d2 bop in pak

8/9/2019 D2 BOP in pak

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Presented by:Presented by:

GroupGroup DD22

Mehreen Kanwal (Mehreen Kanwal (0404))

Mudassar Shahid (Mudassar Shahid (0808))

Khadija Rafiq (Khadija Rafiq (2828))


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PAKISTANPAKISTANS BALANCE OFS BALANCE OF

PAYMENTSPAYMENTS


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What is Balance of payment ?What is Balance of payment ?

BalanceBalance ofof paymentspayments isis aa recordrecord ofof

economiceconomic transactionstransactions between between thetheresidentsresidents ofof oneone countrycountry andand thethe restrestofof thethe world world duringduring thethe coursecourse ofof

oneone yearyear..


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TheThe balance balance ofof paymentspayments likelike allallbalance balance sheetssheets mustmust balancebalance.. TheThe

itemsitems which which leadlead toto anan inflowinflow ofofforeignforeign earningsearnings areare placedplaced onon thethecreditcredit sideside ofof thethe balance balance sheet,sheet,

whereaswhereas thethe itemsitems whichwhich givegive riserise toto

anan outout flowflow ofof foreignforeign currencycurrency areareplacedplaced onon thethe debitdebit sideside..


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Deficit & surplusDeficit & surplus::

DeficitDeficit ==DebitDebit >> CreditCredit

SurplusSurplus ==DebitDebit


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urpose of BOPPurpose of BOP::

ItsIts mainmain purposepurpose isis toto provideprovide thethe

govtgovt.. informationinformation aboutabout thetheinternationalinternational economiceconomic positionposition ofofthethe countrycountry andand toto helphelp makemakedecisionsdecisions aboutabout monetarymonetary andand fiscalfiscal

issues,issues, onon thethe oneone hand,hand, andand aboutabouttradetrade andand paymentspayments onon thethe otherother..


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Main items OF BOPMain items OF BOP::

TheThe mainmain itemsitems whichwhich areare includedincluded ininthethe balancebalance ofof paymentspayments areare::

11)) TheThe CurrentCurrent accountaccount

22))T

heT

he CapitalCapital accountaccount33)) TheThe officialofficial reservereserve assetsassets accountaccount


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11).). The Current account:The Current account:

TheThe currentcurrent accountaccount isis composedcomposed ofof::

A)A).. ImportsImports andand exportsexports ofof visiblevisible

goodsgoodsB)B).. ServicesServices suchsuch asas expensesexpenses onon

travel,travel, transport,transport, insurance,insurance, fees,fees,commissionscommissions

C)C).. UnrequitedUnrequited transfers,transfers, donations,donations,pensionspensions grantsgrants etcetc..


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22).). Capital accountCapital account::

CapitalCapital accountaccount isis mademade upup ofof aa

variety variety ofof capitalcapital movementsmovementsbetweenbetween oneone countrycountry andand thethe restrest ofofworldworld duringduring aa givengiven periodperiod ofof timetimewhich which isis aa yearyear.. TheThe capitalcapitalmovementsmovements ofof shortshort andand longlong termterm

loansloans between between thethe countriescountries arearecarriedcarried outout by by Government,Government, firmsfirmsandand HouseholdsHouseholds..


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33). The official reserve). The official reserve

assets accountassets account::

OfficialOfficial reservereserve transactionstransactions consistconsist

ofof movementsmovements ofof internationalinternationalreservesreserves byby governmentsgovernments andand officialofficialagenciesagencies toto accommodateaccommodateimbalancesimbalances arisingarising fromfrom thethe currentcurrent

andand capitalcapital accountsaccounts..


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Pakistans Balance ofPakistans Balance of

Payments:Payments:PakistansPakistans balance balance ofof paymentspayments

situationsituation hashas notnot been been satisfactorysatisfactory

sincesince independenceindependence.. TheThe countrycountrywithwith thethe exceptionexception ofof fivefive yearsyears ii..ee..((19501950--5151,, 19541954--5555,, 19551955--5656,, 19581958--5959,,

andand 19591959--6060)) hashas been been runningrunning aapersistentpersistent deficitdeficit inin itsits balance balance ofofpaymentspayments onon currentcurrent accountaccount..


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TheThe fivefive years years inin which which PakistansPakistanscurrentcurrent accountaccount showedshowed surplussurplus areare asasfollowsfollows::

SurplusSurplus ofof RsRs.. 578578..oo crorecrore inin 19501950 5151

SurplusSurplus ofof RsRs.. 0909..99 crorecrore inin 19541954 5555

SurplusSurplus inin 19581958 6060


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Current situation:Current situation:

CurrentlyCurrently PakistansPakistans balance balance ofof paymentspaymentsshowedshowed aa deficitdeficit inin itsits currentcurrent accountaccount

balancebalance duringduring followingfollowing yearsyears..

BOPBOP (million dollars)(million dollars)yearyear

-- 1,5341,53420042004--0505

-- 4,9904,99020052005--0606


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Factors contributing towardsFactors contributing towards

adverse balance of paymentsadverse balance of payments::

11)).. ImportImport ofof capitalcapital goodsgoods..

TheThe heavyheavy importimport ofof machinery,machinery,technocratstechnocrats etc,etc, hashas considerablyconsiderablyincreasedincreased thethe importimport bill bill andand hashas

adverselyadversely affectedaffected thethe balance balance ofofpaymentpayment onon currentcurrent accountaccount..


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22)).. RiseRise inin oiloil pricesprices..

TheThe sharpsharp riserise inin thethe pricesprices ofof oiloil

particularlyparticularly inin 7070,s,s andand alsoalso inin thethebeginningbeginning ofof 19801980,s,s andand 19901990,s,s andandfromfrom 20032003 onwardonward isis takingtaking aa bigbigchunkchunk ofof thethe foreignforeign exchangeexchange

earningsearnings..


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33.. IncreaseIncrease inin importimportpaymentspayments forfor fertilizersfertilizers etcetc..

DueDue toto increaseincrease inin thethe pricesprices ofoffertilizers,fertilizers, machinery,machinery, petroleum,petroleum,edibleedible oiloil etcetc..,, therethere isis aa sharpsharpincreaseincrease inin thethe importimport paymentspayments toto

thethe outsideoutside worldworld.. TheThe balance balance ofofpaymentpayment has,has, therefore,therefore, beenbeenadverselyadversely affectedaffected..


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44)).. CConsumptiononsumption orientedoriented

societysociety::

TheThe PakistanisPakistanis asas aa whole whole areare

consumptionconsumption orientedoriented.. TheThe importimportofof consumerconsumer goodsgoods isis aboutabout 1616%% ofofthethe totaltotal importsimports.. MostMost ofof thetheconsumersconsumers goodsgoods importedimported fromfrom

abroadabroad cancan bebe easilyeasily manufacturedmanufacturedinin thethe countrycountry andand cancan easeease thethesituationsituation inin thethe balancebalance ofof paymentspayments ..


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55)).. ImportImport industrialindustrial rawraw

materialmaterial::

MostMost ofof thethe industriesindustries which which werewere

establishedestablished forfor achievingachieving thethe twintwinobjectiveobjective ofof earningearning andand savingsaving foreignforeignexchangeexchange havehave beenbeen eatingeating awayaway roughlyroughly33%% ofof thethe aggregateaggregate importimport billbill.. TheThe

excessiveexcessive importimport ofof industrialindustrial inputsinputs isis aastrainstrain onon thethe balance balance ofof paymentspayments ononcurrentcurrent accountaccount..


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66)).. DeteriorationDeterioration inin termsterms ofoftradetrade::

InIn Pakistan,Pakistan, thethe importimport unitunit values values areare

higherhigher thanthan thethe exportexport unitunit valuesvalues forfor thethe

lastlast overover threethree decadesdecades.. AA declinedecline inin termtermofof tradetrade causescauses imbalanceimbalance inin thethe balancebalanceofof paymentspayments..


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77)).. HigherHigher paymentspayments forforfreightfreight insuranceinsurance..

PakistanPakistan hashas toto makemake higherhigherpaymentspayments forfor nonnon factorsfactors servicesservices

suchsuch asas freight,freight, insurance,insurance,transports,transports, traveltravel etcetc..


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88.. cottoncotton--ricerice ledled growthgrowth::

PakistanPakistan isis heavilyheavily dependingdepending onon thethe

exportsexports ofof twotwo primaryprimary commoditiescommoditiescottoncotton andand ricerice andand textiletextilemanufacturesmanufactures.. IfIf therethere isis anyany naturalnatural

disaster,disaster, declinedecline inin exportsexports causescausesanan imbalanceimbalance onon thethe currentcurrentaccountaccount..


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99)).. DomesticDomestic developmentsdevelopments..

AA numbernumber ofofDomesticDomestic developmentsdevelopments likelikepoliticalpolitical uncertainty,uncertainty, floods,floods,nationalizationnationalization ofof industries,industries, shortageshortage inin

availabilityavailability ofof creditcredit toto privateprivate sector,sector,labor,labor, inefficientinefficient handlinghandling ofof vesselsvessels andandcargocargo atat KarachiKarachi airport,airport, havehave cutcut downdownindustrialindustrial production,production, reducedreduced exportsexports

andand havehave enlargedenlarged thethe importimport billsbills.. AllAllthesethese havehave contributedcontributed inin makingmaking aapersistentpersistent deficitdeficit inin thethe balance balance ofofpaymentspayments ..


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1010)).. InternationalInternational factorsfactors::

TheThe sluggishsluggish growthgrowth inin worldworld marketmarket

impositionimposition ofof antianti dumpingdumping duties,duties,propagandapropaganda aboutabout childchild labor,labor, fallfall ininthethe productionproduction ofof largelarge scalescalemanufacturing,manufacturing, overover valuation valuation ofof

PakPak.. rupeerupee etcetc.. havehave reducedreduced thetheexportexport earningsearnings ofof PakistanPakistan..


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Measures for correcting theMeasures for correcting the

adverse balance of payments:adverse balance of payments:

TheThe adverseadverse balancebalance ofof paymentspayments cancan

bebe decreaseddecreased inin threethree waysways::

(A)(A).. ExportExport ledled growthgrowth..

(B)(B).. ReductionReduction inin importsimports(C)(C).. ReductionReduction inin invisibleinvisible growthgrowth..


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A).A). Export led growthExport led growth

TheThe followingfollowing measuresmeasures shouldshould be be adoptadoptforfor increasingincreasing exportsexports alleviatingalleviating thethe

balancebalance ofof paymentspayments problemsproblems..

DiversificationDiversification ofof exportsexports

RestorationRestoration ofof sicksick industriesindustries

ProductionProduction ofof highhigh qualityquality goodsgoods

AttractiveAttractive packingpacking ReductionReduction inin exportexport dutiesduties

CreationCreation ofof exportexport agenciesagencies


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B).B). Reduction in importsReduction in imports::

TheThe declinedecline inin thethe importimport ofof

consumerconsumer goodsgoods andand industrialindustrial rawrawmaterialmaterial which which we we cancan produceproduce

within within thethe countrycountry cancan greatlygreatly

reducereduce thethe deficitdeficit gapgap..


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C).C). Reduction in invisibleReduction in invisible

importsimports::

TheThe paymentspayments onon invisibleinvisible importsimports

likelike shipping,shipping, insurance,insurance, bankingbankingservices,services, expensesexpenses onon diplomatsdiplomats etcetc..hashas been been onon increaseincrease.. ItIt hashas toto bebe

curtailedcurtailed downdown..


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THANK YOUTHANK YOU

d2 bop in pak

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