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3April 12, 2023 3

THE QUALITY OF YOUR LIFE

IS THE QUALITY OF YOUR COMMUNICATION ~

BOTH WITH YOURSELF & OTHERS

Pakistan’s

Balance of Payments Pakistan’s

Balance of Payments Presentation

ByUniQue GrOup

MEMBERS FAHEEM ASLAM ABRO (BS-COM)

DANISH MOHAMMAD (BS-COM) SADAQAT ALI ODHO (BS-COM)

TOUQEER ALI MERANI (BS-COM) BHAWAL KHOKHAR (M-COM FINAL)

RIZWAN ALI SOOMRO (M-COM FINAL)BILAWAL MUGHAL (M-COM FINAL)

AMEER HAMAZA (M-COM FINAL)

How we have collected data How we have collected data

Reference •Wiki pedia http://en.wikipedia.org/wiki/Balance_of_payments

•State bank of pk http://www.sbp.org.pk/publications/bop/index.htm

•Reserch paper of mr. ∗ Gulzar Ali, M.Phil Scholar, Department of Economics, University of Peshawar.E-mail : [email protected] reseacrch paper name Pakistan’s Balance of Payments as a Monetary Phenomenon: (Econometric Evidence published in Journal of Managerial Sciences 169 Volume V, Number 2

•Reserch paper of mr. M. Ashraf Janjua Institute of Business Management, Karachi publised in PAKISTAN BUSINESS REVIEW JULY 2010

"A candle loses nothing by Lighting another candle" "A candle loses nothing by Lighting another candle"

INTRODUCTION

What is BOP ? Basic concepts ,Why is it important ? Major components of BOP? History of Pakistan's BOP? Analysis of Pakistan's BOP (2003 to 2010) Conclusion ? Recommendations of uniQue grOup,

7

What is BOP ?

•Balance of payments is a summary transaction B/W domestic and foreign residents for a specific period of time.

•A systematic record of an economy’s transactions with the rest of the world.

BOP…….

an accounting record of all monetary transactions between a country and the rest of the world.

BOP registers transactions between residents and non-residents.

BOP deals with flows BOP uses double entry accounting

system. BOP are normally expressed in domestic

currency or in stable unit of account.

To be conscious that you are ignorant is a great step to knowledge.

The balance of payments are used for a country and worldwide. The most frequent users are: Domestic Economic PolicyGovernment authorities are constant users of balance of payments and other statistics in carrying out their responsibilities of monitoring economic activity, formulating recommendations an appropriate balance of payments and domestic economic policies and evaluating various economic strategies.

Why is it important ? Why is it important ?

"I hear and I forget. I see and I remember. I do and I understand." "I hear and I forget. I see and I remember. I do and I understand."

International UsesRegional balance of payments statistics are used by partner countries to monitor developments in economic relations between Pakistan and those countries or specific country grouping.

Pakistan’s balance of payments is used by academic and business observers as well as by policy maker around the world in monitoring developments in the worldwide payments position and in comparative studies of trends in the balance of payments of various countries. BOP data is also used by international bodies such as IMF, World Bank for funding ,loaning purpose and other external stakeholders etc.

Why is it important ?Why is it important ?

Standard Components of BOP

Examples of Transactions Credit Transactions (+ve):

Provision of goods and services to non-residents

Income receivable from non-residents A decrease in foreign financial assets An increase in foreign financial liabilities

Debit Transactions (-ve): Purchase of goods & services from non-

residents Income payable to non-residents An increase in foreign financial assets A decrease in foreign financial liabilities

Basic concepts of BOP Trade – buying and selling of goods and services

Exports – a credit entry & Imports – a debit entry Trade balance – the sum of Exports and Imports

Factor income – repayments and dividends from loans and investments

Factor earnings – a credit entry Factor payments – a debit entry Factor income balance – the sum of earnings and

payments. Trade deficit = export<import or import>export Trade surplus = export>import or import<export

If the debits exceed the credits, then a country is running a balance deficit.

If the credits exceed the debits, then a country is running a balance surplus.

History of Pakistan’s Balance of payment

History of Pakistan’s Balance of payment

independence on 14 Aug, 1947, currently facing a large balance of payments deficit. to preserve an unwavering stability in the balance of payments as one of the foundation objectives of macroeconomic policy.

The IMF and World Bank have been benevolent a great pact

of concentration to stable balance of payments situations in Pakistan

The country with the exception of five years i.e. (1950-51, 1954-55, 1955-56, 1958-59 and 1959-60) has been running a persistent deficit in her current account

independence on 14 Aug, 1947, currently facing a large balance of payments deficit. to preserve an unwavering stability in the balance of payments as one of the foundation objectives of macroeconomic policy.

The IMF and World Bank have been benevolent a great pact

of concentration to stable balance of payments situations in Pakistan

The country with the exception of five years i.e. (1950-51, 1954-55, 1955-56, 1958-59 and 1959-60) has been running a persistent deficit in her current account

History of Pakistan’s Balance of payment…

History of Pakistan’s Balance of payment…

payment was in surplus of Rs. 578 crore in 1951-52, mainly due to the Korean War , in the demand of two primary goods, jute and cotton in the outside world. Due to increase in exports

balance of payment in the year 1954-55 amounting Rs. 9.9 crore was marginal , due to devaluation of the rupee and greater restrictions on imports

surplus in its balance of payment from 1958-1960 due to the introduction of bonus voucher scheme and placement of restriction on import commodities

.

payment was in surplus of Rs. 578 crore in 1951-52, mainly due to the Korean War , in the demand of two primary goods, jute and cotton in the outside world. Due to increase in exports

balance of payment in the year 1954-55 amounting Rs. 9.9 crore was marginal , due to devaluation of the rupee and greater restrictions on imports

surplus in its balance of payment from 1958-1960 due to the introduction of bonus voucher scheme and placement of restriction on import commodities

.

History of Pakistan’s Balance of payment…

History of Pakistan’s Balance of payment…

The deficit was Rs. 2.78 billion in 1972-73, rapidly mounting to Rs12.78 billion in 1975-76, Rs. 25.84 billion in 1978-89, Rs. 30.05 billion in 1979-80 and Rs. 31.62 billion in 1980-81

The current account deficit in the balance of payment for the year 1996-97 was 3.28 billion dollars. It had been

brought down to 1.92 billion dollars during 1997-98 and 1.14 billion dollars in 1999-2000.

Pakistan’s current account balance was favorable from 2002 to 2004

The deficit was Rs. 2.78 billion in 1972-73, rapidly mounting to Rs12.78 billion in 1975-76, Rs. 25.84 billion in 1978-89, Rs. 30.05 billion in 1979-80 and Rs. 31.62 billion in 1980-81

The current account deficit in the balance of payment for the year 1996-97 was 3.28 billion dollars. It had been

brought down to 1.92 billion dollars during 1997-98 and 1.14 billion dollars in 1999-2000.

Pakistan’s current account balance was favorable from 2002 to 2004

History of Pakistan’s Balance of payment…

History of Pakistan’s Balance of payment…

it again slipped in to red in 2004-05 and 2006-07 due to higher import bills of oil and import of machinery etc

primary objective of Pakistan is to control and minimize the deficit

it again slipped in to red in 2004-05 and 2006-07 due to higher import bills of oil and import of machinery etc

primary objective of Pakistan is to control and minimize the deficit

Components of B.O.P&

Graphically Analysis of Pakistan's BOP (2003 to 2010)

Components of B.O.P&

Graphically Analysis of Pakistan's BOP (2003 to 2010)

Standard Components of BOPcurrent account

I. Goods FOB Credit Debit Net General merchandise. Goods for processing.  Repairs on goods.  Goods procured in ports by carriers  Non-monetary gold.

II. Services Credit Debit Net

Transportation. Travel. Communication Construction  Insurance Financial

Standard Components of BOP- current account Contd…

“A single conversation with a wise man is better than ten years of study.”

“A single conversation with a wise man is better than ten years of study.”

II. Services Credit Debit Net

Computer and information  Royalties and license fees  Other business services  Entertainment & Cultural and recreational Government services

Standard Components of BOP- current account Contd…

III.  Income Credit Debit Net Compensation of employees Investment income ► Direct investment ► Portfolio investment ► Other investment Monetary authority General govt. Banks Others

Standard Components of BOP- Contd…

IV. Current transfers Credit Debit Net General government   Other sectors ► Workers’ remittance . ► donations . ► gifts.

Standard Components of BOP- Contd…

V. Capital account Credit Debit Net

Capital transfers General government Debt forgiveness Others Other sectors Debt forgiveness Others Acquisition/disposal of non-produced non-financial

assets

Standard Components of BOP- Contd…

VI. Financial account Credit Debit Net

Direct investment Direct investment abroad Direct investment in reporting economy

Portfolio investment Portfolio investment – Asset Portfolio investment – Liability

Financial Derivatives

Standard Components of BOP- Contd…

"You are not only responsible for what you say, but also for what you do not say.

"You are not only responsible for what you say, but also for what you do not say.

Reserve assets Credit Debit Net

Monetary gold SDRS reserve position in fund Foreign exchange other claims

Vii) errors and omissions: net produce to preserve the balance of BOP

Viii) exceptional financing

Reserve assets Credit Debit Net

Monetary gold SDRS reserve position in fund Foreign exchange other claims

Vii) errors and omissions: net produce to preserve the balance of BOP

Viii) exceptional financing

Standard Components of BOP- Contd…

Conclusion

Through this Research it has been concluded that. Pakistan is facing many difficulties. Political Instability. Law and Order Situation Rapid flow of new currency High Inflation High Unemployment rate Continuous Restrictions of USA and other

countries

Recommendations

law and order stability.

social and physical infrastructure energy resources

improvement in macroeconomic stability

Recommendations….Recommendations…. small scale industry. Establish a ceiling for the share of

foreign savings Pakistan badly needs foreign

investment to competitive pressures for Pakistan’s

textile and clothing exports

small scale industry. Establish a ceiling for the share of

foreign savings Pakistan badly needs foreign

investment to competitive pressures for Pakistan’s

textile and clothing exports

Recommendations….Recommendations…. overall production structure Policy attention needs to be focused on

non-textile

Skill development and training Reduced tariffs, particularly on imported

raw material, imports,

overall production structure Policy attention needs to be focused on

non-textile

Skill development and training Reduced tariffs, particularly on imported

raw material, imports,

By: UniQue GroupBy: UniQue Group