Question

Explain how a country could have a deficit on its primary income but a current account surplus. 4 marks​

Answer 1

The following are the reasons for how a country could have a deficit on its primary income but a current account surplus:

• The identified and associated sources of primary income would be different than the sources of financial activities that reflect their collection in the current account.
• The expenses on developmental activities could be drawn from the primary account rather than drawing them directly from the current account.
• There could be diversions of funds to manage the accounts in order to earn interest on them.