It has earned on invisible account. From the middle of the nineteenth century up to 1931 the

UK’s balance on current account was always in surplus (except for the period during the First

World War and perhaps to a minor extent in 1926). Even after 1931, up to the Second World

War, the deficits were relatively small. In the 1940s the UK was forced to liquidate many of its

overseas assets and to borrow substantial sums to pay for the war. Since then the current balance

has varied — falling towards deficit until the devaluation of the late 1960s when it recovered;

that was followed by the increase in the price of oil by OPEC in 1973, driving the account

Into deficit; only to see it move sharply into surplus with the uk’s own oil discoveries. It fell

into substantial deficit during the boom of the late 1980s, and recovered again in the early

1990s, even in fact when demand at home was strong. Table 10 shows the composition of the

balance of payments of the UK.

The overall deficits or surpluses in the balance of payments are brought into balance by movements

in the gold and foreign exchange reserves or liabilities to non-residents. The transactions between foreigners

and residents are carried out, in the UK, through the exchange equalization account.

Table 14.2. UK’s balance of Payments

Current Account ￡ billion

Export of goods + 152.3

Import of goods -164.0

Visible balance -11.7

Trade in services (net balance):

Government -2.0

Transport -0.5

Travel -3.7

Financial and other services + 12.4

Total services +6.2

Other transactions (net balance) :

Government -9.9

Other + 12.5

Current balance -2.9

202

Capital Account

Investments overseas by UK residents -65.9

Investments in the UK by overseas residents +37.3

Other capital transactions +29.0

Balancing item +2.4

Vocabulary Notes to Text 14.7.1.1

1. to tabulate — сводить в таблицу

2. the credit and debit transactions — кредитно-дебетовые операции

3. to collate — сравнивать

4. visible trade — видимая торговля

5. overseas assets — зарубежные активы

14.7.1.2. Read the text “The Factors Reflecting a Country’s Balance of Payments.” 2004 and

compare it with the USA balance of payments in 1995 with that given in the main text “A Nation’s

Balance of Payments.” Make the conclusions.

The Factors Reflecting a Country’s Balance o f Payments

The balance of payments (Table 14.3) reflects many factors — first, the state of aggregate demand

at home and the state of demand abroad; and secondly the exchange rate and the relative

costs of domestic production. Governments can only really influence the balance by changing

demand, or by changing the exchange rate. In the past it was felt important to avoid a deficit which

Implied a net demand for foreign currency. In the fixed exchange rates of the time, the central

authority had to finance an imbalance by selling gold or foreign exchange for its currency. This was

not sustainable for ever.

Table 14.3. USA balance of payments

Current Account $ billion

Export of goods +574.9

Import of goods -749.3

Visible balance -174.5

Trade in services (net balance) +51.7

Other transactions (net balance):

Government -14.1

Other -16.0

Current balance -152.9

Capital Account