Current Affairs

GROWTH AND DOWNFALLS IN 2020-21

Name:AhsanArif
Section: DSAP ID: 70113571 Date:18-05-22.
Assignment#3
Question: Identify areas in which Pakistan grew economically and areas in which economic
conditions deteriorated.

Answer:
Pakistan's economy has always had an unpredictable growth pattern, with recurrent boom and
bust cycles, making it difficult to achieve long-term, inclusive growth. The administration began
making decisive and far-reaching changes in every sector of the economy even before the
COVID-19 pandemic rocked Pakistan's economy. The reforms began to resolve economic
imbalances and laid the groundwork for better economic performance, including tighter fiscal
and external accounts, exchange rate stability, and increased investor confidence.

We will now look how effective these reforms were in uplifting economy through statistical data.

1. Growth and Investment

Pakistan's economy returned well in fiscal year 2021, growing at 3.94%, significantly higher
than the previous two years (-0.47 and 2.08 percent in FY2020 and FY2019, respectively), and
exceeding the target (2.1 percent for FY2021). Despite tight fiscal constraint, the government's
timely and appropriate policy initiatives resulted in a V-Shaped economic rebound.
The graph below shows growth rate in fiscal year 2021 and the V-shaped red line of recovery.

Private Consumption has a significantly large share in GDP. This large share implies that
Pakistan’s economy is a consumption-driven economy. Better consumer confidence can
influence domestic production by increasing demand for durable. Growth in private consumption
remained 17% in Fiscal year 2021 as compared to 4 percent last year. On the other hand, growth
in Public Consumption remained 11.4%, lower than 19.3% recorded last year, mainly due to
lower growth in interest payments.

Gross Fixed Capital Formation (GFCF) posted a growth of 13.8% in FY2021 and remained 13.6
percent of GDP.
FY2019 was an era of stabilization, while FY2020 was not only humanitarian crisis but economy
also suffered contraction. Economic growth remained 3.94 percent in FY2021 posting quicker
significant economic recovery.

2. Agriculture

The agriculture sector’s performance during 2020-21 broadly stands encouraging as it grows by
2.77 percent against the target of 2.8 percent.

The production of major Kharif crops 2020, such as sugarcane, maize and rice indicated
considerable improvement compared to last year and surpassed the production targets. The
production of sugarcane increased by 22.0 percent to 81.009 million tonnes from 66.380 million
tonnes, rice by 13.6 percent to 8.419 million tonnes from 7.414 million tonnes and maize by 7.4
percent to 8.465 million tonnes from 7.883 million tonnes.

Wheat is the most important crop of “Rabi”, which showed growth of 8.1 percent and reached
record high production level of 27.293 million tonnes compared to 25.248 million tonnes last
year.

However, the cotton crop suffered mainly due to decline in area sown, heavy monsoon rains and
pest attacks. The cotton production reduced by 22.8 percent to 7.064 million bales from 9.148
million bales last year
3. Manufacturing and Mining

The Large-Scale Manufacturing (LSM) performance has been much favorable during July-
March FY2021 and witnessed 8.99 percent growth as compared to 5.1 percent decline during the
same period last year.

Out of 15 subsectors, nine posted growth during July-March FY2021. Textile and Food
Beverages & Tobacco, the top two sectors of LSM, grew by 5.9 and 11.7 percent, respectively.
Despite its enormous potential, this sector is lagging behind due to interconnected and cross-
cutting issues such as a poor regulatory framework, insufficient infrastructure at mine sites,
outdated technology installed, semi-skilled labour, a lack of financial support, and a lack of
marketing. During the fiscal year July-March 2021, production of major minerals such as coal,
natural gas, and crude oil fell by 5.97, 4.70, and 6.72 percent, respectively.

Following figure shows group wise growth of large scale mining.

4. Fiscal Development
The fiscal sector has witnessed significant challenges due to additional expenditures made to
lessen the negative impact of COVID-19. Presently, the fiscal policy measures are mainly
focused on relief measures to support businesses and to protect vulnerable segments of society.
Simultaneously, the government is focused on containing the fiscal deficit at a manageable level
and keeping the primary balance at a sustainable level. Figure below shows overall expenditures,
revenues and the fiscal deficit as a percentage of GDP.

Fiscal Deficit was highest in 2019 and the main source of revenue was taxes. However, the
government's fiscal consolidation efforts provided significant support in maintaining fiscal
discipline, increasing revenues and controlling expenditures, thus the fiscal sector continued to
perform better.

5. Money and Credit

Following the COVID-19 outbreak, the State Bank of Pakistan proactively reduced the policy
rate by a total of 625 basis points (bps) between March and June 2020, from 13.25 percent to 7.0
percent. During the pandemic, the focus of monetary policy was shifted to supporting growth and
employment.
Government borrowings were highest when Covid-19 hit the country. However, the borrowing
decreased during 2020. Graph below shows government borrowing from State Bank and other
banks.

The government has borrowed Rs 675.9 billion for budgetary support during 1st July-30th April,
FY2021 compared to Rs 1,171.3 billion in the same period last year.

6. Capital Markets and Corporate sector

Capital market is a place where trading of numerous financial instruments like bonds, stocks, etc.
takes place. Corporations participate in capital markets to raise funds to finance their investment
in real assets. Capital markets play an active role in the development of an economy by
connecting the monetary sector with the real one.

During FY2021, global equity markets recovered after plummeting in March 2020 as
governments around the world pumped large amounts of stimulus funds into their economies.
Major Asian stock market indices have also recorded a positive growth in the first nine months
of the current fiscal year. Pakistan’s KSE-100 index and India’s Sensex 30 have seen the
highest growth among the selected indices.
According to Economic survey, as of May 31, 2021, the total market capitalization of the
Pakistan Stock Exchange was Rs 8,267 billion. An increase of 26.6 percent was witnessed in
market capitalization, compared with the June 30, 2020 market capitalization of Rs 6,529 billion.
However, the figure does not support the claimed data.

7. Inflation

The headline inflation measured by the Consumer Price Index (CPI) was recorded at 8.6 percent
during July-April FY2021 as against 11.2 percent during the same period last year. Due to the
government measures for maintaining price stability, inflation in perishable food items was
increased 0.1 percent.
Non-perishable food items are the main contributory factor in driving up food inflation in the
Food and Non-alcoholic Beverage group, with a 16.0 percent increase compared to a 12.4
percent increase during the same period last year.

Sensitive Price Indicator (SPI) is computed on weekly basis to assess the price movements of
essential commodities at a shorter interval of time to review the price situation in the country.
SPI dropped to 12.9% against 14.3% last year.

At the beginning of FY2021, a major contribution to increase in inflation in both urban and rural
baskets came from food groups mainly due to the extended monsoon season. The government
realizing the significance of supply disruption started establishing Sahulat/Bachat Bazar in all
parts of the country

8. Trade and Payments.

Export of goods grew by 6.5 percent during July-March FY2021 and stood at $ 21 billion as
compared to $ 19.7 billion in the same period last year. Import of goods grew by 13.5 percent to
$ 42.3 billion as compared to $ 37.3 billion last year. Consequently, the trade deficit increased to
$ 21.3 billion as compared to $ 17.6 billion last year.
 .

Pakistan’s total liquid foreign exchange reserves increased to US$ 20.6 billion by the end of
March 2021, up by US$ 1.7 billion, indicating a growth of 9.1 percent over end-June 2020. The
exchange rate reached Rs 152.5 per US$ by the end of March 2021, effectively appreciating the
rupee by 10.01 percent over end-June 2020.

9. Public Debt

Total public debt was recorded at Rs 38,006 billion at end March 2021. Domestic debt was
recorded at Rs 25,552 billion while external public debt was recorded at Rs 12,454 billion.
Pakistan has been able to contain the growth in its public debt portfolio despite a very
challenging macroeconomic situation around the globe due to the pandemic. In fact, Pakistan
witnessed one of the smallest increases in its public debt. Global public debt to GDP Ratio
increased by 13 percentage points, from 84 percent in 2019 to 97 percent in 2020, whereas,
Pakistan’s Debt-to-GDP ratio witnessed minimal increase of 1.7 percentage points and stood at
87.6 percent at end June 2020 compared with 85.9 percent at end June 2019

10. Education

The current government is committed to achieving Goal 4 of the SDGs, "Quality Education,"
which calls for equitable education, the elimination of discrimination, the provision and
upgrading of infrastructure, skill development for sustainable progress, universal literacy,
numeracy, and the enhancement of teachers' professional capacity.

According to the PSLM, District Level Survey 2019-20, the literacy rate of population (10 years
and above) is stagnant at 60 percent in 2019-20 as compared to 2014-15. Province wise analysis
suggests that Punjab has the highest literacy rate, with 64 percent followed by Sindh with 58
percent, KPK (Excluding Merged Areas) with 55 percent, KPK (Including Merged Areas) with
53 percent and Balochistan with 46 percent.
The COVID-19 pandemic has not only created a health crisis in the country but also adversely
affected other sectors including education sector. In order to mitigate the learning losses of
students during the closure of educational institutes, the government has launched initiatives like
Tele School and Radio School to provide distance learning.

The educationrelated expenditures decreased by 29.6 percent i.e., from Rs 868.0 billion to Rs
611.0 billion due to closure of educational institutes, amid country-wide lockdown and decrease
in current expenditures (other than salaries) due to COVID-19 pandemic.

11. Health and Nutrition

The COVID-19 pandemic has tested the country’s health infrastructure and identified the need
for more investment in the health sector, especially for diagnostic facilities, disease surveillance,
disease prevention, and spread, training of health personnel and their protection from the
pandemic, vaccine development, up-grading health care infrastructure, emergency rooms,
intensive care units, isolation wards, and public awareness. To make substantial progress on Goal
3 of SDGs (Good Health and Wellbeing), the Government of Pakistan has given priority to
strengthening the health sector to further resolve and address the outbreak of the COVID-19
pandemic. The health-related expenditure increased by 14.3 percent from Rs 421.8 billion (1.1
percent of GDP) in 2018-19 to Rs 482.3 billion (1.2 percent of GDP) in 2019-20. In Pakistan, the
first case of COVID-19 was confirmed on 26 February 2020, when the first patient in Karachi
tested positive. The first wave of COVID-19 claimed 6,795 lives, infected 332,186, and left
behind 632 on ventilators. The government announced the second wave of COVID-19 on 28
October 2020, when there was a sudden increase in active cases from 6,000 to 11,000, and 93
hospitalized patients were put on ventilators. The third wave of COVID-19 in Pakistan started on
17 March 2021, when daily cases reached 3,000 with a positivity rate of 10 percent. Pakistan
formally launched the coronavirus vaccination drive on 03 February 2021. China has donated 1.5
million doses of the Sinopharm vaccine, which has an efficacy of 79 percent. Till 2nd June 2021,
a total of 13.0 million doses of vaccine have been received by the Government of Pakistan and
8.3 million doses have been administered as of 5th June 2021. The government is fully
committed to increasing the health coverage and provision of good nutrition to meet the
emerging demand and to develop effective human capital.

12. Population, Labour Force, and Employment

According to the National Institute of Population Studies (NIPS) estimated population of

Pakistan is 215.25 million with a population growth rate of 1.80 percent in 2020-21 and a
population density of 270 per Km2. Pakistan has an extraordinary asset in the shape of a youth
bulge, which means that the largest segment of our population consists of young people. The
population falling in the age group of 15-59 years is 59 percent, whereas 27 percent is between
15-29 years. This youth bulge can translate into economic gains only if the youth have skills
consistent with the requirements of a modern economy. The government has started different
programs for improving employment opportunities for youth such as "Prime Minister's Youth
Entrepreneurship Scheme" and "Prime Minister's Hunarmand Programme-Skills for All” etc.
According to the "Special Survey for Evaluating Socio-Economic Impact of COVID-19 on
Wellbeing of People" conducted by the Pakistan Bureau of Statistics, the population working
was 55.74 million, before COVID-19. This number declined to 35.04 million which indicates
people either lost their jobs or were not able to work. The government announced a package for
the construction sector and provided industrial relief, etc. Thus, the opening of these sectors, in
which daily wagers were working along with fiscal stimulus and monetary measures, helped the
economy to recover. Thus, according to the survey in August-October FY2021, 52.56 million
resumed jobs

Prime Minister’s Hunarmand Pakistan Programme -Skill for All

Prime Minister’s Hunarmand Pakistan Programme-Skills for All under Kamyab Jawan program
has been implemented since February 2020, and training cost has been disbursed to all selected
training institutes to commence the training of 100,000 educated youth in market-oriented
conventional and High-Tech/High-End courses. The program will directly employ 42 individuals
under the project staff, whereas the services of more than 28,000 individuals will be hired on a
remuneration basis as instructional, non-instructional technical field experts, assessors, subject
judges, industrial experts, etc. The 14 areas of interventions covered under this program are as
follows:

I. Development & Standardization of 200 Technical and Vocational Education and

Training (TVET) Qualifications
II. International Accreditation of 50 Pakistani TVET institutes with joint degree programs
III. Extension of National Vocational and Technical Training Commission's (NAVTTC) Job
Portal
into National Employment Exchange Portal
IV. Establishing 75 Smart Tech Labs for virtual skill development programs
V. Establishing 10 countries of destination-specific facilitation centers
VI. Establishing 70 vocational labs in Madrassas
VII. Skill development program for 50,000 youth belonging to less developed areas
VIII. Skill development training for 50,000 youth in High-End technologies
IX. Apprenticeship training for 20,000 youth in the industry under the Apprenticeship
Act2018
X. Recognition of Prior Learning (RPL) of 50,000 youth
XI. Establishment of National Accreditation Council – placed at ICT
XII. Accreditation of 2,000 TVET institutes across Pakistan
XIII. Training of 2,500 TVET teachers in international best TVET practices
XIV. Establishment of 50 Business Incubation Centres
People lost their job in the Covid-19
13. Transport and Communications

Due to COVID-19, the scheduled flight operations to most parts of the country and the globe
remained suspended. However, Pakistan International Airline Corporation (PIAC) operated
special flights to facilitate stranded Pakistanis abroad. Pakistan Railways is a major mode of
transport in the public sector, contributing to the country’s economic growth and providing
national integration. Pakistan Railways comprises a total of 466 locomotives (461 Diesel Engine
and 05 Steam Engines) for the 7,791 km route length. During July-February FY2021, gross
earnings have been recorded at Rs 30,966.11 million against Rs 36,916.85 million. Pakistan
National Shipping Cooperation Group has made significant progress in bulk and liquid cargo
segments. Despite the pandemic, the Group has managed to achieve a profit of Rs 1,235 million
against Rs 1,411 million in the corresponding period last year. The turnover stands at Rs 9,633
million compared to Rs 9,621 million for the previous year’s corresponding period. Revenue of
the tanker segment, including foreign charters, grew by 7.12 percent from Rs 6,195 million to Rs
6,635 million. The increase in revenues reflects the growth in the operational activity of the
Group. There has been a consistent growth in IT & IT-enabled services (ITeS) remittances over
the last 5 years, with a compound annual growth rate (CAGR) of 18.85 percent, the highest
growth rate in comparison with all other industries and the highest in the region. Micro
enterprises, independent consultants, and freelancers have contributed an estimated $ 500 million
in IT & ITeS exports. The annual domestic revenue exceeds $ 1 billion. IT export remittances,
including telecommunication, computer, and information services have surged to $ 1.298 billion
at a growth rate of 41.39 percent during JulyFebruary FY2021, in comparison to $ 918 million
during the corresponding period of FY2020. ITeS export remittances comprising computer
services and call center services have surged to $ 1.113 billion at a growth of 41.65 percent
during July-February FY2021 as compared to $ 785.686 million during the same period last year.
The number of Pakistan Software Export Board (PSEB) registered IT & ITeS companies as of
30th March 2021, is 3,013 compared to 2,484 as of March 2020, showing a growth of 21 percent.
FDI in telecom during July-February FY2021 was $ 101.1 million. Telecom operators have
invested an amount of $ 363.9 million during July-February FY2021. The main driver behind
this investment is the cellular mobile sector which has invested $ 253.5 million during the
period. The overall investment in the telecom sector during the two-quarters of FY2021 crossed
$ 465.0 million. Cellular mobile subscribers (number of active Sims) in Pakistan reached 182
million at the end of March 2021 compared to 167.3 million at the end of June 2020, showing a
growth of 8.6 percent in nine months. Broadband connections as of the end-March 2021,
increased to 100 million registering a 19.7 percent increase as compared to FY2020. PEMRA has
issued 258 Licenses for FM Radio and 4,173 Cable TV Licenses. PEMRA has deposited over Rs
105.0 billion in the national exchequer.
Import Export in 2020-21
Port Qasim Authority

Port Qasim handled a total cargo volume of 43.006 million tonnes during the first nine months of
FY2021. Out of this, 37.255 million tonnes were imported while 5.575 million tonnes were
exported.

Gwadar Port Gwadar

Port is located on the shores of the Arabian Sea in Balochistan. It is about 630 km away from
Karachi and 120 km from the Iranian border. It is strategically located at the mouth of the
Persian Gulf, just adjacent to the Strait of Hormuz, the key shipping route in and out of the
Persian Gulf. Gwadar Port is in the process of becoming the Gateway Port for Pakistan as well as
for the region. It is the first Deep Sea Port in the country, complementing and supplementing the
other two vibrant ports i.e Karachi Port and Port Qasim. Its development is critical to stimulate
the economic growth of Balochistan in particular and Pakistan in general as it will provide an
outlet for land-locked Central Asian Republics (CARs), Western China, and Afghanistan.

Telecom Investment
PERMA

14. Energy

Pakistan’s Electricity Generation Capacity and Energy Mix

The hydro share in total electricity generation has declined in FY2021 as compared to its share in
FY2020. Currently, thermal has the largest share in electricity generation. Moreover, its
percentage share in FY2021 has increased as compared to FY2020. Significant growth of RLNG
usage in the energy mix has helped for improved supply to various power plants. RLNG is also

supplied to fertilizer plants, and industrial and transport sectors. The comparison of the share of
different sources of electricity’s installed and generation capacity is given below:
Electricity Consumption There is no considerable change in the consumption pattern of
electricity. During JulyApril FY2021, the share of agriculture in electricity consumption is
constant. However, the share of Industry in electricity consumption has increased which shows a
revival of economic activities. The comparison between consumption patterns of electricity
during July-March 2021 with the corresponding period last year is shown below:
15. Social Protection

Social protection has a central role to play in addressing the social, economic, and health
dimensions of the COVID-19 crisis. The Ehsaas Emergency Cash program has proven to be
effective in mitigating the socio-economic consequences of the COVID-19 pandemic. The
Government has disbursed Rs 179.8 billion as one-time emergency cash assistance to 14.8
million families at risk of extreme poverty. Since the launch of Ehsaas, many transformative
initiatives and policy reforms have effectively been implemented nationwide. Some of the
Ehsaas’ early wins across various sectors include Ehsaas Kafaalat, Ehsaas Emergency Cash,
Ehsaas Undergraduate Scholarship, Ehsaas Nashonuma, Ehsaas Langars, Ehsaas Interest-Free
Loans, Ehsaas Amdan, and several others Under Ehsaas Kafaalat Programme, the government is
providing cash stipends of Rs 2,000 monthly. The number of Kafaalat beneficiaries has increased
from 4.6 million to 7 million. All payments are being made through the new biometric Ehsaas
Digital Payment System ensuring transparency. Under Ehsaas’s strategy, interest-free loans are a
major component of the National Poverty Graduation Initiative. From July 2019 to March 2021,
a total of 1.2 million loans (46 percent loans to women) have been disbursed amounting to Rs
44.42 billion. Overall, 1,100 loan centers/branches have been established in about 110 districts
by 24 partner organizations across the country. During July-March FY2021, a total of 490,368
interest-free loans (47 percent loans to women) amounting to Rs 17.50 billion have been
disbursed to the borrowers. Pakistan Poverty Alleviation Fund (PPAF) also helps in micro-credit,
water, health, education, and livelihood. From its inception in April 2000 till March 2021, PPAF
has disbursed an amount of approximately Rs 228 billion to its Partner Organizations (POs) in
144 districts across the country. A total of 8.4 million microcredit loans have been disbursed
with 60 percent loans to women and 80 percent financing extended to rural areas. The overall
disbursements for core operations during July-March FY2021 amounted to Rs 2.64 billion.
Pakistan Baitul Mal (PBM) is providing financial assistance to the destitute, widows, orphans,
and other needy persons at the district level. During July-March FY2021, PBM has disbursed an
amount of Rs 3.0 billion through its core projects. Workers Welfare Fund during July-March,
FY2021 disbursed Rs 2.47 billion on 33,679 scholarship cases, while Rs 573.44 million have
been utilized as marriage grants @Rs 100,000 per worker benefitting 5,736 workers' families.
The WWF has also disbursed Rs 496.55 million as a death grant @Rs 500,000 per worker,
covering 994 cases of mishaps all over the country. EOBI provides monetary benefits to old age
workers through various programs such as Old Age Pension, Invalidity Pension, Survivors
Pension, and Old Age Grant. During July-March FY2021, an amount of Rs 34.06 billion has
been utilized for 399,574 beneficiaries.

16. Climate Change

The climate changes started around fifty years back due to rapid industrialization with substantial
geopolitical consequences. As things stand, we are at a crossroads for a much warmer world.
According to German Watch, Pakistan is among the top ten countries most affected by climate
change in the past 20 years. The reasons behind this include the impact of back-to-back floods
since 2010, the worst drought episode (1998- 2002) as well as more recent droughts in
Tharparkar and Cholistan, the intense heatwave in Karachi (and Southern Pakistan generally) in
July 2015, severe windstorms in Islamabad in June 2016, increased cyclonic activity and
increased incidences of landslides and Glacial Lake Outburst Floods (GLOFs) in the northern
parts of the country. To revive the forest cover and wildlife resources in Pakistan the government
has launched the Ten Billion Tree Tsunami Programme. The program has achieved a plantation
of 350 million plants in the first three-quarters of FY2021 and about 100,000 daily wagers have
been employed till March 2021. Cumulatively, more than 800 million plants have been
regenerated/planted in the last two years with a target to reach one billion by June 2021. To
mitigate the negative impacts of the automobile sector emissions on the environment and give a
boost to the economy, the Government has approved its National Electric Vehicle Policy
targeting a 30 percent shift to electric by 2030.