Balance of Payment

Topics: International trade, International Monetary Fund, Export Pages: 3 (630 words) Published: January 8, 2011
Balance of Payments
Definition: BOP is a record of economic transaction between the residence of the country and the rest of the world during the period of one year.

Balance of Trade
Definition: BOT is the difference between the various export and import of visible goods of a country during a time. If the value of visible export exceed than the value of visible import than the balance of trade is said to be in favor. OR “The value of goods and services bought and sold in the world market.”

Cause of Adverse Balance of Payment

Since independence of Pakistan, balance of payment condition was not satisfactory. Accept few years, Pakistan is facing deficit in her balance of payment. The deficit is met by the loans. The deficit is increasing day by day.

• Import Of Machinery
Developing countries are importing machines and technology to improve the industrial sector. It has made the balance of payment unfavorable because the value of capital goods is increasing day by day and we want to industrialize our economy.

• Export Of Raw Material
Exports of Pakistan depend upon raw material and semi-manufactured goods. The price of raw material is very low in the world market. So our balance of payment remains unfavorable. For instance the product of cotton reduced in 1995 due to virus, so it also affected adversely our balance of payment, because we imported cotton instead of exporting.

• Political Unrest
Many less developed countries like Pakistan are facing political unrest, which is the main cause of low production. Ultimately balance of payment remains unfavorable. In this situation investors fears to do the investment.

• Import Of Wheat
Pakistan is facing the food shortage problem and spending a huge amount of foreign exchange on its import. In the past we imported many times like wheat and it has affected our balance of payment.

• Increase In The Sick Industrial Units
Due to Nationalization a number of units...
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