Question

During a year, a country records: (i) receipt of External Assistance; (ii) residents purchasing bonds of a foreign government; (iii) FII inflows into domestic stocks; (iv) repayment of External Borrowings. Which transactions are recorded as Credit (+) entries?

Options

• (i) and (ii)

• (iii) and (iv)

• (i) and (iii)

• (ii) and (iv)

Answer 1

Receiving External Assistance and FII inflows bring foreign exchange into the country, so they are Credit (+) capital inflows. Purchasing foreign bonds and repaying External Borrowings take foreign exchange out of the country, so they are Debit (−) capital outflows.