Trade Deficit in Pakistan Overview
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Questions and Answers

What major trade issue has Pakistan experienced consistently since the early 1950s?

  • Trade surplus in all years
  • Consistent trade deficit (correct)
  • Balance of trade neutrality
  • Increasing exports year on year

    • Among the listed fiscal years, which one had the lowest trade deficit?

  • FY 04
  • FY 02
  • FY 01
  • FY 03 (correct)

    • Which fiscal year reported the highest imports in Pakistan?

  • FY 08 (correct)
  • FY 10
  • FY 11
  • FY 06

    • Which fiscal year saw exports exceed $24,000 million for the first time?

    <p>FY 11</p> Signup and view all the answers

    What type of transactions are excluded from the bank's reporting of trade data?

    <p>Land-borne trade</p> Signup and view all the answers

    What was the balance of trade for Pakistan in FY 05?

    <p>-$6,183.80 million</p> Signup and view all the answers

    In which fiscal year did the trade balance reach its most negative value?

    <p>FY 08</p> Signup and view all the answers

    What was the value of re-exports in FY 04?

    <p>415.9 million dollars</p> Signup and view all the answers

    Which year had the highest recorded exchange rate of the Pakistani Rupee against the US Dollar before 2010?

    <p>2008</p> Signup and view all the answers

    What significant financial assistance was provided to Pakistan by the IMF in November 2008?

    <p>A loan of US $ 7.6 billion</p> Signup and view all the answers

    What was the exchange rate of the Pakistani Rupee against the US Dollar in the year 2005?

    <p>59.76</p> Signup and view all the answers

    How much did the IMF increase the loan amount to Pakistan in July 2010?

    <p>US $ 11.3 billion</p> Signup and view all the answers

    In which year did the exchange rate of the Pakistani Rupee first exceed 50 PKR against the US Dollar?

    <p>1999</p> Signup and view all the answers

    What was the exchange rate of the Pakistani Rupee against the US Dollar in 2012?

    <p>97.11</p> Signup and view all the answers

    What economic event led to the IMF providing assistance to Pakistan?

    <p>Balance of payments crisis</p> Signup and view all the answers

    What is a primary benefit of an efficient stock market in relation to investments?

    <p>It allows diversification of firm-specific risks.</p> Signup and view all the answers

    Which year showed a significant jump in the exchange rate from 2006 to 2008?

    <p>2008</p> Signup and view all the answers

    How do efficient stock markets influence the industrial sector?

    <p>They provide entrepreneurs with a feasible option to sell ventures to the public.</p> Signup and view all the answers

    What role does the financial sector play in relation to dispersed household savings?

    <p>It pools funds and allocates them efficiently.</p> Signup and view all the answers

    What is one consequence of inefficient stock markets on investors?

    <p>It limits diversification of investment portfolios.</p> Signup and view all the answers

    What reduces the incentive for entrepreneurs to enter new ventures when stock markets are inefficient?

    <p>High transaction costs and market uncertainty.</p> Signup and view all the answers

    What is a key effect of an efficient stock market on the economy?

    <p>It mitigates moral hazard and boosts productivity.</p> Signup and view all the answers

    What potential effect does increased volume in the capital market have on production and price levels?

    <p>It maintains general price levels in check and increases production.</p> Signup and view all the answers

    Which of the following describes a potential risk for investors in poorly-functioning stock markets?

    <p>Limited options for diversifying portfolios.</p> Signup and view all the answers

    What is the main objective of the second phase of reforms initiated by the SBP?

    <p>To further strengthen the financial sector</p> Signup and view all the answers

    What is one responsibility of the State Bank of Pakistan?

    <p>To ensure soundness and stability of the financial system</p> Signup and view all the answers

    What method does the SBP use for off-site surveillance of banks?

    <p>Regular reviews of various returns received from banks</p> Signup and view all the answers

    What is the purpose of the inspection conducted by the SBP?

    <p>To judge the soundness of operations and lending policies</p> Signup and view all the answers

    Which department has the SBP established to protect customer interests?

    <p>Customer Protection Department</p> Signup and view all the answers

    What type of regulations has the SBP issued to ensure the viability of financial institutions?

    <p>Prudential Regulations for commercial banks</p> Signup and view all the answers

    What is a key feature of on-site inspection by the SBP?

    <p>Undertaking visits to bank premises as needed</p> Signup and view all the answers

    What is the importance of continuously reviewing the reforms initiated by the SBP?

    <p>To adjust according to changing local and international circumstances</p> Signup and view all the answers

    What is the minimum paid-up capital requirement for Microfinance Banks/Institutions to commence business?

    <p>As prescribed in MFIs Ordinance 2001</p> Signup and view all the answers

    What percentage of risk-weighted assets must a Microfinance Bank maintain as equity?

    <p>15%</p> Signup and view all the answers

    What is the maximum loan amount that a Microfinance Bank can extend to a single borrower?

    <p>Rs. 100,000</p> Signup and view all the answers

    Which of the following constitutes Non-Performing Loans (NPLs) for Microfinance Banks?

    <p>Loans with overdue payments for 30 days or more</p> Signup and view all the answers

    What percentage of demand and time liabilities are scheduled banks required to keep with the State Bank?

    <p>A specific percentage as per SBP Act</p> Signup and view all the answers

    What service does the State Bank provide to scheduled banks regarding deposits?

    <p>Maintaining statutory reserves of scheduled banks</p> Signup and view all the answers

    What is the liquidity requirement for Microfinance Banks in terms of their time and demand liabilities?

    <p>10%</p> Signup and view all the answers

    What defines a scheduled bank under the SBP Act?

    <p>A bank that fulfills specific capital and reserve requirements</p> Signup and view all the answers

    Study Notes

    Trade Deficit in Pakistan

    • Pakistan has faced a trade deficit in most years, except for 1947-48, 1950-51, and 1972-73.

    Balance of Trade in Pakistan (Million Dollars)

    • FY 2000: Exports - 8,568.60, Re-exports - 67.1, Imports - 10,309.40, Re-imports - 18.1, Balance of Trade - -1,691.80
    • FY 2001: Exports - 9,201.60, Re-exports - 63.5, Imports - 10,728.90, Re-imports - 12.2, Balance of Trade - -1,476.00
    • FY 2002: Exports - 9,134.60, Re-exports - 70.1, Imports - 10,339.50, Re-imports - 11.1, Balance of Trade - -1,145.90
    • FY 2003: Exports - 11,160.20, Re-exports - 50.4, Imports - 12,220.30, Re-imports - 5.8, Balance of Trade - -1,015.50
    • FY 2004: Exports - 12,313.30, Re-exports - 415.9, Imports - 15,591.80, Re-imports - 14.3, Balance of Trade - -2,876.90
    • FY 2005: Exports - 14,391.10, Re-exports - 103.4, Imports - 20,598.10, Re-imports - 80.2, Balance of Trade - -6,183.80
    • FY 2006: Exports - 16,451.20, Re-exports - 129.1, Imports - 28,580.90, Re-imports - 10.3, Balance of Trade - -12,010.90
    • FY 2007: Exports - 16,976.20, Re-exports - 162.1, Imports - 30,539.70, Re-imports - 4.4, Balance of Trade - -13,405.80
    • FY 2008: Exports - 19,052.30, Re-exports - 727.4, Imports - 39,965.50, Re-imports - 10.9, Balance of Trade - -20,196.70
    • FY 2009: Exports - 17,688.00, Re-exports - 263.3, Imports - 34,822.10, Re-imports - 20.4, Balance of Trade - -16,891.20
    • FY 2010: Exports - 19,290.00, Re-exports - 257, Imports - 34,710.00, Re-imports - -, Balance of Trade - -15,163.00
    • FY 2011: Exports - 24,810.90, Re-exports - 357.3, Imports - 40,413.70, Re-imports - 24.1, Balance of Trade - -15,269.60
    • FY 2012: Exports - 24,573.00, Re-exports - -, Imports - 44,950.00, Re-imports - -, Balance of Trade - -20,377.00

    PKR vs US Dollar Exchange Rates

    • 1961: 4.76
    • 1970: 4.76
    • 1972: 9.91
    • 1980: 7.887
    • 1990: 21.32
    • 1991: 24.74
    • 1992: 25.46
    • 1993: 30.12
    • 1994: 30.76
    • 1995: 33.59
    • 1996: 39.53
    • 1997: 43.64
    • 1998: 46.11
    • 1999: 51.76
    • 2000: 57.71
    • 2001: 61.31
    • 2002: 58.68
    • 2003: 57.43
    • 2004: 59.83
    • 2005: 59.76
    • 2006: 60.73
    • 2007: 60.95
    • 2008: 79.76
    • 2009: 82.87
    • 2010: 83.41
    • 2011: 85.95
    • 2012: 97.11
    • August 2013: 104.39

    IMF Bailouts for Pakistan

    • IMF provided a loan of US$7.6 billion in November 2008 to prevent a balance of payments crisis.
    • The loan amount was increased to US$11.3 billion in July 2010 to help Pakistan overcome the economic crisis.

    Financial Sector Reforms in Pakistan

    • State Bank of Pakistan (SBP) initiated a five-year reform program for the financial sector in early 2005.
    • The reforms were completed successfully and a second phase was launched for implementation over the next five years.
    • The objective of the second phase is to further strengthen the financial sector and integrate it with the global economy.

    State Bank of Pakistan's Roles

    • Ensuring Financial System Soundness: The SBP regulates and supervises the financial system to ensure soundness, stability, and protect depositor interests.
    • Customer Protection: The SBP established a Customer Protection Department.
    • Inspection: The SBP monitors banking activities through 'off-site' surveillance and 'on-site' inspections, ensuring prudent lending and investment policies.
    • Prudential Regulations: The SBP has issued comprehensive Prudential Regulations for commercial banks, Rules of Business for non-banking financial institutions (NBFIs), and Prudential Regulations for Microfinance Banks/Institutions (MFBs/MFIs).
    • The Bankers' Bank: The SBP serves as the bankers' bank, providing services to scheduled banks that meet its requirements, such as maintaining statutory reserves, and offering other facilities in exchange for certain obligations.

    Microfinance Bank/Institution (MFB/MFI) Regulations

    • Minimum paid-up capital is required for MFBs/MFIs to operate.
    • MFBs/MFIs must maintain equity equal to at least 15% of risk-weighted assets, a 5% cash reserve, and 10% liquidity in liquid assets.
    • Loans exceeding Rs. 100,000/- to a single borrower are not allowed.
    • Loans overdue for 30 days or more are classified as Non-Performing Loans (NPLs).

    Stock Markets and Economic Growth

    • An efficient stock market attracts savings and allows for efficient allocation of funds to entrepreneurs with good credentials and reputation.
    • It helps households diversify risk and maintain liquid investments.
    • It facilitates information gathering and monitoring of industrial activities, reducing the risk aversion towards equity stakes.
    • It mitigates moral hazard and enhances productivity.
    • It encourages entrepreneurship by providing an exit route through public offerings.

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    Description

    This quiz explores the historical trade deficit data of Pakistan, highlighting significant years and their respective balances of trade. Participants will learn about the trends in exports and imports from FY 2000 to FY 2006, enhancing their understanding of Pakistan's economic challenges.

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