asked the Secretary of State for Trade whether he is now holding an inquiry into the methods of calculating the sterling value of imports and exports; and why the inquiry is necessary.
The valuation in sterling of many transactions in the balance of payments accounts depends on the exchange rate adopted for conversion of foreign currencies into sterling, which, with fluctuating exchange rates, will, in turn, depend on the timing of various aspects of the transaction. In particular, the timing of supply or receipt of goods or services may not coincide with the timing of the financing of such transactions and therefore the sterling value of these two aspects of the transaction will not match in the accounts.
The effects of this mismatching are often compensatory; in so far as they are not, the net effect will appear in the errors and omissions entry required to balance the balance of payments estimates —"the balancing item".
An inquiry about the size of this item is not being held at present, but the basis of valuation of merchandise trade and all other transactions in the balance of payments accounts will be kept under constant review by this and other Departments concerned with the compilation of the accounts.