ISLAMABAD: Pakistan’s terms of trade, which measure the ratio of export to import prices, have not only been adverse, but have also deteriorated over the years, which has adversely impacted the economy in terms of growth and balance of payments.
If an economy’s terms of trade are less than 100%, they are regarded as adverse. This signifies that capital inflows into the economy in the form of export receipts are less than capital outflows in the form of import payments.
In the case of Pakistan, like most other non-oil exporting developing countries, both trade balance and terms of trade have remained adverse, which shows that not only we import more than we export, but on balance our exports are much cheaper than imports.
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