6.5.1—Current account stability objective

Current-account stability means an external position that can be financed without an abrupt crisis and is consistent with sustainable output, employment and living standards—not necessarily an exact zero every year.

Temporary deficits can finance productive investment, while temporary surpluses can reflect a commodity boom. The key questions are duration, financing quality, debt-service capacity, exchange-rate flexibility and whether domestic demand is being unnecessarily compressed.

A deficit used to build export capacity may be sustainable if future income services the borrowing; the same deficit used for repeated consumption is more vulnerable when capital inflows reverse.

“Balance the current account every year” is not the objective; forcing zero can sacrifice useful investment or demand.