The Structure of the Current Account — Current Account of the Balance of Payments | IGCSE Economics

Exam Frequency Analysis

Past paper frequency (2018 to 2024)

This topic accounts for approximately 5% of your exam marks.

new

Rare

New5%

New emphasis in the 2027 syllabus; the structure of the current account and the causes, consequences and correction of deficits and surpluses are examined directly. Guidance based on specimen materials.

The current account has four parts.

. Exports and imports of physical goods, such as cars, oil, food and machinery. Exports are credits; imports are debits.
. Exports and imports of services, such as tourism, banking, insurance, shipping and education. Selling these to foreigners is a credit; buying them from abroad is a debit.
. Income from lending, investing or working abroad, such as interest, profit, dividends and wages, set against the same kinds of income paid out to foreigners.
. Transfers for which nothing is given in return, such as foreign aid and workers' remittances sent between countries.

Calculating the balance

The current-account balance = total credits − total debits across all four parts.

If credits exceed debits, the country has a current-account surplus; if debits exceed credits, it has a current-account deficit. The same arithmetic applies to a single part: for trade in goods alone, exports minus imports gives a trade surplus or in goods. So a country can run a deficit on trade in goods while running a surplus on services or income, and the overall current-account balance combines all four parts.

Exam tip

Calculate a current-account balance (2 marks)

What comes up: a 2-mark data-response calculation asking for the balance on the current account, or on one of its component sections, from figures in a table.

Write (two marks): add the credits (exports of goods and services, income and transfers received), add the debits (imports of goods and services, income and transfers paid), then subtract debits from credits (1); state clearly whether the result is a surplus (credits larger) or a deficit (debits larger), with the correct sign or wording (1).

Watch out: read the table carefully so you place each figure as a credit or a debit, and label the answer as a surplus or deficit rather than leaving a bare number.