RESTRICTEDWORLD TRADE
ORGANIZATIONWT/BOP/G/11
1 May 2000
(00-1743)
Committee on Balance-of-Payments Restrictions Original:  English
2000 CONSULTATIONS WITH PAKISTAN
Basic Document Supplied by Pakistan
I. OVERVIEW
1. The current account deficit (excluding official transfers) which was US$1.9 billion in 1997-98
increased by almost 26% to about US$2.4 billion in 1998-99.  The widening of the trade gap and fall
in workers’ remittances was a cause of serious concern for the Government of Pakistan.  To restore
the external sector stability, the Government adopted a comprehensive stabilization package in the
second quarter of 1996-97 which was further strengthened by concluding Stand-by CreditArrangements with the IMF and adopting additional policy measures to attract capital inflows.
2. The Federal Budget and the Trade Policy for 1997-98 introduced various policy changes
relating to external sector and foreign investment to improve the process of economic recovery over
the medium-term.  As a result of the above policy initiatives, the pressure on the external payments
position slightly eased during the first half of 1997-98.  The exchange rate adjustment in October1997, in the wake of the deepening Asian financial crisis, limited the adverse impact on export
competitiveness.
3. Despite the marginal improvement in 1997-98 over the previous year the external sector again
came under severe pressure during 1998-99, reflecting mainly the impact of economic sanctions.  The
position for Pakistan immediately before the beginning of 1998-99 was difficult since the foreign
exchange reserves were low, programmed loans from multilateral organizations were in jeopardy and
prospects for the inflow of foreign investment, aid and loans from other sources were not veryencouraging.  The appreciation of the Pakistani rupee against major non-dollar currencies, particularly
of European countries, affected the competitiveness of Pakistan’s products in these international
markets.  Under these circumstances a number of corrective measures were taken to contain the
adverse impact of economic sanctions and global recession on the economy.
II. ECONOMIC REFORMS
4. The policy measures adopted in the post-sanctions period included in particular:
(a) introduction of a two-tier exchange rate mechanism;  (b) adoption of various measures to reduce
trade gap;  and (c) tightening of certain exchange control regulations.  Simultaneously, the
Government continued its consultation with the IMF to reactivate the stalled IMF programme.  An
agreement with the IMF was concluded in January 1999 after which the flow of funds from theinternational institutions was restored and Paris Club countries also agreed to reschedule the external
debt.
5. The improved prospects of availability of external financing, augmentation of foreign
exchange reserves and relative exchange rate stab ility made it possible to gradually liberalize the
exchange and payments regime.  Important trade and exchange liberalizing policy measures taken inthe second half of 1998-99 included:  (a) gradual elimination of cash margin requirements for openingWT/BOP/G/11
Page 2
letters of credits for imports;  (b) reduction of customs tariff rates;  (c) rationalization of duty
drawback system;  (d) lifting of temporary restrictions on the sale of foreign exchange for travel,
education and health purposes at composite rate;  and (e) replacement of the two-tier exchange rate
system with market-based unified exchange ra te system with effect from 19 May 1999, whereby
floating inter-bank rate would apply to all foreign exchange receipts and payments both in public andprivate sectors.  The official exchange rate and also the surrendering requirement of export proceeds
were abolished.
6. During the first half of 1999-2000 the external sector like the rest of the economy continued
to remain under pressure.  The current account deficit, without official transfers, contracted by 53% to
US$.856 million in July-December, 1999.  The overall deficit also stood lower at US$1,976 million in
July-December 1999, compared to US$2,568 million in the same period the previous year.
III. ECONOMIC REVIEW OF 1998-99
A. G
ROSS DOMESTIC PRODUCT (GDP)
7. Assuming continuation of normal circumstances,  the sectoral GDP growth target for 1998-99
had been projected at 6%, comprising growth rates of 5.4% in agriculture, 7.2% in manufacturing and
5.7% in services sectors.  However, the economy suffered a setback on account of economic sanctions
imposed in June 1998 which almost completely suspended external resources inflow, including thatfrom multilateral sources, reduced the imports, investment and hence production, especially in large-
scale manufacturing.  Another setback was faced in the agriculture sector because of reduced crop
production of wheat and cotton.  All these factors continued to adversely affect the performance of the
economy during the year.
8. The real GDP  grew by 3.1% in 1998-99 against the target of 6.0% and actual performance of
4.3% in 1997-98.  The fall  occurred due to multiple factors like decline in the production of major
crops by 0.6%, reduced growth in the production of  minor crops, livestock and fishing by 0.4%, 1.5%
and 3.7% respectively, and constrained growth of 3.5% in output of large-scale manufacturing.
Growth of the services sector is estimated at 4.1% against the target of 5.7% which was mainly due to
a slower growth in trade and public administration se ctors.  Fixed investments marginally increased to
Rs.400.5 billion as compared to the previous year’s fixed investment of Rs.396.6 billion, whereas
national savings as percentage of GDP declined from 14.1% in 1997-98 to 12.0% in 1998-99.
Foreign direct investment amounted to only US$472.0 million as compared to the previous year’s
US$601.3 million.  The real per capita income increased by only 1.3% over the previous year.
Inflation rate, nevertheless, decelerated to 5.7% compared to 7.8 in 1997-98.
1. Agriculture
9. The Agriculture sector was targeted to grow by 5.4% in 1998-99.  Despite increased
agricultural credit disbursement of Rs.43 billion against an allocation of Rs.40 billion so as to enable
farmers to procure the required inputs in time, Pakist an’s output of two out of four main  crops, i.e.,
wheat and cotton, declined by 3.4% and 4.3%, respectively.  The main reason for a fall in the output
of wheat was the long dry spell during the sowing period, particularly in the rainfed barani areas.  The
reasons for lower production of cotton were:  (i) reduction in area under crop in Punjab by 4.6% andin NWFP by 1.2%;  (ii) heavy fog and abnormally high temperature during the maturing and
harvesting period;  and (iii) shortfall in production in Sindh due to heavy rains and attack of virus.
10. Rice production has, however, been estimated at 4.67 million tonnes in 1998-99 as against
4.33 million tonnes in 1997-98 showing an increase of 7.9%.  The sugarcane production is also
estimated at 55.2 million tonnes in 1998-99 against the previous year’s production of 53.1 millionWT/BOP/G/11
Page 3
tonnes.  The main reason for the increase in output of sugarcane was an increase in yield per hectare
from 50.3 tonnes per hectare in 1997-98 to 52.7 tonnes per hectare in 1998-99.
11. The production of bajra and maize (kharif crops) increased by 0.9% and 4.1% respectively
over the previous year.  In 1998-99, production of  jawar, barley, gram, rapeseed and mustard
decreased slightly, while the production of tobacco increased by 1.01%.  Important minor crops, likepotatoes, onion and chilies, were also slightly higher as compared to the previous year.
2. Mining and Quarrying
12. The key mineral items, which have more than 70% weight in overall sector, are coal, crude oil
and natural gas.  The output of coal and natural gas increased by 7.2% and 5.6%, respectively,
whereas production of crude oil declined by 2.4% over the previous year’s level.  Production of rock
salt is estimated 22.6% higher over the correspondi ng period the previous year.  On the whole, the
mining and quarrying sector registered a growth of 4.5% for the year 1998-99.
3. Manufacturing
13. The manufacturing sector had a growth rate of 4.7% against the target of 7.2%.  The large-
scale manufacturing sector recorded a growth rate of 3.5%.  The growth has been mainly contributed
by an increase in production of vegetable ghee (12.5%), beverages (23.2%), cigarettes (5.2%) and
cotton cloth (11.2%).  On the other hand, a decline in production has been observed in sugar (-0.1%),cotton ginning (-4.2%), cement (-1.8%), diesel engine (-11.6%), air conditioners  (-43.7%), billets (-
21.5%) and sewing machine (-17.9%).
4. Electricity and Gas
14. The electricity and gas sector is estimated to have grown only by 2.7% in 1998-99 against the
target of 9.0%.  The installed capacity of the pow er sector increased by 1797 MWs, of which 33 MWs
are in the public sector and 1764 MWs in the private sector.  However, due to retirement of 157 MW
in the public sector, the net addition in the installed capacity of the power sector amounted to 1640
MWs and installed capacity rose from 15,968 MW to 17,080 MWs.
5. Services
15. Overall the services sector recorded a growth  of 4.1% during 1998-99 compared with a target
of 5.7%.  The transport, storage and communications sector grew by 5.3% in 1998-99 compared with
8.1% in 1997-98.  The wholesale and retail trade sector grew by 1.3% during 1998-99 compared with
2.9% during the previous year.
6. Total Resources / Uses
16. The Annual Plan of 1998-99 had projected total resources availability at Rs.3191.2 billion of
which 81.5% was to be used for consumption and 18.5 % for investment.  The estimates for 1998-99
indicate the total available resources at 3.1% less than the target amount of Rs.3090.8 billion.  Out ofthis, 85.5% was used for consumption and only 14.4% for investment.
7. Savings and Investment
17. Total investment outlay in 1998-99 was estimated at Rs.446.9 billion against Rs.468.0 billion
during the previous year which showed a decline of 4.5% in nominal terms.  Fixed investment
increased only by 1.0% in nominal terms from Rs.396.6 billion in 1997-98 to Rs.400.5 billion in1998-99.  Investment rates {the share of total investment in GNP (market prices)} declined fromWT/BOP/G/11
Page 4
17.3% to 14.9% in 1998-99.  National savings were estimated to finance 81.4% of total investment
while the remaining 18.6% was financed by foreign savings.  National savings rate also declined from
14.2% to 12.1% and foreign savings, as a percentage of GNP, declined from 3.1% to 2.8% in 1998-
99.  This suggests that the reliance on foreign savings in financing domestic investment went down in
1998-99 .
8. Foreign Private Investment
18. Foreign private investment amounted to US$499.6 million (including US$27.3 million
portfolio investment) in 1998-99 as compared to US$825.6 million (including US$221.3 million
portfolio investment) in the corresponding period of 1997-98.  The direct foreign investment declined
by 21.5%, whereas portfolio investment declined by 88.0%.
B. FISCAL DEVELOPMENTS
19. Fiscal imbalances and resultant debt burden have emerged as the main source of
macroeconomic imbalance in Pakistan.  The reduction in large and unsustainable fiscal deficit
received top priority in the 1998-99 Federal Budget.  The strict observance of fiscal and financial
discipline in 1997-98 and 1998-99 resulted in the reduction of the fiscal deficit from more than 6.0%
of GDP to 5.6% in 1997-98 and to 3.4 of GDP in 1998-99.
20. The consolidated budget for 1998-99 aimed at further reducing the fiscal deficit to Rs.143.2
billion in 1998-99 from Rs.153.6 billion in 1997-98.  The budget estimated that government revenues
would rise from Rs.436.6 billion (16% of GDP) in 1997-98 to Rs.522.9 billion (16.7% of GDP).  The
tax revenues were to grow by 15.8% from Rs.361.7 billion in 1997-98 to Rs.418.8 billion in 1998-99.
The non-tax receipts at Rs.104.1 billion were estimated to increase by 39% over the 1997-98 amount
of Rs.74.9 billion.
21. The 1998-99 budget estimated that the government expenditure at Rs.666.1 billion was to be
higher by 12.9% compared to the 1997-98’s expenditure of Rs.590.1 billion.  However, as a
proportion of GDP, the government expenditure was estimated to fall from 21.6% in 1997-98 to
21.3% in 1998-99.  The current expenditure was estimated to rise by 11.9% from Rs.496.3 billion to
Rs.555.5 billion in 1998-99.  A major portion of expenditure (37.7% of current expenditure) wasearmarked for interest payments estimated at Rs.209.5 billion, as compared to Rs.191.7 billion in
1997-98.  The expenditure on the Public Sector Deve lopment Programme (PSDP) financed from the
budget at Rs.110.7 billion was higher by 26.2%  over the 1997-98’s PSDP of Rs.87.7 billion.
22. The overall fiscal deficit of Rs.143.2 billion was to be financed by 89.7% and 10.3% through
domestic and external borrowing respectively.  Of the internal financing of Rs.128.5 billion, the bank
borrowing was estimated at Rs.39.2 billion an d the non-bank borrowing at Rs.89.3 billion.
23. The Government collected Rs.512.8 billion revenues in 1998-99 as against the target of
Rs.522.9 billion, showing a shortfall of Rs.10.1 billion or 1.9%.  The shortfall in government revenue
is mainly due to shortfall in tax collection by the Central Board of Revenue.  The shortfall in
government revenues has been offset by a reduction in government expenditure of Rs.52 billion.  The
government expenditure in the revised estimates of 1998-99 at Rs.614.1 billion has been lower by
7.8% from the budget estimates of Rs.666.1 billion.  Both current and development expenditures havebeen below the budget estimates, by Rs.26.9 billion and Rs.18.5 billion respectively.
24. The overall fiscal deficit at Rs.101.3 billion has been significantly lower than the budget
estimate of Rs.143.2 billion.  The financing of the budget deficit has, however, shown a significant
deviation from the budget estimates mainly because of rescheduling of foreign debt.WT/BOP/G/11
Page 5
C. BALANCE OF PAYMENTS
25. The current account of balance of payments for the year 1998-99 indicates a significant
deterioration due to a substantial decline in private transfers and invisible receipts.  The exports
during 1998-99 decreased by a substantive 10.7% in dollar terms.  Imports also declined but by only
6.7% resulting in a massive increase of 11.7% in the trade deficit over the previous year.  Workersremittances during 1998-99 also declined by 28.9%.  The current account deficit increased to
US$2381 million (3.9% of GDP) in 1998-99, higher than the previous year’s level of US$1921
million (3.0% of GDP).
26. Performance of the external sector during the year remained unsatisfactory mainly due to a
decline in world GDP growth of 2.5% compared to 4.2% during 1997 and to a depressed volume of
world trade which grew only by 3% during 1998 as compared to 11% during 1997.  The external
sector also came under pressure because of economic sanctions after May 1998.  To mitigate theadverse effects of the economic sanctions the Government adopted several interim measures which
included introduction of a multiple exchange rate system, cash margin requirements for opening of
letters of credit, and restricted outflow on the capital account.  Foreign currency accounts were also
frozen to guard against the flight of capital.  These measures were gradually relaxed as the economy
adjusted to the economic sanctions and unfavourable international environment which had badlyaffected the external sector.
1. Current Account Balance
27. With the trade deficit at US$2085 million and an invisible deficit of US$296 million, the
current account deficit for 1998-99 is estimated at US$2381 million (3.9% of GDP) compared to
US$1921 million (3.0% of GDP) in the preceding year.
2. Capital Account
28. The net long-term capital inflows (both private and official) which had declined from
US$2186 million in 1996-97 to US$1337 million during  1997-98, though, depicted a rise of 19.2% to
US$1594 million during 1998-99, but this was almost 27. 1% less than the 1996 figures.  The decline
during 1997-98 resulted from a fall in both private capital inflows (US$-758 million) and net officialcapital (US$-91 million), whereas the rise in 1998-99 was exclusively accounted for by official capital
(US$+526 million) as private capital declined by US$269 million.
3. Exports
29. During 1998-99, exports stood at US$7528 million as compared to US$8434 million during
the previous year showing a decline of 10.7%.  The decline was primarily due to a deterioration in
terms of trade which led to a fall in export receipts from leather, fish and fish preparations, cotton
yarn, cotton cloth, readymade garments, synthetic textiles, sports goods and surgical goods.  Cottonexports were affected due to plant disease and fo ggy weather in the Punjab province.  Trends in the
global economy and a fall out of the East Asian crisis also adversely affected exports from Pakistan.
However, exports of knitwear, bed wear, vegetabl es, and petroleum and petroleum products showed
increases over the preceeding year.
4. Imports
30. Imports in 1998-99 also fell by 6.7% to US$9613 million largely on account of a decline in
import of wheat, sugar, power and electrical mach inery combined with the reduced cost of other
imports, particularly of petroleum.  Imports of crude oil, petroleum products, tea, synthetic fibre,
insecticides, iron and steel scrap, iron and steel, and rubber tyres and tubes have declined due to theWT/BOP/G/11
Page 6
sharp fall in prices, while imports of wheat and sugar declined on account of the fall both in volumes
and prices.  However, import of soybean oil, artificial silk yarn and fertilizers registered increases
despite the sharp fall in their prices.
5. Foreign Exchange Reserves
31. The liquid foreign exchange reserves, which had declined from US$1219.4 million at the end
of June 1997 to US$930 million at the end June 1998, came under further pressure and declined
sharply to a low US$440.4 million by the end of October 1998.  The decline can mainly be attributed
to:  (i) lower inflows under residents’ foreign currency deposits due to temporary suspension of
foreign current accounts;  (ii) the fall in exports and other receipts under current transfers and services
account;  and (iii) disruption of financial flows from donors.  However, after resumption of the flow
of resources from multilateral institutions in January 1999, reserves started rising and increased to
US$1729.7 million by the end of June 1999, and by the end of February 2000 these stood at US$1528million.
6. Exchange Rate Regime
32. Pakistan was pursuing a managed floating exchange rate policy until 21 July 1998.  In order
to minimize the adverse effects of economic sanctions, Pakistan moved to a dual exchange rate
system with effect from 22 July 1998.  Under this exchange rate regime essential imports were subjectto an official exchange rate while all other import payments were put on composite rate.  The
composite rate was the weighted average of the official exchange rate and the inter-bank floating rate.
Initially 50:50 weights were assigned to the inter-bank  floating rate and official exchange rate.  These
weights were changed to 80:20, and further to 95:5, with 95% weight assigned to inter-bank rate and
only 5% to official exchange rate in order to determine the composite rate.  With growingimprovement in the economy, the build-up in foreign exchange reserves, and stability in the exchange
rate regime, Pakistan had already come very close to a market-based exchange rate regime when 95%
exchange rate was determined in the inter-bank market.
33. The dual exchange rate system has been replaced with a market-based unitary exchange rate
system with effect from 19 May 1999.  The official exchange rate and requirement of surrendering5% of export proceeds to the State Bank of Pakistan has been abolished.  Under the unitary exchange
rate system, the floating inter-bank rate would apply to all foreign exchange transactions (like
imports, invisibles, debt repayment etc.) and foreign exchange requirements will be met by the
authorized dealers from the inter-bank market.  The authorized dealers would neither approach the
State Bank for release of foreign exchange for any purpose, nor would they have to surrender it to the
State Bank.  However, the State Bank can, and will, intervene in the market for the sale and purchase
of foreign exchange on its own account at rates and timing of its choice.
IV. ECONOMIC PROSPECTS FOR 1999-2000
A. G
ROSS DOMESTIC PRODUCT (GDP)
34. Growth prospects of the economy during 1999-2000 largely depend on recovery in the
agriculture as well as industrial sectors.  The policy measures, already put in place by the Government
in recent months, are expected to help a gradual recovery.  These measures includeprovision/allocation of credit for agriculture of Rs.60 billion and significant expansion of credit
facilities for small and medium enterprises for which the Small and Medium Enterprise Development
Authority (SMEDA) has been established.  However,  because of low investment levels and other
developments in the last few years, and despite the IMF’s stabilization programme in place during the
year, recovery in GDP growth in 1999-2000 is expe cted to remain at around 5.0%.  The growth in
GDP is expected to be contributed by sectoral growth of 4.3% each in agriculture and large-scaleWT/BOP/G/11
Page 7
manufacturing, 5.0% in electricity and gas distribution, and 5.1% in the services sector.  The
commodity producing sectors as a whole is projecte d to grow by 4.9%.  The main growth targets of
the Annual Plan 1999-2000 are given in the table be low, however, these growth projections may be
revised later in the year in light of actual information available.
Table 1
GDP Growth
Growth Rates (%) 1996-97 1997-98 1998-99
(Provisional)1999-2000
(Target)
Agriculture 0.12 3.82 0.35 4.30
Manufacturing 1.29 7.88 4.70 5.80
Large-scale Manufacturing -2.14 7.60 2.70 4.30Service 3.61 3.20 4.14 5.10
1. Agriculture
35. The agriculture sector is expected to grow overall by 4.3%.  The output of major crops is
projected to grow by 5.4%.  The production of minor crops is forecast to increase by 4.5%, livestock
by 3.0%, and fishing by 4.0%.  For the developmen t and promotion of the agricultural sector, a
comprehensive agriculture reform package has already been announced with the Agriculture Policy.
The production targets of different crops are given at Annex I.
2. Manufacturing
36. In the manufacturing sector, 5.8% growth is envisaged, with 4.3% increase in large-scale and
8.4% increase in small-scale manufacturing.  Efforts are being made to remove constraints faced by
the large-scale manufacturing sector.  The targeted  production of major industrial items is shown in
Annex II.
3. Services
37. The services sector as a whole is projected to grow in 1999-2000 by 5.1%.  The main
contributors of value addition in this sector are transport, communications, trade, banking and
insurance.  The transport and communications sector which accounts for 10.2% of GDP is forecast to
grow at the rate of 5.3%.  The trade sector, having 15.3% share in GDP, depends on the value addition
in the agriculture and manufacturing sectors and imports.  It is expected that the trade sector wouldgrow by 4.8%, while the banking and insurance sector is projected to grow by 5.0%.  The sectoral
growth rates are given at Annex III.
4. Macroeconomic framework
38. The macroeconomic framework of the Annual Plan 1999-2000 envisages an increase of
10.6% in total resources of Rs.3418.4 billion as against provisionally estimated resources ofRs.3090.8 billion for 1998-99.  The consumption expenditure is projected at Rs.2810.7 billion and
total investment at Rs.607.9 billion, including fixed investment of Rs.556.2 billion and changes in
stocks of Rs.51.6 billion.  The consumption will t hus increase by 6.3% whereas total investment and
fixed investment are expected to increase by  36.1% and 38.9%, respectively, during the year.
39. Selected macro-economic indicators for the Annual Plan 1999-2000 are presented in Table 2.WT/BOP/G/11
Page 8
Table 2
Selected Macro-Economic Indicators
1997-98 1998-99 1999-2000
(T) (P) (T)
Percentage Change
GDP growth 4.3 6.0 3.1 4.4
Inflation (GDP deflator) 8.0 8.0 5.7 4.0
As % of total resources
Consumption 83.2 81.5 85.5 82.2
Total Investment 16.8 18.5 14.5 17.8
As % of GDP (mp)
Total Investment 16.1 18.7 14.8 14.5
 National Saving 13.1 15.8 10.9 15.3Foreign Saving 3.0 2.8 3.9 2.7
Investment Financed by (%)
National Saving 82.3 84.5 73.6 84.9
Foreign Saving 17.7 15.5 26.4 15.1
5. Investment
40. Total investment in 1999-2000 is projected at Rs 607.9 billion, which is 36.0% higher over
the preceeding year's approximate investment of Rs .446.9 billion.  As a porti on of GDP, investment is
targeted at 18.0% against 14.8 % during 1998-99.  Fixed investment is projected to grow by 38.9% to
Rs.556.2 billion.  In line with the Government policy of encouraging the private sector, about 63.0%of fixed investment would be in the private sector.  Thus, the private sector investment is targeted to
reach Rs.350.4 billion whereas public sector inve stment would amount to Rs.205.8 billion.  As a
proportion of GDP, the public and private investment shares are projected at 6.1% and 10.4%,
respectively.
6. Inflation
41. It is expected that enhanced production of the commodity producing sectors, fiscal discipline
and judicious demand management would moderate inflationary pressure.  Timely imports,
adjustment and reductions in the duty structure c ontinued with administrati ve measures would also
stabilize prices.  The rate of inflation for the year 1999-2000 is, therefore, targeted at 6.0%.
B. F
ISCAL DEVELOPMENTS
42. The Budget for 1999-2000 aims to further reduce overall fiscal deficit to Rs.112.8 billion or
3.3% of GDP.  Government revenues are expected to increase from Rs.512.8 billion to Rs.570.9
billion, showing an increase of 11.3%.  Tax revenues are expected to increase from Rs.404.5 billion in
1998-99 to Rs.443.4 billion in 1999-2000 or by 9.6%.  Taxes collected by the Central Board of
Revenue are expected to increase from Rs.308.5 billion in 1998-99 to Rs.356.0 billion in 1999-2000
or by 15.4%.  The major increase in government revenues has been estimated in sales tax which
increased by 34.2% from Rs.71.9 billion in 1998-99 to Rs.96.5 billion in 1999-2000, while non-taxrevenues have been estimated to increase by 17.8% i.e. from Rs.108.3 billion in 1998-99 to Rs.127.6
billion.
43. The government expenditure in 1999-2000 has been estimated to increase by 11.3% from
Rs.614.1 billion in 1998-99 to Rs.683.7 billion.  As a proportion of GDP, government expenditure isWT/BOP/G/11
Page 9
estimated to reduce from 21.6% of GDP in 1997-98 to 20.2% in 1999-2000.  The current expenditure
is estimated to grow by 9.3% from Rs.528.6 billion in 1998-99 to Rs.557.7 billion.
C. BALANCE OF PAYMENTS
1. Trade Account
44. It is expected that 1999-2000 may experience a slight improvement over the previous year in
the balance of payments which will be primarily stem ming from recovery in export growth.  Exports
are projected to grow by 10.7% while imports are forecast to increase only by about 6.1%.  The low
growth in imports projections is based on the assumption of having good food crops in the agriculture
sector like wheat, sugar, etc.  The increase in exports earnings is dependent on increased production of
cotton and rice along with a revival of the manufacturing sector and competitiveness of Pakistan’s
value added products.  The trade account is projected to be in deficit by US$1862 million in 1999-
2000 against a deficit of US$2085 million in 1998-99.
2. Invisibles Account
45. Prospects for the invisibles balance including remittances will continue to be governed mainly
by the behaviour of the workers remittances and private transfer.  For the year 1999-2000, worker’s
remittances have been projected at US$950 million and inflow into foreign currency accounts at
US$290 million.  Allowing for other invisibles of receipts and payments, an optimistic surplus ininvisibles is anticipated to be US$167 million in 1999-2000 as compared with a deficit of US$296
million during 1998-1999.
3. Current Account Balance
46. With a deficit of US$1862 million in the trade account and a surplus of US$166 million in the
invisibles account, the current account deficit excluding official transfers, is estimated to decline toUS$1696 million in 1999-2000 from US$2381 million in 1998-99.
4. Capital Account
47. The long-term capital inflow, both official and pr ivate, is likely to decline to US$377 million
in 1999-2000 from US$1594 million in the previous year.  This significant decline of US$1217
million is primarily due to a decline in net official capital of US$879 million and a decline of US$338million in private capital during 1999-2000.WT/BOP/G/11
Page 10
Annex I
Pakistan:  Balance of Payments
(US$ Million)
Items 1996-97 1997-98 1998-99
(Prov)1999-2000
Estimate11-3-2000
Trade Balance
          Exports (fob)
          Imports (fob)-345
  8096
11241-1867
  8434
10301-2085
 7528
 9613-1862
  8334
10196
Service (Net)Receipts          Payments                       Shipment                        Interest-Official Debt
                        Others-3659
1840
-5499
978
-960
-3561-3264
1708
-4972
-921-957
-3094-2570
1409
-3979
-844-949
-2186-2890
1518
-4408
-879
-1122
-2407
Current Transfers (Net)
Private
                Of which:
                 Workers remittances
                  Foreign Current Accounts-Residents       Official3247
2958
1409
1347
2893430
3210
1490
1476
2202468
2274
1060
5391943164
3057
950
290108
Current Account Balan ce  (1 through 3)
Current Account Balance
(excl. Official Transfers)-3557
-3846-1701
-1921-2181
-2381-1588
-1696
Long-Term Capital (Net)
Official Capital
                   Disbursement of Loans/Credits                                   Project                                   Food
                                   Programme
                   Amortization                   OtherPrivate capitalForeign Investment
Loan/Credits
Others2186
693
19981587
409
0
-1797
494
1493
968
298
2271337
602
26171369
623
625
-1891
-124
735793
373
4311594
112826101451
230
929
-2038
556466456
-241
251377
249
22401127
224
889
-1974
17
128
-512
-453
69
Outstanding Export Bills -97 -383 40 -87
Errors and Omissions (Net)
(including other short-term capital)156 568 1030 538
Official Assistance
              Medium and short-term loans (net)
              Other official short-term including              Government Bonds-266
-446
180572
390
182-1174
-863
-311-936
-114
-822
Foreign Current Deposits-Non -Residents 546 -699 -2445 -2436
Overall Balance (4 through 9) -1032 -306 -3142 -4132Financing
            Net International Reserves (increase -)
            Use of Fund Credit (net)           Exceptional Financing/Gap1032
1199
-167
0306
148
158
03142
-1254
430
3966-4132
318
-280
4094
Source:  State Bank of PakistanWT/BOP/G/11
Page 11
Annex II
Industrial and Mineral Production
1997-98 1998-99 1999-2000 % change
Items Unit Targets Prov. Targets 1998-99 1999-2000
(1) (2) (3) (4) (5) (6) (7) (8)
A.  INDUSTRIAL
PRODUCTION
(Large Scale)
Sugar (000 MT) 3558.3 3500.0 3541.3 3452.4 -0.9 -2.0
Jute Goods (000 MT) 95.4 98.0 85.5 87.4 -7.8 3.1
 Cement (000 MT) 9106.0 10465.0 9432.0 10105.0 -1.9 10.0Paper & Board (000 MT) 2718 347.0 278.1 352.1 0.4 1.7Fertilizer (N) (000 MT) 1660.4 1900.0 1773.6 1804.4 4.8 3.7
Soda Ash (000 MT) 240.3 246.0 239.4 259.8 4.8 3.6
Caustic Soda (000 MT) 115.7 121.0 120.4 125.2 5.6 2.5Billets (000 MT) 350.0 380.0 376.2 271.0 -23.9 2.3H & CR Sheets (000 MT) 581.9 700.0 599.6 408.6 -6.6 3.5
Cotton Yarn (000 MT) 1533.1 1634.0 1540.3 1613.0 0.2 5.0
Cotton Cloth (Mln Sq.M) 340.3 360.0 384.6 389.6 10.2 4.0
Cigarettes (Bln Nos) 47.4 51.0 50.2 54.1 6.8 5.0
Motor Tyres (000 Nos) 767.0  500.0 845.0 494.0 0.0 12.0
Truck/Buses (000 Nos) 2.3 2.5 2.4 2.3 8.7 9.5LCVs/Cars/Jeep (000 Nos) 44.2 51.0 47.4 57.6 5.2 19.0Bicycles (000 Nos) 452.1  460.0 504.0 543.7 12.4 7.0
Tractors (000 Nos) 14.1 15.0 26.6 29.2 67.9 24.3
Sewing Machines (000 Nos) 36.2 39.0 29.7 32.5 -17.3 5.0
Air Conditioners (000 Nos) 2.1 3.0 1.1 1.8 -41.2 20.0
Electric Motors (000 Nos) 26.0 28.0 33.6 20.8 -34.1 15.6
Cotton Ginning (000 Tonnes) 15.62 10.5 1496.0 9.7 -4.3 10.2
Petroleum Products (Mln. Ltr) 7464.6 7700.0 7599.5 7979.0 3.8 3.0
B.  MINERAL
PRODUCTION
Crude Oil (BPD) 56251 61904.0 55463.5 61236.0 -1.4 10.4
Natural Gas (MMCFT) 1916.5 2372.0 1947.6  2404.0 1.6 23.4
Coal (000 MT)  3145.0 3780.0 3370.0 5620.0 15.4 61.5Limestone (000 MT) 11166.0 9723.0 9467.0 10947.0 -1.8 11.0Rock salt (000 MT) 971.0 995.0 1190.0 1495.0 38.4 10.8WT/BOP/G/11
Page 12
Annex III
Macro-Economic Framework
(Current Billion Rs.)
1994-95 1997-98 1998-99 1999-00 % change
(R) (T) (P) (T)
1998-99 1999-00
(T) (P) (T) (P)
GDP(fc) 1688.1 2540.1 2899.4 2785.0 3097.0 14.5 9.6 6.8 11.2
Indirect Taxes (net) 200.5 210.3 258.9 252.2 278.6 14.5 22.3 7.6 15.7
GDP(MP) 1882.1 2736.9 3158.4 3025.7 3375.6 14.5 10.6 11.6 11.6Net Factor Income from
abroad14.0 -24.7 -56.7 -28.6 -49.3 -37.6 -8.3 -27.0 -27.0
GNP(MP) 1896,1 2712.3 3101.6 2997.1 3326.3 14.1 10.8 11.4 11.4
External Resource Inflow
(net)76.6 83.0 112.8 83.3 92.1 -0.9 0.4  -15.1  -15.1
Total Resources/uses 210.8 2783.6 3191.3 3090.8 3418.4 13.6 10.5 10.7 10.7
Total consumption 1586.2 2315.6 2602.1 2643.9 2810.7 11.6 13.5 6.4 6.4Total Investment 346.5 468.0 589.2 446.8 607.9 23.7 -4.5 36.0 36.0Fixed Investment 318.3 396.6 538.6 400.5 556.2 33.0 1.0 38.9 38.9Public 155.1 134.0 190.8 150.9 205.8 18.4 12.6 36.4 36.4Private 163.2 262.6 347.8 249.6 350.4 42.6  -5.0 40.4 40.4Changes in stocks 28.2 71.4  50.5 46.4 51.6 - - - -National Saving - 385.0 499.5 334.0 515.8 18.4 -5.6  - 47.7Memo items (as % of GDP)
Investment 18.4 17.1 18.7 14.8 18.0 - - - -
Fixed Investment 16.9 14.5 17.1 13.2 16.5 - - - -Public 8.2 4.9 6.0 5.0 6.1 - - - -Private 8.7 9.6 11.0 8.2 10.4 - - - -External Resources 4.1 3.0 2.8 3.7 2.7 - - - -National Savings 14.3 14.1 15.8 12.0 15.3 - - - -GDP deflator - 8.0 8.0 6.30 6.0 - - - -
T:  T a r g e t
P : ProvisionalR:  R e v i s e d
__________