Sunday, December 21, 2008

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Foreign trade



Pakistani exports in 2005

Pakistan is a member of the World Trade Organization, and has bilateral and multilateral trade agreements with many nations and international organizations.


Fluctuating world demand for its exports, domestic political uncertainty, and the impact of occasional droughts on its agricultural production have all contributed to variability in Pakistan's trade deficit.


In the six months to December 2003, Pakistan recorded a current account surplus of $1.761 billion, roughly 5% of GDP. Pakistan's exports continue to be dominated by cotton textiles and apparel, despite government diversification efforts. Exports grew by 19.1% in FY 2002-03. Major imports include petroleum and petroleum products, edible oil, chemicals, fertilizer, capital goods, industrial raw materials, and consumer products.


Past external imbalances left Pakistan with a large foreign debt burden. Principal and interest payments in FY 1998-99 totaled $2.6 billion, more than double the amount paid in FY 1989-90. Annual debt service peaked at over 34% of export earnings before declining.


With a current account surplus in recent years, Pakistan's hard currency reserves have grown rapidly. Improved fiscal management, greater transparency and other governance reforms have led to upgrades in Pakistan's credit rating. Together with lower global interest rates, these factors have enabled Pakistan to prepay, refinance and reschedule its debts to its advantage. Despite the country's current account surplus and increased exports in recent years, Pakistan still has a large merchandise-trade deficit. The budget deficit in fiscal year 1996-97 was 6.4% of GDP. The budget deficit in fiscal year 2003-04 is expected to be around 4% of GDP.


In the late 1990s Pakistan received about $2.5 billion per year in loan/grant assistance from international financial institutions (e.g., the IMF, the World Bank, and the Asian Development Bank) and bilateral donors.[38] Increasingly, the composition of assistance to Pakistan shifted away from grants toward loans repayable in foreign exchange. All new U.S. economic assistance to Pakistan was suspended after October 1990, and additional sanctions were imposed after Pakistan's May 1998 nuclear weapons tests. The sanctions were lifted by president George W. Bush after Pakistani president Musharraf allied Pakistan with the U.S. in its war on terror. Having improved its finances, the government refused further IMF assistance, and consequently the IMF program was ended.[39] The government is also reducing tariff barriers with bilateral and multilateral agreements.


While the country has a current account surplus and both imports and exports have grown rapidly in recent years, it still has a large merchandise-trade deficit. The budget deficit in fiscal year 2004-2005 was 3.4% of GDP. The budget deficit in fiscal year 2005-06 is expected to be over 4% of GDP. Economists believe that the soaring trade deficit would have an adverse impact on Pakistani rupee by depreciating its value against dollar (1 US $ = 60 Rupees (March 2006) ) and other currencies.


One of the main reasons that contributed to the increase in trade deficit is the increased imports of earthquake relief related items, especially tents, tarpaulin and plastic sheets to provide temporary shelter to the survivors of earthquake of October 8, 2005 in Azad Jammu and Kashmir and parts of the NWFP, an official said. The rise in the trade gap was also fuelled by high oil import prices, food items, machinery and automobiles.


The Petroleum Ministry says that this year the bill of oil imports was expected to reach $6.5 billion against $4.6 billion in the last fiscal year, which is the main reason behind the all-time high trade deficit.


The EU is the single largest trading partner of Pakistan absorbing over one-third of the exports in 2003.



[edit] Exports





Pakistan produces export quality Footballs

Pakistan's exports stood at $17.011 billion in the financial year 2006-2007, up by 3.4 percent from last year's exports of $16.451 billion.[40]


Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, sports goods (renowned for footballs/soccer balls), surgical instruments, electrical appliances, software, carpets, and rugs, ice cream, livestock meat, chicken, powdered milk, wheat, seafood (especially shrimp/prawns), vegetables, processed food items, Pakistani assembled Suzukis (to Afghanistan and other countries), defense equipment (submarines, tanks, radars), salt, marble, onyx, engineering goods, and many other items. Pakistan now is being very well recognized for producing and exporting cements in Asia and Mid-East. Starting August 2007, Pakistan will be exporting Cement to India to fill in the shortage there caused by the building boom.[41]



[edit] Imports


Pakistan's imports stood at $30.54 billion in the financial year 2006-2007, up by 8.22 percent from last year's imports of $28.58 billion.


Pakistan's single largest import category is petroleum and petroleum products. Other imports include: industrial machinery, construction machinery, trucks, automobiles, computers, computer parts, medicines, pharmaceutical products, food items, civilian aircraft, defense equipment, iron, steel, toys, electronics, and other consumer items.


Sales tax is levied at 15 percent both on imports and domestically produced products. The income withholding tax is levied at 6 percent on imports and at 3.5 percent on the sales of domestic taxpayers.[26][40]



[edit] Deficit in economy


Pakistan suffered a merchandise trade deficit of $13.528 billion for the financial year 2006-7. The gap has considerably widened since 2002-3 when the deficit was only $1.06 billion.[42] Services sector deficit for 2006-2007 stood at $4.125 billion which equals the services export of $4.125 billion for the same year.[43]


The combined deficit in services and goods stand at $17.653 billion which is approx 83.5 percent of country's total export of $21.136 (Goods and services). The rise in the trade gap has been attributed to high oil import bill, and rise in the prices of food items, machinery and automobiles.


Current account deficit - Current account deficit for 2006-7 reached $7.016 billion up by 41 percent over previous year's $4.490 billion.



[edit] Bonds


Pakistan is expected to sell a dual-tranche sovereign bond worth $750 million on March 23, 2006 that analysts said should ensure a favorable reception in the bond market. The 10-year tranche would be $500 million and the 30-year portion $250 million. Pricing is expected during New York trading hours on March 23, 2006. The sources said that the 10-year tranche was expected to be priced at around 7.125 percent, while the longer-dated tranche was expected to be sold at around 7.875 percent, the top end of the indicative yield range of 7.75 to 7.875 percent.


The bonds, comprising 10-year and 30-year tranches, had generated $1.5 billion in orders and a total size of as much as $1.25 billion had been anticipated for what is Pakistan’s third foray into the international debt market since 2004.[44]


Government of Pakistan has been raising money from the international debt market from time to time.


Details of amount raised in various issues is as follows:


1999 - $623 million


2004 - $500 million @ 6.75 Percent[45]


2005 - $600 million worth Islamic bonds[46][44]


2007 - $ 750 million @ 6.875 Percent worth Euro Bonds which were highly over subscribed[47]



[edit] Foreign acquisitions and mergers


With the rapid growth in Pakistan's economy, foreign investors are taking a keen interest in the corporate sector of Pakistan. In the recent years, majority stakes in many corporations have been acquired by multinational groups.



  • PICIC by Singapore based Tamasek holdings for $339 million
  • Union Bank by Standard Chartered bank for $487 million
  • Prime commercial bank by ABN Amro for $228 million
  • PakTel ltd by China Mobile Ltd for $460 million
  • Additional 57.6 percent shares of Lakson Tobacco company acquired by Philip Morris international for $382 million

The foreign exchange receipts from these sale outs are also helping covering the massive current account deficit.[48]



[edit] Fiscal budget



  • Fiscal year: 1 July - 30 June
  • Revenues: $19.8 billion
  • Expenditures: $25 billion (2006 est.)
  • Debt - external: $39.94 billion (2005 est.)
  • Economic aid - recipient: $2 billion (FY97/98)


[edit] Industrial sector




[edit] Income distribution



  • Gini Index: 41
  • Household income or consumption by percentage share:

    • lowest 10%: 4.1%
    • highest 10%: 27.7% (1996)
    • lowest 20% : 27.7% (2006)


[edit] See also















List of topics related to the Economy of Pakistan
Institutions:KSE, LSE, ISE, State Bank, National Bank, SECP, IPS, PIIA, PINA
Lists:Companies, Banks, Tallest buildings, Airlines
Related Topics:Business people, Transport, Airlines, Banks, Companies, Finance Ministers, Low cost housing, Economy of Karachi Ports & Harbours







[edit] Further reading



  • Ahmad, Viqar and Rashid Amjad. 1986. The Management of Pakistan’s Economy, 1947-82. Karachi: Oxford University Press.
  • Ali, Imran. 1997. ‘Telecommunications Development in Pakistan’, in E.M. Noam (ed.), Telecommunications in Western Asia and the Middle East. New York: Oxford University Press.
  • Ali, Imran. 2001a. ‘The Historical Lineages of Poverty and Exclusion in Pakistan’. Paper presented at Conference on Realm, Society and Nation in South Asia. National University of Singapore.
  • Ali, Imran. 2001b. ‘Business and Power in Pakistan’, in A.M. Weiss and S.Z. Gilani (eds), Power and Civil Society in Pakistan. Karachi: Oxford University Press.
  • Ali, Imran. 2002. ‘Past and Present: The Making of the State in Pakistan’, in Imran Ali, S. Mumtaz and J.L. Racine (eds), Pakistan: The Contours of State and Society. Karachi: Oxford University Press.
  • Ali, Imran, A. Hussain. 2002. Pakistan National Human Development Report. Islamabad: UNDP.
  • Ali, Imran, S. Mumtaz and J.L. Racine (eds). 2002. Pakistan: The Contours of State and Society. Karachi: Oxford University Press.
  • Amjad, Rashid. 1982. Private Industrial Investment in Pakistan, 1960-70. London: Cambridge University Press.
  • Andrus, J.R. and A.F. Mohammed. 1958. The Economy of Pakistan. Stanford: Stanford University Press.
  • Barrier, N.G. 1966. The Punjab Alienation of Land Bill of 1900. Durham, NC: Duke University South Asia Series.
  • Jahan, Rounaq. 1972. Pakistan: Failure in National Integration. New York: Columbia University Press.
  • Kessinger, T.G. 1974. Vilyatpur, 1848-1968. Berkeley and Los Angeles: University of California Press.
  • Kochanek, S.A. 1983. Interest Groups and Development: Business and Politics in Pakistan. New Delhi: Oxford University Press.
  • LaPorte, Jr, Robert and M.B. Ahmad. 1989. Public Enterprises in Pakistan. Boulder, Colorado: Westview Press.
  • Latif, S.M. 1892. Lahore. Lahore: New Imperial Press, reprinted 1981, Lahore: Sandhu Printers.
  • Low, D.A. (ed.). 1991. The Political Inheritance of Pakistan. London: Macmillan.
  • Noman, Omar. 1988. The Political Economy of Pakistan. London: KPI.
  • Papanek, G.F. 1967. Pakistan’s Development: Social Goals and Private Incentives. Cambridge, Massachusetts: Harvard University Press.
  • Raychaudhuri, Tapan and Irfan Habib (eds). 1982. The Cambridge Economic History of India, 2 vols. Cambridge: Cambridge University Press
  • White, L.J. 1974. Industrial Concentration and Economic Power. Princeton, N.J.: Princeton University Press.
  • Ziring, Lawrence. 1980. Pakistan: The Enigma of Political Development. Boulder, Colorado: Folkestone.
  • Ali, Imran. 1987. ‘Malign Growth? Agricultural Colonization and the Roots of Backwardness in the Punjab’, Past and Present, 114
  • Ali, Imran. August 2002. ‘The Historical Lineages of Poverty and Exclusion in Pakistan’, South Asia, XXV(2).
  • Ali, Imran and S. Mumtaz. 2002. ‘Understanding Pakistan—The Impact of Global, Regional, National and Local Interactions’, in Imran Ali, S. Mumtaz and J.L. Racine (eds), Pakistan: the Contours of State and Society. Karachi: Oxford University Press.
  • Hasan, Parvez. 1998. Pakistan’s Economy at the Crossroads: Past Policies and Present Imperatives. Karachi: Oxford University Press.
  • Hussain, Ishrat. 1999. Pakistan: The Economy of an Elitist State. Karachi: Oxford University Press.
  • Khan, Shahrukh Rafi. 1999. Fifty Years of Pakistan’s Economy: Traditional Topics and Contemporary Concerns. Karachi: Oxford University Press.
  • Kibria, Ghulam. 1999. Shattered Dream: Understanding Pakistan’s Development. Karachi: Oxford University Press.
  • Kukreja, Veena. 2003. Contemporary Pakistan: Political Processes, Conflicts and Crises. New Delhi: Sage Publications.
  • Zaidi, S. Akbar. 1999. Issues in Pakistan’s Economy. Karachi: Oxford University Press


[edit] References




  1. ^ CIA - The World Factbook - Rank Order - GDP - real growth rate
  2. ^ Economic Data - Trend in Price Inflation (State Bank of Pakistan)
  3. ^ CIA - The World Factbook - Rank Order - Exports
  4. ^ "Pakistan Among Top 10 Reformers" (September 12, 2005). Retrieved on 2006-06-03.
  5. ^ World Bank Country Classification Groups, (July 2006 data)
  6. ^ http://www.economist.com/countries/Pakistan/profile.cfm?folder=Profile-Economic%20Data&CFID=26493986&CFTOKEN=87659164
  7. ^ GDP Estimate
  8. ^ Pakistan Embassy
  9. ^ "Bush administration puts pressure on Pakistan (Sept 13 2001)", CNN. Retrieved on 4 December 2007. 
  10. ^ "Doing Business in 2006: South Asian Countries Pick up Reform Pace, says World Bank Group; India Ranks 116th, 25 Places After China; Pakistan Among Top 10 Reformers" (September 12, 2005). Retrieved on 2006-06-03.
  11. ^ Ishrat Husnain - Economy of Pakistan PDF Format Article by the Governor of State Bank of Pakistan.
  12. ^ Bloomberg.com: Asia
  13. ^ CIA - The World Factbook - Pakistan
  14. ^ Feeney and Alam Report on Pakistan fertility, 2003 PDF Format
  15. ^ CIA - The World Factbook - Rank Order - Unemployment rate
  16. ^ Pakistan News Service - PakTribune
  17. ^ www.forexpk.com
  18. ^ http://geo.tv/11-27-2008/29648.htm
  19. ^ The Forbes Global 2000 - Forbes.com
  20. ^ http://www.statpak.gov.pk/depts/fbs/statistics/national_accounts/table13.pdf
  21. ^ Mahgul Rind, Hina. Cellular subscribers hit 78.7m. The News International. Retrieved on February 16, 2008
  22. ^ IT sector export about $600 million a year: minister. Business Recorder. Retrieved on February 16, 2008
  23. ^ Pakistan Recognised by GSMA for Exceptional Work in Developing Mobile Communications. GSM World. Retrieved on February 16, 2008
  24. ^ Pakistan: Growth and Export Competitiveness, World Bank Document No. 35499-PK, Table 6.7, page 116. Issued 25 April 2006
  25. ^ Daily Times Pakistan among top countries for offshore outsourcing: Gartner Retrieved on January 5, 2008
  26. ^ Gross National Product @ Factor Cost - Pakistan. Statistics Division, GOP. Retrieved on February 16, 2008
  27. ^ Pakistan's post-9/11 economic boom BBC News, 21 September 2006
  28. ^ 0.5 million housing units needed annually to meet shortfall: KCCI Business Recorder, 7 October 2006
  29. ^ Gross National Product of Pakistan (at current factor cost) Pakistani Government
  30. ^ "World Bank plans 6.5 bln usd lending to Pakistan", Forbes.com (06.02.2006). Retrieved on 3 June 2006. 
  31. ^ "Japan to resume USD 500 mn annual funding for Pak", The Hindu News Update Service (2006-05-29). Retrieved on 3 June 2006. 
  32. ^ Pakistan gets record $5.493bn remittances -DAWN - Business; July 17, 2007
  33. ^ Daily Times - Leading News Resource of Pakistan
  34. ^ FDI into Pakistan jumps 180.6% in 1st 9 months of FY06
  35. ^ Pakistan News Service - PakTribune
  36. ^ Daily Times - Leading News Resource of Pakistan
  37. ^ Private Equity in Pakistan, Israel, and Egypt, by Sethi, Arjun Nov 2007, accessed December 29, 2007.
  38. ^ Macroeconomic Stability of Pakistan: The Role of the IMF and World Bank (1997–2003) Faisal Cheema, University of Illinois at Urbana-Champaign, May 2004
  39. ^ Pakistan ends 15-year ties with IMF; Daily Times, 7 September 2004) Pakistani Newspaper Article, 2004
  40. ^ a b http://www.statpak.gov.pk/depts/fbs/statistics/external_trade/monthly_external_trade/met6/summary_june2007.pdf
  41. ^ "Pakistan to start cement export by August end", Yahoo! News, August 3, 2007
  42. ^ http://www.statpak.gov.pk/depts/fbs/statistics/external_trade/14.8.pdf
  43. ^ Current account deficit up by 41pc -DAWN - Business; July 22, 2007
  44. ^ a b Daily Times - Leading News Resource of Pakistan
  45. ^ Pakistan sells $500m Eurobond at 6.57pc: Orders reach $2 billion -DAWN - Business; 13 February, 2004
  46. ^ Record 'Sukuk" - Islamic Bond offering - by Pakistan | QeRN
  47. ^ DAWN - Annual Budget 2007; June 9, 2007
  48. ^ Dawn 9 July 2007




[edit] External links



Official Websites


  1. Statistics Division, Government of Pakistan
  2. Ministry of Finance, Government of Pakistan
  3. Regional / Bilateral Trade Agreements
  4. Trade Statistics and Analysis Ministry of Commerce
  5. Board of Investment, Government of Pakistan
  6. Central Board of Revenue
  7. Privatization Commission
  8. Central Depository of Pakistan Limited
  9. World Trade Organization: Pakistan
  10. National Clearing Company of Pakistan Limited
  11. Security and Exchange Commission of Pakistan
  12. Pakistan Software Export Board (PSEB)
  13. Central Board of Revenue: Pakistan's current trade policy
  14. Pakistan International: Chamber of Commerce
  15. Economic Comparison 1999 to 2008


Finance Newspapers/Magazines


  1. Economy of Pakistan Blog Blog featuring information on growth, development and fiscal issues
  2. Business Recorder Karachi, Lahore, Islamabad based Business Newspaper
  3. Pakistan Economist Pakistan's leading Business & Economy Magazine
  4. Industrial Information Network Pakistani B2B and information portal
  5. Stockpk -- We Watch The Stocks For You Articles on the Stock Exchanges of Pakistan
  6. Live updates on the Karachi Stock Exchange


Economy Profile Information


  1. http://presidentmusharraf.wordpress.com/2008/07/01/economic-comparison-1999-2007-and-beyond/
  2. CIA-The World Fact Book, Pakistan Section
  3. Pakistan CPI Index
  4. United Nations Development Programme, Human Development Index
  5. Index of Economic Freedom, 2005
  6. The Economist's Pakistan Fact Sheet
  7. The Economist Economic Data of Pakistan
  8. BBC Facts & Figures on Pakistan
  9. Global Economic Prospects: Growth Prospects for South Asia The World Bank, December 13, 2006


URL Based News


  1. The Economy: Pakistan's economic nightmare BBC Business News Article, 1999
  2. The Economy: Pakistan closes its banks BBC Business Article, 1999
  3. Disappointment over IMF talks BBC Article, 1999
  4. Sanctions boost for Pakistan economy BBC Article, 2001
  5. The Economist: Recent Articles on Pakistan
  6. World business invited to invest in Pakistan
  7. India, China And Pakistan Steal the show at the World Economic Forum Meeting Asia Plus, 2005
  8. '67% US companies plan to raise investment in Pakistan'
  9. Indonesia, Pakistan Strengthen Trade Ties Yahoo News, 2005


URL Based Articles


  1. SURVEY: INDIA AND PAKISTAN: "Not cricket", The Economist (May 20, 1999)
  2. Modern world economics and Pakistan Karachi Plus, Business Section
  3. Business, Stakeholders and Strategic Responses in Pakistan Article written by Imran Ali of Lahore University of Management Sciences
  4. EU report on new business opportunities in Pakistan (pdf)
  5. A refreshing and enlightening commentary on European, Pakistani and World economics www.ultranomics.com


Articles




















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