Balance of payments

The balance of payments system is used to record transactions between Canada and the rest of the world. It tracks receipts coming into Canada from all international sources, as well as payments made by Canadians to non-residents. The current account records international trade in goods and services; investment income including interest, dividends and profits earned by Canadian firms both at home and abroad; and Canada-based operations of foreign companies. The capital and financial accounts measure direct investment abroad and investments made by Canadians in foreign stocks and bonds.

	Port activity Photo: Comstock

Just like any company's financial books, the accounts must balance. If more money is leaving Canada than coming in, the balance of payments shows a deficit, and the difference needs to be financed. In other words, a current account deficit must be matched by an equivalent amount of foreign capital entering Canada or by borrowing from other countries.

Canada’s current account balance of payments was negative for most of the 1990s. However, in 1999, Canada recorded a surplus of $2.5 billion, which has grown substantially over the subsequent years. In 2002, the surplus stood at $23.4 billion, down from $26.9 billion in 2001.

Since Canada traditionally sells more goods than it buys, the balance of trade for merchandise is usually positive. This positive trade balance (surplus) for goods is almost entirely a result of trade with the United States. The current account surplus for goods stood at $92.0 billion in 2002, down from an all time high of $97.1 billion in 2001. As was the case for much of the 1990s, the agriculture, fishing, energy, forestry and automotive sectors all continued to produce positive trade balances in 2002. Negative merchandise trade balances occurred in 2002 for machinery and equipment goods and consumer goods.