Notes

1. Primary income includes labor income (wages) and investment income (dividends, interest).
2. Secondary income includes private and government transfers (labor remittances, foreign aid).
3. The “capital account” shown in the table includes capital transfers between U.S. residents and nonresidents (debt forgiveness) and trade in non-produced non-financial assets (franchises, trademarks). It is relatively insignificant and very different from KA (in textbooks). Textbook KA includes all private capital flows, including FDI and portfolio investment, but (typically) not official reserve transactions (ORT).
4. Net borrowing can be thought of as textbook KA + ORT (a negative number for Net borrowing indicates net capital inflow). It includes items in the Financial Account: FDI, portfolio investment, bank deposits AND reserve assets. Changes in reserve assets are ORT, or official reserve transactions.
5. The difference between the two Net borrowings is the Statistical Discrepancy.

According to BEA (same as IMF/BPM6):

The balance of payments is broken down into the current accounts (international), capital accounts (international), and financial accounts (international).

• CA: current account
• KA: capital account (typically small)
• FA: financial account (all cross‑border financial flows, including reserves)
• Reserves: a component of FA, not a separate ORT line
• Statistical/other adjustments: SD (statistical discrepancy) or EO (errors & omissions);

Identity: CA + KA + FA + SD = 0

If we ignore the small capital account and statistical discrepancy:

FA = -CA

• Current account deficit → FA surplus → net borrowing

• Current account surplus → FA deficit → net lending

Question: What is a balance of payments deficit?