“Overview on BOP of

Pakistan”
 PRESENTED BY:

ASMA MUNAWAR (M05BBA077)

MAHA HASSAN (M04BBA070)
FATIMA TAHIR (M05BBA027)
KANWAL AMIN (M05BBA012)
 ECONOMY OF
PAKISTAN

BALANCE OF
PAYMENT
 Balance of Payments

• Balance of payments is a statistical

statement designed to provide for a
specific period of time a systematic
record of an economy’s transactions
with the rest of the world.

• An “economy” is comprised of
economic entities (residents) that have
closer association with that specific
economy than with any other.
 Balance of Payments
• A systematic record of a nation's total
payments to foreign countries, including
the price of imports and the outflow of
capital and gold, along with the total
receipts from abroad, including the price
of exports and the inflow of capital and
gold.
• It is a tabulation of Dr. and Cr.
Transactions of a country with foreign
countries and organizations.
• It helps countries about making the
monetary and fiscal policies and to solve
the issues relating to the trade and
 CONCEPTUAL FRAMEWORK
OF BOP
• BOP registers transactions between
residents and non-residents.
• BOP deals with flows.
• BOP uses double entry accounting
system.
• BOP adopts the principal of accrual
accounting (time of recording).
• BOP are normally expressed in
domestic currency or in stable unit of
account.
 Why is it important ?
The balance of payments statistics are used
for a number of reasons within 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.
 Why is it important ?
International Uses
Regional balance of payments statistics are used both by
the Pakistan’s authorities and by the authorities of
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 and other external stakeholders etc.
 Who Compile it
• Statistics Department of State Bank
of Pakistan is responsible to compile
Pakistan’s Balance of Payments
Statistics (BOP) as per IMF format
(BPM5)
 Periodicity and Timeliness
• Monthly (highly provisional),
Quarterly and Annually.

• Monthly: By the time lag of 36 days

after the reference Month.
• Quarterly: By the time lag of one
quarter after the reference period.
 BOP OF A COUNTRY
• Payment received from a foreign country
is a credit transaction.
• The principal item shown on the credit side are:
– exports of goods and services,
– transfer receipts,
– borrowing from abroad,
– foreign direct investment
– and official sale of reserve assets including
gold to foreign countries and international
agencies.
BOP OF A COUNTRY (Contd)

• The payment to a foreign country is a

debit transaction.
• The principal items on the debit side are:
– import of goods and services,
– transfer payments to foreigners,
– lending to foreign countries,
– investments by residents in foreign
countries and official purchase of reserve
assets of gold from foreign countries and
international agencies.
BOP OF A COUNTRY (Contd)
• The debit and credit items are shown
vertically in the BOPs account of a
country . Horizontally, they are divided
into three categories.

• MAJOR COMPONENT OF BOP

e) The current account

f) The capital account
g) The official settlement account or official
reserve asset account.
 Current account
• Current account

I.1 Imports and exports of goods

(merchandise)

I.2 Imports and exports of services

(payments for legal services, shipping
services, tourist meals,…) “invisible
current
I.3 Factor income receipts/factor income transaction
payments to foreign countries (interest s”
and dividend payments, earnings of firms
and workers operating in foreign countries)
I.4 Current unilateral transfers: gifts
(transfers) across countries that do not
purchase a good or service nor serve as
 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.
 Current account

• II. Services Credit Debit

Net
 Transportation.

 Travel.

 Communication

 Construction 

 Insurance

 Financial
 Current account

III. Current transfers Credit Debit

Net
• General government  
• Other sectors
• ► Workers’ remittance
• ► Resident FCAs
• ► Others
The capital account

The capital and financial account records

loan transactions, investment flows, short-
term capital and other related items.

Financial Transactions consisting of direct

investment and purchases of interest bearing
financial instruments, non interest bearing
demand deposits and gold , comprise the
capital account.
• Financial account:
– the difference between sales of domestic assets to foreigners
and purchases of foreign assets by domestic citizens.

• Financial (capital) inflow

– Foreigners loan to domestic citizens by acquiring
domestic assets.
– Foreign owned (sold) assets in the domestic economy
are a credit (+)

• Financial (capital) outflow

– Domestic citizens loan to foreigners by acquiring foreign
assets.
– Domestically owned (purchased) assets in foreign
economies are a debit (-)
 The Official Reserve
Account
a. Function:
1.) measures changes in
international reserves owned by
central banks.
2.) reflects surplus/deficit of
a.) current account
b.) capital account
 The Official Reserve
Account
• Official reserve transactions consist of
movements of international reserves by
governments and official agencies to
accommodate imbalances arising from
the current and capital accounts.
• The official reserve assets of a country
include
3. its gold stock,
4. holdings of its convertible foreign
currencies and SDRs and its net position
in the IMF
 The Official Reserve
Account
Reserves Assets  Credit Debit
Net

Monetary gold 
SDRs 
Reserve position in the Fund. 
Foreign exchange
Other claims
Net Effects:
a. Sum of all transactions must be
zero:

1.) current account

2.) capital account
3.) official reserves
 BOP’s EQUILIBRIUM
• Equilibrium is that state of BOPs over
the relevant time period which
makes it possible to sustain an open
economy without severe
unemployment on a continuing basis.
 Types of BOPs Equilibrium

2. Static Equilibrium
3. Dynamic Equilibrium

26
 STATIC EQUILIBRIUM
• Exports equal imports including
export and import of services as well
as goods and other items on the
BOP– short term capital , long term
capital and monetary gold are on
balance, zero
• Not only should the BOPs be in
equilibrium but also national money
incomes abroad. The foreign
exchange rate must also be in
equilibrium.
 Dynamic Equilibrium.
• The condition for the short term is that
Export and imports differ by the amount of
short term capital movements and gold and
there are no large destabilizing short term
capital movements.

• The condition for the long term is that

imports and exports differ by the amount of
long term autonomous capital movements
made in a normal direction, when the BOP is
in equilibrium the demand and supply of
money is equal.
 Types of Disequilibrium

• Cyclical disequilibrium
• Secular Disequilibrium
• Structural Disequilibrium

29
 Cyclical Disequilibrium
• If two countries passing through different
paths of business cycle or the countries
may be following the same path but
income elasticities of demand or price
elasticities of demand are different, it
results in cyclical disequilibrium.

30
 Secular Disequilibrium
• The secular or long run disequilibrium in
BOPs occurs because of long run or
deep-seated changes in an economy as it
advances from one stage of growth to
another.

31
 Structural Disequilibrium
Structural disequilibrium has two sub-types:

3.Structural disequilibrium at goods level

and
4.Structural disequilibrium at factor level.

32
 CAUSES OF DISEIQUILIBRIUM
• There are several variables which affect a
country’s BOP. Any change in these
variable would bring disequilibrium in BOP.
These are:-
b) National Incomes at home and abroad
c) The prices of goods and factors of
production
d) The supply of money and rate of interest.
e) State of technology, taste , distribution of
income etc.
33
 GENERAL MEASURES TO
CORRECT THE BOP
DISEQUILIBRIUM.
• Exchange Depreciation (Price effect)
• Devaluation (by Government)
• Tariffs
• Import quotas
• Export duties.
 EXCHANGE DEPRECIATION
(PRICE EFFECT)
• Fixed Exchange Rate: which is kept
stable by monetary authority,
fluctuation with small limits.
• Exchange rate flexibility: means that
demand for foreign exchange
matches its supply so that there is no
disequilibrium flows of money
between the country and the rest of
the world.
 EXCHANGE DEPRECIATION
(PRICE EFFECT) cont.
• Internal Balance: simultaneous balance in
product and money market assuring full
employment with out inflation.
• External Balance: means balance in BOP,
neither deficit nor surplus.
• Expansionary monetary and fiscal policies
under the flexible exchange rates exert strong
influence over national income. It also help in
maintaining internal and external balances.
 DEVALUATION
• It is an official action which reduces
the price of domestic currency in
terms of foreign currency.
• Where is depreciation or appreciation
is the result of market forces.
• Devaluation is effective when there is
a fixed exchange rate. The aim of
devaluation is to correct the BOP’s
deficit.
 TARIFFS
• Tariff is tax on imports (import duty
or custom duties)
• These are used for two purposes ,
revenue or protection.
 IMPORT QUOTAS
• These are alternatives to tariffs.
• Fixed volume of commodity is
allowed to be imported in the country
during a specified period.
 EXPORT DUTIES
• When world price is higher than
domestic prices, exports become
more lucrative. In such situation,
government may levy export duties.
• These are levied to protect domestic
consumers.
 MAIN CAUSES OF
DISEQUILIBRIUM
• SLOW GROWTH OF PRODUCTION:
• POLITICAL UNCERTAINTY
• FISCAL POLICIES
• PAKISTAN’S TARIFFS
• TRADE RESTRICTIONS OF DEVELOPED
COUNTRIES.
• HEAVY IMPORT OF FOOD GRAIN AND ENERGY
• EXPORT OF PRIMARY COMMODITIES
• DEPRECIATION OF PAKISTAN RUPEE
• INFLATION
• FOREIGN EXCHANGE REMITTANCES
 Exchange Rate Regime
• Floating exchange rate
• Fixed exchange rate
• Managed float
 Exchange Rate Regime
• A floating exchange rate or a flexible exchange
rate is a type of exchange rate regime wherein a
currency's value is allowed to fluctuate according
to the foreign exchange market. A currency that
uses a floating exchange rate is known as a
floating currency. The opposite of a floating
exchange rate is a fixed exchange rate.
• Many economists think that, in most
circumstances, floating exchange rates are
preferable to fixed exchange rates. However, in
certain situations, fixed exchange rates may be
preferable for their greater stability and certainty.
In cases of extreme appreciation or depreciation,
a central bank will normally intervene to stabilize
the currency. Thus, the exchange rate regimes of
floating currencies may more technically be
known as a managed float. A central bank
might, for instance, allow a currency price to float
freely between an upper and lower bound, a price
 PAKISTAN’S BOP

• The 6th most populous country(164 Million

2007) in the world is suffering its greatest
internal crises since partition, with
security, economic and political interests.
Wheat and other food staples are scarce
and hunger is on the rise. Energy crises
have soared and electricity blackouts are
every day occurence. Inflation is beginning
to pinch even those who believed that
they had achieved middle-class security.
 PAKISTAN’S BOP
• Pakistan payments problems have been chronic
since the 1970s, with the cost of oil imports
primarily responsible for the trade imbalance. The
main reasons are:
– export of raw material and import of finished goods.
– Natural disasters.
– Decline in foreign remittances and foreign aids.

• The growth of exports and of remittances from

Pakistan working abroad (mostly in the Middle
East) helped Pakistan to keep the payment deficit
in check. Since the oil sector boom began
subsiding in the early 1980s, however,
remittances declined.
 PAKISTAN’S BOP
• Remittances from overseas workers
peaked at $2.9 Billion in 1983, and
then dropped to $1 Billion in 2001.
This trend esp. accelerated during
the Gulf War, when nearly 80,000
Pakistani in Kuwait and Iraq lost their
jobs. Only about 25% of these jobs
had been regained a year after the
end of the conflict. Increased imports
and softer demand for Pakistan
textiles in major markets also caused
the current account deficit to further
 Remittances
FY 06-07 FY 07-08 FY 08-09
(July _Nov)

US $ 5.49 B US $ 6.5 B US $ 2.97 B

From July – Oct 07 remittances increased

10.4%
From July – Oct 08 remittances increased
26.4%
 PAKISTAN’S BOP
• The BOP position weakened in 1996 as
imports grew by 16% and exports by only
6%. Foreign Exchange Reserves fell to
around $800 Million by mid-1997. By 2000,
foreign debt equaled 100% of GDP. The
Gov. took steps in the early 2000s to
liberalize and deregulate the exchange.
This caused increase in the liquid Foreign
Exchange Reserves in 2001 and also
because of inflows from IFI. Export growth
in 2001 was primarily due to higher
exports of primary commodities such as
rice, raw cotton, and fish and other
manufactures such as leather, carpets,
sporting goods, and surgical instruments.
Foreign Exchange Reserves

FY 06-07 FY 07-08 FY 08-09

(July _Dec)

US $ 15.18 B US $ 10.83 B US $ 9.34 B

Main sources of Foreign Exchange (excluding

FDI)
• Textile exports
• Workers remittances
 Exports
FY 06-07 FY 07-08 FY 08-09
(July _Nov)
US $ 17 B US $ 20.50 B US $ 10.16 B

In FY 06 – 07 exports increased 4.5 %.

In FY 07-08 exports increased 7.5%.

Largest Merchandise Export Destination

• USA (21.3 % )
• Others are UAE 10.4%, Afghanistan 8.4%, China
5.2%, UK 4.7%.
 Exports
• Our major exports are textile, rice, leather goods,
sport goods, chemicals and carpets.
• Specifically the textile sector which until recently
had been the major driver of the exports growth
could only muster 1% growth from last year. Even
the weak textile export growth during July-oct 08
was largely contributed by rise in the low value
added category of synthetic textiles and in
knitwear exports. Exports of all the middle and
high value added categories included garments,
bed wear and towel experienced a fall. This all
due to enhanced competition. Major reason is
china’s increasing textile exports to EU and USA.
 Imports
FY 06-07 FY 07-08 FY 08-09
(July _Nov)
US $ 30.99 B US $ 39.96 B US $ 18.83 B

ain Imports:
Machinery and Transport equipment (26 %)
Mineral Fuels (24 %)

ur major importers are China 16.2 %, Saudi Arabia 10.9%,

AE 10.1%, USA 5.7%, Kuwait 4.9%, Japan 4.4%.

Import Bill is more than our export earnings because apart

from the near doubling of our demand for oil, most of the rest
of our import expenditure is on capital goods. We are bringing
in machinery for new factories and infrastructure and for
expanding and modernizing extra existing facilities.
 Trade Deficit
FY 06-07 FY 07-08 FY 08-09
(July _Nov)
US $ -13.53 B US $ -20.74 B US $ -8.67 B

During July – Nov 07 Trade Deficit increased by

18.7%.
During July – Nov 08 Trade Deficit increased by
32.3%.
 Foreign Debt
1999 2006 2008

US $ 39 B US $ 36 B US $ 45 B

The Gov paid nearly $ 3 B in annual debt

servicing payments in the last FY, this year it
will be even more. Together the debt
servicing payments amount to nearly 40% of
the entire budget of $ 30 Billion.
Foreign Direct Investment
FY 05-06 FY 07-08 FY 08-09
(July _Nov)
US $ 3 B US $ 5.1 B US $ 1.40 B

Singapore has been the single largest investor in Pakistan

from July-Nov 08.
FDI from Singapore 19.8%, USA 19.6%, Malaysia 12.7%, UK
7.1%, Switzerland 4.4%.
 “Debt and Investment
dilemma”
• Pakistan is suffering from “Debt and
Investment dilemma”. On debt our
dilemma is that we must not borrow,
because it increases our debt
servicing liability but we must borrow
if we wish to develop rapidly. As to
investment we want to draw in FDI to
increase our declining Foreign
Exchange reserves, but investors
look at the health of our Foreign
 PAKISTAN’S BOP
• Decisions made by the last Gov.
which leads an economic meltdown.
This was done by bumping money
into the economy. Previous Gov.
gave middle and lower income
groups access to banking credit.
Interest rates were lowered to 5%
thus lowering the cost of doing
business and Gov. expenditures were
increased. These actions proved
 PAKISTAN’S BOP
• Inflation was the direct result which
touched unprecedented levels. Inflation a
measured by CPI rose to 24.7% in the 5
months through Nov. compared with a
year earlier. Commodity prices began to
increase, climbing to new heights
everyday in the summer 08. At one point,
the prices of oil almost touched $150 a
barrel. Pak. is increasingly rely on
imported goods as compared to its
domestic production. Since Pakistan is a
large oil importing country this worsened
the already serious BOP situation. In the
year 08, the import bill increased by
almost 45.4% and the share of oil bill in
 Inflation
FY 06-07 FY 07-08 FY 08-09
(July _Nov)

7% 10.3% 25%

An opinion survey by the US- based International

Republic Institute shows that 58% of Pakistanis
believe rapidly rising inflation is their main
concern, while 77% cite on economic issue as
their top priority.
 PAKISTAN’S BOP
• Depletion of Pakistan rupee in the last year also
posed a great pressure for Pakistan economy.
The rupee in 17 oct 08 plunged to an all time low
of Rs. 84.40 compared to 62.72/ dollar

Exchange Rate
FY 06-07 FY 07-08 FY 08-09
(July _Nov)
US $ = Rs. US $ = Rs. 71 US $ = Rs.
60.5 78.9
 SBP First Quarterly Report
FY 08-09
• In the first Quarterly report for the FY 08-09 which
was released on 29 Dec 08 pointed out that both
fiscal and current account deficits estimated to
improve in the upcoming quarter of FY 09.
• Federal Gov. had projected to achieve 5.5% real
GDP growth rate during FY-09. The report further
said that Pak. export’s are expected to be in the
range of $20.50 B to $22 B while imports are
projected to remain around $35 B for the current
financial year.
• The report maintained that global recession and
risk averse behaviour of investors would likely to
severely impact international trade and level of
Foreign exchange inflows in the economy. SBP
estimates for both imports and exports have been
revised downwards, with a more pronounced
effect on imports.
 SBP First Quarterly Report
FY 08-09
• It said the disbursement of first release of $3 B by
end Nov. 08 under the programme meant that
any immediate risk of default on external
obligations receded, with substantial
improvement in Foreign Exchange Reserves. Also,
export growth has strengthened and import
growth moderated somewhat. This lent strength
to the rupee, reducing the impact of an important
generator of inflationary pressures.
• The report said that the gain on the external
account was helped by a sharp decline in
international commodity prices that is expected
to substantially lower the country’s import bill,
offering the possibility of a decline in the
country’s very large current account deficit and
 •The global financial crisis of 2008
is an ongoing major financial crisis
•It became prominently visible in
September 2008 with the failure,
merger or conservatorship of several
large United States-based financial
firms.
• The crisis has led to:
a liquidity problem and
the de-leveraging of financial
institutions
• The crisis continued to change,
evolving at the close of October into a
currency crisis.
Pakistan is poorly integrated with
the global economy.
Pakistan is likely to be protected by
the underdeveloped status of its
trading sector.
No significant impact on either the
quantum or value of exports
• The financial crisis has suddenly
reversed these trends.
• The price of oil has declined by 50%
• The prices of traded food crops have
registered significant drops.
• Even though Pakistan may escape
the immediate negative
consequence of the turmoil in the
West, there will be long-term
consequnces.
• Over the years the US has become
the single most important source of
remittances for Pakistan,
The FIA made raid
a telephonic conversation about the
illegal transfer of about 0.5 to $1 mn
Dunya International Moneychangers in
Gujranwala
seized $ 786,000 and four vouchers of
Havala
Havala and Hundi are the two most
popular channels of illegal transfer of
foreign currency from one country to
another.
• Munaf Kalia and Javed Khanani
confessed of transferring foreign
currency of locals to their relatives and
friends living abroad.
• money exchangers have transferred
around $ 10 billion for the last five years
from the country.
• On an average, they were transferring
about $ 10 million every day through the
“Havala” and “Hundi” system
 FIA is pursuing a two-pronged strategy:
–registering a case
–an out-of-court settlement.
• Malik Bostan offered FIA DG to arrange
$500mn($6 billion (Rs480 billion) a year) a
month to maintain dollar-rupee parity
• said if entertained, it could help both the
government and the other stakeholders
The forex scandal of the exchange
companies involved in transferring
millions of dollars abroad
Bt was not a major cause of depletion in
foreign exchange reserves,
The FoP is not a donors’ group but is a
support group
The FoP was launched on in New York at
a high-profile meeting of world powers
on the sidelines of the UN General
Assembly session
The FoP comprises the United States,
Saudi Arabia, Britain, France, Germany,
China, the United Arab Emirates,
Canada, Turkey, Australia and Italy.
• Pakistan is supported through a series of
negotiations by various world economic
bodies - World Bank, Islamic
Development Bank, Asian Development
Bank, Japan-IBRD and the UK’s
Department for International
Development,” Zardari said, suggesting
that options remain open for his country
to avoid a loan from the IMF.
• “The IFIs have appreciated our economic
programs and social safety net, but they
want to get it approved from the IMF
before providing us financial facility,”
• The Friends of Pakistan group have
already advised Islamabad to first move
the International Monetary Fund to
qualify for their formal financial
commitments which they will make in a
meeting to be held in Dubai on Nov 17.
• Pakistan’s ailing economy, is left with no
option but to obtain the IMF loan.
The International Monetary
Fund (IMF)
 Introduction of IMF
• It is an organization of 185 countries,
working to
– foster global monetary cooperation,
– secure financial stability,
– facilitate international trade,
– promote high employment and
sustainable economic growth,
– and reduce poverty around the world
 original purpose
• to help countries in need to finance
balance-of-payments (BOP) deficits so
that they would not take actions that
would harm their trading partners.
• countries do not go bankrupt.
• IMF credits come with policy conditions
that borrowing countries find painful to
accept and implement.
 IMF
& PAKISTAN
 Features
• The International Monetary Fund (IMF)’s
executive board’s meeting,
• The loan will carry 6-6.5 per cent interest
against the SDR (special drawing rights)
of $1.3 billion to help Pakistan restore
financial and economic discipline
• Of the $7.6 billion loan, $3.1 billion will be
made available by the IMF immediately
to strengthen the reserve position.
• while the rest will be distributed in six
equal installments.
• The money is likely to be transferred to
the SBP’s account in the US Federal
Reserve in New York.
• The IMF will extend The 23-month Stand-
By loan under the newly created short-
term liquidity facility (SLF)
• Pakistan is to pay $45-50 million more to
the IMF apart from repaying principal of
$7.6 billion
Pakistan accepts 11 IMF
conditions
• -Central Excise Duty (CED) on services and
agriculture sectors at the rate of 8-18% in
place of the General Sales Tax (GST)

• -the Pakistani currency will also be devalued

• -the release of 60% funds under the Public

Sector Development Programme (PSDP),
would be reviewed downward to 45 %.

• -freezing of non-development expenditure

under the defense budget for the last three
quarters of the current financial year
1. Non-provision of grants to government
departments
2. Ending subsidy
3. 20% reduction in non-development expenditures
4. Increase in markup & inter-bank transactions
5. Uniformity in the inter-bank and open market
dollar exchange rate
6. Stoppage of intervention in stock markets.
7. The IMF will be informed at the time of the
issuance of credit line by any international
financial institution, including the World Bank
Pakistan's economic program
• The Government's program has two
objectives:
– first, to restore overall economic stability
and confidence through a tightening of
macroeconomic policies
– second, to do so in a manner that ensures
social stability and adequate support for
the poor during the adjustment process
• The authorities' program for the coming
24 months envisages a number of
additional steps:
1) The fiscal deficit, excluding grants, will
be brought to down from 7.4 percent of
GDP in 2007/08 to a more manageable
4.2 percent in 2008/09 and 3.3 percent in
2009/10—in line with what it was three
years ago.
2) The State Bank Of Pakistan (SBP) will act on
monetary policy to build its international
reserves, bring down inflation to 6 percent
in 2010, and eliminate central bank financing
of the government
3) Expenditure on the social safety net will be
increased to protect the poor
4)on the social safety net of 0.6 percentage
points of GDP to 0.9 percent of GDP. for
2008/09
• The IMF deal will bring the consumers,
subscribers and provincial governments on a
collision course after its hidden conditions will
be revealed.
• The major controversy is about the interest rate
to be paid by Pakistan.
• Pakistan has never obtained structural
adjustment facility loan or balance of payment
assistance on mark-up rates higher than 3 per
cent.
 Not the mark-up but the conditions
attached are worrisome for

• The new loan to Pakistan for which the two

sides agreed on Saturday is stringed to
conditions for increasing tolls, energy price and
taxes by fiscal and administrative measures in
2009
 for 2009-11
•The transport tolls might be increased four
times 15%
•the energy rates would be increased by more
than 30%.

–Electricity prices by 32%

–gas by 39%
–petroleum prices by 15 %

•medicine prices would also be increased as

the payable income tax would be increased by at
least 100 per cent
• raising the discount rate from 13 per cent
• set a course for increasing tax to the GDP
ratio from 10% to 15% in the next five to
seven years
• There is a need for upgrading the Index
Production Unit (IPU) related to
agriculture production
• and imposition of the GST on services also
required
• sources said the government had accepted
the IMF demand to cut down development
and non-development expenditures by 35-
40% and 7-10%,
• They expressed apprehensions that in
case of missing the agreed conditions in
the current fiscal year, the second or third
tranches would be in danger.
 President Zardari’s visit to China,

• Following President Zardari’s visit to

China, the Chinese government has
agreed to extend financial assistance of
US $500 million to the government of
Pakistan.
 Islamic Development Bank

• State Bank of Pakistan said it has

received $200 million from the Islamic
Development Bank as the country’s
reserves are barely enough to cover nine
weeks of imports.
• Standard & Poor downgraded Pakistan’s
ranking twice in the last five weeks ñ first
on Oct 6 and again on Nov 14
• S&P lowered Pakistan’s foreign currency
debt rating from B to CCC+
• Pakistan’s local currency debt rating was
lowered from BB- to B-.
 AFTER IMF LOAN
• it had raised its long-term foreign-
currency sovereign credit rating on the
Islamic Republic of Pakistan from 'CCC‘ to
'CCC+‘
• and affirmed the 'CCC+' long-term local-
currency rating.
• The upgrade of Pakistan incorporates the
disbursal of the first tranche (US$3.1
billion) of the US$7.6 billion International
Monetary Fund (IMF) loan facility in
November 2008.
 “Beggars are never given choices ...
Leaders made us beggars, they have
'kashkool' in their hands and now they're
begging in front of IMF, US, Saudia,
China, Friends of Pakistan, Iran,
Germany, NATO ....!!”
PROPOSED SOLUTIONS
• order to eliminate borrowing, the interest
rates set at Treasury bill auctions would
have to be attractive.
• Pakistan needs a leadership with
competence, very strong nerves, clear
understanding of the issues and psyche of
the other side of the table, ability to
negotiate with the super powers and
come out with a most suitable package.
Thank You for your patience