A Study on the Problem of Deficit in the Balance of Payments: The Case of Pakistan

摘要

Pakistan is suffering from the problem of a deficit in the balance of payments that has lasted for many decades. High payment balances strengthen the foreign currency against the home currency which makes imports of goods and services more expensive as compared to exports and cause for devaluation of the home currency and a balance of payments deficit. This paper examines how Pakistan's balance of payments is influenced by different factors. It contains an analysis of the current account balance and balance of trade with different economic factors. After a detailed analysis, we find that imports, exports, foreign direct investment, workers remittances, inflation, gross domestic saving, and domestic production capacity are the main economic factors that sway Pakistan's balance of payment and cause deficit. At the end of this paper, we have given some suggestion for overcoming this problem.