Savenaca Narube: Balance of payments - a central banker's view
Opening address by Mr Savenaca Narube, Governor of the Reserve Bank of Fiji, at the Regional
Course on Balance of Payments and International Investment Position, Suva, 11-22 April 2005.
* * *
Introduction
Mr Jon Craig and Mr Michael Andrews at PFTAC
Our Course Facilitators - Mr Jens Reinke of the IMF, Mr Mahinder Gill - a former division chief of the
Balance of Payments and External Debt at the IMF) and Mr Paul Mahoney of the Australian Bureau of
Statistics.
Distinguished Delegates
On behalf of the Government of Fiji and the Reserve Bank I would like to welcome you to and the
workshop participants to this regional training course on Balance of Payments. This is the first regional
course and supplements the existing courses held by the IMF in Washington D.C. and at the
Singapore Training Institute. I would like to extend my appreciation to the IMF and PFTAC or
organizing this course. These forums provide an excellent opportunity for statisticians and economists
in the region to exchange knowledge and experiences.
Why is the Balance of Payments important?
The Balance of Payments show a country's transactions with the rest of the world. The Balance of
Payments records all the flows of goods and services of a country with the rest of the world, and flows
of other types of income into and out of the country.
The current account brings all these flows together. It is important for domestic policy making because
it shows that calls on a country's foreign savings equals net savings in the domestic economy. So a
deficit can reflect domestic conditions. This may be good - if it comes about because investment
exceeds domestic savings, but it's bad if its due to excess consumption.
Regardless of the cause of a deficit, a deficit has impact on debt and this can lead to crisis if debt
becomes too large and reserves become too low. Debt and reserves are recorded in the international
investment position.
So the balance of payments system is vital in economic policy making, because of the important
relationship between external and domestic economic developments, timely, reliable, and
comprehensive balance of payments statistics are an indispensable tool for economic analysis and
policy making. Indeed, with the growing interdependence of the world's economies, the need for such
statistics - which reflects in part the underlying movement towards greater liberalization and integration
of markets - has increased over time.
Also, balance of payments and international investment position data constitute an indispensable link
in the compilation of data for various components of the national accounts (e.g., production accounts,
income accounts, capital and financial accounts, and the related measurement of national wealth).
The balance of payments is directly aligned and integrated with the system of national accounts. For
example, trade statistics used in the balance of payments are also included in the measure of
expenditure on GDP.
What is the purpose of course?
This course has been arranged to help countries to build their capability to compile balance of
payments statistics. The conceptual framework will be explained, sources and methodologies for the
various components described, and discussions held on the many issues that are of particular
concerns to the Pacific island countries. The fishing industry, for example, provides the opportunity to
discuss many issues including the definitions of residency and national boundaries, flows of goods,
services, royalties, salaries of fishermen and so on.
I realise that there is a very wide spread of experience of participants - from countries that have been
compiling Balance of Payments for many years including quarterly statistics, through to those that do
not currently compile any Balance of Payments statistics. This will be a particular challenge for the
presenters and the participants to ensure everyone gains what they want from the course. The
outcomes aimed for in the course will therefore range from increased knowledge to enable participants
to return to their countries and make refinements to existing estimates, through to an increased
awareness of the benefits from compiling BOP which will hopefully lead to plans for development of
Balance of Payments stats in future for countries not yet producing them.
What resources are available to Balance of Payments compilers?
There are a number of manuals and handbooks available to assist in developing and compiling
Balance of Payments and International Investment Position statistics. These include both conceptual
materials and very practical guidance in terms of sources and methods that are most suitable for the
various elements of the system.
PFTAC here in Suva has provided a significant amount of technical assistance to Balance of
Payments compilers in the region for about 12 years. Staff at the IMF headquarters in Washington
provides backstopping support to PFTAC and can also provide additional advice and assistance.
I wish you well in this course, and hope that you will learn enough of the concepts and practical issues
involved in the Balance of Payments to take home to your countries and work toward improving the
range and quality of the statistics you produce. I also hope you have an enjoyable stay here in Suva.
Thank You.