2. When people talk,
listen completely.
Most people never
listen.
Franklin Delano Roosevelt
3. THE QUALITY OF YOUR LIFE
IS THE QUALITY OF YOUR COMMUNICATION
~
BOTH WITH YOURSELF & OTHERS 3
March 18, 2013
4. Pakistan’s
Balance of Payments
Presentation
By
UniQue 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)
5. 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 : gulzar_ali69@yahoo.com
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"
6. 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.
7
8. 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.
9. Why is it important ?
The balance of payments are used for a country
and worldwide. The most frequent users are:
Domestic Economic Policy
Government 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.
To be conscious that you are ignorant is a great step to knowledge.
10. Why is it important ?
International Uses
Regional 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.
"I hear and I forget. I see and I remember. I do and I understand."
12. 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
13. 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.
14. 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
15. 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
.
16. 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
17. 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
19. Standard Components of BOP
current account
I. Goods FOB Credit Debit Net
General merchandise.
Goods for processing.
Repairs on goods.
Goods procured in ports by carriers
Non-monetary gold.
20. Standard Components of BOP- current account Contd…
II. Services Credit Debit Net
Transportation.
Travel.
Communication
Construction
Insurance
Financial
21. Standard Components of BOP- current account
Contd…
II. Services Credit Debit Net
Computer and information
Royalties and license fees
Other business services
Entertainment & Cultural and recreational
Government services
“A single conversation with a wise man is better than ten
years of study.”
22. Standard Components of BOP-
III. Income Contd… Debit Net
Credit
Compensation of employees
Investment income
► Direct investment
► Portfolio investment
► Other investment
• Monetary authority
• General govt.
• Banks
• Others
23. Standard Components of BOP- Contd…
IV. Current transfers Credit Debit Net
General government
Other sectors
► Workers’ remittance .
► donations .
► gifts.
24.
25.
26.
27.
28.
29.
30.
31.
32. 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
33.
34. 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
"You are not only responsible for what you say, but also
for what you do not say.
35. Standard Components of BOP-
Contd…
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
36.
37.
38.
39. 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
40. Recommendations
law and order stability.
social and physical infrastructure
energy resources
improvement in macroeconomic stability
41. 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
42. 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,