INSTITUTE OF BUSINESS &

TECHNOLOGY (BIZTEK)

PRESENTATION ON
BALANCE OF TRADE

SHOAIB HASAN BM-25118

TAHA YASEEN BM-25093
AAMIR ALI KHAN BM-25128
ANZAR ISHAQUI BM-25167
ASAD MAZHAR BM-25065
 Globalization Is Gaining
Speed
The world economy is becoming
a single, interdependent system

Export:
Domestic product sold abroad

Import:
Foreign product sold
domestically
 BALANCE OF TRADE
 The term trade refers on import and export.
 Trade balance is the difference between a
country’s imports and exports.
 When a country’s imports surpass its exports over
a period of time, it is called a trade deficit.
 When a country’s export exceed to import over a
period of time, its trade surplus or favorable
balance of trade.
A country’s balance of trade is its
largest component when it comes to
payments.

 The value of balance of trade is

expressed in domestic currency and
is denoted by the symbol, ‘NX’.
 Import/Export Balances

Balance of Trade
Trade Deficits
Trade Surpluses

Balance of Payments
 UNDERSTANDING TRADE
BALANCE
 Trade balance is a reflection of a country’s
international market and its domestic
consumption.
 A country’s balance of trade comprises a
major segment of balance of payments.
 This is an effective mechanism to quantify
a country’s overall economic transactions
with the rest of the world.
 It also affects the country’s overall GDP for
that particular period.
Factors that effect trade balance
are :
 Demand and Supply
 Domestic Business
 Trade agreement
 Tariff and Policies
 Exchange Rate
 New Technology
 Demand and supply

 Thedemand and supply trend

defines the cost of domestic products
to be sold in the international
market.
 Domestic Business
 Sound, domestic policies are required
to boost production and international
trade. Some countries like US provide
subsidies to local manufacturers for
exported goods and services.
 External pressures: Many countries export
items that face heavy competition in
international market. This results in market
segmentation and low pricing. Countries
that are mostly oil exporters or IT hubs tend
to generate favorbale trade balance due to
less competition in the international market.
External pressures also work in the form of
trade bans. These bans are enforced by
either individual countries or international
organizations such as the WTO or IMF.
Exchange Rates
Heavily Impact Global Trade
 When an economy’s currency is strong :
Domestic companies find it harder to export
products
Foreign companies find it easier to import
products
Domestic companies may move production
to cheaper sites in foreign countries
 Implications for balance of trade?
 Proactive market policies
These required to ensure that a
country’s trade balance remains
favorable. A sound trade balance
represents an imports benchmark as it
reflects economic stability between
nations. It fortifies trade ties with other
countries and generates immense
possibilities to stem job losses, inflation
and unemployment.
 OTHER TERMS OF TRADE
There are several measures of terms
of trade, each representing a
different concepts. The important
measures among them are:
 Net barter terms of trade
 Gross barter terms of trade
 Income terms of trade
 TRADE REVIEW

Imports and Exports 2008-09

 EXPORTS

Exports 07-08 US$ 19.1

Billion
Export Target 08-09 US$
22.1 Billion
Actual Exports 08-09 US$
17.8 Billion*
Export Growth -
6.7%
 EXPORTS REVIEW

Exports were 6.7% less than 2007-08 due to

Exogenous factors - demand shrinkage,
financial crisis and ensuing protectionist
policies.
Domestic Factors - Power
shortages/outages, high financial cost,
bad law & order situation and
competitiveness erosion

Traditional sectors like textile (- 9.5%),

Leather (- 29%) declined, whereas Rice (8%),
Engineering goods (26%), Jewelry (35%)
EXPORTS –
HISTORICAL
Year Value Change
(FOB $ (%age)
Billion)
2000-01 9.2 -
2001-02 9.1 -0.7
2002-03 11.2 22.2
2003-04 12.3 10.3
2004-05 14.4 16.9
2005-06 16.5 14.3
2006-07 17.0 3.2
2007-08 19.2 13.2
2008-09 (P) 17.8 - 6.7
 Export/Import (Last 5 years)
Value in Billion US$
EXPORTS OF MAJOR
COMMODITY GROUPS
EXPORTS PROFILE
2008-09
EXPORTS
DESTINATIONS
 IMPORT REVIEW

Imports were US$ 34.8 billion in 2008-09

as compared to US$ 40 billion in 2007-08
, a decrease of 13 %
Lower imports are attributed mainly to
demand shrinkage of items in Transport
Group (-41%), and Textile Group (-29%)
whereas imports of Petroleum decreased
by 17% due to drop in international prices
of crude oil; imports of fertilizer were
lower both in terms of value (39%) and
quantity (45%)
IMPORTS – HISTORICALS
Year Value Change (%age)
(C&F US$
Billion)
2000-01 10.7
2001-02 10.3 - 3.6
2002-03 12.2 18.2
2003-04 15.6 27.6
2004-05 20.6 32.1
2005-06 28.6 38.8
2006-07 30.5 6.9
2007-08 40.0 30.9
2008-09(P) 34.8 - 13.0
IMPORTS OF MAJOR COMMODITY
GROUPS
Balance of Trade (US$
Billion)