Balanced of Payments is a record of economic transaction between the residents of one country and rest of the world during the course of one year.
Pakistan's balance of payments situation has not been satisfactory since Independence. The main factors contributing adverse balanced of payments in Pakistan is due to:
- Import of capital goods like machinery, new technology etc. for rapid industrialization has adversely affected the balance of payments in Pakistan.
- Rising in oil prices has adversely affected the balance of payments in Pakistan.
- Increase in import payments for fertilizer, machinery, edible oil etc.
- Pakistan's society is consumption oriented and most of the consumer goods are important from abroad.
- Import of industrial Raw material and machinery.
- Higher import unit values than export unit values.
- Higher payments for freight, insurance, transports and trade by Pakistan.
- Political instability, floods, droughts, strikes etc. cause reduction in industrial production.