Muhammad Arif : Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research ArifHabib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan

In 2020 Pakistan population is around 219 million. In absolute terms, people living in poverty have increased from 69 million in June 2018 to 87 million by June 2020, indicating 26% increase in poverty or an addition of 18 million people in first two years of the PTI government. For every 1,000 babies born in Pakistan in 2018, 69 die before their 5th birthday.

Government Revenues in Pakistan is expected to reach 4500.00 PKR Billion by the end of 2020, according to Trading Economics global macro models and analysis.

Its Revenues is around 12.7% of GDP i.e. near to Rs 4,900 billion. Its expenditure is around 21.6% of GDP, Pkr 8238.3 Billion or $ 52.2 billion. Other than this it is getting economic aid of around $ 2.28 billion annually.

About ₨ 18.17 trillion is owed by the government to domestic creditors, and about ₨1.378 trillion is owed by Public Sector Enterprises (PSEs). Similarly, as of March 2020, external Debt of Pakistan is now around US$112 billion.

Pakistan Labor force is around 10 million with half of them is unemployed in the current situation.

Than the question arises that whether Pakistan is surviving and whether it would survive in the future. Yes of course yes! Because realistically speaking, Pakistan is a nuclear power and it has been increasing its nuclear threshold, though its economy is crippling but it is striving to handle it and soon it will be on smooth path. The leaders who made Pakistan a nuclear state i.e. Bhutto, Nawaz Saharif, Benazir Bhutto are traitors in establishment terms but history cannot be changed and Pakistan is thankful to them after Jinnah, Allama Iqbal and Fatima Jinnah.

Now we come to the scenario in 2020.

COVID-19 related lockdowns has started to take their toll on an all favorable macroeconomic trajectories.

Improvement in the inflation outlook was an exception apart from fiscal and external sectors deterioration but now it has started inching up again with increase in oil prices. Both production and retail activities came near to a standstill leading towards significant contraction in economic activity.

Such was the severity of the COVID-19 shock that after 73 years Pakistan’s real GDP is provisionally estimated to record a negative growth of 0.4 percent for FY20.

As expected in most other countries, this contraction in Pakistan’s GDP is due to a decline in output of industrial and services sectors.

Industrial sector is at growth of negative – 2.6% of GDP compared to + 4.6% of GDP in 2018 whereas Large scale manufacturing  is at growth of negative – 7.8% of GDP  compared to + 5.1% of GDP in 2018 and services sector is witnessing growth in negative by – 0.6% of GDP compared to +6.3 % of GDP in 2018..

Only agriculture sector has survived in spite of locust attack and hot weather. It is on +2.7% of GDP compared to 4.0% of GDP in 2018.

The good signs have been stability in FX Reserves at around $ 19 billion (enough to meet 2-3 month support) due to multilateral and bilateral support. The FX remittances have also gone up to $ 23 billion as most of the Pakistanis are coming back due to corona epidemic. The current account deficit has shrunk to around – 3% of GDP from – 13% of GDP in 2018.

Foreign Direct Investment has also not changed and is touching $ 2 billion mainly due to CPECK. Fiscal balance is around 4.5% of GDP showing that government would have to borrow around Rs 2-3 trillion for this year.

Specifically, notable gains in terms of primary budget surplus of the first half have turned into a deficit during Q3-FY20. Growth in all categories of FBR taxes turned negative in March FY20 after recording encouraging gains earlier in the fiscal year. As the onset of lockdowns disrupted mobility and unemployment increased sharply, strong pressures to provide direct support to the most vulnerable segments of the society, especially in the informal sector, emerged. As the economy moves towards the end of FY20, it continues to be faced with high uncertainty owing to the challenges posed by the COVID-19 pandemic on several economic fronts.

The biggest concern is the fast growth in the extent of the disease. As the count of new infections is increasing every day, this shows that the distribution has not yet peaked. High levels of uncertainty are also reflected in recent SBP surveys. The Consumer Confidence Survey of May 2020 recorded a sharp deterioration in both consumer confidence and expected economic conditions following their improvement in March 2020. Similarly, the Business Confidence Survey of April 2020 registered its lowest historical level for overall business confidence.  However month of August 2020 is showing some decline in epidemic that would be better for Pakistan economy.

Importantly, Pakistan is not an outlier in this regard, as the global economic uncertainty index also recorded its historic peak in April 2020, indicating a global manifestation of uncertainty at present.

However, going forward, there are some prospects for gradual improvement in economic activity as the government is easing the lockdown while allowing many sectors to resume activities. This may result in a supply side revival, though agriculture sector outlook is at risk from locust attacks, which can unfavorably impact the ongoing kharif season’s output.

Nonetheless, achieving the target of 2.1 percent growth in real GDP during FY21 will require a parallel improvement in underlying demand. This requires effective utilization of PSDP as per its allocation in the budget for FY21,


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