THE PAKISTAN DEVELOPMENT REVIEW
The Balance-of-Payments Problem and Resource Allocation in Pakistan—A linear Programming Approach .
The purpose of this study is to examine Pakistan’s foreign-trade problems and policies in the context of the wider question of a rational allocation of domestic resources. It will be argued that measures taken in Pakistan to regulate the flow of imports and exports have led to a pattern of resource allocation which may aggravate the balance-of-payments problem. The difficulty is mainly attributable to the fact that foreign economic policies and policy measures taken to regulate the domestic economy have often been at cross-purposes. For instance, whereas the domestic .investment policy has aimed at promoting the most economical use of scarce investment resources, the licensing system has provided strong incentive for a wasteful use of these resources by encouraging import substitution even where the country may have a long-run comparative disadvantage. While domestic policy has aimed at raising the marginal rate of savings, the policy of protecting consumption goods, particularly the nonessential ones, has tended to liberalize consumption.
Pakistan Institute of Development Economics
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