Current Transfers

What are 'Current Transfers'

Current transfers are current account transactions in which a resident entity in one nation provides a nonresident entity with an economic value, such as a real resource or financial item, without receiving something of economic value in exchange. Current transfers are transactions where the originator does not receive a “quid pro quo” in return; this absence of economic value on one side is represented in the balance of payments by one-sided transactions called transfers. Current transfers affect the current account and are separate and distinct from capital transfers, which are included in the capital and financial account. Current transfers include workers’ remittances, donations, tax payments, foreign aid and grants.

BREAKING DOWN 'Current Transfers'

Current transfers include all transfers that do not have the following characteristics of capital transfers:

  1. Transfers of ownership of fixed assets;
  2. Transfers of funds linked to acquisition or disposal of fixed assets; and
  3. Forgiveness by creditors of liabilities without any counterparts being received in return.

Current transfers are classified into two main categories – general government and other sectors.

General government transfers include the following:

  • Transfers in cash or kind backed by international cooperation between governments of different economies, or between a government and an international organization;
  • Cash transfers between governments for financing current expenditures by the recipient government;
  • Gifts of food, clothing, medical aid, etc. as relief efforts after a natural disaster;
  • Gifts of certain military equipment; and
  • Current taxes on income and wealth, and other transfers such as Social Security contributions.

“Other sectors” transfers include the following:

  • Workers’ remittances by migrants (someone who stays in another nation for more than a year) who are considered residents of other countries;
  • Transfers in cash and kind for disaster relief;
  • Regular contributions to charitable, religious, scientific and cultural organizations; and
  • Premiums and claims for non-life insurance.

While current transfers are grouped separately from goods, services and income in the balance of payments because of their one-sided nature, the distinction between a transfer and a regular transaction is not always clear. For example, remittances from overseas workers are classified by the recipient nation either as current transfers or as “compensation of employees,” depending on the length of stay by these workers in the foreign countries where they are working. As another example, a remittance from a resident of one nation to finance another resident who is staying abroad temporarily is not recorded as a transfer, since it is considered a transaction between residents of the same country.

RELATED TERMS
  1. Telegraphic Transfer - TT

    An electronic method of transferring funds. Telegraphic Transfers ...
  2. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  3. Wire Transfer

    An electronic transfer of funds across a network administered ...
  4. Direct Transfer

    A transfer of assets from one type of tax-deferred retirement ...
  5. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  6. Transfer Price

    The price at which divisions of a company transact with each ...
Related Articles
  1. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  2. Investing

    2015's Best Balance Transfer Credit Card Promotions

    Trying to pay off a credit card balance at too high an interest rate? You might save a good chunk of cash with one of these balance transfer promotions.
  3. Personal Finance

    Best Ways to Send Large Sums of Money Abroad

    Understand why it may be difficult to send large sums of money internationally. Learn about the top five ways to send large sums of money abroad.
  4. Investing

    Understanding Remittance

    Remittance is the process of sending money to remove or pay an obligation.
  5. ETFs & Mutual Funds

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  6. Personal Finance

    Sending Money? The Top Money Transfer Services

    Need to send money in a hurry? Here's a list of the major players in the money transfer business. Compare rates, times and other details before deciding.
  7. Personal Finance

    Shuffle Away Your Debt With Balance Transfers

    This option can save you big bucks, but only if you watch out for rates and fees.
  8. Markets

    The World Will Soon Use Bitcoin to Send Money Home

    New players are constantly challenging the dominant, conventional mechanism of payment transfers that existed before bitcoin and blockchain arrived.
  9. Personal Finance

    Understanding The Insurance Transfer-For-Value Rule

    If you are banking on your life insurance payout being tax-free, you may be in for a surprise.
  10. Markets

    How Tech Companies are Disrupting the Remittance Market

    Mobile apps by many financial tech firms are increasingly gaining high revenues from international remittances.
RELATED FAQS
  1. Are there any regulations on transfer pricing?

    Learn about transfer pricing, its role in intra-business calculations, and how the U.S. government regulates transfer pricing ... Read Answer >>
  2. How does transfer pricing help business?

    Explore several ways that transfer pricing helps businesses. Transfer pricing can often help streamline accounting and business ... Read Answer >>
  3. How do you transfer common stock from one broker to another?

    Understand how common stock assets are transferred from broker to broker using the Automated Customer Account Transfer Service ... Read Answer >>
  4. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Answer >>
  5. Can I get a balance transfer if I have bad credit?

    Transferring funds from one credit card to another is often possible with bad credit, but it will likely cost you in interest ... Read Answer >>
  6. I work for a university, and I have a 403(b) with TIAA-CREF. But TIAA-CREF says I ...

    It depends. The IRS does permit the transfer of assets between 403(b) providers; however, employers and 403(b) providers ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center