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Why Pakistan’s Economic Growth Continues to Be Balance-of-Payments Constrained

Publication | December 2019
Why Pakistan’s Economic Growth Continues to Be Balance-of-Payments Constrained

This paper analyzes recurring balance-of-payments crisis in Pakistan, with data presented for the period 1980–2017.

In Pakistan, the balance-of-payments constrained growth rate is estimated at 3.8% based on 1980–2017 data and using long-term estimates of import and export income elasticities. The result is lower than previous estimates of balance-of-payments constrained growth in the literature, indicating that lower export performance weighed more on gross domestic product growth in the recent period. The paper recommends structural reforms to improve Pakistan’s export performance.

Contents 

  • Introduction
  • From Current Account Imbalances to Balance-of-Payments Constraints
  • Measuring Pakistan's Balance-of-Payments Constraint to Economic Growth
  • Policy Recommendations
  • Conclusions