A CRITICAL STUDY OF BALANCE OF PAYMENT

S.Qamar Hasan

SYNOPSIS
A CRITICAL STUDY OF BALANCE OF
PAYMENT OF PAKISTAN
IDENTIFIY YOUR PROBLEM
There are number of Problems that causes imbalance in Pakistan’s
Balance of Payment.Few of them are given Below.

1. The major reason is and has always been the imports of luxurious
and high cost goods for the elite class of the country that
increases the import bill to the dangerous level where as on the
other hand the exports are on decreasing day by day. The textile
industry was the backbone of our exports but now it’s suffering
from various crises among them the power crisis is the major
issue.

2. Apart from import bill, the global recession in the recent year has
severely affected the business and trade all over the world which
also affected Pakistan.

3. The investments in the country have declined to the lowest and

the major reason is the law and order situation prevailing in the
country. The self-imposed war against terrorism has made our
situation worse as no one is willing to make
investments in the country.

4. The local industry is facing hard times as we don’t have sufficient

energy resources available. It has decreased the production of
goods and ultimately we have to buy them from other countries
which add to our import bill and increase the supply of our
currency.

5. Pakistan is agriculture based country and we have one of the

finest and largest canal system. But would you believe that we
need to import sugar, wheat and other basic crops to meet the
demand in the country? In recent year Pakistan needed to import
 A CRITICAL STUDY OF BALANCE OF PAYMENT
S.Qamar Hasan

tons of sugar and wheat just because of the mismanagement of

resources and water shortage created by India by building dams
on rivers which are flowing towards Pakistan.

6. Energy crisis needs to be separately mentioned because it not

only affected the Textile industry but overall the economic
activities in the country are paralyzed. And we need to put some
serious efforts to eliminate it otherwise the
consequences will be dangerous.

7. Political instability in the country has always affected the growth

of the country and it does affect the trade and ultimately the
current account of the country.

8. The government policies are the tools to take corrective actions

to make the things stable and on the track but wrong policies
may lead to adverse affects. We have been lacking in good
policies regarding the economy of the country.

9. Inflation, as we’ve discussed in class is a factor which affect not

only the trade but the foreign exchange as well. The increasing
rate of inflation will lead to the surplus supply of the currency and
it would depreciate the currency value. Once the Currency is
depreciated our current account will suffer as we have to pay
more to buy the same commodities and our import bill will rise.

INTRODUCTION
1. It is a systematic record of all the economic transactions between
domestic country and rest of the world is known as Balance of
Payment.”

2. It includes the payments and receipts during exports, imports,

3. Foreign remittances, inward or outward investments etc…

4. Balance of Payment is the difference between Current Account and

Capital accounts of a country.
 A CRITICAL STUDY OF BALANCE OF PAYMENT
S.Qamar Hasan

5. The Current Account further includes Trading Account, Service

Account, Income Account and unilateral transfers and other related
items.

6. The Capital account includes Loan transactions, inward or outward

investments, short-term capital, and other related items.

7. The actual figures for balance of payment can be obtained at theyear

end therefore it is projected based on the previous data andassisting
facts and figures.

STATEMENT OF THE PROBLEM

The biggest reason for budget deficit Pakistan experiences is because it's
import bills exceed it's exports. Exports are foreign exchange earners and
when we import it actually takes away our foreign exchange reserves thus
creating a budget deficit. A major reason for the excessive imports is
because of their unhealthy lifestyles. Almost 50% of the import bill comprises
of edible oil alone, now that is an excess which can easily be avoided. On a
micro level people tend to eat too much of greasy food. Besides being
unhealthy it reflects very badly in Pakistan's annual fiscal reports. There are
several other instances of such excesses. Besides that, Pakistan is not a very
easy country to conduct business in. Almost all major industrial units are sick
and closed. A mismanagement of resources and funds exists which further
exacerbates the problem. The insecure economic air makes it harder for
Pakistani businessmen to conduct businesses and are moving their
investments to other countries.

SIGNIFICANCE OF THE PROBLEM

• THIS PAPER WILL EXAMINE THE FOLLOWING ISSUES
1. Pakistan Balance of Payment Performance.

2. Reason for the Surplus in the above Years.

3. Current Balance of Payment’s Position.

4. Balance of Payment Future Expectations.

5. Problems of Balance of Payment of Pakistan.

 A CRITICAL STUDY OF BALANCE OF PAYMENT
S.Qamar Hasan

6. Impacts of Balance of Paymet’s deficit on economy.

7. Suggestions to Overcome balance of Payment deficit.

OBJECTIVES
Particularly in Pakistan , Factors Responsible for the deficit in Balance of
Payment are:

1. DEPENDENCE ON TEXTILE

2. IMPORT ORIENTED INDUSTRY

3. TOUGH COMPETITION IN INTERNATIONAL MARKET

4. POLITICAL UN CERTANITY

5. INCREASE IN PRICES OF INPUTS

6. FISCAL POLICY

7. EXPORTS OF PRIMARY GOODS AND IMPORT OF FINISHED GOODS

8. ENERGY CRISES

9. DEPENDENCE ON FOREIGN ASSISTANCE

10. NATURAL DISASSTERS

11. SHORTAGE OF AVAILABILITY OF CREDIT TO PRIVATE SECTOR

12. LIMITED COUNTRIES EXPORTS

13. STRIKES AND PROCESSIONS

14. RISE IN FREIGHT RATES

15. CONSUMPTION ORIENTED SOCIETY

 A CRITICAL STUDY OF BALANCE OF PAYMENT
S.Qamar Hasan

METHOLODOGY
The methodology of research used for collecting data will be

• Descriptive Data:
• Empirical Data:
• Past/Present:
• Experimenta
• Qualitative:
• Interviewing:

LITERATURE USED
Research Topic : A CRITICAL STUDY OF BALANCE OF PAYMENT OF PAKISTAN.

Chapter 1 Identtify Your Problem

Chapter 2 Introduction

Chapter 3 Statement of the Problem

Chapter 4 Significance of Problem

Chapter 5 Objectives

Chapter 6 Metholodogy

Chapter 7 References

REFERENCES

Links
• http://www.sbp.org.pk/publications/bop/index.htm
• http://www.planningcommission.gov.pk

• http://www.finance.gov.pk/survey_0910.html
 A CRITICAL STUDY OF BALANCE OF PAYMENT
S.Qamar Hasan

• http://www.sbp.org.pk/ecodata/forex.pdf
Sources

Economics of Pakistan by Professor M.Saeed Nasir Chapter

International Trade Page Number 183.

Economics of Pakistan by Professor M.Saeed Nasir Edition 2009-10

Chapter International Trade Page Number 184.

Kawish News Paper 20,January,2011 Page Number 3

Pakistan and Gulf economist, how to boost exports?Feb 14-20 ,2011

Exporting Fruits from Baluchistan Page number.21

Pakistan and Gulf Economist , Power Emergency ,Feb 2-8,2009, Fact

sheet page number 61 Table.

Economic Survey of Pakistan 2009-10 chapter name balance of

payment topic name direction of export page 94.

Pakistan and Gulf Economist , how to boost exports? Feb 14-20,

2011 Kyrgyz hold immense trade opportunities for Pakistan , Page
Number 8.

Pakistan and Gulf Economist , Power Emergency ,Feb 2-8,2009,

Topic Energy Crises relity or myth by Muhammad Ashfaq Page
Number 23.

Economic Survey of Pakistan 2009-10, chapter name balance of

payment, topic nameExchange Rate, Page Number 105.