introduction to statistics and data analysis€¦ · introduction to statistics and data analysis...

Introduction to Statistics and Data Analysis Statistics and Economic Research Department – External Sector Division

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Outline

Introduction

Compilation Practices

Legal and Regulatory Framework

Data Sources and Dissemination

BOP Structure and Classification

BOP Importance


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Introduction BOP is a statistical statement designed to provide:

A record of all transactions between an economy and the rest of the world

During a given period of time

The rest of the world* consists of all non-resident institutional units that:

Enter into transactions with resident units

Have other economic links with resident units

*1993 SNA Definition


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BOP: Compilation Practices

Concept & Classifications

BOP is compiled in millions of US dollars & on a monthly basis

BOP is available six to nine months after the reference period.

BOP covers all types of transactions between residents and the rest of the world.

Data are recorded at the date of payment or receipt.

Conversion: Market rates prevailing on the transaction dates, if not available

average rates for the shortest period applicable should be used


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Methodology

BOP is compiled in accordance with the definitions and classifications of the fifth edition

of the IMF’s Balance of Payments Manual.

1) BPM5 presentation (since 2002).

2) BPM6 presentation (projected end 2017).

BOP methodology is updated regularly and disseminated upon request or through

publication (BOPSY)


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Basic principles

RTGS # transactions are recorded as soon as they are processed # flows

Market value

Double entry compilation & assumptions & limitations

Residence criteria- basic concept for Bop and national accounts- variables

not based on nationality

center of principal economic interest

concept of economic territory of a country, territorial enclaves

length of stay-one year

exclusions & exceptions


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Concept in theory

Basic principle of double-entry recording used in constructing the bop implies that

the SUM of ALL international transactions _current, capital and financial INCLUDING

reserves assets_ is in principle equal to zero.

CAB = NKA + RT

CAB (current account balance) NKA( net capital & financial account, excluding reserves assets) RT (reserves assets transactions)


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Current Account

CAB is necessarily equal with sign reversed to NKA plus RT

By definition: the net provision of resources to or from the rest of the world

_as measured by the CAB_ must be matched by a change in net claims on the

rest of the world.


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Capital and financial account

Measures the net foreign investment or net “lending or borrowing” vis-à-vis the rest

of the world

This account reveals the channels through which a country invests its net wealth


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BOP: Organization and Data processing

Current Account: GOODS

General merchandise (exported and imported ,change of ownership principle).

Exception: goods for processing in Lebanon or abroad (If re-exported or re-

imported )

Public sector imports (BDL reports), not included in the Customs data

Repairs on goods, exports and imports of non-monetary gold, goods procured in

ports by carriers, as well as grants in kind (for adjustment )


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Legal & Regulatory Framework

The BDL is the sole agency designated to generate the balance of payments (BOP)

statistics.

BOP is a shared project between BDL (DSER- ESS) and CAS.

Central Administration of Statistics (CAS) has the responsibility for conducting surveys

among private sector (Article#3 of Decree #1793, dated Jan 22, 1979).

Banque du Liban has the authority to collect data from public sector, banks, and

financial institutions. (The Code of Money and Credit Article#73, #72 ,#146, ,#151

promulgated on 1st Aug 1963 by Decree #13513).


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BDL circulars concerning BOP

Residence circular: Basic Circular# 24 (Decision# 6170 issued on 17 May 1996,

amended by virtue of Decision# 7919 of 7 Sep 2001 ): classification of Resident and

Non-Resident

International Transactions Reporting System (ITRS): Basic Circular # 90

(issued on 4 Feb 2002 amended by Intermediary Circular# 315 on 28 January 2013):

regulation of The Statement of Reports about International Transactions.

Coordinated Portfolio Investment Survey (CPIS): Basic Circular # 91

(issued on 13 Feb 2002 amended by Cir. #133, 21 Mar 2007): investments by residents

in securities issued by Nonresidents.


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BDL circulars concerning BOP (cntd)

Foreign direct investment : Basic circular#131, (Decision# 11618 issued on 29 Nov

2013): Foreign (non-residents) direct investment in the resident banking and financial

sector- CDIS (coordinated direct investment survey).

Payment cards: Basic Circular # 63 (issued on 3 Oct 1997 amended by Cir. #296 dated

30 April 2012): payments and withdrawals, credit and debit cards, through automated

teller machines (ATM), points of sale, over the counter, internet and other.

Electronic Banking and Financial Operations : Basic circular # 69, (Decision# 7548

issued on 30 Mar 2000 amended by intermediary Decision #11937 dated 26 Jun 2015).


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Data Sources

Public sector statistics are collected through :

Ministries & Public administrations

Ministry of Finance (acquisition of real estate by foreigner -total appraised value of the

properties bought & sold by foreigners )- High Council of Lebanese Customs (trade- grants)

Ministry of Labor (work permits)

Ministry of Economy and Trade MOET: Insurance sector statistics are

collected and compiled through the Insurance Control Commission (CDIS- CPIS-

Consolidated profit and loss statement of insurance sector).

Ministry of Interior: General Security (number of persons by nationalities entering or

leaving Lebanon through the various ports of entry)

Central Administration of Statistics (CAS)- future plan.


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Data Sources

CAS responsibility: some BOP components such as, transportation services,

tourism, insurance services, workers’ remittances, direct investment and trade

credits need surveys; but In the absence of such surveys and until availability,

estimation techniques are put in place to produce preliminary data for these

components

BDL DEP.

Foreign Exchange dep. :PSO -public sector operations, documentary credits.

Financial operations dep. :Public debt –T.B., Eurobond, contracted loans.


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Data Sources

International Organizations statistics

IMF (International Monetary Fund), BIS (Bank for International Settlements) & UNHCR.

Media folder:

news related to external sector statistics are captured according to the different

BOP components to consolidated, confirm or infirm information or to constitute

additive data source

official gazette


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Data Dissemination

Dissemination and Periodicity

BOP Methodology published on http://www.bdl.gov.lb/downloads/download/109/en

Annually: Detailed BOP to the IMF and the AMF, diverse international organizations.

Quarterly: Summarized BOP report, trade balance data, portfolio investments data.

http://www.bdl.gov.lb/downloads/index/9/148/Quarterly-Bulletins.html

Monthly time series data: disseminated on the BDL’s website

http://www.bdl.gov.lb/app/webroot/statistics/

http://www.bdl.gov.lb/downloads/download/109/en














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Current Account

Goods

Services

Income

Transfers

Capital & Financial Account

Capital Account

Direct Investment

Portfolio Investment

Other Investment

Reserve Assets

Unrecorded Transactions

BOP Structure and Classification


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BOP Components: Goods Account Definition:

Physical movement of goods across all borders.

Change of ownership.

Goods component comprises:

External Trade Statistics derived from Customs records.

Foreign Trade Transactions with Public Sector derived from BDL records.

Grants in kind derived from Customs records.

Goods component covers general merchandise, goods for processing, repairs on

goods, goods procured in ports by carriers, and nonmonetary gold.

General merchandise covers all movable goods for which changes of ownership

occur between residents and nonresidents.


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BOP Components: Services Account

Definition: “Services are the result of a production activity that changes the condition of the

consuming unit or facilitates the exchange of products or financial assets” (System of

National Accounts definition).

Differences Goods Services

Intangibility Ownership of goods can be

established and transferred

from one institutional unit to

another.

Services are not generally

separate entities, over

which ownership rights can

be established.

Location specific The production and

exchange of goods are

separate activities.

Services cannot be traded

separately from their

production.


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BOP Components: Services Account Services:

Transportation

Travel

Insurance Services

Communication services (Postal and courier services, Telecommunication services)

Construction services

Financial services

Computer and information services

Royalties and license fees

Merchanting and other trade-related services

Other business services (research and development, professional and management

consultancy, technical, trade related and other services)

Personal, cultural and recreational services (audio-visual and other services)

Government services (embassies and consulates, military units)


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BOP Components: Income Account

Definition:

Money received or paid on a regular basis,

for work → compensation of employees

or through investments → direct investment, portfolio investment, other investment.

Income received: inflows from nonresident account to resident (credit)

Income paid : outflows from resident account to nonresident (debit)


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BOP Components: Transfers Account

BPM5- definition

A resident entity in one economy has provided a nonresident entity with

a real resource or,

a financial item (goods, provision of a service, financial or non financial asset etc)

The double-entry system requires that an offsetting entry be made.

If the offsetting entry does not consist of the provision of a real resource or a financial

item, the offset is designated as a transfer.


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BOP Components: Transfers Account Current transfers

Current transfers consist of all transfers that are not transfers of capital. To distinguish current transfers from capital transfers through the special characteristics of capital transfers:

a transfer in kind is a capital transfer when it consists of • the transfer of ownership of a fixed asset or • the forgiveness of a liability by a creditor when no counterpart is received in return. .

a transfer of cash is a capital transfer when it is linked to or conditional on: • the acquisition or disposal of a fixed asset (for example, an investment grant) by one or both

parties to the transaction. • the change in the stocks of assets of one or both parties to the transaction.

Capital transfers also may be distinguished by being large and infrequent

Current transfers

affect the level of disposable income and should influence the consumption of goods

or services

items: general government & other sectors


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Other Sectors

It includes: Current transfers between other economic sectors and the rest of the

world cover transfers between individuals, institutions or nongovernmental

organizations.

Workers’ Remittances: major component in BOP.

Other Transfers: assistance or contribution receive or extend by all non-

governmental sectors.


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BOP Components: Transfers Account Workers’ Remittances:

Remittances essentially represent household income from foreign economies arising

mainly from the temporary or permanent movement of people to those economies

Remittance flows have increased rapidly due to rising migration and labor mobility.

For some countries, receipts from remittances exceed receipts from the export of

goods and services and from financial inflows on foreign direct investment.

Many governments now consider remittances to be of high policy interest and wish to

analyze their impact on economic development and security (sensitive data in

Lebanon case).

Balance of Payments Manual (5th edition) definitions: “workers’ remittances” is

defined as current transfers from employment income by migrants who are employed

in new economies and considered residents there.

Balance of Payments Manual (6th edition) definitions: It has been replaced by a

broader concept “personal transfers” and will be included in the secondary income.


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Workers’ Remittances: Lebanon particularity: sender /receiver country

Current transfers carried out between migrants working in their new economy and

their country of origin

In the form of a familial financial aid, sent regularly, small or moderate values

As no single data source can ensure that all transactions are captured: compilation

requires: Using data from diverse sources


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BOP Components: Capital Account Definition

Capital account shows credit and debit entries for non-produced nonfinancial assets

and capital transfers between resident and nonresident.

Acquisition or Disposal of Non-produced, Non-financial Assets consist of:

-Natural resources; tangible assets (land, subsoil assets: only for Intl.org. & forg.gov.)

-Contracts, leases, licenses; intangible ones (recognize as tradable economic assets)

-Marketing assets (good will, brand names, logos, domain names)

Capital transfers are transfers in which the ownership of an asset (other than cash or

inventories) changes from one party to another; or where a liability is forgiven by the

creditor

Capital Transfers: designates transfers made for the purpose of long-term economic

interests.


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BOP Components: Capital Account

Capital Transfers Classification & Components

Debt Forgiveness (both for governments and private entities).

Other General Government: Includes transfers in kind of fixed assets &

investment grants. Also: Taxes levied on such transfers.

Migrants’ Transfers: Contra Entry to the flow of goods & financial items that

accompany migration into the country.

Other Transfers: Large Donations, Inheritance by private entities.


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The DI is a sub-item of the BOP’s Financial Account

As per BPM5, DI statistics are recorded in the BOP according to the “Directional

Principle” i.e.:

DI abroad (Outflows)

DI in reporting economy (Inflows)

On Net Basis (Acquisition less Disposal) for all DI components (Equity, Debt,

& Reinvested Earnings)

BOP Components: Direct Investment


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DI Concept

The FDI critical determinant: Equity ownership

FDI reflects the objective of:

Establishing a lasting interest by a resident enterprise (DI) in an enterprise (DIE)

resident in an economy other than that of the investor.

The lasting interest:

A long term and steady relationship between the DI and the DIE;

And a significant degree of influence on the enterprise management;

Foreign investor owning directly or indirectly 10% or more of the ordinary

shares or voting power of the DIE.

No choice: other criteria are not accepted in order to ensure consistency

in FDI recording.



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4- DI Definition

Direct investment is a category of cross-border investment;

Arises when an investor resident in one economy, the Direct Investor (DI), makes an

investment that gives a significant degree of influence on the management of an

enterprise (not less than 10% of voting power) that is resident in another economy,

the Direct Investment Enterprise (DIE).

NOTE: FDI is defined according to the “Residency Concept” and not to other

concepts such as Nationality, Geographical boundary, etc.



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5- DI Stakeholders

Direct Investor (DI): could be

Individual or a group of Individuals

Company or a group of companies from the Public and/or Private sector

Governmental Entities

Direct Investment Enterprise (DIE): could be

Associates (between 10% & 50% of the voting power owned by the DI)

Subsidiaries (more than 50% of the voting power owned by the DI)

Branches (100% of the voting power owned by the DI)



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BOP Components: Portfolio Investment

Definition of Portfolio Investment

Portfolio Investment involves cross border transactions and positions in equity or debt securities, other than those included in direct investment or reserve assets.

The key is the difference in the relationship between the creditor and debtor:

In the case of direct investment the investor has over 10% in voting power while the opposite is true for portfolio investment. The intention of the investor is not to acquire influence on decision making, and he may not have a lasting relationship or say in management.

Regarding the reserve assets the creditor is a monetary authority or the assets are under its control.

Portfolio Investment designates the acquisition of financial instruments for the purpose of making a profit or generating returns. Portfolio instruments are negotiable and designed to be traded on organized markets.

The changes in the holdings are recorded, not the holdings (BOP measures flows).


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The presentation of portfolio investment in BOP is by:

1. assets/liabilities

2. broken down by instrument (equity, debt)

3. original maturity (long term/short term)

4. institutional sector (monetary authorities, general government, banks, other

sectors).

BOP Components: Portfolio Investment


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BOP Components: Other Investment

Other investment is a residual category that includes all financial transactions not

covered in direct investment, portfolio investment or reserve assets.

It includes the assets and liabilities of the resident economy against the rest of the

world, with respect to:

Trade credits

Loans

Currency and deposits


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Trade Credits:

Trade Credits represent credits extended directly by the suppliers of goods and

services to their consumers. They arise when payment for goods and services is not

made at the same time as the goods change ownership or as the services are

provided.

Assets Liabilities

Prepayment of imports Prepayment of exports

Loans to facilitate exports Loans to facilitate imports


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Loans:

Loans are financial assets created through the direct lending of funds by a lender to a

borrower.

Data is derived from PSO, ITRS, External Debt Statistics, the consolidated balance

sheets, and Non Banks Investment (From the Bank for International Settlements (BIS)).

Assets Liabilities

Monetary authorities Monetary authorities

General government General government

Banks Banks

Other sectors Other sectors


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Currency and deposits:

Currency: notes and coins that are in circulation, commonly used to make payments.

Deposits: transferable deposits and other deposits (in domestic or foreign currency)

Data is derived from PSO, Net Foreign Assets (NFA), and Non Banks Investment (From

the Bank for International Settlements (BIS)).


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BOP Components: Reserve Assets

Definition

External Assets controlled by the Monetary Authorities that are readily available

(generally Central Banks).

Used to finance payments imbalances or to affect the exchange rate through

intervention in the exchange market.

Other motives for holding reserves: legal requirements, generate confidence or as a

basis for foreign borrowing.

NB: Only changes arising from transactions are included in BOP!


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BOP Components: Reserve Assets

Components

Monetary Gold: Gold owned by authorities and held as reserve. In BOP, only changes

in the stock of gold (through transactions) are recorded and not those affected by

price fluctuations. Although the stock of Monetary Gold stood at $10.9 Billion in 2014,

no entries have been recorded in BOP lately.

Special Drawing Rights (SDR): Allocated by the IMF and can be exchanged for some

foreign currencies (USD, EUR, JPY and GBP).

Position in the Fund (IMF): contingent upon the payment of the member’s quota to

the fund.

Foreign Exchange: Securities, foreign currencies and deposits held as an

arrangement between monetary authorities of two countries.


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BOP Components: Unrecorded Transactions

Unrecorded transactions are part of the “net errors and omissions” item

This item is a balancing item or statistical discrepancy,

This item is an offset to the overstatement or understatement of the recorded

components (i.e if the balance of those components is a credit, the item for net

errors and omissions will be shown as a debit of equal value, and vice versa)


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BOP Importance

One of the main statistical indicators to draw national and international economic

policies as it summarizes the external effects on a certain economy.

An essential analysis tool to diagnose and understand imbalances in international

payments, as well as the relationship between the exchange rate and the BOP

flows.


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Thank You

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