Effect of 1972 Devaluation on Pakistan's Balance of Trade

In most of the developing economies, a rapid growth of G.N.P. invariably implies a larger import bill. Capital goods necessary for development have to be imported and a higher level of income in turn implies an increase in the import of consumption goods. On the other hand, demand for primary goods, which are main exports of developing countries, is inelastic. Moreover, the developing countries face serious problems in selling their manufactured products in the world market, partly due to their relatively inefficient industrial structure and partly due to the restrictive import policies of the developed countries. This results in a deficit in the balance of payments of many developing countries. To meet the deficit, import restrictions and export encouragement policies· arc followed instead of devaluation, which is resisted on both economic and noneconomic grounds.