1. External sector of Pakistan
By: WAQAS AHMED
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2. Overview of external sector of pakistan
What is external sector………?
Exchange rate
Current account balance
Financial account
Investment
Remittances
Debts & liabilities
Foreign Reserves
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3. Current situation
 Sharp deterioration in july-oct FY 09
 Improvements in some sector & its reasons
 83.9% Growth in overall external sector
 Revival of financial inflows
 Increase in foreign reserves
 Increase in value of rupee
Source:
The state of pak economy 2nd quartly report 2008-09
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4. ghggggd
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5. Exchange Rate
The price of domestic currency in terms
of foreign currency is called exchange
rate.
Types:
Fixed exchange rate
Flexible exchange rate
Clean floating exchange rate
Dirty floating exchange rate
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6. Terminology:
Devaluation & revaluation
Depreciation & Appreciation
Exchange rate in the long run
Two currencies are at ppp when a unit of
domestic currency can buy the same basket
of goods at home & abroad.
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7. Real exchange rate
• Real exchange rate is calculated by
this method
R= ePf/Pd
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8. Present situation
 Pak rupee depreciated by 21% during
mar-december2008.
 The exchange rate will remain stable at
around RS 80-82 per dollar and pak rupee
recovered some of it earlier loses against the
US $ and registered a net depreciation of
13.5% for the period july-feb 2008-09
[see fig-3]
• Source :(Ministry of finance)
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10. Investment
What does investment mean…..??
Investment mean increase in existing
stock of capital.
Types of foreign investment & their
current situation
Foreign direct investment(FDI)
Foreign portfolio investment(FPI)
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11. Net foreign investment:
 NFI overall declined by 34.2% during Jul-Feb
FY09 on the top of around 25% decline in the
corresponding period of last year.
Foreign direct investment(FDI)
 During Jul-Feb FY09, FDI increased slightly by
.2% against a decline of 6.1% in the
corresponding period of last year.
 Decline due to absence of privatization
proceeds, decline in remittances, decline in
reinvested earnings, and tighter liquidity
conditions in the international market
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12. Portfolio Investment
With the trend in emerging
economies stock markets, foreign
investors are taking their investment
out from Pakistan's stock market.
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13. remittance
A remittance is a transfer of money by a
foreign worker to his home country.
Money sent home by migrant
Moreover, remittance transfers can also
promote access to financial services for the
sender and recipient, thereby increasing
financial and social inclusion s constitutes the
second largest financial inflow to many
developing countries, exceeding international
aid.
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14. Significance
Remittances are playing an increasingly
large role in the economies of many
countries,
contributing to economic
growth and to
the livelihoods of needy people (though
generally not the poorest of the poor).
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15. Continue……
As remittance receivers often have a higher
propensity to own a bank
account,
remittances promote access to financial
services for the sender and
recipient,
an essential aspect of leveraging
remittances to promote economic
development.
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16. Top recipients of migrant remittances
among developing countries
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17. Top recipient countries
countries Remittances Remittances (2007–2008) (2008–2009)
(2003–2004 (2006–2007)
India $21.7 billion $26.9 billion $27 billion $45 billion
$26.9 billion
China $21.3 billion $22.52 billion $25.7 billion $34.5 billion
Mexico $18.1 billion $24.7 billion $23.97 billion $26.2 billion
France $12 billion $12.5 billion $13.75 billion
Philippine $12 billion $17 billion $18.26 billion
s
Pakistan $3.9 billion $5.493 billion $6.50 billion $7 billion
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18. Continue……
the US economy, which constitute close to
one third of
$ Million July February 2007 08 2008 09 %
Change Total 4,126 4,919 19.2 USA 1,160
1,157 0.3 Saudi Arabia 762 962 26.3 UAE
682 1,035 51.9 Other GCC Countries 619
783 26.6 U.K 293 344 17.5 EU Countries
116 150 29.2 Other Countries 494 488 1.2
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19. Workers’ Remittances
 Workers’ Remittances totaled $ 4.9
 billion in July‐February FY09 as against $
 4.1 billion in the comparable period of
 last year, depicting an increase of 19.2
 percent. The remittances fell by 19.7
 percent in October 2008 over October
 2007 amidst difficult global environment
 and uncertainties surrounding domestic
 economy, however, they recovered to
 their normal high double digit growth
 since November 2008. Deep recession in the US economy, which constitute close to
one‐third of
 Pakistan’s remittances started taking its toll and witnessed marginal negative growth
of 0.3 percent.
 The trend will be expected to continue in the months to come, however, overall
outlook of
 remittances from other source countries is positive [See Table‐9].
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21. Current A/C balance
• The current account balance is the difference
b/w a country’s saving & its investment. If
current account balance is +ve ,it measures
the proportion of a country’s saving invested
abroad. If –ve the proportion of domestic
investment finance foreign savings.
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22. Component of current A/C balance
Imports
Exports
National accounts
Current transfers
Income
Services
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23. Financial account
Financial a/c are concerned with
classifying measuring & recording the
transaction of business mainly it includes
investment & its sub parts.
• Current situation……………………….?????
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24. Reserves
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25. Reserves
Foreign exchange reserves are only the
the foreign currency deposits held by
CB & Monetary authorities.
These are the assets of the CB held in
different currencies mostly in dollar,
euro & yen.
Who holds the reserves…..??
 State bank of Pakistan
 Commercial banks
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26. Continue….
Holdings of foreign exchange reserves by the
central bank were $7.865 billion, compared
with $7.805 billion in the previous week.
Foreign exchange deposits held by
commercial banks were $3.364 billion,
compared with $3.365 billion in the week
ended April.
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27. Continue….
Increase in central bank reserves
during the period due to inflows
from IMF(3 bn US $)capital inflows
from ADB(761 million US $) & from
China (500 million US $).
(source: The state bank of pak’s economy -2nd quartly report 2008-09
Daily times 12-04-09)
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29. External debt & liabilities
External debt & liabilities recovered in 1st
quarter & actually fell in absolute relative
term.
EDL stood at 31% of the projected GDP.
It implies that EDL grew both in absolute &
relative term.
Highest increase in absolute term was
recorded in debt stock owed to the IMF as
a result of inflow of 3.1$ bn.
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30. Continue…..
The countries' debt burden defined as a
ratio of external debt & liabilities to GDP
decline from 50.9 % at the end of 2001-02
to 27.6% of GDP by end June 2008.
thanks
Source: ministry of finance
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32. Conclusion
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33. • thanks
thanks
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