The balance of payments of Cyprus records transactions between residents of Cyprus and the rest of the world, during a certain period of time. It consists of three main accounts: the current account, the capital account and the financial account. Each transaction has to be reported either as a credit or a debit. A transaction which relates to the first two accounts and which leads to an inflow of money on behalf of a resident is reported as a credit, and conversely, a transaction which results in an outflow of money towards a non-resident is presented as a debit. For transactions relating to the financial account, the debit/credit is recorded in accordance with the accounting principle; that is, an increase in claims is recorded as a debit while an increase in liabilities is recorded as a credit.
In principle, the balance of payments is always balanced, since, when the current account together with the capital account is in deficit or surplus, it is always offset by a positive or negative financial account, respectively. In reality, this does not hold and hence the errors and omissions account is used as a balancing item.
(I) Current Account
The current account records the trade in goods and services, income and current transfers. Income mainly consists of cross-border flows of interest, profits, dividends and rents arising from assets or debt held by residents of Cyprus with non-residents. Current transfers concern cross-border transfer payments and usually include international grants, donations and gifts and social security payments.
Data used for the compilation of the current account are collected from the Cyprus Statistical Service (e.g. imports and exports of goods, travel), the banking system (e.g. payments and receipts for imports and exports of services and current transfers), the Ministry of Finance for government transactions, the Central Bank of Cyprus, as well as the specialised surveys conducted by the Central Bank of Cyprus (e.g. surveys on shipping and insurance companies). Data concerning income flows (interest, profits and dividends), are drawn primarily from the Foreign Direct Investment, the Securities and the Other Investment surveys conducted by the Central Bank of Cyprus.
The current account deficit of Cyprus reflects the surplus value of imports of goods and services, returns of investments by non-residents in Cyprus and current transfers of residents to the rest of the world over the value of exports of goods and services, returns of investments by residents abroad and current transfers to Cyprus from the rest of the world.
(II) Capital Account
The capital account records cross-border flows of transfer payments relating to capital goods which usually include payments from the European Union to the member state for investment in infrastructure projects and capital transfers. Data used for the compilation of the aforementioned account are collected from the banking system, the Central Bank of Cyprus and Eurostat.
(III) Financial Account
The financial account records cross-border acquisitions and disposals of financial assets. Data used for the compilation of the financial account are collected through the specialised surveys conducted by the Central Bank of Cyprus (e.g. Foreign Direct Investment Survey, Securities Survey, Other Investment Survey), from the banks’ monthly balance sheets, the Central Bank of Cyprus, the banking system (claims and liabilities of residents vis-à-vis non-residents), as well as from other governmental agencies like the Ministry of Finance. Supplementary data are also collected through the annual financial statements collected from large resident enterprises.