Name: Ayesha

Islam
Student ID: (12252)
Course: Pak Studies
(Miss Rahat Shahid)

How can we
improve the
economy of
Pakistan after the
coronavirus
panedemic?

Name: Ayesha Islam

Name:- AYESHA ISLAM
Student I’D:- 12252

Economy of Pakistan after Corona

Virus outbreak
 Pakistan is an under developed nation which has been suffering from crisis after crisis
for the last many years and passing through political polarisation as well and with bad
governance. While Pakistan’s economy is already on ventilator, the coronavirus which is
bringing the world economy to a standstill, can destroy our economy like it destroys
human body’s immune system and similarly this monster will hit adversely and make
irreversible damage and all at once. Pakistan according to rough estimates may incur
initial economic loss of Rs1.3tr due to coronavirus.

 The Planning Commission estimated that the size of the country’s GDP stood at Rs44
trillion and one/fourth stood at Rs11 trillion, so the disruption caused by
coronavirus is expected to cause at least 10 percent losses in the last quarter (April-
June) that would stand at Rs1.1 trillion at least.

 This lethal pandemic that began in the depths of China’s Hubei province spreading
through the world has now besieged the whole nation and economy of Pakistan. There
are now significant outbreaks in all territories and provinces of Pakistan and the first
death reported was from Sindh while the rest of two from KPK province.

 The economic fallout around the world due to the virus could include recessions in the
US, euro-area and Japan, the slowest growth on record in China, and a total of $2.7
trillion in lost output—equivalent to the entire GDP of the UK. China will sustain
because of its huge reserves.
 While the developing economies are suffering from huge financial blows, the total
external debt of Pakistan as of March 2019 is already $105 billion with additional
burden of bonds, whereas our currency is depleting drastically against dollar.

 By May 2019, the Pakistani rupee had undergone a year-on-year depreciation of 30%
vis-a-vis the US dollar. The year 2019 along had added the debt of over $13 billion,
which is over 40% of the total debt added in last 10 years. Most of our debt is from
World Bank, IMF, Asian Development Bank, Paris Club, etc. There is only a small
fraction of our debt which constitutes around 5% of the total liability which is due to
CPEC. Taking these overt statistics of our economy into consideration, we would not be
needing any further economic indicators to infer that we are doomed already if the
outbreaks stay continued for few months.

 Since 2017, Pakistan is on a consistent roller coaster of crisis, be it energy crisis,

economic crisis, Kashmir crisis, security crisis, health crisis or media crisis and
political crisis.

 We have seen negative fallouts of the change of government and shift of power.
Moreover, the factors making our economy even worse are the IMF programme,
scrutiny by FATF, Indo-Pak relations, Kashmir crisis and inflation etc and now the
potential damages caused by coronavirus can devastate the whole scenario.

 The inflation rate in Pakistan has gone up to 12.93 which is highly alarming and it is big
indicator that there is going to be more price hike but the income slab of almost all lower
middle class people and the poor will remain static. Pakistan is an agro-based country
and is capable to feed many neighbouring countries too but the increase in prices of
regular items like wheat and sugar which have also recently gone short in supply is the
main reason of inflation.

 We have been crippled because of FATF & IMF and this burden of economy and
destabilisation is only due to the fact that we always bow before IMF which is
successfully ensuring to add more burden on common people of our country with non-
 stop price hike and consecutive increase in prices of petroleum products. We like our
obedient mode and avoid being aggressive so we keep adding burden on to ourselves.

 On the other hand, the August 5th illegal and aggressive move by Indian Prime
Minister Narendra Modi in Indian Occupied Kashmir (IOK) followed by complete
lockdown till date have escalated tension between India and Pakistan further adding
potential threat to the world peace. The Indian aggression against innocent people of
Kashmir whose basic human rights are being violated on daily basis is another major
crisis Pakistan is going through as government has failed to take action against it to
bring justice to the Kashmiris as the successive govt continued to play at Indian pitch set
by India on Kashmir. The East & West borders are costing us huge funds.

 Another crisis behind the destabilisation of our economy is the investment crisis as most
of the industries are closed due to government policies creating unemployment and
nobody is willing to invest in Pakistan fearing the potential losses and being in FATF’s
grey list, we are suffering further.

 All of the factors contributing to damaging our economy are not something that comes
out of the blue, however, the deadly virus which has confiscated the whole world putting
everything under lockdown situation can destroy our economy for good as even the
developed countries are failing to deal with it. Our economy is collapsing, the systems
are shut, businesses shut, death scare everywhere, capital flight, burden of virus
causalities on the fragile economy, diplomatic crisis and isolation and no support as
no one will come to our rescue.

 In the wake of these crisis, Pakistan’s initial economic losses incurred in different
sectors of the country’s economy have been estimated at Rs1.3 trillion, on account of
drop in the GDP growth because of reduction in services sector including airline
business, hotel business, retail businesses, hoardings, FBR’s revenue loss, massive
decline in imports, exports, reduction in remittances, disruption in food, mask and
sanitizer’s supplies etc.
 Keeping in view the rise in Italy’s death toll, the health indicators around the world are
emphasizing on total lockdown around the state whereas we cannot afford to practice
such lockouts given that we can face massive revenue shortfall as our resources are
limited and economy is collapsing. The FBR estimates show that the lockdown of
Karachi is going to cause major revenue losses which if persisted till June 2020, then the
tax losses would go up to Rs380 billion.

 Apart from this, people around the country have been directed to stay at homes and
practice social distancing leaving and avoiding all the social gatherings and sports
events which is also causing financial damages to the individuals as well as the economy
on state level. As an initial step towards social distancing, the govt had to get the PSL
sports event cancelled because of which, all the PSL franchises as well as the PCB
has suffered massive losses due to incomplete league. Also the federal secretary
commerce says that the exports might face loss in the range of $2 to $4 billion as
export orders had got cancelled. Pakistan’s textile export sector relies on China for the
bulk of its capital goods inputs, so there will be an impact if there is a protracted
closedown of the Chinese economy.

 The imports would be reduced in the shape of declined POL prices as well as in quantity.
Pakistan imported 80 billion barrels of POL products and keeping in view the
lowest-ever prices in international market in the last two decades, the import bill would
shrink having negative impact for the FBR’s collection and petroleum levy might also
be reduced if the consumption decreased because of possible lockdown in different parts
of the country.

 The worst effects that would have to be borne by the daily wagers as 47 percent
workforce in service sector such as marriage halls, hotel industry and others belonged to
this sector.
 The United Nations (UN) estimates have shown that the international tourism will drop
3% due to virus resulting a loss up to $50 billion globally, is another bad news for the
government which is committed to increase tourism exports.

 Despite not having a lockdown yet, the sealing off markets, restaurants as well as the
automobile and petroleum ventures will cause loss of at least Rs40 billion to local
businesses. This is only the beginning of losses as we are yet to meet the safety
challenges of our citizens and we have no means and supplies for the treatment of
corona positive people.

 While Balance of Trade (BoT) is improving in right direction, coronavirus (COVID-

19) has become threat to the pace of development. Asian Development Bank (ADB)
stated in its report that the virus outbreak could cost the Pakistan economy in the range
of $16.387 million to $4.95 billion, or 0.01 % to 1.57% of Gross Domestic
Product (GDP). United Nations (UN) estimates international tourism to drop 3% due
to virus resulting a loss up to $50 Billion globally, is another bad news for the
government which is committed to increase tourism exports.

 International Monetary Funds (IMF) closely monitoring the grim situation and
announced $50 Billion program to fight the aftermath of virus outbreak. It expects 2020
global growth rate will be below the 2.9% rate for 2019. The US Federal Reserve
announced a 50 basis point cut recently followed by the Bank of Canada to ease out
monetary policy for supporting business activities halted by virus fear. Whatever the
case may be, Pakistan is determined towards improving economic situation of Pakistan.

 Prime Minister Imran Khan recently advised the related departments to control
inflation, ease out interest rates and to encourage business activities by focusing on ease
of doing business. Apart from clinical steps advised by PM, Pakistan is all set to get
benefit from EU GSP plus status specially in the field of Textile where the orders
towards Pakistan increasing while China is partially shut down. Here, a point should be
 noted down that it is not merely the COVID-19 in China which isshedding orders in
favour of Pakistan but the consistent economic policies of government towards export
based economy starting from Financial Year 2019 (FY19) by introducing free floating
exchange rate and increasing discount rate to tackle ever widening Current Account
Deficit (CAD).

 Besides GSP status from Europe after Brexit, United Kingdom (UK) signalled to
double its trade with Pakistan on back of improved security situation of the country.
Good news is that the virus impact on China Pakistan Economic Corridor (CPEC)
activities will be negligible as stated by Pakistan’s envoy to China.

 The country’s 8 months balance of Trade i.e. July to February 2019 – 2020 (8MFY20)
has improved by 26% from $21.46 Billion in 8MFY19 to $15.77 Billion as
reported by Pakistan Bureau of Statistics (PBS). Exports recorded a growth of 3.65%
during the period i.e. increased from $15.1 Billion to $15.65 Billion whereas
imports declined 14.06% i.e. from $36.56 Billion to $31.42 Billion during the
period under discussion. Year on Year (YoY) country’s exports registered a growth
of 13.82% from $1.88 Billion to $2.14 Billion in the month of February
whereas imports showed a decline of 1.71% i.e. from $4.144 Billion to $4.073
Billion.

 Apart from regular international business activities Pakistan is also

focusing on alternative ways for International Trade with US sanctioned
Iran

 It means country’s BoT improved 14.61% i.e. from $2.26 Billion to $1.93
Billion in the month of February. Month on Month (MoM) BoT witnessed
improvement of 10.43%i.e. from $2.16 billion in January 2020 to $1.93 billion
in February 2020. In this regard PM stated that Pakistan is moving on the road to
development where stable rupee, 73% decrease in CAD, growing exports and
accelerated development spending leading the country to right direction. PM Advisor for
 Commerce, Industry and Investment, Abdul Razzaq Dawood stated that the rise in
exports is another sign of improvement in Economic activities.

 He further stated that a comprehensive policy is being formulated for sugar, cotton,
agriculture products and exports where it is focused to boost exports of value added
products in the agriculture sector. Advisor revealed that in addition to facilitating Textile
industry for encouraging exports Government is taking keen interest in the export of
information technology and software.

 On the other hand outbreak of novel Coronavirus is ready to affect government’s efforts
towards increasing pace of export based economic development including tourism
exports. According to a UN body International tourist arrivals to drop 3% due to the
fear. This will lead to an estimated loss of $30 – $50 Billion in international tourism
receipts. Asian Development Bank (ADB) released a study where it quantifies the
impact of COVID-19 on Asian trade with certain projected scenarios.

 It studies the impact on various sectors of the continent including but not limited to
agriculture, mining and quarrying, business, trade, public services, hotels and restaurants
and other personal services, light/heavy manufacturing utilities, and construction and
transport services. The range of scenarios determined in the analysis suggests a global
impact in the range of $77 billion to $347 billion, or 0.1 percent to 0.4 percent of
GDP. In best case scenario, the impact on Pakistan would be limited to a $ 16.4
Million.

 However, if the outbreak in China is more widespread and last longer, with travel bans
and precautionary measures, the impact on Pakistan would be around $4.95 Billion
besides loss of 0.9 million employment.

 Despite of virus fear, government is determined to increase business activities in the

country. For said reason PM ordered relevant departments to put all efforts for ease of
doing business in the country. In this regard Mr Asad Umer is given task to speed up
establishment of Special Economic Zones (SEZs) and related laws to facilitate business
 community with favourable environment to generate more economic activity in the
country. Resultantly, 7 SEZs to be established in Balochistan, Sindh, Khyber
Pakhtunkhwa and Punjab provinces. The meeting was told that after approval of law
for the SEZs in 2012, only seven economic zones were set up in the country till 2018,
while the present government had notified six new economic zones in one year (2019).

 The prime minister stressed the relevant team for utilizing the tourism potential of Gilgit
Baltistan and the establishment of special economic zones there.Further to such
incentives PM has hinted business community for decrease in interest rate which is the
need of the day for allowing businesses to borrow funds on lesser finance cost especially
when the virus fear has increased the input cost of supplies as China shut down.

 On international side of economic situation, luckily, price war sentiments within Oil
Producing Countries (OEPC), making oil prices trending downward which will
benefit Pakistan. UK recently planned to double the size of the British High
Commission trade team and further support economic development and technical
expertise in Pakistan where bilateral trade between the countries currently stands at £3.3
Billion in total i.e. $4.3 Billion. On the other side of BREXIT, Pakistan has been
extended GSP status by Europe according to Ministry of Commerce.

 On the economic front, Pakistan remained a significant beneficiary of the benefits

availed by 9 GSP Plus beneficiary countries. Out of total export of 6.739 Billion
Euros of Pakistan to EU in 2018, our exports worth 5.885 Billion Euro
availed tariff concessions. Since the grant of GSP Plus in 2014, Pakistan’s exports to
the European Union have enhanced from 4.538 Billion Euros in 2013 to 7.492
Billion Euros in 2019, registering an increase of 65% mostly in Textile sector. Apart
from regular international business activities Pakistan is also focusing on alternative
ways for International Trade with US sanctioned Iran. For this purpose Pakistan’s
embassy in Tehran has proposed some suggestions to the Ministry of Commerce as to
how trade relations with Iran can be possible.
 Conclusion:-
 This includes establishing credible banking channel, free trade agreement and
trade mechanism to settle outstanding payments with the sale price of electricity
being imported by Pakistan. Please note that Iran is willing to import rice and
other commodities from Pakistan against cost of electricity being imported from
Iran in Balochistan. Pakistan is keenly looking into this side of untapped
international trade and intends to get one off waivers from USA to trade with
Iran as other countries are doing, especially when US-Pakistan bilateral
relations are getting better.

 We will have to allocate extra funds which will be an additional burden on the
exchequer. If the situation continues this way and civilian lockdown fails than
govt will have choice to call in the army to control corona crisis. I am of the
strong views that the anti-coronavirus operation should be handed over to the
army without further loss of time.