Macro-EconomicsMacro-EconomicsFinal Project

Topic

TRADE AND

PAYMENTS

Presented by:

• 13-4761 Ahsan Bashir

• 13-4713 Tayyab Javaid

• 13-4732 Kamran Zafar

• 13-4850 Saad Ahmed

• 13-4871 Syed Umer Shah

Overview

• Introduction

• Growth and Balance of payments

• Trends in Exports

• Trends in Imports

• Bilateral and Regional Trade Agreements

• Conclusion

Introduction

• Trade:

– Action of buying and selling goods and services

• Two types of trade:

– Exports:

– Send (goods or services) to another country for sale

– Imports:

– Bring (goods or services) into a country from abroad for sale

Growth

• Growth of World Gross Product:

– 2.5% in 2013

– 2.6% in 2014

• World trade:

– 2.3% in 2013

– 2.8% in 2014

• Workers’ remittances:

– 13.7% 2013-14

– 16.1% 2014-15

Balance of Payments

• External account balance surplus:

– US$ 1.95 billion 2013-14

– US$ 2.12 billion 2014-15

• Current account deficit:

– US$ 2.9 billion 2013-14.

– US$ 1.4 billion 2014-15

• Capital and financial account surplus

– US$ 5.3 billion 2013-14

– US$ 3.2 billion 2014-15

Balance of Payments

Current Account

Workers’ Remittances

Workers’ Remittances

Capital and Financial Account

• Recorded a lower surplus of US$ 3.2 billion 2014-15

• Recorded a surplus of US$ 5.3 billion 2013-14

Foreign Investment

Foreign Exchange

Trends in Exports

• Pakistan’s exports have been stagnant for the last few years

• Around US$ 24-25 billion

Trends in Exports

• Pakistan's exports base and markets are extremely narrow

• Major portion of exports earning are by the cotton group

Trends in Exports

• The other items of total exports are

Trends in Exports

• Reasons for the slowdown in exports include:

– Decrease in International prices of commodities

– Increase in Cost of Production

– Energy Crises

– Lack of Research & Development

Trends in Exports

• Top 5 countries, where Pakistan exports are:

• United States of America

• China

• Afghanistan

• Germany

• United Kingdom

Trends in Exports

Trends in Exports

Trends in Exports

Trends in Exports

Trends in Imports

• Net imports:

– US $37,084.81 million 2013

– US $37,763.08 million 2014

Trends in Imports

Trends in Imports

Trends in Imports

Bilateral and Regional Trade

Agreements

1. Trade Promotion with EU member’s countries

• 10 year GSP plus status for Pakistan by the European Union is a blessing for the

country.

• Pakistan’s total exports to EU during the calendar year 2012 amounted to US$ 5.6

billion.

• 82 % of our exports will now be duty free.

• Hence with the grant of GSP Plus status to Pakistan, more than 90 percent of our

exports to EU will be eligible for duty free access.

• It is estimated that due to GSP Plus there will be an increase of more than US$ 1.0

billion worth of exports to EU during the year 2014.

• Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA)

estimated around 100,000 new jobs will be created in textile garments sector only.

Pakistan’s main Exports to European Union

Duty free products from Pakistan to EU

2. Trade Normalization with India

• A meeting was held between the Commerce Ministers of the two

countries in New Delhi in January 2014, on sidelines of the 5th

SAARC Business Leaders Conclave.

• The salient features of this understanding were as follows:

– Normalization of trade relations & providing Non-Discriminatory Market

Access (NDMA) on reciprocal basis, before the end of February 2014

– Increase in working hours at Wagah with the objective of round the clock

operations as soon as possible

– Allow transportation of cargo in containers by road through Wagah/Attari

3. Progress on PTAs/FTAs

Pak-Indonesia Preferential Trade Agreement (PTA)

• Indonesia and Pakistan signed a Preferential Trade Agreement

(PTA) on 3rd February, 2012.

• Agreement includes a total of 313 tariff lines for market

access at preferential tariff.

• Pakistan will import palm oil from Indonesia @ 15 percent

Margin of Preference (MoP) under the PTA.

• Indonesia extended tariff concessions to Pakistan on textiles

and horticulture products including kinnow.

Pak-Malaysia FTA

• The Comprehensive Free Trade Agreement (FTA) for Closer

Economic Partnership between Pakistan and Malaysia was

signed on 08-11-2007 at Kuala Lumpur Malaysia.

• It became operational from 1st January 2008.

• Bilateral trade has increased by 36 percent since then from $

1.72 billion to $2.34 billion.

Pak-China FTA

• China-Pakistan Free Trade Agreement (CPFTA) was signed

on 24th November, 2006

• Implemented from 1st July 2007

• Pakistan’s exports have increased by 400 percent from around

$600 million in 2006-07 to $2.6 billion in 2012-13.

Impact of GSP Plus on Pakistan’s exports to EU

Conclusion

• Pakistan balance of payments improved considerably

• Current account narrowed by more than 50 percent

• Exchange reserves posted an increase of US$ 3.6 billion

• Exchange rate remained stable

• Country’s import bill remained within the target

• Trade deficit remained within limits and witnessed marginal increase