Q-33= What is present position of Pakistan’s balance of payments
PRESENT POSITION OF BALANCE OF PAYMENTSPakistan’s current account balance remained in deficit in 2005-06 with gap continued to widen due to higher oil import bill on the back of high global crude oil prices and hefty rise in non-oil imports fueled by strong demand. Apart from further widening of trade deficit, higher freight charges by international shipping lines as a result of sharp increase in global trade and higher fuel cost, and growth in personal travel due to the rising level of income of middle and high-income groups have also contributed to the widening of current account gap. Deceleration in the growth of net transfers is also responsible for widening of the current account deficit. The current account deficit, excluding official transfers, stood at $ 4696 million in first nine months of the 2005-06.Although trade deficit almost doubled over the last year and services balance deteriorated by 27.5 percent, the strong inflows under private transfer fueled by rising worker’s remittances and resident foreign currency account offset some of the negatives with current account deficit standing at $ 4696 million. The flow under long-term capital improved markedly and rose to $ 3905 million from $ 1633 million last year.
PRESENT POSITION OF BALANCE OF PAYMENTSPakistan’s current account balance remained in deficit in 2005-06 with gap continued to widen due to higher oil import bill on the back of high global crude oil prices and hefty rise in non-oil imports fueled by strong demand. Apart from further widening of trade deficit, higher freight charges by international shipping lines as a result of sharp increase in global trade and higher fuel cost, and growth in personal travel due to the rising level of income of middle and high-income groups have also contributed to the widening of current account gap. Deceleration in the growth of net transfers is also responsible for widening of the current account deficit. The current account deficit, excluding official transfers, stood at $ 4696 million in first nine months of the 2005-06.Although trade deficit almost doubled over the last year and services balance deteriorated by 27.5 percent, the strong inflows under private transfer fueled by rising worker’s remittances and resident foreign currency account offset some of the negatives with current account deficit standing at $ 4696 million. The flow under long-term capital improved markedly and rose to $ 3905 million from $ 1633 million last year.
POSITION OF BALANCE OF PAYMENTS
(in $ million)
1 Imports 17,958
2 Exports 11,854
3 Balance of Trade - 6,104
4 Services - 5,393
5 Private transfers + 6,801
6 Workers remittances + 3,228
7 Current account balance Excluding official transfers - 4,695
8 Long term capital + 3,905
9 Basic balance - 790
10 Errors and omissions + 480
11 Balance requiring official financing - 383
12 Official assistance and Debt Relief + 562
13 Medium and short term capital - 180
14 Other short term assets and liabilities + 742
15 Exceptional financing - 55
16 Change in reserves = 124
CAUSES OF DEFICIT IN BALANCE OF PAYMENTSThe balance of payments position of Pakistan is usually against it and the main causes of deficit in the balance of payments of Pakistan are as under: -
1. Decrease in exports
2. Increase in imports
3. Lack of modernization of export oriented industries
4. Import restrictions by developed countries
5. Increase in invisible expenditures
6. Unfavorable terms of trade
7. Devaluation of currency
8. Fall in workers foreign remittances