also
introduces detailed guidance on the classification of financial instruments and
addresses the need for consistency across various economic data sets. The
revised manual further refines the concepts of residency and the classification
of economic transactions, aiming to provide a more comprehensive, accurate, and
flexible system for capturing international economic transactions in a
globalized financial environment.
Nepal's progress in
Balance of Payments (BOP) data compilation began in 2030/31 (1973/74 AD) with
the first published data. This was followed by the release of the Sodhanantar
Tathyanka Sankalan Nirdesika (Data Collection Guidelines) in 2031 BS. In
2031/32 (1974/75 AD), as per the IMF’s BPM3, Nepal incorporated service and
transfer income in its BOP statistics. Over the years, the country updated its
guidelines with new editions in 2034 (1977 AD), 2038 (1981 AD), 2043 (1986 AD),
2051 (1994 AD), and in 2061 (2004 AD), reflecting advancements in statistical
methodology and improvements in BOP data collection practices
The BPM6 style data available
in NRB website, and earlier CMEs publication since 2021/22, is the generically
mapped data originally compiled based on Sodhanantar Tathyanka Sankalan
Nirdesika-2061. Nepal’s historical BoP data (BPM5 or earlier based), as well as
mapped BPM6 data can be accessed from database on Nepalese economy (https://www.nrb.org.np/database-on-nepalese-economy/external-sector/).
Why Nepal’s Migration to BPM6 is significant.
· BPM6
adoption ensures Nepal’s data aligns with international norms, fostering
comparability with other economies and boosting its credibility on a global
platform. As per Balance of Payments Statistics Yearbook 2023,
187 economies out of 196 economies reported BoP data in BPM6 standard. Better
late than never, Nepal joins the majority club lately.
· Incorporation
of transactions arising from increasing globalization, balance sheet issues and
financial innovations, the components of the BoP tables have grown
significantly. Granular presentation of data enables central bank, government,
and other stakeholders with the tools for economic analysis and decision
making.
Changes BPM6 Presentation
· BPM6
presents data in accounting terms - credit (for receipt/Inflow) and debit (payment/outflow)
on current and capital accounts in contrast to earlier symbol-based
presentation where export/receipt were presented in positive sign and
import/payments were presented in negative sign. Financial accounts, in BPM6, are
presented in Net Acquisition of Financial Assets (NAFA) and Net Incurrence of
liability (NIL).
· The
introduction of double entry principle in presentation makes data symmetrical. Both
inflows and outflows of the given heading are available. In previous (BPM5)
presentation, such symmetricity was not available. For example, only outflow of
education travel was presented, likewise only inflow of remittance was presented.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Snippet of BoP report format under BPM5 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Snippet
of BoP report format under BPM6. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
· The
component nomenclature in BPM6 has made the identification of components more
organized and readable. While the parent-child hierarchy of components was
present in the BPM5 presentation table, it was indicated through whitespaces
before the headings. In contrast, the BPM6 presentation introduces a structured
naming convention that clearly conveys the hierarchy. For example, the code
1.A.b.4.2.1 (Health-related) can be easily interpreted as a subcomponent under
1 (Current Account), A (Goods and Services), b (Services), 4 (Travel), 2
(Personal). It is important to note that, O/W (Of Which) items
represents noteworthy component of its parent heading but not necessarily the
only component. In BPM6 presentation, 1.A.a.1.1 (Oil/Petrol)
is ‘O/W’ child of 1.A.a.1(General Merchandise) meaning that Oil/Petrol
is one of the child of General merchandise which is of good importance, but not
the sole subcomponent of General Merchandise.
· The
BPM6 framework has significantly expanded the granularity of components
(transactions headings). For instance, under BPM5, the service accounts were presented
in three components on the credit side—Travel, Government Not Included
Elsewhere (NIE), and Other Services—and five components on the debit side, with
Transportation added and Education as an "Of Which" (O/W) component
under Travel. New presentation, in contrast, presents service account alone in
25 headings[1]
with debit and credit transactions of each. ITRS guideline (2022) has detailed
description of the components presented in BoP Statistics.
· Simple
yet the appreciable change in BPM6 may be reporting of BoP surplus or deficit
figure. In BPM6, a BoP surplus is reported in positive sign under “Changes in
reserve net”. In contrast, BPM5 reported the BoP surplus with a negative sign.
While the narration ("Changes in reserve net (- increase)")
technically clarified that a negative sign indicated a surplus and vice versa,
this presentation was unfamiliar and less intuitive.
|
|
||||||||||||||||||||||||||||
|
Example:
Both tables indicate BoP Surplus (BPM5 style in left and BPM6 style in right).
The difference in figure is due to revision. P=Preliminary R=Revised |
|||||||||||||||||||||||||||||
· In
addition to changes in the BoP reporting format, BoP statistics are now
reported on both a cumulative and monthly basis. Historically, Nepal's BoP
statistics have been published cumulatively for the fiscal year. While this
cumulative presentation offers an overall picture, it may be slow to reflect
recent changes in trade and transaction dynamics, particularly in the latter
part of the fiscal year. By utilizing standalone monthly BoP data, policy
responses to recent economic developments can be accelerated.
Cautions to be taken.
BPM6-style BoP data can
be found in earlier releases of the monthly Current Macro-Economic and
Financial Situation data, as well as in the Database on Nepalese Economy under
the BPM6 series. However, these data have been prepared using a generic mapping
from data originally collected under BPM5. Due to the methodological shift in
data collection and increased granularity at the reporting source, some
components of the current BPM6-based BoP data are not directly comparable with
the mapped version. While certain headings may be comparable at the aggregated
level, they may not be at the disaggregated level (for instance:
Telecommunication, computer, and information services). Furthermore, some
headings are not comparable even at the aggregated level (for instance: other
business services). Therefore, current BPM6-based BoP data uses dashes “-“ in the
corresponding data fields for the previous year to indicate incompatibility for
direct comparison. Users of the data should exercise caution when making direct
comparisons between the two.
References
International Monetary Fund. (2009). Balance of
Payments and Internatioanl Investment Position Manual. Washington, D.C.:
International Monetary Fund.
International Monetary Fund. (2014). BPM6
Compilation Guide. Washington, DC: International Monetary Fund.
International Monetary Fund. (2023). Balance of
Payment Statistics Yearbook. International Monetary Fund.
Nepal Rastra Bank. (2022). International
Transaction Reporting System( ITRS) Guideline. Kathmandu.
[1] 12 primary service categories (Manufacturing services on physical inputs owned by others, Maintenance and repair services n.i.e., Transport, Travel, Construction, Insurance and pension service, Financial services, Charges for the use of intellectual property n.i.e., Telecommunication., computer, and information services, Other business services, Personal, cultural, and recreational services and Government goods and services n.i.e.) that are further classified into subcategories totaling 25.