Web Trader MT5
A complete ledger of every economic transaction between residents of a country and the rest of the world over a given period. Imports, exports, dividend flows, interest payments, foreign investment, remittances, central bank reserve changes; all of it.
The accounting splits into three parts. The current account covers trade in goods and services, plus primary income (investment returns) and secondary income (remittances). The capital account is small and mostly handles transfers of capital assets. The financial account tracks cross-border investment: direct investment, portfolio flows, reserves.
The whole thing has to balance to zero by construction. If a country runs a current-account deficit, somebody is funding it through the financial account, whether through bond purchases, FDI, or reserve drawdowns. Persistent current-account deficits funded by hot portfolio flows are a classic emerging-market vulnerability.
Example: India typically runs a current-account deficit driven by oil imports, offset by FDI and FII inflows into equities and remittances from Indians in the Gulf. When portfolio flows reverse (as in 2013, when the “taper tantrum” pulled FII money out), the rupee dropped fast because the financing leg disappeared.
