Chapter 2 Balance of Payments - Planning Commission

Balance of PaymentsChapter 2Balance of PaymentsPakistan is facing a situation of low growth over few years. . The emergence of newtechnology (internet, mobile) and financial sector exuberance temporarily providedepisodes of higher growth in mid-2000. Barring this brief interval, the growth rateremained generally lower than potential for almost two decades now. The experienceof East Asian economies illustrates that the export has the potential to serve as anengine of growth and take the economy to higher growth trajectory. Accordingly, astrategy which improves productivity, competitiveness and promotes exports breaksthe syndrome of low growth.2.1 StrategyThe trade strategy is guided by the Framework for Economic Growth and the proposedStrategic Trade Policy Framework 2012-15 (Box 2.1). Central to achieving theobjective of export competitiveness is the role of the private sector. However,inconsistency of policies risk of investment and short term planning horizon lead tosub-optimal allocation of resources. To encourage the private sector to export,consistency and continuity of supportive policy framework is required. Internally, twomajor challenges faced by the country are shortage of energy and security-relatedissues. Whereas, the former will take some time to fill the gap in energy supply anddemand, the latter should be tackled on priority basis so that the export industry doesnot suffer much and stays competitive internationally.Pakistan is a member of two regional groupings: South Asian Association for RegionalCooperation (SAARC) and Economic Cooperation Organization (ECO) but has notbeen successful in promoting the intra-regional trade significantly. Political differences,failure to develop infrastructure and protocols for large scale overland trade andsimilarities in the trade pattern of the member states, together with absence ofcomparative advantage in the capital intensive and high value added products (thatare normally imported in the region) are some of the reasons for this lack of success.In the regional context, Pakistan’s exports to neighbors accounts for only 17% and thisneeds to be expanded through regional trade agreements and identifying prospectiveareas of cooperation (Box 2.2). The potential of FTAs is also not fully exploited andspecial access arrangements (GSP plus with EU and Bilateral Investment Treaty withUS) are long overdue. The need is to identify right partners to enter into FTA instead ofindulging into dialogue with many countries. An encouraging development in thisregard is the Currency Swap Arrangements (CSA) that Pakistan has entered into withPeoples Republic of China and Turkey. The objective of these swaps is to promote theuse of regional currencies for trade settlement purposes and specifically in the case ofChina; and enhance the role of the Chinese Yuan in international trade andinvestment.Trade with India should flourish since there are several advantages of normalizingtrade between the two countries. To begin with, the advantage of geographicalAnnual Plan 2012-13 Page 23

Balance of Paymentsproximity – cheaper transportation costs and trade complementarily in goods in whicheither country has a comparative advantage are overwhelming. The shorter distanceswill render it unnecessary for industry to carry high levels of inventories of rawmaterial, intermediate goods and parts, thereby reducing cost of operations and thecountry’s overall trade deficit while also improving allocation of scarce resources.(Box 2.2).Box: 2.1 Draft Strategic Trade Policy Framework 2012-15Salient Features of Strategic Trade Policy Framework (STPF) are:• Process of trade policy formulation, implementation and post implementation auditand evaluation has been streamlined. Ministry of Commerce (MoC) will align tradepolicy with development policies of the Government and Pakistan’s Framework forEconomic Growth• Export performance during the period 2009-12 was better than expected despiteglobal recession, energy shortages and security concerns. The target of 23.5Billion US Dollars set for June 30 th 2012 was surpassed a complete year inadvance• STPF is an outward looking policy framework that put emphasis on increasingexports to reduce trade deficit than on reducing imports. The overall objective ofthe STPF is to achieve export led sustainable high economic growth by engagingIndustry, civil society and donors and necessary policy intervention• STPF aims to reduce twin problems of uncertainty of policy and regulatory rigidity• STPF place special emphasis on increasing the volume of regional trade. Tradenormalization process with India is the most important step taken by the Ministry ofCommerce which will open large market for Pakistani goods andservices. Moreover, increase in imports from India will reduce cost of our Industrialproduction and it will also be beneficial to domestic consumer• MoC is planning to introduce “Principles of Protection Policy” in STPF to provideguiding principles to protect certain industries. This will ensure the right balancebetween protection and competition for the industry• STPF aims at facilitating the business community in every possible way. In thisregard, MoC have completed an in-house review of regulatory framework oninternational trade i-e Import policy order and export policy order with a view tointroduce regulatory reforms that reduce cost of doing business. Regulations willamended/reformed in consultations with relevant stakeholders to ease theregulatory burdenSource: Ministry of CommerceAnnual Plan 2012-13 Page 24

Balance of PaymentsBox: 2.2 Regional Cooperation• The government has declared 2012 as the Year of Regional Cooperation andEconomic Activity. In this back drop, the Planning Commission in collaboration withWorld Bank and the Department for International Development UK has proposed tohold a Conference on “Regional Conference on Economic Cooperation and Trade”during the last quarter of 2012. The Conference will (i) build on the currentmomentum for greater regional trade, (ii) examine opportunities to take full advantageof emerging economic cooperation, (iii) address three overarching challenges inbuilding greater regional trade: (a) Creating regional markets by removing barriers totrade in goods and services (b) enhancing connectivity between people andeconomic sector (c) opening access to finance as means to expand opportunities forcross-border investment and financial risk mitigation. The Conference is expected tohelp build the knowledge and analytical base for these efforts• The focus countries for this Conference are regional partners that share a border withor have recently announced the intention to signing a free trade commitment withPakistan. This includes: Afghanistan, China, India, Iran, and Turkey• Other developments that could enhance trade with Pakistan’s neighbors include, i)Progress in structuring commercial arrangements to underpin the proposed TAPI gaspipeline between Turkmenistan, Afghanistan, Pakistan, and India. ii) High-levelcommitment to develop the Central Asia-South Asia Regional Electricity Market,including the CASA-1000 regional transmission line between Afghanistan, PakistanKyrgyz Republic and Tajikistan; iii) The signing of the Afghanistan-Pakistan Tradeand Transit Agreement, iv) The completion of the development of Gwadar Port byChina, and its commercial operation by a leading port operator from Singapore (PSIInternational)Macroeconomic stability and supportive fiscal, monetary and exchange rate policiesprovide impetus to trade. The on-going tariff rationalization drive will eliminate manydistortions hampering trade and production. Industrial policy framework may be mademore realistic and supportive to industrial development.On the import side balance of payments position can be improved through demandmanagement and cutting the imports of luxury items in the short run. In addition, thiscan be done by entering into agreements with friendly countries by trading in localcurrencies and barter trade. In the long run trade deficits can be reduced throughbringing down heavy dependence on imported oil for power generation. This can bedone by diverting to alternate sources of power generation.The current account will be driven by the workers’ remittances which have shownremarkable strength. The flow of remittances has been improving over the last fewyears and has remained a consistent source of inflows to the country. However, itwould be unrealistic to solely depend on this source of financing external account. Forthis purpose, we are to enhance non- debt creating inflows that are stable, sustainableand have positive impact on economic growth.Annual Plan 2012-13 Page 25

Balance of Payments2.2 Review of 2011-12The Annual Plan 2011-12 was prepared in the backdrop of energy and powershortages coupled with weak law & order situation and global uncertainty. Exporttarget was, therefore, set at $ 25.8 billion for 2011-12 as compared to US$ 25.3 billionrecorded during 2010-11, depicting an increase of about 2.0%. The current accountdeficit was targeted to be 0.6% of GDP in 2011-12, against current surplus of 0.1% ofGDP actually recorded in 2010-11 (Annexure 2.3).Pakistan’s external sector showed strength in the previous year but could not maintainit in the current financial year. External account during July-March of 12 remained indeficit to the tune of $ 2.6 billion as compared to a surplus of $ 1.8 billion recordedduring the same period of previous year. Deterioration in the country’s externalaccounts largely owes to higher trade deficit, that widened by 42.4%. The increase inthe services account deficit also contributed to the deteriorated current accountbalance.The most encouraging development during Jul-March of 2011-12 was 21.5% growth inremittances that reached to a level of $ 9.7 billion as compared to about $ 8 billionrecorded during the corresponding period of last year. The growth in remittances is theresult of Pakistan Remittance Initiative (PRI) jointly launched by State Bank ofPakistan, Ministry of Finance and Ministry of Overseas Pakistanis. However, it wouldbe unrealistic to solely depend on this source of financing external account.With a gradually rising current account deficit and consistently declining foreigninflows, the SBP foreign exchange reserves are on declining path. Total liquid foreignexchange reserves stood at $ 16.5 billion as on 6 th April 2012. The decline in reserveswas primarily because of scheduled repayments to International Monetary Fund (IMF),decline in external official inflows and decline in foreign direct investment because ofpower shortages and deteriorating law and order situation. These developmentsexerted downward pressure on rupee strength. Consequently, the Rupee during Jul-Mar 2012 depreciated by 3.0% as compared to 2.4% in the same period of previousyear. The average exchange rate for the month of March 2012 was Rs 90.71/$.Balance of Trade: Trade deficit in the Annual Plan 2011-12 was targeted at $ 12.2billion (5.2% of GDP). Due to higher growth in imports as compared to exports, tradedeficit widened by 42.4% during the first nine months of 2011-12 and touched the levelof $ 11.6 billion (Annexure 2.3). This deterioration in trade account is mainly due to anincrease of $ 3.9 billion in the imports payment which more than offset the impact ofrise of about $ 431 million in the exports earning. Trade deficit remained 6.4% of GDPduring July-March 2012.Exports: Exports during July-March of 2011-12 stood at $ 18.3 billion against $ 17.9billion in the corresponding period of previous year showing an increase of 2.4%.Component-wise analysis of export items during July-March of 2011-12 shows positivegrowth in other manufactures group and all other items groups while other groupshave depicted a negative growth. The available data of about 76.3% of total exportitems, on both volume and prices, shows a negative growth of 9.7%.If this trend inexports continues, targets of Annual Plan 2011-12 are likely to be missed. . Exports(fob) for the full year of 2011-12 are estimated to be around $ 24.8 billion against theAnnual Plan target of $ 25.8 billion (Annexure 2.1). The weak performance of exportsAnnual Plan 2012-13 Page 26

Balance of Paymentsmay be attributed to the following factors:• High export base of the previous year as a result of high export receipts due toexport prices. The windfall gains to export receipts due to abnormally highcotton prices in 11 have dissipated faster than anticipated• Instable law and order situation, energy shortages and increase in the cost ofdoing business in the country• Crises in the Euro zone and stiff competition in textile products from China,India and Bangladesh in the international market• India has allowed the export of Basmati rice after 4 years that has augmentedthe world supply. India is offering non-basmati rice at much lower price due toboth large carryover stocks and recent depreciation of the Indian currencyTo increase exports, improvement in quality of export products, product and marketdiversification, exploring untapped markets, promoting local R&D and ensuringuninterrupted supply of energy are required. At the moment if we look into annualizedexports (by adding exports of past 12 months till respective month, the exportspotential has declined since August 2011. This is partially because of weaker demandin export destinations like EU and partly because of supply side disruptions Figure 2.1:$ Million27.026.025.024.023.022.021.020.019.018.017.016.0Fig-2.1: Annualized ExportsApr-12Dec-11Aug-11Apr-11Dec-10Aug-10Apr-10Dec-09Aug-09Apr-09Dec-08Aug-08Apr-08Dec-07Aug-07Apr-07Dec-06Aug-06Annualized by adding monthly exports of preceding 12-monthsImports: Imports during July-March 2011-12 increased by 14.9% to $ 29.9 billion overthe corresponding period of previous year i.e. $ 26 billion. Group-wise analysis ofimports during July-March 2011-12 showed that all import groups indicated positivegrowth except food, transport and textile groups, which have witnessed negativegrowth rates.Imports bill surged mainly on account of higher prices of import of crude and edible oil.The rise in international oil prices severely impacted the import bill of the country. Priceof Brent crude had almost touched $ 125 a barrel due to tensions in the Middle Eastand fell only recently eased below $100 a barrel. It is estimated that imports (fob) for2011-12 will be about $ 40.2 billion compared to the Annual Plan target of $ 38.0billion (Annexure 2.2).Annual Plan 2012-13 Page 27

Balance of PaymentsWorkers’ Remittances: Workers’ remittances have continuously witnessed anincreasing trend during the last few years. Remittances during July-March of 2011-12reached a level of $ 9.7 billion as against $ 8 billion in the corresponding period ofprevious year (Annexure 2.3), registering an increase of 21.4%. Monthly averageremittances during this period stood at $ 1,081 million as compared to $ 890 millionduring the same period of previous year. Keeping this trend in view, remittances areexpected to surpass the annual plan targets of $ 12.0 billion and will be around $13billion. Remittances have shown an upward trend due to various factors, particularlythe measures taken under the Pakistan Remittance Initiative (PRI) leading toincreased inflow through official channels. Increasing trend of worker’s remittance isreflected in Figure 2.2.$ Million12,00011,00010,0009,0008,0007,0006,0005,0004,0003,0002,0004,169Fig 2.2: Flow of Remittances8,9067,8116,4515,4944,60011,201 10,877* July-April Source: SBPCurrent Account Balance: The current account deficit was targeted at $ 1.4 billion(0.6% of GDP) in the Annual Plan 2011-12 as against a surplus of $ 214 million(0.1% of GDP) recorded in 2010-11 (Annexure 2.3). This was largely based on theassumption of higher level of workers’ remittances. With estimated trade deficit at$ 15.3 billion and remittances of $ 13.2 billion, the current account for 2011-12 isestimated to be in deficit by $ 4.0 billion against a surplus of $ 0.2 billion recordedduring 2010-11.Capital Account: Gross aid disbursements during 2011-12 are expected to decreasemarginally to $ 2.3 billion as compared to $ 2.4 billion recorded previous year.(Annexure 2.3)Overall Balance: The overall balance is likely to be in deficit by $ 2.6 billion in2011-12 compared to a surplus of $ 2.5 billion recorded in 2010-11 (Annexure 2.3).2.3 Outlook for 2012-13The Annual Plan 2012-13 aims at maintaining a sustainable balance of paymentsposition to ensure macroeconomic stability. Pakistan has a high degree of dependenceon oil imports, essential industrial raw materials & machinery and equipment. To meetthe requirements without excessive reliance on external borrowing needs a robustAnnual Plan 2012-13 Page 28

Balance of Paymentsexport growth strategy. The current account balance would also need to be improvedby attracting private transfers, especially workers’ remittances. The capital accountwould be strengthened by attracting various sources of financing with greater recourseto non-debt creating, stable and sustainable sources of financing such as foreign directinvestment.Trade Account: On account of the energy shortages and security situation, exports(fob) for 2012-13 are projected to grow by 4% to $ 25.8 billion from $ 24.8 billionestimated for 2011-12. Imports during 2012-13 are projected to increase by 6.8% to$ 42.9 billion from $ 40.2 billion estimated for 2011-12. Hence, the trade account isprojected to be in deficit by $ 17.1 billion in 2012-13 (Annex: 2.3).Current Account Balance: The current account is targeted to be in deficit by $ 4.8billion in 2012-13 (1.9% of GDP) as against a deficit of $ 4.0 billion (1.7% of GDP)estimated for 2011-12 (Annex: 2.3).Capital Account: Gross aid disbursements during 2012-13 are expected to remain atthe level of $ 2.7 billion against $ 2.3 billion estimated for 2011-12.Overall Balance: Balance of payments will remain under pressure due to externaldebt repayments including repayments to IMF, declining trend of export quantum,rising international oil prices and weak financial inflows. Allowing for other capitalinflows, the overall balance is likely to be in deficit by $ 1.7 billion in 2012-13 comparedto an estimated deficit of $ 2.6 billion in 2011-12. Details are given In (Annexure 2.3)Annual Plan 2012-13 Page 29

Balance of PaymentsEXPORTSAnnex-2.1($ Million)2010-11 July-March 2011-12 2012-13ItemsActual 2011 2012 Target Estimate* Target**A. Food Group 5,459.3 3,135.2 2,976.6 4,209.3 4,963.8 5,212.0Rice 3,123.0 1,596.4 1,488.4 2,229.1 2,756.1 2,893.9a)Basmati 2,160.3 698.5 574.3 940.6 1,776.0 1,864.8b)Others 962.7 897.9 914.1 1,288.5 980.1 1,029.1Fish & Fish Preparations 296.2 198.7 222.8 297.9 332.1 348.7Fruits 292.4 239.2 275.7 274.6 337.0 353.9Vegetables 268.2 155.1 91.0 259.6 157.4 165.2Wheat 586.6 350.2 106.5 368.1 178.4 187.3Meat & Meat Preparations 153.8 108.5 123.6 161.0 175.2 183.9All other food items 739.1 421.2 588.6 522.9 1,032.9 1,084.5B. Textile Group 13,817.5 9,955.3 9,019.5 15,489.9 12,564.4 13,192.7Raw Cotton 364.8 276.6 362.0 251.4 477.4 501.3Cotton Yarn 2,201.4 1,697.8 1,264.2 2,064.7 1,639.2 1,721.1Cotton cloth 2,623.2 1,835.7 1,751.2 2,430.0 2,502.4 2,627.5Knitwear 2,305.6 1,678.2 1,469.7 2,459.5 2,019.1 2,120.0Bedwear 2,088.9 1,502.4 1,311.1 3,678.0 1,822.8 1,914.0Towels 762.3 534.4 492.6 844.9 702.7 737.8Ready-made Garments 1,773.7 1,228.1 1,204.0 1,836.0 1,738.9 1,825.9Art, Silk & Synthetic Textile 607.8 435.8 414.0 712.9 577.5 606.4Madeup Articles (exclud. Other Tex) 624.9 454.3 411.4 733.8 566.0 594.3Other textile materials 464.9 312.0 339.3 478.7 518.4 544.3C Petroleum Group & Coal 1,345.4 990.4 721.9 1,239.6 969.7 1,018.2Petroleum Products(Excl. TopNaphta) 895.4 649.6 282.6 695.2 389.5 409.0Petroleum Top Naphta 449.9 340.7 439.1 544.4 579.9 608.9Annual Plan 2012-13 Page 30

Balance of PaymentsEXPORTSAnnex-2.1($ Million)2010-11 July-March 2011-12 2012-13ItemsActual 2011 2012 Target Estimate* Target**D. Other Manufactures Group 4,041.5 2,857.7 3,455.6 4,706.7 4,949.7 5,197.2Carpets,Rugs & mats 132.4 97.8 92.5 132.7 125.2 131.5Sports Goods 330.0 231.4 234.1 338.7 333.9 350.6Leather Tanned 465.0 324.2 313.7 506.3 449.9 472.4Leather Manufactures 540.6 412.9 400.3 572.7 527.3 553.7Footwears 109.3 79.4 76.0 108.8 107.5 112.9Surgical Goods & MedicalInstruments 260.6 186.7 222.1 247.1 309.9 325.4Cutlery 85.5 64.2 59.9 94.7 79.8 83.8Chemicals And Pharm.Products 923.0 639.3 812.8 933.7 1,178.1 1,237.0Engineering Goods 255.8 160.5 215.9 676.6 350.2 367.8Jewellary 403.0 277.2 584.7 565.8 849.9 892.4Cement 457.4 329.7 339.2 440.6 470.6 494.2Other Minor items 78.8 54.2 104.4 89.0 167.3 175.6E. All Others 146.7 788.0 1,015.9 (27.3) 611.0 641.6Total Exports (A-E) 24,810.4 17,726.7 17,189.5 25,618.2 24,058.7 25,261.6Exports (fob) 25,356.0 17,892.0 16,251.0 25,835.2 24,840.0 25,812.0Source: PBS, SBP & Planning CommissionEstimates* Revised Estimates** Annual PlanAnnual Plan 2012-13 Page 31

Balance of PaymentsIMPORTSAnnex-2.2($ Million)2010-11 July-March 2011-12 2012-13ItemActual 2011 2012 Target Estimate* Target**A. Food Group 3,878.1 2,948.3 2,591.2 8,419.6 3,356.1 3,557.0Milk & Cream Including milk forinfants 165.8 114.6 121.7 178.3 157.7 167.1Tea 334.1 260.8 271.7 412.6 351.9 372.9Spices 104.0 83.3 76.8 118.3 99.5 105.5Palm Oil 2,020.7 1,378.3 1,718.3 5,824.0 2,225.4 2,358.7Sugar 684.6 677.1 15.1 1,017.8 19.6 20.8Pulses 403.1 308.6 282.4 691.6 365.7 387.6Others 165.9 125.4 105.2 177.0 136.3 144.4B. Machinery Group 5,274.9 3,938.3 4,156.1 4,008.0 4,028.0 4,269.2Power Generating Machinery 1,038.3 778.2 826.0 1,062.7 1,069.8 1,133.9Office Mach. Incl. Data Proc. Equip. 239.4 172.9 211.9 228.1 274.5 290.9Textile Machinery 456.7 357.2 316.0 502.9 409.3 433.8Construction & Mining Machinery 115.6 87.0 99.6 139.1 129.0 136.8Electrical Machinery & Apparatus 618.9Annual Plan 2012-13 Page 32

Balance of PaymentsItemIMPORTSAnnex-2.2($ Million)2010-11 July-March 2011-12 2012-13Actual 2011 2012 Target Estimate* Target**793.4 604.6 806.2 801.6 849.6Telecom 1,023.6 751.8 943.7 1,158.9 1,222.2 1,295.4Others 1,607.9 1,186.6 1,139.9 110.1 121.6 128.8C. Transport Group 2,068.6 1,549.9 1,508.8 1,974.5 1,954.1 2,071.1Road Motor Vehicles Build UnitsCKD/SKD 1,314.0 955.4 1,159.6 1,286.0 1,501.9 1,591.8Aircrafts, Ships and Boats 749.6 590.3 297.7 683.8 385.6 408.7Other Transport Equipments 5.0 4.2 51.4 4.7 66.6 70.6D. Petroleum Group 12,085.5 8,088.9 11,136.4 12,069.3 14,423.5 15,287.0Petroleum Products 7,277.3 4,688.5 7,406.9 6,786.5 9,593.2 10,167.5Petroleum Crude 4,808.2 3,400.4 3,729.5 5,282.8 4,830.3 5,119.5E. Textile Group 2,883.0 2,172.4 1,802.6 2,638.2 2,334.6 2,474.4Raw Cotton 979.9 785.1 340.2 1,232.0 440.6 467.0Synthetic Fibre 546.6 399.1 397.3 639.8 514.6 545.4Suynthetic & Artificial SilkYarn 542.8 401.3 456.6 620.2 591.4 626.8Annual Plan 2012-13 Page 33

Balance of PaymentsItemIMPORTSAnnex-2.2($ Million)2010-11 July-March 2011-12 2012-13Actual 2011 2012 Target Estimate* Target**Worn clothing 128.7 92.9 109.5 146.2 141.8 150.3Other Textile Items 685.1 494.2 499.0 646.3 685.0F. Agri. & other Chemi. Gr. 2,892.0 4,525.1 2,644.7 6,423.4 3,425.3 3,630.3Fertilizer Manufactured 537.6 471.7 899.2 596.9 1,164.6 1,234.3Insecticides 154.2 106.6 96.9 1,586.7 125.5 133.0Plastic Materials 1,511.5 1,115.7 1,152.4 788.0 1,492.5 1,581.9Medicinal Products 688.7 501.3 496.2 3,451.8 642.7 681.2G. Metal Group 1,972.0 1,460.9 1,609.9 2,158.9 2,085.1 2,209.9Gold 109.7 87.7 119.2 135.1 154.4 163.7Iron and Steel Scrap 517.8 383.9 412.9 461.1 534.8 566.8Iron and Steel 1,203.9 886.0 984.4 1,400.0 1,275.0 1,351.3Aluminium Wrought & Worked 140.7 103.4 93.3 162.7 120.8 128.1H. Miscellaneous Group 812.4 590.4 606.7 982.9 785.8 832.8Rubber Crude Incl. Synth/Reclaimed 201.4 142.0 145.7 216.3 188.7 200.0Annual Plan 2012-13 Page 34

Balance of PaymentsItemIMPORTSAnnex-2.2($ Million)2010-11 July-March 2011-12 2012-13Actual 2011 2012 Target Estimate* Target**Rubber Tyres & Tubes 201.5 148.7 173.5 229.6 224.7 238.1Paper & Paper Board & Manuf.Thereof 409.5 299.7 287.6 537.0 372.4 394.7I. All Others 8,547.1 3,742.0 7,229.0 4,235.3 10,717.6 11,359.2Total Imports( A-I) 40,413.7 29,016.3 33,285.4 42,910.1 43,110.0 45,691.0Imports (fob) 35,872.0 26,049.0 29,941.0 38,037.1 40,183.0 42,938.0Source: PBS, SBP &Planning Commission Estimates * Revised Estimates ** Annual PlanAnnual Plan 2012-13 Page 35

Balance of PaymentsBalance of PaymentsAnnex-2.3US $ MillionITEM 2010-11 July-March 2011-12 2012-13Actual 2011 2012 Target Estimate* Target**Current Account Balance 214 466 -3,394 -1,401 -4,015 -4,777-Balance on Goods -10,516 -8,499 12,683 -12,202 -15,343 -17,126Exports f.o.b 25,356 20,460 20,474 25,835 24,840 25,812Imports f.o.b 35,872 28,959 33,157 38,037 40,183 42,938Services Balance -1,940 -1,225 -2,347 -1,391 -2,664 -2,494Income (net) -3,017 -2,465 -2,655 -2,808 -3,075 -3,171Balance on Goods, Services &- -Income -15,473 12,189 17,685 -16,401 -21,082 -22,791Current Transfers (net) 15,687 12,655 14,291 15,000 17,067 18,014Current Transfers: credit, of which: 15,863 12,798 14,400 15,120 17,189 18,138Workers Remittances 11,201 9,046 10,877 12,000 13,169 14,091Capital Account 161 82 167 160 172 128Financial Account: of which 2,101 690 1,200 6,946 1,574 3,072Direct Investment in Pakistan 1,635 1,293 668 3,500 850 1,800Portfolio Investment (net) 338 295 -126 950 -152 507General Government 298 -25 389 1,974 575 573Annual Plan 2012-13 Page 36

Balance of PaymentsBalance of PaymentsAnnex-2.3US $ MillionITEM 2010-11 July-March 2011-12 2012-13Actual 2011 2012 Target Estimate* Target**Disbursements 2,377 1,674 1,588 3,631 2,284 2,700Amortization 1,957 1,677 1,184 164 1,709 2,127Financing gap 16 -29 -515 1,705 -296 -100Overall Balance 2,492 1,209 -2,542 7,410 -2,565 -1,677Reserves and Related Items -2,492 -1,209 2,542 -7,410 2,565 1,677Reserve Assets -2,225 -1,635 3,239 -420 4,510 2,653Foreign Exchange ( SBP ) -2,225 -1,635 3,239 -420 4,510 2,653Use of Fund Credit and Loans -27 -185 -588 -1,180 -1,197 -2,953Memorandum ItemsCurrent Account Balance (% of GDP) 0.1 0 -1.3 -0.6 -1.7 -1.9Exports f.o.b (growth rate %) 28.9 24.7 2.4 5.0 -2.0 4.1Imports f.o.b (growth rate %) 14.9 15.6 14.9 6.0 12.0 6.9* Revised EstimatesSource: SBP & PlanningCommission Estimates** Annual PlanAnnual Plan 2012-13 Page 37