trade deficit
DESCRIPTION
A compilation on trade deficit in Muhammad ali jinnah university karachi pakistan by Dr.Ahmed Sohaib.TRANSCRIPT
Trade DeficitIs it good for Economy!!
BY DR.AHMED SOHAIBCLASS OF SPRING 2008MAHUMMAD ALI J INNAH UNIVERSITYKARACHI – PAKISTAN.
Trade
TRADE- Process of buying & selling
FOREIGN
IMPORT EXPORT
DOMESTIC
WHOLE SELLER
RETAILER
OR
TRADE
FAVOURABLE
MORE EXPORTLESS IMPORT
( TRADE SURPLUS )
UNFAVOURABLE
MORE IMPORTLESS EXPORT
An export is any good or commodity, transported from one country ( home country ) to another country in a legitimate fashion, typically for use in trade.
AN IMPORT IS ANY GOOD OR COMMODITY, BROUGHT INTO ONE COUNTRY FROM ANOTHER COUNTRY IN A LEGITIMATE FASHION, TYPICALLY FOR USE IN TRADE. IMPORT GOODS OR SERVICES ARE PROVIDED TO DOMESTIC CONSUMER BY FOREIGN PRODUCER.
Trade Balance (or net exports)The value of a country’s exports less the value of its imports in a particular period (quarter or year)
Export – Import & Trade Balance
Trade Deficit…..A NEGATIVE BALANCE OF TRADE IS KNOWN AS A TRADE DEFICIT OR, INFORMALLY, A TRADE GAP
the difference between the monetary value of export and IMPORTS in an economy over a certain period of time. A NEGATIVE balance of
trade is known as a TRADE DEFICIT and consists of IMPORTING More than is EXPORTED.
Deficit In terms of Economy, Deficit refer to More expenditure and
less revenue.
Disadvantages of a Bigger Trade Deficit
• Loss of manufacturing jobs• industries may be completely shutdown.• The country to depend entirely on foreign
sources. • Most serious, if the trade deficit becomes
so large that the value of the currency falls below equilibrium, then the
advantages of vigorous productivity growth and low inflation start to
disappear.
Benefits of a Bigger Trade Deficit• Consumers gets…
• A larger variety. • Better quality.
• lower prices for traded goods. also apply to capital goods.
• Vigorous foreign competition boosts….• productivity. • reduces inflation.
• also keeps interest rates low
• Increase in foreign saving helps to fund capital spending and boosts financial market prices
PAKISTANWHAT DO YOU THINK ABOUT PAKISTAN
TRADE OVER DECADES
?TRADE
SURPLUS
TRADE DEFICIT
Factors Effecting Trade DeficitThe reasons of TRADE DEFICIT in
Pakistan…..• Failed Trade Policy.
• Less Production against high Demand.• Instability of the Government Structure.
• Less adaptation of the Modern Technology.
• Prices of goods manufactured at home• Exchange Rates
• Trade agreements & barriers• Other Taxes & tariff and trade measures• Business Cycle @ home & abroad.
Exchange rates: Pakistani rupee (PKR) per US$1
60.50 (01/11/07)60.75 (05/08/2007)58 (2004)57.752 (2003)59.7238 (2002)61.9272 (2001)53.6482 (2000)51.90 (1999)44.550 (1998)40.185 (1997)35.266 (1996)30.930 (1995)
Macro Economy of Pakistan
162797000 population
7.5% GDP
4.2% Fiscal Deficit 7.9% Inflation
Tax-GDP ratio:10.5%
Saving: 18%
Public debt 53.4%
External Liab. 27.1%
Trade deficit: 9%
Current account: 5%
Banking spread:6.4-7.8%
Per Capita Income US$ 925.
Economic Survey of Pakistan 2005-06
Investments: 23% Trade
Export : $10.15B
Import : $20.48B
Stable exchange rate:.7% dep. last year
Forex covers almost 6 months of imports
20 million banking clients with less then 6m borrowers
Low level of investments in the social sectorRaising capital both
debt and equity from international markets
Ultimate Objective:
1) Create jobs, 2) Raise incomes and 3) Reduce poverty
An Over View of Pakistan Imports & Exports (1998-2007)
9,613 9,602 10,2029,434
11,333
13,604
18,724
23,629
26,655
16,724
14,371
16,993
8,9338,1907,528
12,396
10,889
9,140
6,0008,00010,00012,00014,00016,00018,00020,00022,00024,00026,00028,000
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06(T)
2006-07
Imports Exports
Imports and Exports (US$ million)
Source: SBP
Major Export Pattern of Pakistan 2005-2007
Major Export Pattern of Pakistan 1996-2007
16
MACHINERY 23.1%
PETROLEUM PRODUCTS 19%
CHEMICALS 13.4%
TRANSPORT EQ. 4.7%
EDIBLE OIL 5.1%
IRON & STEEL 3.9%
FERTILIZER 3.2%
TEA 1.1%
OTHERS 26.5%
Pakistan Imports 1996-1997 (% Shares )
17
Pakistan Imports 2006-2007 (% Shares )
MACHINERY 22.5%
PETROLEUM PRODUCTS 22.5%
CHEMICALS 12.7%
TRANSPORT EQ. 8%
EDIBLE OIL 2.9%
IRON & STEEL 5%
FERTILIZER 1.2%
TEA 0.7%
OTHERS 24.5%
Major Import Pattern of Pakistan 2005-2007
Major Import Pattern of Pakistan 1990-2007
JAPAN..• Japan has continued to produce a trade
surplus since 1981.• In terms of Japan's international trade
exports showed an annual increase of 14.6 percent to 75.25 trillion yen,
marking the fifth consecutive year of increase.
• Imports grew by 18.3 percent to 67.34 trillion yen, thus increasing for the fourth
consecutive year.
A SURPLUS STATE.
Japan….• Major reasons JAPAN is a historical surplus
state.– Advancement of Technology– High skilled Labor.– Effective trade Policy.– Strong government support.– Productions meet the demands.
FOREIGN TRADE AND COMPONENT RATIO OF F.T.
References• www.wikipedia.org• www.Accountancy.com.pk• www.sbp.gov.pk• www.statpak.com.pk• www.pakboi.gov.pk• www.stat.go.jp/english
THANK YOU &ALLAH HAFIZ