Trade Deficit

Is it good for Economy!!

By
Dr.Ahmed Sohaib
Class of Spring 2008
Mahummad Ali Jinnah University
OR
Export – Import & Trade Balance
An export is any good or commodity, transported from one
country ( home country ) to another country in a legitimate
fashion, typically for use in trade.

An import is any good or commodity, brought into one

country from another country in a legitimate fashion,
typically for use in trade. Import goods or services are
provided to domestic consumer by foreign producer.

Trade Balance (or net exports)

The value of a country’s exports less the value of
its imports in a particular period (quarter or year)
 Deficit In terms of Economy, Deficit
refer to More expenditure and
less revenue.

Trade Deficit…..
a negative balance of trade is known as a trade deficit or, informally, a
trade gap

the difference between the monetary

value of export and IMPORTS in an
economy over a certain period of time. A
NEGATIVE balance of trade is known as a
Disadvantages of a Bigger Trade
Deficit
• Loss of manufacturing jobs
• industries may be completely shutdown.
• The country to depend entirely on foreign
sources.
• Most serious, if the trade deficit becomes
so large that the value of the currency falls
below equilibrium, then the advantages of
vigorous productivity growth and low
inflation start to disappear.
Benefits of a Bigger Trade Deficit
• Consumers gets…
• A larger variety.
• Better quality.
• lower prices for traded goods. also apply to capital
goods.

• Vigorous foreign competition boosts….

• productivity.
• reduces inflation.
• also keeps interest rates low
• Increase in foreign saving helps to fund
capital spending and boosts financial
market prices
 PAKISTAN
WHAT DO YOU THINK ABOUT PAKISTAN

?
TRADE OVER DECADES
Factors Effecting Trade Deficit
The reasons of TRADE DEFICIT in Exchange rates:
Pakistan….. Pakistani rupee (PKR)
per US$1
• Failed Trade Policy.
• Less Production against high Demand. 60.50 (01/11/07)
60.75
• Instability of the Government (05/08/2007)
Structure. 58 (2004)
• Less adaptation of the Modern 57.752 (2003)
Technology. 59.7238 (2002)
• Prices of goods manufactured at 61.9272 (2001)
home 53.6482 (2000)
51.90 (1999)
• Exchange Rates 44.550 (1998)
• Trade agreements & barriers 40.185 (1997)
• Other Taxes & tariff and trade 35.266 (1996)
measures 30.930 (1995)
• Business Cycle @ home & abroad.
Macro Economy of Pakistan
Ultimate Objective:
7.5% GDP
1) Create jobs, 2) Raise incomes and 3) Reduce poverty
4.2% Fiscal Deficit 7.9%
Inflation
Public debt 53.4% Tax-GDP
External Liab. 162797000 population ratio:10.5%
27.1% Saving: 18%
Per Capita
Income US$ 925.

Investments:
23% Banking
Trade spread:6.4-7.8%
Export : $10.15B
Trade deficit: 9%
Import : $20.48B
Current account: 5%

Stable exchange 20 million banking

rate:.7% dep. last clients with less
year then 6m borrowers

Forex covers almost

Low level of
6 months of imports
investments in the
social sector
Raising capital both
debt and equity from
international Economic Survey of Pakistan 2005-06
markets
An Over View of Pakistan Imports
& Exports (1998-2007)

Source:
SBP
Major Export Pattern of Pakistan 2005-2007
Major Export Pattern of Pakistan 1996-2007
Pakistan Imports 1996-1997 (% Shares )

16
Pakistan Imports 2006-2007 (% Shares )

17
Major Import Pattern of Pakistan 2005-2007
Major Import Pattern of Pakistan 1990-2007
JAPAN.. A SURPLUS STATE.
• Japan has continued to produce a trade
surplus since 1981.
• In terms of Japan's international trade
exports showed an annual increase of
14.6 percent to 75.25 trillion yen,
marking the fifth consecutive year of
increase.
• Imports grew by 18.3 percent to 67.34
trillion yen, thus increasing for the fourth
consecutive year.
Japan….
• Major reasons JAPAN is a historical surplus
state.
– Advancement of Technology
– High skilled Labor.
– Effective trade Policy.
– Strong government support.
– Productions meet the demands.
FOREIGN TRADE AND
COMPONENT RATIO OF F.T.
THANK YOU &
ALLAH HAFIZ

References
• www.wikipedia.org
• www.Accountancy.com.pk
• www.sbp.gov.pk
• www.statpak.com.pk
• www.pakboi.gov.pk
• www.stat.go.jp/english