Conway's experts

Yesterday, the Silk Road Intelligencer reported this:

“Kazakhstan wracked up a $4b current account deficit in the first nine months of 2015, the Central Bank said on Wednesday, a sharp drop from a surplus of over $6b during the same period last year.

“A country’s current account is the difference between government revenue and expenditure….”

Uh, no.  The current account usually refers to the difference between exports and imports.  The account is in deficit when it is negative – that is, when imports exceed exports.  This is the case in Kazakhstan this year because of low oil prices.  For better or worse, Kazakhstan’s economy is based on export revenues from oil and gas, which usually account for at least a fourth of the value of production on Kazakhstani soil (gross domestic product).

The difference between government revenues and spending is called the fiscal surplus.   When spending exceeds revenues, we have a fiscal deficit, which the government covers by borrowing. For instance, if the government receives $1 in tax payments and spends $3, it must borrow $2.

The Central Bank was talking about trade, not fiscal policy.

Unfortunately, English-language coverage of Central Asian economics is abysmal.  This latest gaffe from The Conway Bulletin is just another example.  –Leon Taylor tayloralmaty@gmail.com

Notes

Technically, the current account also includes international income transfers, but these play a minor role in the account.  As the media use the term, the “current account” almost always refers to net exports of goods and services. If you’d prefer a more precise term for net exports, try “the balance of trade.”

Good reading

Paul Krugman and Maurice Obstfeld.  International economics: Theory and policy.  Eighth edition.  Clear and authoritative.