COVID-19 shook the world economy at its very foundation. It played the ruthless might of nature and mocked the limits of much-celebrated human advancements. Beyond fear and tears, Covid-19–induced disruptions changed the world in more basic ways than we may realise.
As the global recession deepened, the World Bank projected shrinkage of 5.2 percent in the world economy, the largest since the Second World War with the starkest decline in the per-capita output in the past century and a half (since 1870).
Pakistan surprised itself and others as it fared better than neighbours and most advanced nations in terms of containing the loss to life and the economy. Let’s take an in-depth review of Pakistan’s economy.
PTI government’s steps
Pakistan’s economy is assessed to have contracted by about 3.5 percent. According to the government, it was on track to grow by 3 percent before the pandemic but closed 2019-20 with a negative 0.4pc GDP growth rate.
Pakistan received global support of multibillion dollars to stay afloat. Collectively, the International Monetary Fund (IMF), World Bank, China, Saudi Arabia and others poured in over $4bn to ease financial pressure.
The government’s Rs1.2 trillion ‘relief and revival package’ did shield the poorest from hunger during the lockdown period and energised certain growth drivers. An incentive package, loaded with tax cuts, subsidies and duty breaks was announced to restore investor’s confidence.
A lucrative plan was offered for the construction industry that included a subsidy of Rs30bn for small housing schemes and an amnesty till Dec 31 on undeclared resources to housing investors. A scheme of soft loans was offered for covering the wage bill in return for retaining the workforce.
Besides tax breaks, duty concessions and soft credit schemes, the State Bank of Pakistan (SBP) slashed the interest rate from 13.25pc in February to 7pc currently and permitted a one-year extension in principal payments along with the rescheduling and restructuring of loans to private borrowers worth $3bn.
Pakistan’s economic indicators
Current account surplus, for the fifth month in a row, rose to $447 million. Remittances, at $2 billion, maintained a strong momentum for the sixth consecutive month. The stock market is picking up.
The country witnessed a record increase in exports of 18.3% in the month of December 2020 as demand in the international market surged. Exports rose to $2.357 billion in December 2020 compared to $1.993 billion in the same month of previous year.
The weekly inflation for the combined income group, measured through the Sensitive Price Indicator (SPI), declined 0.69% in the week ended December 31, 2020, as compared to the previous week, Pakistan Bureau of Statistics (PBS) data showed.
Pakistan Stock Exchange (PSX) consolidated its position in 2020, as benchmark Kse-100 with a year-on-year gain of 7%, managed to close at 43,755.38 level, its highest year-end index closing in past four years.
FBR tax collection
The PTI government narrowly missed the first half tax collection target despite setting a very low milestone, leaving a gigantic task of collecting Rs2.8 trillion with a growth rate of 45% in the remaining period of current fiscal year.
From July through December of fiscal year 2020-21, the FBR provisionally collected close to Rs2.2 trillion in taxes. It had set a very low target of Rs2.210 trillion, which was hardly 44% of the annual target and needed a mere 5.7% growth, even lower than the pace of inflation.
Is economy heading in right direction?
As economies around the globe have remained under intense pressure, the Pakistani economy is showing encouraging signs of a promising recovery with improved economic indicators, according to experts.
The country’s economic experts believed that despite the testing times, the national economy is heading in the right direction as the government’s extensive measures have helped it move progressively on the adjustment path in a stabilisation process.
According to a recently released Asian Development Bank (ADB) report on development outlook, Pakistan’s economy has been getting better despite the persistent challenge of COVID-19.
“Pakistan’s economy is recovering, particularly in the manufacturing and construction sectors, supported by the government emergency relief,” said the report, a regular supplement to the Asian Development Outlook (ADO) 2020.
