July 27, 2020: Despite being confronted with multifaceted challenges, Pakistan's economy witnessed significant improvement in some of its sectors during Fiscal Year 2020, according to Monthly Economic Outlook released here Monday by Finance Ministry.
According to the official document, the sectors that showed positive improvements included external account, which had been stabilized with current account deficit reduced by 78 percent.
Likewise, the workers’ remittances surged to a historic high level of $23.1 billion during FY2020 compared to $21.7 billion during FY2019, witnessing a growth of 6.5 percent and Foreign Direct Investment (FDI) increased by 88 percent and reached to $ 2.6 billion during FY2020 as compared to $ 1.4 billion in FY2019.
Recently an Annual Security Survey 2020, conducted by Overseas Investors Chamber of Commerce & Industry (OICCI), in which foreign investors have shown overall high level of satisfaction on the fast improving security environment in the country, the report said adding that the this stance of foreign investors will surely help the economy by boosting up FDI.
In addition, KSE 100 index is also going up, which reflects resilience of the institutions and the trust of investors on the institutions.
According to the report, the world was in an unprecedented time of change as the COVID-19 pandemic has provoked a threat to life sciences that were previously unthinkable.
It said that the lockdown measures opted by most governments succeeded in slowing the spread of the virus and in reducing the death toll but they have also frozen business activity in many sectors, widened inequality, disrupted education and undermined confidence in the future.
Some International financial institutions like International Monetary Fund (IMF) and World Bank (WB) were still predicting slowdown in 2020 amid economic activities that resumed in most of the countries since June 2020.
Pakistan’s economy was progressively moving along the adjustment path and stabilization process, it said adding that business confidence was recovering and prices had started settling down, twin deficits were under control and economy was gradually moving towards sustainable growth when the shock of the COVID-19 outbreak hit the economy.
Overall, COVID 19 has undermined the growth prospects, it added.
However, with wide ranging policies implemented by the government and State Bank of Pakistan, the detrimental impact of COVID has been lessened.
These policies were put in place to protect people and businesses from the consequences of the sudden stop in activity, the report said adding that to avoid significant impact on manufacturing and service sector, the government followed smart lockdown policy to avoid supply chain disruptions.
The report said that beside COVID-19, the desert locust situation has worsened and was likely to be at its peak in between July 15 to September 15, and consequently, crops might suffer.
However, the government is taking proactive measures to control the locust and to provide relief for the locust affected area, it added.
It said that the main priority of the government of Pakistan was to protect the vulnerable segments through social safety nets (Ehsaas Programme) and implement immediate measures that support early and quick economic recovery.
In this regard, the budget strategy for FY2021 was focused on maintaining a balance between Corona related expenditure and fiscal deficit, keeping primary balance at the sustainable level, and development expenditure at sufficient level to support the economic activity and revenue mobilization.
It said that for FY 2020-21 agriculture sector growth is targeted at 2.8 percent on the basis of better growth in crops, livestock, fisheries and forestry.
Likewise, resumption in business activities started showing signs of recovery and LSM grew by 20.5% on month-on-month basis in May FY 2020 (-32.5% April FY 2020). While on year-on-year basis, LSM decreased by 24.8% in May FY 2020 (-1.01% May FY 2019). LSM during July-May FY 2020 plunged to -10.3% (-2.7% last year).
It said that the government has announced a special package for construction sector, which include amnesty scheme, tax exemptions and Rs 30 billion subsidy for Naya Pakistan. Banks have been asked to set aside 5% of their portfolios for house financing which comes to about Rs 330 billion.
The Consumer Price Index (CPI) inflation rate is recorded at 8.6 percent year-on-year in June 2020. On the other hand, Pakistan’s total liquid foreign exchange reserves increased to $ 17.97 billion by the end of June 2020, up by $ 3.5 billion over end-June 2019.
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