On the current account balance of payments.
Primary income
Primary income is defined as earnings arising from the provision of a factor of production: labour, financial assets, land, and natural resources
This includes
- Income from interest, profits, and dividends (generated from foreign investment).
- Compensation of employees
- Taxes and subsidies on products and production
(e.g., sales tax or value added,
Secondary income
Secondary income is defined as the redistribution of income through current transfers. By governments, multinational organisations or charities.
This includes spending and transfers on foreign overseas aid, and payment to multinational bodies.
Long-term remittances
IMF Details on secondary income
source: IMFFurther reading
Example – UK Balance of Payments, 2024 – Summary
All figures are in £ million. Balances are credits minus debits (for the financial account: assets minus liabilities).
1. Current Account
| Component | Credits | Debits | Balance |
|---|---|---|---|
| A. Goods and services | 893,585 | 918,729 | -25,144 |
| B. Primary income | 400,351 | 421,310 | -20,959 |
| C. Secondary income | 30,736 | 47,828 | -17,092 |
| Total current account | 1,324,672 | 1,387,867 | -63,195 |
The UK ran a current account deficit of £63.2bn in 2024.
2. Capital Account
| Component | Credits | Debits | Balance |
|---|---|---|---|
| Capital transfers | 0 | 5,606 | -5,606 |
| Acquisition/disposal of non-produced, non-financial assets | 2,011 | 1,104 | 907 |
| Total capital account | 2,011 | 6,710 | -4,699 |
3. Financial Account
Balance = net acquisition of assets − net incurrence of liabilities.
| Component | Assets | Liabilities | Balance |
|---|---|---|---|
| 1. Direct investment | -13,515 | -47,363 | 33,848 |
| 2. Portfolio investment | 85,728 | 118,034 | -32,306 |
| 3. Financial derivatives | -7,367 | x | -7,367 |
| 4. Other investment | 292,187 | 348,193 | -56,006 |
| 5. Reserve assets | -2,311 | x | -2,311 |
| Total financial account | 354,722 | 418,864 | -64,142 |
4. Overall Summary
The UK ran a large current account deficit in 2024, financed partly by
direct investment inflows but offset by outflows in portfolio and other
investment. Overall the UK was a net borrower from the rest of the world.
About The Author
