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KHAIRPUR
ASSIGNMENT TOPIC:
“BALANCE OF PAYMENTS AND
BALANCE OF PAYMENTS PROBLEMS IN
PAKISTAN”
Submitted by:
Ahtisham Rajput-107
Ibrar Ahmed Qazi-136
Zain-ul-Abdin Shaikh-196
CONCLUSION
19
REFERENCES
20
TABLE OF TABLES
Table Page
TABLE NAME
number number
There is no country in this world which produces every thing that it needs. So
every country therefore, tries to produce those commodities in which it has
competitive advantage then countries exchange their commodities produced b the
other countries e.g. as Pakistan export cotton, rice etc in other countries and in
return it import those goods which it cannot produce or don’t have competitive
advantage as Capital goods, edible oil etc. so as we maintain our personal business
record similarly a country also maintain its record in the shape of balance of
payment.
1
Economics of Pakistan by Professor M. Saeed Nasir chapter International trade page 183.
2
Economics of Pakistan by M. Seed Nasir edition 2009-10, chapter international trade page
number 184.
is being met by short and long term loans from the other countries or from
institutes as International Monitory Fund (IMF).
• The surplus of Rs: 578 crore in 1950-51 in BOP was mainly due to the
Korean War.
• The favorable BOP in the year 1954-55 amounting to Rs: 9.9 crore was
marginal. However, the surplus on current account was due to devaluation
of rupee and greater trade restrictions on imports.
• While in 1958 to 1960 BOP was in surplus due to introduction of Bonus
vouchers.
Excluding the five years stated above, Pakistan has been facing a deficit in its
BOP.
“The current account deficit in BOP for the year 1996-97 was $3.28 billion. It has
been down to $ 1.92 Billion during 1997-98 and $1.14 billion in 1999-2000.
Pakistan’s current account balance was favorable in 2002 to 2004. However it
slipped again into danger zone in 2004-05 and 2006-07 due to higher imports of
oil and machinery. BOP deficit increased to $ 13.735 billion during 2007-08
against $ 6.878 billion in 2006-07. During 2008-09 (July- April) the deficit
reduced to $ 8.549 billion against $11.173 billion in the corresponding year period
last year but in 2009-10 this deficit reduced to $3.6 billion”1 and now “currently
we have a trade surplus of 26 million in our current account which is a good
sign”3.
3
Kawish Newspaper, 20 January 2011 page number 3.
2.0 TERMINOLOGY OF BALANCE OF PAYMENTS
The main items which are included in the balance of payments are given below”:
• CURRENT ACCOUNT
• CAPITAL ACCOUNT
• OFFICIAL RESERVE
• Our export and imports has shown improvement as our exports of goods
has increased while imports of goods has decreased and due to this our
trade deficit
reduced from $11.1 billion to $9.9 billion See (Table 2.1).
• Our servicing account also shown improvement as its deficit was $3.21
billion and it reduces to $1.98 billion in 2009-10 See (Table 2.1).
Source: Table 2.1 Pakistan economic survey 2009-10, chapter balance of payment page number
101, and table number: 7.11.
So over all our current account has shown improvement as it can be seen with the
improvement that takes place in these two to three years.
Although our foreign reserves right now are the highest in the history of Pakistan
but there is major contribution of IMF- International Monitory Fund borrowed
money and when in the month of June 2011 Pakistan will pay the loan to IMF its
foreign reserves will shrink and the condition of borrowing will become again.
• If the IMF, World Bank and Asian Development Bank release their loans
for Pakistan as promised, than our B.O.P may show some improvement.
• Our Prime Minister Promised that energy crisis will come to an end in the
Month of March, 2011 if this happen it will have a good impact on
Pakistan’s BOP.
• Our exports may increase and BOP may show good results because of
natural disasters in Australia, Japan etc. so the demand and prices of our
raw material will increase and than Pakistan can earn substantial profit
from there and can its BOP.
• As recently oil prices reached $104 per barrel it will hurt our BOP because
our major import is based on oil and petroleum.
5
Pakistan and gulf economist, how to boost exports? Feb 14-20,2011 , Export target for 2011
revised to $22 Billion, page number 7,
3.7 IMPORTS OF PAKISTAN: Import
growth during July-April 2009-10 declined by 2.8
percent against the corresponding period last year.
Lower international prices, compressed domestic
demand, exchange rate depreciation and improved
production of cotton crops remained the major
factors behind less imports. Among the major
import groups: food, machinery and telecom
groups witnessed a decline during July-April 2009-
10 while Petroleum, consumer durables, raw
materials and other items showed increment. So
over all mixed trend is observed in imports of
Pakistan in 2009-10 See (table 3.6).
6
Pakistan and gulf economist, Power emergency, Feb 2-8,2009 , Fact sheet page number 61, table
1.
private sector won’t have enough money how can?
We boost our export in other countries.
7
Economic survey of Pakistan 2009-10, chapter name balance of payment, topic name direction of
exports page 94
5.0 IMPACTS OF BALANCE OF
PAYMENT DEFICIT ON ECONOMY
Grand total
$.5 billion
So this example clearly show that how quickly
county “A” reserves fall and how BOP effect
foreign reserves of country.
YEAR LEADERS US
1972 Zulfiqar Ali Bhutto Rs:4
1977 Zulfiqar Ali Bhutto Rs:9
1983 General Zia-ul-Haq Rs:1
1987 General Zia-ul-Haq Rs:1
1990 Benazir Bhutto Rs:2
1991 Nawaz Sharif Rs:2
1994 Benazir Bhutto Rs:3
1996 Benazir Bhutto Rs:4
1997-99 Nawaz Sharif Rs:5
1999-08 Parwaiz Musharaf Rs:6
2009 Syed Yousuf Raza Gillani Rs:8
Source Table 5.1: Pakistan and gulf economist,
Inflation and interest rate Feb 15-21, 2010, Fact
Sheet, page number 48
8
Economic survey of Pakistan 2009-10, chapter name balance of payment topic: Exchange rate,
page 105
6.0 SUGGESTIONS TO OVERCOME
BALANCE OF PAYMENT DEFICIT
9
Pakistan and gulf economist, how to boost exports? Feb 14-20,2011 ,Kyrgyz holds immense
trade opportunities for Pakistan , page number 8,
loss of billions to our industrial sector which is
considered to be as a backbone of our export.
CONCLUSION