pressure on balance of payments

7/30/2019 Pressure on Balance of Payments

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Group Members:Rija Ahmed-9887Arhum Qadeer-10083

Reema Tariq-10188


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A record of all transactions made betweenone particular country and all othercountries during a specified period of time.

BOP compares the dollar difference of theamount of exports and imports, including allfinancial exports and imports.

A negative balance of payments means thatmore money is flowing out of the countrythan coming in, and vice versa.


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Balance of payments may be used as anindicator of economic and political stability.

For example, if a country has a consistentlypositive BOP, this could mean that there issignificant foreign investment within thatcountry.


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Pakistans trade with the rest of the world hasplayed a crucial role since the beginning of itsexistence.

Every developing country is dependent ontrade as it lacks capital and industries so itneeds foreign exchange for its imports.

Pakistans produce mainly consisted ofagricultural products in its early years. Its main imports were manufactured goods in

this period.


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In 1948/9 Pakistan was a member of the sterlingarea its major trading partners were India andUK.

Pound Sterling was devalued by 31% Pak did not devalue its rupee with the pound

sterling. However its BOP position improved because the

Korean War broke out which increased demandfor raw material.

Pakistans exports rose, improving BOP position.


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After the Korean boom, the governmentimposed direct controls on imports.

Import substituting industrialisation.


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Year Exports Imports Balance

1950/1 406 353 53

1951/52 279 445 -1661952/53 282 307 -45

1953/54 194 249 -55

1954/55 149 237 -88

1955/56 156 203 -47

1956/57 147 319 -172

1957/58 91 276 -185


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Liberal import policies Export bonus scheme

Basic import control structure wasmaintained Open General Licensing System was

expanded Free list was increased Exports and imports increased


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Processed goods were exported at theexpense of raw material.

Exporters sold good at lower prices. Some exports had been increased anyways.


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Half of the exports went to East Pakistan 18% imports were from the East

Major structural break Abolishment of import licensing system, and

the export bonus scheme Devaluation of the rupee


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Absence of explicit export policy Export taxes were imposed

Worse balance of payment Not many export promoting measures


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1958/59 93 215 -122

1959/60 160 379 -219

1960/61 114 457 -343

1961/62 114 470 -356

1962/63 210 588 -378

1963/64 226 626 -400

1964/65 239 772 -533

1965/66 253 605 -3521966/67 273 762 -489

1967/68 346 699 -353

1968/69 357 640 -283

1969/70 338 690 -352


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1970/71 420 757 -337

1971/72 591 638 -47

1972/73 817 797 20

1973/74 1026 1362 -336

1974/75 1039 2114 -1075

1975/76 1137 2067 -930

1976/77 1141 2325 -1184


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Reduced banned goods Non-tariff barriers removed

Free list increased(438+91) World bank 41% ,22% Removal of quotas Subjects of import licensing decreased 2 lists Virtual elimination


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Import facilities for exporters

Flexible exchange rate Nominal tariff rates


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Duty rates125%,raw material20-50% Tariff rates

Removal of Non tariff barriers FCD accounts 1988-remaining non-tariff barriers,import tax

concessions and exceptions,duty rates,exporttaxes,sales tax.

1993-tariffs,protection,duty on raw materials.


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54% federal government revenue fromimport taxes.

Duty collection to value of imports 33% Lesser costs


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1977/78 1311 2810 -1499

19978/79 1710 3676 -1966

1979/80 2365 4740 -2375

1980/81 2958 5409 2451

1981/82 2464 5357 -2663

1982/83 2694 5357 -2663

1983/84 2768 5685 -2917

1984/85 2491 5906 -3415

1985/86 3070 5634 -2564

1986/87 3686 5380 -1694

1987/88 4455 6391 -1936

1988/89 4661 7034 -2373


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Years Exports Imports Balance

1989/90 6131 7619 -1488

1990/91 6904 9252 -2348

1991/92 6813 9941 -3128

1992/93 6803 8564 -1761

1193/94 8137 10394 -2257

1994/95 8707 11805 -3098

1995/96 8320 11894 -3574

1996/97 8628 10118 -14901997/98 7779 9432 -1653

1998/99 8569 10309 -1740

1999/2000 9202 10729 -1527

2000/01 9135 10340 -1205


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Trade Balance -1269 Merchandize Exports (f.o.b) 8933 Merchandize Imports (f.o.b) -10202 Non-factor Services (Net) -981 Investment Income (Net) -2161 Receipt 113 Payments -2274

Private Transfers (Net) 3898 (Workers Remittances) (1087) Current Account Balance -513 Private Capital (Net) -380 Direct Investment 146 Other Long Term -214 Short Term -312 Public Capital (Net) 577 Long Term Disbursements 2302 Less Repayments Long Term 1795 Other Short Term and Long Term 70 Changes in Reserves -1001 Errors and Omissions 625 Financing Accumulation of Arrears 692 Source: Pakistan Economic Survey-2002-03.


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Alternate Presentation of Balance of Payments of Pakistan: 2000-2001 Trade Balance -1269 Services (Net) 8933 Exports -10202 Imports -3142 Receipts 1464 Payments -4606

Shipments (877) Investment Incomes of Foreigners (2274) Others (1455) Private Unrequited Transfers (Net) 3898 Workers Remittances (1087) Current Account Balance -513 Long Term Capital (Net) 171 Private Capital (Net) -68 Official Capital 239 Basic Balance 342 Errors and Omissions 313 Balance Requiring Official Assistance -29 Official Borrowings 338 Official Short Term Capital (Net) 431 Balance of Payments Borrowing 93 Changes in Reserves 1001 Financing Accumulation of Arrears 692


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Production of Main Crops

Years +Wheat, Rice,cotton

1990-91 -14565 -3261- 9628 1991-92 -15684 -3243 -12822 1992-93 -16157 -3116 -9054 1993-94 -15213 -6995 -8041 1994-95 -17002 -3447 -8697 1995-96 -16907 -3996 -10595 1996-97 -16651 -4305 -9374 1997-98 -18694- 4333 -9184 1998-99 -17856 -4676 -8790 1999-2000 -21079- 5156- 11240 2000-2001- 18535 4803 10732 Source: Pakistan Economic Survey various issu


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External Stability at Risk Current account inked in red

Added pressure from financial account Global Securities Pakistan


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pressure on balance of payments

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