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pk Balance of Payment of Pakistan

Outline/Contents
Balance

of Payment (BOP) Balance of Trade (BOT) Difference between BOP & BOT History of BOP Major Exports & Imports of Pakistan Causes of Adverse BOP of Pakistan Measures to Correct Adverse BOP of Pakistan

Balance of Payment (BOP)

BOP

is a record of the economic transactions between the residents of one country and the rest of the world during the course of one year

BOP (contd)
All

trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is coming in and going out from a country

BOP (contd)
The

items which lead to an inflow of foreign earnings are placed on the credit side of the balance sheet
items which give rise to an outflow of foreign currency are placed on the debit side of the balance sheet

The

Components of BOP
The

components of BOP are divided into following three categories:

The

Current Account The Capital Account The Official Reserve Assets Account

The Current Account

Current

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

The Capital Account

In

Capital Account, international monetary flows related to investment in business, real estate, bonds and stocks are documented

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

Surplus & Deficit of BOP

Surplus/Favorable

BOP: Payments < Receipts of BOP

Balanced/Equilibrium

Payments = Receipts
Deficit/Unfavorable

BOP: Payments > Receipts

Balance of Trade (BOT)

BOT

is the difference between the value of exports and imports of physical items (goods) of a country during a given period of time

Surplus & Deficit of BOT

Surplus/Favorable

BOT: Value of exports > Value of imports

of BOT:

Balanced/Equilibrium

Value of exports = Value of imports

Deficit/Unfavorable

BOT: Value of exports < Value of imports

Difference Between BOP & BOT

BOP
BOP refers to the sum of both the balance on visible transactions as well as invisible items. It also includes capital and financial accounts

BOT
BOT refers only to the merchandise balance or balance on visible transactions alone

History of BOP
Pakistans

BOP situation has not been satisfactory since independence. The country with the exception of five years has been running a persistent deficit in her BOP on current account

Years of Surplus in BOP of Pakistan

These

years are as follows:

1950-51 1954-55 1955-56

1958-59
1959-60

Major Exports and Imports of Pakistan

Exports
Exports

mean selling of goods and services to other countries to earn foreign exchange exports of Pakistan recorded a growth of 10.2% during the first ten months (July-April) of the fiscal year 2007-08 against a growth of 3.6% in the same period of 2006-07

Overall

Exports (contd)
Pakistans

exports have increased from $ 13.8473 billion to $ 15.2555 billion in the first ten months (July-April) of the fiscal year 2007-08 as compared to the same period of 2006-07

Major Exports of Pakistan

Commodities
Cotton Manufactures

2006-07 in %
59.7

2007-08 in %
54.7

Leather
Rice Textiles Sports goods Others

5.2
6.6 2.5 1.7 24.3

6.1
7.1 2.9 1.6 27.6

Imports
Imports

mean buying of goods and services from other countries to fulfill the domestic needs
imports during the first ten months (July-April) of the fiscal year 2007-08 grew by 28.3% compared with the same period of the fiscal year 2006-07 reaching to $ 32.06 billion

Pakistans

Major Imports of Pakistan

Commodities
Machinery Petroleum & Products
Chemicals Transport Equipments

2006-07 in %
21.9 24.0
13.0 7.6

2007-08 in %
18.4 26.5
12.4 5.7

Edible oil Iron & Steel

Fertilizers Tea Others

3.1 4.9
1.5 0.7 23.3

4.2 3.3
2.7 0.5 26.3

Causes of Adverse BOP

Following
Increase

are some of the causes of adverse BOP of Pakistan:

in Imports Low Volume of Exports Inflation Increase in Defense Need

Causes of Adverse BOP (contd)

Substitutes Increase

in Population Revenue Oriented Tariffs Deterioration in Terms of Trade (TOT) Trade Restrictions

Measures to Correct Adverse BOP

Following are the measures to correct adverse BOP of Pakistan:

Promotion of Exports

Finished Products Non-traditional Exports Quality & Cost of Export Goods Export Exhibitions and Fairs Devaluation

Measures to Correct Adverse BOP (contd)

Check

on Imports

Luxurious

Products Unnecessary Items

Invisible

Receipts and Payments Industrial Development Explore New Markets

Any Question???

Thank You Have a Nice Day!!!