The Balance of Payments is a record of a country’s transactions with the rest of the world. It shows the receipts from trade. It consists of the current and financial account. The balance of payments has three components—the current account, the financial account, and the capital account.[1]. Balance of Payments (the sum total of all economic transactions between one country and its trading partners around the world), which includes capital movements (money flowing to a country paying high interest rates of return), loan repayment, expenditures by tourists, freight and insurance charges, and other payments.

Types of Account

Current account

Current accounts measure international trade, net income on investments, and direct payments. This is a record of all payments for trade in goods and services plus income flow and it is divided into four parts:

  • Balance of Trade (BoT) in goods (visibles)
  • Balance of trade in services (invisibles) e.g. tourism, insurance.
  • Net income flows. Primary income flows (wages and investment income)
  • Net current transfers (Eg foreign aid). Secondary income flows

The country’s external sector position continued to improve, with the current account remaining in surplus in 2020 as per Reserve Bank of Zimbabwe's Monetary Policy presented on 18 February 2021. Preliminary estimates showed that the current account improved from a surplus of US$0.9 billion in 2019, to a surplus of US$1.1 billion in 2020. The strong external sector position was spurred by merchandise exports which increased by 5.8%, from US$4.7 billion in 2019 to US$4.9 billion in 2020. Export performance was largely driven by increases in exports of the platinum group metals (PGMs), amid improved palladium and rhodium prices. The increase was, however, partially offset by declines in exports of gold, tobacco, manufactured goods, chrome ore and diamond.

Financial account

The financial account describes the change in international ownership of assets. This is a record of all transactions for financial investment. It includes:

  • Foreign Direct Investment (FDI). This is net investment from abroad. For example, if a Zimbabwean firm built a factory in South Africa it would be a debit item on Zimbabwean financial account)
  • Portfolio investment (stocks and bonds). These are financial flows, such as the purchase of bonds, gilts or saving in banks. They include short-term monetary flows known as “hot money flows” to take advantage of exchange rate changes, e.g. foreign investor saving money in a Zimbabwean bank to take advantage of better interest rates – will be a credit item on financial account.

The RBZ announced that the country’s financial account position was estimated to have posted a surplus of US$955.6 million in 2020, compared to US$308.5 million in 2019 during its 2021 Monetary Policy presentation on 18 February 2021. Going forward, the country is expected to benefit from large-scale investments in the mining sector.

Capital Account

This refers to the transfer of funds associated with buying fixed assets such as land. The capital account includes any other financial transactions that don't affect the nation's economic output.

During the 2021 Monetary Policy presentation on 18 February 2021 the central bank announced that capital transfer receipts which principally constitute the capital account were estimated to have registered significant growth in 2020 to US$312.6 million, compared to US$52.8 million received in 2019. This, phenomenal growth was attributed to the increase in humanitarian assistance following natural catastrophes, including Cyclone Idai and the Coronavirus (Covid-19) pandemic.

Balancing Item

In practice when the statistics are compiled there are likely to be errors, therefore, the balancing item allows for these statistical discrepancies.

  • (note the Financial Account used to be called the Capital Account, which is potentially quite confusing. Even now some people refer to financial account as the capital account)

Factors affecting the balance of payments

A current account deficit could be caused by factors such as:

  • The rate of consumer spending on imports. For example, during an economic boom, there will be increased spending and this will cause a deficit on the current account.
  • International competitiveness. If a country experiences higher inflation than its competitors, exports will be less competitive leading to lower demand.
  • Exchange rate. If the exchange rate is overvalued, it makes exports relatively more expensive leading to a deterioration in the current account.
  • Structure of economy – deindustrialisation can harm the export sector.[2]

What it Means

A country's balance of payments tells you whether it saves enough to pay for its imports. It also reveals whether the country produces enough economic output to pay for its growth. The BOP is reported for a quarter or a year.

A balance of payments deficit means the country imports more goods, services, and capital than they export. It must borrow from other countries to pay for its imports. It's like taking out a school loan to pay for education. Your expected higher future salary is worth the investment.

In the long-term, the country becomes a net consumer, not a producer, of the world's economic output. It will have to go into debt to pay for consumption instead of investing in future growth. If the deficit continues long enough, the country may have to sell its assets to pay its creditors.3 These assets include natural resources, land, and commodities.

A balance of payments surplus means the country exports more than it imports. It provides enough capital to pay for all domestic production. The country might even lend outside its borders. A surplus boosts economic growth in the short term. There are enough excess savings to lend to countries that buy its products. The increased exports boost production in its factories, allowing them to hire more people. In the long run, the country becomes too dependent on export-driven growth. It must encourage its residents to spend more.

A larger domestic market will protect the country from exchange rate fluctuations. It also allows its companies to develop goods and services by using its own people as a test market.

The Difference Between BoP deficit and BoP surplus

Balance of Payments Deficit Balance of Payments Surplus
*The country imports more goods, services & capital than it exports *The country exports more than it imports
*It must borrow from other countries to pay for its imports *Country provides enough capital to pay for all domestic production
*In the short-term, this fuels economic growth *A surplus boosts economic growth in the short term
*In the long-term, it will have to go into debt to pay for consumption *In the long run, it becomes too dependent on export-driven growth

Zimbabwe's BoP statistics

Total merchandise imports to Zimbabwe increased to USD4.1 billion in 2018, from an annual average of USD3.9 billion for 2015 to 2017. Exports increased to USD4.0 billion in 2018, from an annual average of USSD3.3 billion for 2015 to 2017. The faster growth in exports has not been sufficient to improve Zimbabwe’s current account balance, which improved from a deficit averaging of -USD 679.0 billion (approx. -3.1% of GDP) for 2016 to 2018, to a deficit of -USD 493.0 million (approx. -2.2% of GDP) in 2019. The faster growth in export earnings has not been sufficient to improve Zimbabwe’s balance of payments and gross official reserves have decreased due to the narrowing capital and financial account surplus.[3]

Zimbabwe’s capital and financial account balance deteriorated from a surplus (net inflows) averaging USD1.3 billion (approx. 6.1% of GDP) for 2016 to 2018, to a surplus of USD219.0 million (approx. 1.0% of GDP) in 2019. As a result, Zimbabwe’s balance of payments deteriorated from a deficit averaging -USD262.0 million (approx. -1.2% of GDP) for 2016 to 2018, to a deficit of -USD273.0 million (approx. -1.2% of GDP) in 2019. Gross official reserves decreased from USD310.0 million in 2016 to USD87.0 million in 2018, before recovering to USD137.0 million in 2019. During this period, Zimbabwe experienced persistent inward FDI inflows.

Inward FDI inflows decreased from USD 421.7 million in 2015 to USD 349.4 million in 2017, before recovering to USD 744.6 million in 2018. As a result, Zimbabwe’s inward FDI stock increased from an average of USD 4.3 billion for 2015 to 2017, to USD 5.4 billion in 2018. Zimbabweans’ investments abroad have increased as inward FDI to the country persisted.

Outward FDI outflows increased from USD 22.0 million in 2015 to USD 42.2 million in 2017, before decreasing to USD 26.8 million in 2018. As a result, Zimbabwe’s outward FDI stock increased from an average of USD 542.6 million for 2015 to 2017, to USD 607.1 million in 2018. These capital flows have improved Zimbabwe’s balance of payment but the country’s net international FDI position deteriorated.

Zimbabwe’s balance of payment has been supported by the narrowing current account deficit despite the deteriorated capital and financial account surplus in the period from 2015 to 2018. Outward FDI flows have been volatile as inward FDI inflows persisted. Zimbabwe’s net international FDI position deteriorated from net liabilities amounting to an average of -USD 4.1 billion (approx. -19.8% of GDP) for 2015 to 2017, to net liabilities amounting -USD 5.5 billion (approx. -20.4% of GDP) in 2018


  1. Kimberly Amadeo, [1], The Balance, Published: 4 May, 2020, Accessed: 12 August, 2020
  2. Tejvan Pettinger, [2], Economics Help, Published: 28 November, 2019, Accessed: 12 August, 2020
  3. [3], PESA, Accessed: 12 August, 2020