PRESENTED TO:

SIR SHEIKH USMAN YOUSUF

PRESENTERS
RIZWAN JAVED Mi09MBA007

YASIR QAYYOM

Mi09MBA039

SAMAR ABBAS

Mi09MBA046

WE ARE GOING TO PRESENT

BALANCE OF PAYMENT OF PAKISTAN

OUTLINE

BALANCE OF PAYMENT

TYPES OF BOP
PRESENTATION OF BOP

Vertically
Horizontally

HISTORICAL PERSPECTIVE

Pakistans Balance of Payments

OUTLINE Cont

CURRENT SITUATION OF BOP OF PAKISTAN

IMPORT EXPORT AND TRADE BALANCE

THE PROBLEMS IN CORRECTION OF (BOP)

MEASURES TO REMOVE DEFICIT IN BOP

SUGGESTIONS TO CORRECT DEFICIT IN BOP CONCLUSION

Balance of Payments
Balance of payments is systematic record of all economic transactions completed between the residence of a country and the residence of the rest of the world.

TYPES OF BOP

Surplus in (BOP)
Receipts > Payments

Balance in (BOP)
Receipts = Payments

Deficit in (BOP)
Receipts < Payments

PRESENTATION OF BOP

BOP OF A COUNTEY CAN BE SHOWN IN TWO FORMS:

Vertically

Debit (Payments) Credit (Receipts)

Horizontally

The current account The capital account The official settlements account or official reserve assets account

Vertically

When a payment is received from a foreign country, it is a credit transaction while a payment to a foreign country is a debit transaction.

DEBIT (RECEIPTS): Include imports of goods and services, transfer payments to foreigners.e.t.c CREDIT(PAYMENTS): Includes exports of goods and services, borrowings from abroad, foreign direct investment e.t.c.

HORIZONTALLY

The Current Account:

It includes all international trade transactions of goods and services, international service transactions (i.e. tourism, transportation and royalty fees) International unilateral transfers (i.e. gifts and foreign aid).

The Capital Account: Financial transactions consisting of direct investment and purchases of interest-bearing financial instruments, non-interest bearing demand deposits and gold comprise the capital account

Horizontally Contd...

The Official Reserve Assets Account:

Official reserve transactions consist of movements of international reserves by governments and official agencies to accommodate imbalances arising from the current and capital accounts

Historical Perspective

Pakistan has always faced negative BOT except for three years

1947-48 1950-51 1972-73

Reasons of surplus in these years

In 1947-48 the country had a huge exports and a favorable balance of trade (US $ 42 million). In 1950-51 With the Korean War boom once again Pakistan gained a surplus in BOT (US $ 53 million).

In 1972-73 there is a favorable BOT (US $ 20 million) The exports increased significantly and the share of exports in GDP rose to 14.9%.

YASIR QAYYOM Mi09MBA039

BOP 1994-1998

Exports were stagnant & Structural problems

persisted

Debt servicing burden was rising.

Current account deficit hovered around $ 3-3.5

billion or 4-5% of GDP.

BOP 1999-2000

Foreign exchange regime was liberalized and all restrictions on foreign investment outflows removed. The premium over open market rate was stable 4 to 5%. Current account deficit has been reduced from 3.8% to 1.6%. In 1999-2000 cash payments of ($ 3.6 billion) were paid on external debt servicing.

Pakistans Balance of Payments July 2008 - June 2009

Pakistans balance of payments showed a deficit of $9,261 million in its current account balance during 2008-09 as against a deficit of $13,874 million during 2007-08.

Current Situation of BOP of Pakistan AS % OF GDP

Year Export Import Trade Deficit Workers Remittances Current Account Deficit 5.1

2006-2007

11.8

21.2

9.4

3.8

2007-2008

11.6

24.4

12.8

3.9

8.5

2008-2009

10.9

21.5

10.6

4.8

5.7

2009-2010

9.1

16.0

7.0

4.2

1.7

IMPORT EXPORT AND TRADE BALANCE

Year 2006-2007 Export 1,029,312 Imports 1,851,806 Balance -822,494

2007-2008

1,196,638

2,081,763

-1,315,434

2008-2009

1,383,718

2,723,570

-1,339,852

2008-2009 ( July to March)

1,176,388

2,021,991

-905,375

The Problems in Correction of (BOP)

Revenue oriented tariffs Adverse terms of trade Capital account problem Trade restrictions of developed countries Inflation Political instability Import substitution policy of Pakistan

The Problems in Correction of (BOP) contd..

Income Type of Disequilibrium Price Type of Disequilibrium Capital Movement Structural Changes

Measures to Remove Deficit in BOP

To Give Subsidies to Exporters Restrictions on Imports Deflation Devaluation International Monetary Fund (I.M.F) Depreciation Appreciation

SAMAR ABBAS Mi09MBA046

Suggestions to correct Deficit in BOP

The export proportion of manufactured goods should be increased. The non-traditional exports should be enhanced i.e. dairy & milk products. The quality and cost of the export goods should be improved. The imports of luxurious items should be restricted. Reduction in export duties

Suggestions to correct Deficit in BOP contd..

Pakistan must encourage the export of engineering industries. We should import advanced technology for increasing home production. We should explore new markets for our exports and export exhibitions should be organized in country i.e.: expo-centers in Karachi and Lahore. Increase in Invisible Receipts and Decrease in Invisible Payments

Conclusion

After having a complete study of BOP of Pakistan we conclude that Pakistan facing deficit in balance of payments. Pakistan facing this problem since its freedom and it is due to ineffective fiscal policies. Political instability is another cause of this deficit in BOP. Pakistan should make trade agreement with other countries to enhance its exports. Pakistan should obtain assess to international market to increase its foreign reserves.