Q.No.8.

Adverse Balance of Trade (BOT)/Trade deficit of

Pakistan.
The balance of trade (BOT) is defined as the country’s exports minus
its imports. A positive trade balance indicates a trade surplus while a negative
trade balance indicates a trade deficit. Adverse trade balance is a situation in which
the value of the goods a country imports is more than the value of the goods it exports.

Reasons for the adverse balance of trade of Pakistan

1. Pakistan is with the cost of oil imports primarily responsible for the trade imbalance.
2. Imports increased at a faster rate than the exports of the country.
3. Pakistan’s exports and imports are concentrated on only few countries.
4. Exchange rate fluctuation.
5. Imported raw material and technology.
6. The Devaluation of Pakistan rupee.
7. The frequent changes in the fiscal and monetary policies of Pakistan.
8. The political uncertainty and labour unrest in the country.

Measures/Remedies to improve balance of trade of Pakistan

1. Pakistan should import capital goods and machinery to support domestic production
capacity and value added goods should be exported instead of primary goods and raw
materials.

2. It was observed that per capita productivity of textile sector in Pakistan is very low, if
compared with other countries of the region (China and India). So it is required to
enhance education facilities, skills development program, on job training and innovation
in the field of export relating.

3. Many countries gradually shifted their export from primary goods to capital or value
added goods that may be a role model for Pakistan to adopt.

4. Existence of WTO (World Trade Order) and FTA (Free Trade Agreement) may provide
opportunity to have an access to new markets.
 5. SME (small and medium enterprises) are also playing a significant role in Pakistan’s
export along with facing problem and challenges of different kinds, so it is suggested to
the government should focus on the measures to sort out the problems and challenges.

6. Government should formulate a strategy to be free of the country’s dependency on

workers’ remittances.

The above mention recommendation may be very useful to increase Pakistan exports and lessen the
balance of trade deficit.

Trade deficit of Pakistan

Trade deficit is a situation in which the value of the goods a country imports is more
than the value of the goods it exports. Trade deficits are usually considered to be an
unfavorable balance of trade.

Pakistan recorded a trade deficit of 337463 PKR Million in July of

2019. Balance of Trade in Pakistan averaged -42352.98 PKR
Million from 1957 until 2019, reaching an all time high of 6457
PKR Million in June of 2003 and a record low of -452668 PKR
Million in June of 2018.
Pakistan trade deficit

Reasons:

1. Pakistan is with the cost of oil imports primarily responsible for the trade imbalance.
2. Imports increased at a faster rate than the exports of the country.
3. Pakistan’s exports and imports are concentrated on only few countries.
4. Exchange rate fluctuation.
5. Imported raw material and technology.
6. The Devaluation of Pakistan rupee.
7. The frequent changes in the fiscal and monetary policies of Pakistan.
8. The political uncertainty and labour unrest in the country.

Measures/Remedies to improve Pakistan trade deficit

1. Pakistan should import capital goods and machinery to support domestic production
capacity and value added goods should be exported instead of primary goods and raw
materials.

2. It was observed that per capita productivity of textile sector in Pakistan is very low, if
compared with other countries of the region (China and India). So it is required to
enhance education facilities, skills development program, on job training and innovation
in the field of export relating.
 3. Many countries gradually shifted their export from primary goods to capital or value
added goods that may be a role model for Pakistan to adopt.

4. Existence of WTO (World Trade Order) and FTA (Free Trade Agreement) may provide
opportunity to have an access to new markets.

5. SME (small and medium enterprises) are also playing a significant role in Pakistan’s
export along with facing problem and challenges of different kinds, so it is suggested to
the government should focus on the measures to sort out the problems and challenges.

6. Government should formulate a strategy to be free of the country’s dependency on

workers’ remittances.

The above mention recommendation may be very useful to increase Pakistan exports and lessen the
balance of trade deficit.