Jumayev A. G., PhD Poturaeva L. V.

Oles Honchar Dnipropetrovsk National University, Ukraine

EVALUATION OF BALANCE OF PAYMENTS AND THE PROSPECTS FOR ITS IMPROVEMENT

The purpose of this article is to consider the essence of the balance of payments and to show its relationship to the major categories of macroeconomics. To achieve the goal the following objectives are set:

1. Give theoretical determination of the balance of payments.

2. Reveal structure of the balance of payments of Ukraine.

3. Show opportunities, forms and methods of regulating the balance of payments of Ukraine.

4. Analyze the current state of the balance of payments of Ukraine.

This article discusses the theoretical concept of the balance of payments, its meaning and structure, as well as the mechanisms of its formation.

The evaluation of the balance of payments of Ukraine is also analyzed, and the prospects for its improving are described.

The balance of Payments (BOP) is based on the principle of accounting: each transaction is recorded twice on the credit of one article articles and the debit of the other. This rule has very simple economic interpretation: the majority of economic transactions lies in equivalent exchange of economic values​​.

The balance of payments is made to take account of the results of foreign economic activity of the country. It is an essential source of information that allows one to judge the effectiveness of the country’s participation in the international division of labor and serves as a basis for decision-making in the field of foreign policy.

BOP characterizes the development of foreign trade, the level of production, employment and consumption. Its data allow tracing the forms of foreign investment attraction, foreign debt payments of the country, changes in international reserves, the state of fiscal and monetary policy, regulation of the internal market and the exchange rate.

The sum of all creditor transactions should match the amount of accounts receivable, and the overall balance is always zero. However, in practice, the balance is never achieved. This is because the data describing the different sides of same operations are taken from several sources. These differences are often referred to as net errors and omissions.

One of the most important concepts in the balance of payments is the concept of residence. Economic unit is a resident of the economy, if it has a center of economic interest on the economic territory of the country. It is important to know in order to determine the degree of integration of the unit into the economy of the country.

The main components of the balance of payments: current account, capital account and financial resources and reserves.

Current account reflects the movement of all goods and services, factor income and current transfers between residents and non-residents.

Capital account comprises capital transfers operations and non-produced financial assets.

Financial account consists of all operations that modify the international investment position.

Current account transactions consist of four major groups: transactions in goods, services, income flows and current transfers.

The balance of payments has a standard and analytical forms of presentation. In the analytical presentation, the components are rearranged according to a user’s goals.

The sum of the current account and capital flows gives balance to official reserves.

In practice, Ukraine has regularly to perform at the same time if not mutually exclusive, then at least difficult to reconcile objectives: to increase employment (for this to expand production, naturally) or to settle the balance of payments.

State regulation of the balance of payments is a set of economic – including monetary, financial and monetary – measures of the state aimed at forming the main articles of the balance of payments as well as covering the existing balance.

In order to regulate the payments and receipts on the «invisible» account transactions, the following measures are taken:

– Limiting norms of export currency by tourists of the country.

– Direct or indirect participation of the state in the creation of tourism infrastructure in order to attract foreign tourists.

– Promotion of the construction of ships from the budget in order to reduce expenditures under the «Transport».

– Increase of public spending on research and development in order to increase revenues from trade in patents, licenses, scientific and technical knowledge, etc.

– Regulation of labor migration. In particular, restricting the entry of immigrants to reduce the translation of foreign workers.

The State shall take measures to curb the «flight» of capital. These include: economic and political stability in the country, the credibility of the government and the national currency, the strengthening of statehood, national security, the fight against corruption and the «shadow» economy. An important method of «flight» of capital restrain is an effective state control over international capital movements, including limiting the size of its export and requirement for timely repatriation of dividends and interest.

Principal means of balancing the final balance of payments are convertible foreign currency reserves.

Formally, the balance of payments, as any balance, is balanced, since total major balancing items cancel each other out.

Finding sources of repayment deficit, Ukraine raises funds on the world capital market in the form of loans from consortium banks or bonds. In this regard, commercial banks are actively involved in the balance of payments.

The final alignment of the balance of payments can be carried out by the official gold and foreign exchange reserves.

Currency and credit relations of the CIS countries with Ukraine are specific, but gradually they acquire traits of world practice: customs regimes strengthen, prices of commodities are equal to the world ones, the calculations use convertible currency, as well as hryvnia.

Prolonged deficiency on the current account balance will inevitably lead to slower economic growth. To avoid this, the government of Ukraine sets the task, at least to avoid prolonged deficit of current account. To solve this problem is not easy, as this depends not only on the state of the economy, but also on the economic processes in the rest of the world.

In the conclusion of this article, it can be said that the balance of payments is an important macroeconomic report of any state. It gives information about the relationship of the country as a subject of international economic relations with the outside world economic agents. The balance of payments is the information needed by state authorities to determine foreign trade, financial and monetary policy, as well as by the economic agents to make decisions about future actions in the financial, currency and money markets in the field of investment and pricing policies.