2. Pakistan Balance of Payment, Current and Capital Accounts
Kamran Tabish (15770)
Ghulam Abbas (14087)
Faizan Khan (15568)
Nehreeza Aklaq (15082)
Nida Tariq (7009)

3. Distribute Topic in Group
1. Faizan Khan
Balance of Payment (BOP)
History of Balance of Payment
Balance of Trade
Difference between BOP & BOT
2. Nehreeza Akhlaq
Terminologies of Balance of Payment
5. Nida Tariq
Measures to Remove deficit Balance of Payment.
BOP Balance of payment Future Expectations.
3. Kamran Tabish
Major Exports & Imports of Pakistan
4. Ghulam Abbas
Problems of balance of Payment in Pakistan.
Factors responsible for Deficit Balance of payment

4. Outline/Contents Balance of Payment (BOP)
History of Balance of Payment
Balance of Trade
Difference between BOP & BOT
Terminologies of Balance of Payment
Major Exports & Imports of Pakistan
Problems of Balance of Payment in Pakistan
Factors responsible for Deficit Balance of payment
Causes of Adverse or Remove deficit BOP of Pakistan
Balance of Payment Future Expectations
Suggestions
Conclusion.

5. Balance of Payment (BOP)
Balance of payments is a statistical statement designed to provide for a specific period of time a systematic record of an economy’s transactions with the rest of the world.
It is a record of economic transactions between resident of one country and the rest of the world during the course of one year.
Its major components are the Current Account and the Financial Account.

6. BOP (cont’d)
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

7. BOP (cont’d)
The balance of payment like all balance sheets must balance.
The items which lead to an inflow of foreign earnings are placed on the credit side of the balance sheet
The items which give rise to an outflow of foreign currency are placed on the debit side of the balance sheet

8. Surplus & Deficit of BOP
Surplus/Favorable BOP:
Payments < Receipts
Balanced/Equilibrium of BOP
Payments = Receipts
Deficit/Unfavorable BOP:
Payments > Receipts

9. History of BOP
Pakistan’s 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

10. Years of Surplus in BOP of Pakistan
These years are as follows:

11. After the surplus years, Pakistan has been facing a deficit in its BOP
($3.82 billion)
($1.92 billion)
($ 1.14 billion)
($6.878 billion)
($ billion)
($8.549 billion)

12. Deficit in Pakistan BOP

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

14. Surplus & Deficit of BOT
Surplus/Favorable BOT:
Value of exports > Value of imports
Balanced/Equilibrium of BOT:
Value of exports = Value of imports
Deficit/Unfavorable BOT:
Value of exports < Value of imports

15. Difference Between BOP & BOT
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

16. Terminologies of BOP
The terminologies of BOP are divided into following three categories:
The Current Account
The Capital Account
The Official Account/Reserve

17. The Current Account Consist of four main components Trade balance –
Net Services Balance –
Net Income Balance –
Current Transfer –

18. Current Account (cont’d)

19. Comparison of Pakistan current account with others countries.2010
Country
Current Account Balance U.S ($)
Pakistan
-1,640,999,936
China
272,499,998,720
Japan
166,500,007,936
Kuwait
38,200,000,512
Denmark
14,350,000,128

20. The Capital Account
In capital account, international monetary flows related to investment in business, real estate, bonds and stocks are documented
The capital account is the net result of public and private international investments flowing in and out of a country.

21. The Net Capital Account in Pakistan
Reported Years
Net Capital Account U.S ($)
2008
148,000,000.00
2009
484,000,000.00
2010
132,000,000.00

22. Comparison of Pakistan Capital Account with Others Countries 2010
Country
Pakistan
132,000,000.00
China
5,207,525,000.00
United Kingdom
5,182,095,000.00
Canada
4,620,237,000.00
Kuwait
2,158,031,000.00

23. 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
End Period
Net Reserve with SBP
Net Reserve with Bank
Total Liquid Ex Reserve
8,577.0
2,821.7
11,398.7
9,117.9
3,307.3
12,425.2
12,958.2
3,792.2
16,750.4

24. Major Exports and Imports of Pakistan

25. Exports
Exports mean selling of goods and services to other countries to earn foreign exchange
Export for the fiscal year are estimated to be around $ 24.6 billion, against the Annual Plane target of $19.9 billion.

26. Exports (cont’d)
Pakistan exports were worth 2034 Million USD in February of 2012.
Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, sports goods, surgical instruments, electrical appliances, software, carpets and rugs and food products.
Pakistan now is being very well recognized for producing and exporting cements in Asia and Mid-East.
Main exports partners are European Union (UK), United States, UAE, and Afghanistan.

27. Exports of Pakistan

28. Imports
Imports mean buying of goods and services from other countries to fulfill the domestic needs
Pakistan’s imports during July-March increase by 15.1% to $25.9 billion over the corresponding period of previous year $22.5 billion.

29. Imports (cont’d)
Pakistan import was worth 3649 Million USD in February of 2012.
Pakistan imports mainly petroleum, petroleum product, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel and tea.
Its major import partners are: European Union, China, Saudi Arabia, United Arab Emirates and United States.

30. Imports of Pakistan

31. Problems of Balance of Payment in Pakistan
Pakistan's balance of payments situation has not been satisfactory since Independence. The main factors contributing adverse balanced of payments in Pakistan is due to:
Import of capital goods like machinery, new technology etc. for rapid industrialization has adversely affected the balance of payments in Pakistan.
Rising in oil prices has adversely affected the balance of payments in Pakistan.

32. (cont’d)
Increase in import payments for fertilizer, machinery, edible oil etc.
Pakistan's society is consumption oriented and most of the consumer goods are important from abroad.
Import of industrial Raw material and machinery.
Higher import unit values than export unit values.
Higher payments for freight, insurance, transports and trade by Pakistan.
Political instability, floods, droughts, strikes etc. cause reduction in industrial production

33. Factors of Deficit Balance of Payment
Substitutes
Increase in Population
Revenue Oriented Tariffs
Trade Restrictions
Import of Capital Good
Inflation
Political Uncertainty
Import of Oil and Fertilizer
Repayment of Debt and Interest
Huge Import of Invisible Goods
Technological Change in Method of Production
Change Country Nation Income

34. Measures to Correct/Remove deficit balance of payment
Following are the measures to remove deficit BOP of Pakistan:
Export Led Growth:
Export plays an important role in the growth of the economy
Promotion of labor Intensive Industries
Diversification of Export
Decrease in Consumption
High Quality Goods
Price of Goods
Packing
Creation of export agency
Joint Venture

35. Measures to Correct/Remove deficit balance of payment (Contd.)
Reduction in Imports
Reduction in Invisible Import

36. Balance of Payment Future Expectations
Foreign Direct Investment (FDI) may increase if there is political stability and continuation of policies.
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.
Friends of Pakistan has promised significant monetary support. If it realizes than it will have a positive effect.

37. Balance of Payment Future Expectations
Our Export may increase and BOP may show good result because of natural disasters in Australia, Japan etc. so the demand prices of our raw material will increase and than Pakistan can earn substantial profit from there and can its BOP.
Chine’s investors are still showing confidence in investing Pakistan’s economy. If this remains constants in upcoming year our BOP will improve
In short f our government will pay proper attention in boosting exports our BOP will show positive results in future.

38. SUGGESTIONS
Pakistan must increase its production so that Surplus can be exported. Pakistan don’t need to enter IMF & World Bank Programs. New Water Reservoirs need to be made. Pro Active Export Policy and better marketing of Surplus goods. Electricity crises needs to be solved urgently so that open mills and factories give more production and closed units open again. Pakistan needs a leadership with competence, very strong nerves, clear understanding of the issues and psyche of the other side of the table, ability understanding of the issues and psyche of the other side of the table, ability to negotiate with the super powers and come out with a most suitable to negotiate with the super powers and come out with a most suitable package.

39. “MAY ALMIGHTY ALLAH BLESS OUR COUNTRY PAKISTAN” AMEEN