Pakistan - Balance of payments

Pakistan Balance Of Payments 1456
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Pakistan's payments problems have been chronic since the 1970s, with the cost of oil imports primarily responsible for the trade imbalance. The growth of exports and of remittances from Pakistanis working abroad (mostly in the Middle East) helped Pakistan to keep the payments deficit in check. Since the oil sector boom began subsiding in the early 1980s, however, remittances declined. Remittances from overseas workers peaked at $2.9 billion in 1982/83, then dropped to $1.4 billion by 1997/98 and $1 billion from 1999 to 2001. This trend especially accelerated during the Gulf War, when nearly 80,000 Pakistanis in Kuwait and Iraq lost their jobs. Only about 25% of these jobs had been regained a year after the end of the conflict. Increased imports and softer demand for Pakistan's textiles and apparel in major markets also caused the current account deficit to further increase. The balance of payments position weakened in 1995/96 as imports grew by 16% and exports by only 6%. The rupee was devalued by 11% during 1995 and 1996 to encourage exports. Nevertheless, foreign reserves fell to around $800 million by mid-1997. By 2000, foreign debt equaled 100% of GDP. The government took steps in the early 2000s to liberalize and deregulate the exchange and payments regime. Pakistan moved to a dual exchange rate system in 2000. An increase in liquid foreign exchange reserves in 2001 was due in part to outright purchases from the kerb market and inflows from international financial institutions. Export growth in 2000/01 was primarily due to higher exports of primary commodities such as rice, raw cotton, and fish, and other manufactures such as leather, carpets, sporting goods, and surgical instruments. Imports increased in 2000/01 primarily due to higher imports of petroleum and petroleum products, and machinery.

The US Central Intelligence Agency (CIA) reports that in 2001 the purchasing power parity of Pakistan's exports was $8.8 billion while imports totaled $9.2 billion resulting in a trade deficit of $399.9 million.

The International Monetary Fund (IMF) reports that in 2001 Pakistan had exports of goods totaling $9.13 billion and imports totaling $9.74 billion. The services credit totaled $1.46 billion and debit $2.33 billion. The following table summarizes Pakistan's balance of payments as reported by the IMF for 2001 in millions of US dollars.


Current Account 1,880
Balance on goods -608
Balance on services -871
Balance on income -2,079
Current transfers 5,438
Capital Account
Financial Account -399
Direct investment abroad -31
Direct investment in Pakistan 383
Portfolio investment assets
Portfolio investment liabilities -192
Other investment assets 54
Other investment liabilities -613
Net Errors and Omissions 716
Reserves and Related Items -2,197

User Contributions:

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muhammad humayun
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Shomail Khan
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