RESTRICTEDWORLD TRADE
ORGANIZATIONWT/BOP/R/56
22 December 2000
(00-5599)
Committee on Balance-of-Payments Restrictions
REPORT ON THE CONSULTATIONS WITH PAKISTAN
1. The Committee held resumed consultations, suspended on 5 May 2000, with Pakistan on
20 and 21 November 2000.  The consultations were held under the Chairmanship ofMr. Milan Hovorka (Czech Republic) in accordance with the Committee's terms of reference, and
pursuant to Article XVIII:12(b) of GATT 1994 and the Understanding on Balance of Payments
Provisions of GATT 1994.  The IMF was invited to participate in the consultations in accordance with
Article XV:2 of GATT 1994.
2. The Committee had before it the following documents:
WT/BOP/R/51 Report on the Consultations with Pakistan (14 June 2000)
WT/BOP/N/51 Communication from Pakistan (7 July 2000)
WT/BOP/R/54 Note on the Meeting of 18 September 2000 (9 October 2000)
A. O
PENING STATEMENT BY THE REPRESENTATIVE OF PAKISTAN
3. The opening statement by the representative of Pakistan is attached as Annex 1.
B. DISCUSSION IN THE COMMITTEE
4. Members commended the Government of Pakistan  for its commitment to liberalized trade.
They welcomed the positive news that Pakistan would be implementing its existing plan for removal
of its balance-of-payments restrictions and would be notifying the first phase in its three-year plan; the
second and third phase would be implemented by the end of June 2001 and 2002.  In response to a
question as to whether the removal of restrictions was part of the IMF programme, the representative
replied that his Government acted autonomously.  On the link between the balance-of-paymentsdifficulties and greater market access, the view was expressed that there could be no direct link with
the balance-of-payments situation and that internal factors had to be tackled;  the question was also
posed as to how the restrictions had improved the external position.  While the representative
acknowledged that there was no direct causality, improvements in market access for Pakistan would
help the balance of trade.
C. C
ONCLUSIONS
5. The Committee welcomed Pakistan's commitment to  the principle of liberal trade.  Members
expressed appreciation for Pakistan's decision to implement its existing phase-out plan, in spite of the
existing fragility of the balance-of-payments situation in Pakistan which the Committee had
recognized at its May 2000 meeting.
6. The Committee took note of Pakistan's commitment to remove the first tranche of balance-of-
payments restrictions within the next two weeks and remove in two tranches all the remainingWT/BOP/R/56
Page 2
restrictions by the end of June 2001 and 2002, respectively, in accordance with the scheduled phase-
out; on this understanding, the Committee concluded that Pakistan was in conformity with its
obligations under Article XVIII:B and the Understa nding on the Balance of Payments Provisions of
the GATT 1994.
7. Members noted that Pakistan was willing to accelerate its phase-out plan should market
access for its exports, and the sustainability of its balance-of-payments, improve.WT/BOP/R/56
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ANNEX I
Opening Statement by the Representative of Pakistan
1. A detailed review of Pakistan's BOP position was undertaken by this Committee in its
meeting of 5 May 2000.  This review took account of the analysis presented by the Government of
Pakistan and the International Monetary Fund.  At that time, we had outlined the major problems
which have contributed to Pakistan's adverse BOP position.  I do not intend to delve into these details
once again today.  Let me just recall that in the report prepared by the Secretariat following the
consultations of Pakistan (WT/BOP/R/51, dated 14 June 2000) "Members recognized the fragile
balance-of-payments situation faced by Pakistan".
2. During the period between the last consultati ons and now, the situation has not shown any
significant improvement.  Pakistan continues to face balance-of-payments difficulties.  Trade deficit
(1999/2000) stood at US$1.7 billion, showing an increase of US$88.4 million over financial year
1998/1999;  terms of trade continued to deteriorate;  worker remittances dipped below the
US$1 billion mark for the first time since the early 1980s;  there was a sharp fall in inflows from  IFIsand bilaterals;  foreign exchange reserves fell from US$1.740 billion to US$1.358 billion.
3. The current account deficit came down from  US$2.24 billion (1998/199 9) to just above
US$1 billion this year due to outright purchases of over US$1.6 billion from the kerb market and a
reduction in the "realized" trade deficit.  There were, however, large capital outflows and the gap in
the balance of payment had to be met through exceptional financing of US$4 billion, almost the samelevel as last year.
4. The Government of Pakistan has recently concluded its negotiations for a standby
arrangement with the IMF.  The approval of this  facility will not only provide a reprieve on the
external front but is also likely to trigger fresh inflows of concessional assistance.  It is our
expectation that this standby arrangement will lead to a three-year poverty reduction and growthfacility, which may consolidate the gains of macroeconomic stability and accelerate economic revival.
5. While reviewing the prospects for the year 2000/2001, we are optimistic that the BOP
position may improve.  This expectation is based mainly on improved balance of trade.  Pakistan
plans to increase exports at a much faster rate, especially in the value added sectors.  A concerted
effort has already been taken to keep Pakistan's exports competitive by pursuing a market-based
exchange rate policy.  Diversification and increasing the share of existing exports of textiles and non-
textile categories in the world market will be pursued aggressively.  Special focus will also be givento export of non-traditional items.  By these measures, it is estimated that Pakistan's exports during the
year 2000/2001 will reach US$9.4 billion, an increase of 14.6 per cent over last year.  Imports have
been projected at US$10.5 billion, an increase of 9.4 per cent.  The trade deficit is thus proposed to be
brought down to US$1.136 million in 2000/2001.
6. A sound foundation has been created for economic recovery.  Adequate support from the IFIs
and our trading partners will be indispensable to ensure our success in realizing sustained economic
revival.  The anticipated approval of the standby arrangement by the Fund would be a first and
important step in this process and will hopefully be accompanied by the complementary support from
other IFIs.  Clearly, realizing a sustainable BOP s ituation will be possible only with an adequate
restructuring of Pakistan's debt profile by the Paris Club, apart from enlarged exports inter alia
through larger access in markets of our major trading partners.
7. Notwithstanding the adverse BOP position a nd the strains of Pakistan's economy, the
Government of Pakistan is committed to the principle of liberalized trade.  We wish to make everyWT/BOP/R/56
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effort to fulfil our obligations and commitments under the multilateral trading system.  Therefore, in
anticipation of the positive and reciprocal approach by our major trading partners to provide us with
increased market access, especially in the textiles sector, and also in anticipation of the arrangements
with international financial institutions, Pakistan as decided to implement the phase-out plan of
restrictions maintained under Article XVIII:B of GATT 1994 already submitted to the WTO.
8. I am, accordingly, pleased to inform the Committee that Pakistan will immediately notify
removal of restrictions that were due to be lifted during the first year of our phase-out plan and will
also take the necessary steps towards fulfilling its obligations for the next financial year
9. May I conclude by expressing the hope that our major trading partners will help to make this
possible, especially by providing significantly improved access for our textiles and clothing exports in
their markets.  If there is substantial improvement in our balance of trade and, consequently, in our
BOP position, Pakistan would be prepared to accelerate the implementation of the phase-out plan.
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