Current Transfers

What is ‘current transfers

Current transfers-current account transactions in which a resident entity in one country provides a nonresident entity with an economic value, such as a real resource or financial item, without receiving something of economic value in exchange.

Penetration current transfers

Current transfers are transactions, where the originator does not receive “quid Pro quo” in return; it’s the lack of economic values on one side represented in the balance of payments one-way operations called transfers. Current transfers affect current accounts, and are distinguished from capital transfers, which are included in the capital and financial account. Current transfers include workers ‘ remittances, premiums, tax payments, foreign aid and grants.

Current transfers include all transfers that do not have the characteristics of capital transfers:

  • Transfers of ownership of fixed assets;
  • Transfers of funds associated with acquisition or disposal of assets; and
  • Forgiveness by creditors of liabilities without any analogues, obtained in return.
  • Two main types of current transfers

    Feasibility study the main types of current transfers are General government and other sectors.

    General government transfers include the following:

    • Transfers in cash or in kind, supported by international cooperation between different governments, or between state and international organization;
    • Money transfers between governments for financing current expenditures by the government of the recipient country;
    • Gifts in the form of food, clothing, medical care, etc. as efforts to provide aid after natural disasters;
    • Gifts of certain military equipment; and
    • Current taxes on income and wealth and other transfers such as social security contributions.

    Other translations of the sector include:

    • Remittances of migrant workers (someone who stays in another country for over a year) that are considered residents of other countries;
    • Transfers in cash and in kind for the elimination of consequences of natural disasters;
    • Regular contributions to charitable, religious, scientific and cultural organization; and
    • Premiums and insurance payments for life insurance.

    While current transfers are grouped separately from goods, services and income in the balance of payments because of their unilateral nature, the distinction between translation and transaction is not always clear. For example, remittances from overseas workers are classified according to the recipient country, either as current transfers or as “compensation of employees”, depending on the length of stay of these workers in foreign countries where they work. As another example, a remittance from a resident of one country to Finance another resident, who is temporarily residing abroad are not registered as a translation, as it is considered a transaction between residents of one country.

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