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Daily Briefs


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12 June 2020, Friday, Vol 1, No.44, Special Brief

Pakistan’s Economic Survey 2019-20



Special Brief on Pakistan's Economic Survey 2019-2 provides, in a nutshell, multiple issues relating to the economic situation as explained by the Survey and highlighted in the media today.

PR Daily Brief | PR Team

Special Brief

All economic targets missed

That's the first-page story in the Nation.

Releasing the Pakistan Economic Survey 2019-20, Advisor to the PM on Finance and Revenue Abdul Hafeez Sheikh said the nation’s economy suffered tremendously due to the novel coronavirus pandemic. As per the survey, for the first time in 68 years Pakistan’s economy is set to contract with a negative 0.38 per cent in the outgoing fiscal year. Hafeez blamed Covid-19 for a loss of over three trillion rupees and the shrinking economy. PTI’s economic team members Omar Ayub Khan, Asad Umar and Hammad Azhar were noticeably absent from the ceremony. (“Hafeez Shaikh presents Pakistan Economic Survey 2019-20,” The News International, 11 June 2020)
 
Indicators painted a bleak economic performance and sector-wide broad-based setbacks. As per the report, public debt has increased to 88per cent of GDP; FBR revenues will likely take a Rs800bn hit; and sectors showing positive growth have missed targets. Economic stabilisation policies faced by the industrial sector prior to the pandemic have also contributed to the dwindling economy. (“Hafeez blames Covid-19 for Rs3 trillion GDP loss,” Dawn, 12 June 2020) (“Govt unveils economic survey, misses key targets,” Pakistan Today, 11 June 2020)
 
Dr. Hafeez attempted to lessen the economic horror and save PTI’s face endorsing their successful economic policies during the outgoing fiscal year – primary surplus; stable exchange rate; the 2.7 per cent growth in agriculture sector (target 3.6 per cent); 10.8 per cent growth in total tax collection; 73.1 per cent reduction in current account deficit compared to the previous year; healthy growth in FDI (126.8 per cent); better World Bank ranking in ‘ease of doing business’ index; and ‘Stable’ credit outlook from ‘Negative’ by Moodys. The Advisor said the Center controlled state expenses without borrowing from the State Bank of Pakistan; argued the economy was headed in the right direction before the pandemic hit; and credited the PM and Army Chief for controlling the defence budget and expenditure. He also roped in IMF’s forecast of decline in exports and remittances; and pointed out the troubled economy the ruling PTI had inherited. (“Pakistan's Economy Contracts For First Time In 68 Years Due To COVID-19,” NDTV Profit, 12 June 2020)
 
Dr. Hafeez, although uncertain regarding the recovery pattern, promised more relief, tax-reduction and incentivization in the new budget. Today, the 2020-21 budget will be presented in the parliament.
 
Minister for Economic Affairs Khusru Bakhtiar, also present at the ceremony, said Pakistan’s forex exchange reserve would cross $18 billion by the end of FY2020. He blamed PPP and PML-N for Pakistan’s staggering total external debt of $76.5 billion and said it further strained the economy. (“Economic Survey for the fiscal year 2019-20 reveals 73% decline in current account deficit,” MG Link, 11 June 2020)
 
The Survey also gives a glimpse of Pakistan’s current healthcare infrastructure; crucial in understanding its resilience to tackle the pandemic. Pakistan’s total health expenditure in 2018-19 was 1.1 per cent of the year’s GDP (a decline from the 1.2 per cent in 2017-18). The survey refrains from reporting the doctor-patient ratio (a constant in previous reports) in an attempt to downplay the neglect shown to the health sector and its subsequent deterioration. (“Pakistan Economic Survey: The state of healthcare in 2020?,” Geo TV, 12 June 2020)

 

In Brief

Pakistan Government launch stimulus package to revive the economy
The Pakistan Economic Survey for the year 2019-20 has predicted a V-shaped recovery after Covid-19 cases drop in Pakistan. In the overall, Industrial and service sector have been deteriorating apart from Agriculture. The government considers the effect on workers in non-agricultural sectors, has launched a stimulus of Rs1.24tr. This policy will mend the daily wage workers and employees who have been laid-off during the pandemic. (Mutaher Khan, “Economic survey 2019-20: V-shaped recovery highly likely,” Dawn, 12 June 2020)
 
Total debt and liabilities rise to 102.6 per cent of GDP
The economic survey has provided data on the country’s total debts in the financial period from July 2019 to March 2020. As per the survey, the public debts that include a loan from IMF stand at 88 per cent and interest payments have already reached Rs1.88tr within the first nine months of the year. The government assumes the debt to GDP ratio to lessen by the end of this fiscal year, but the survey foresees no possibility due to reduced growth and increased budget deficit. (“Total public debt jumps to 88pc of GDP,” Dawn, 12 June 2020)
 
The tax exemptions cost under a tumble
The Tax exemptions granted to numerous industry sectors have increased. Starting from independent power producers, import, and the local supplies mostly consumer goods have been exempted from total income and given tax credits. Additionally, FTA’s and PTA’s with China, Malaysia, and Indonesia have also contributed to the rise of the cost of tax exemptions. (Mubarak Zeb Khan, “Tax exemptions cost kitty Rs1.15tr,” Dawn, 12 June 2020)
 
Zero deviation in the growth of agriculture
In the fiscal year 2019-20, the production in agriculture has been potential despite climate change, locust attacks, and water scarcity. The produce has exceeded the domestic demand and met the surplus quantity for exporting as well. As per the Economic Survey, it has identified one issue which is the accessibility for farmers to sell directly the produce in the market. Apart from that the food security and livelihood have been met. (Amin Ahmed, “Agriculture performance ‘remarkable’,” Dawn, 12 June 2020)
 
The large-scale manufacturing (LSM) pitches down
The coerce in Pakistan’s economy has pushed LSM industries down to 5.4 per cent. The Economic Survey says that keeping fertilizers apart, the textile, food, beverage, iron, steel, and petroleum products have all slumped down due to the economic crisis in the present fiscal year. (Kalbe Ali, “Large-scale industrial output shrinks 5.4pc,” Dawn, 12 June 2020)
 
Blocks in energy sector affect Pakistan’s economy
In the past few years this sector has been on the rise but due to increased circular debts and worsening economic position in the trial to utilize the low oil prices and share of hydropower in the world. The Economic Survey has pointed out that the country’s involvement in IMF and WB has only resulted in more debts, thereby high prices of energy and high cost of doing business. (Khaleeq Kiani, “Economic survey 2019-20: Energy sector bottlenecks mar business activity,” Dawn, 12 June 2020)
 
The annual inflation is estimated to drop further
The price of International commodities has decreased and the inflation rate is set to 10.7 per cent. The Economic Survey has said that the inflationary pressure will turn to single-digit with falling oil prices in the year 2021. It has observed the causes of the change, firstly due to disruptions in supply of perishable goods, secondly due to increased transportation costs and all the seasons in 2019 has met shifts causing failure of minor crops. Thereby the dependency on imported food increased. Regarding the government, although it has provided relief package and stimulus, the fall in petrol prices has only slowed down the inflation rate. (“Inflation to fall further in next fiscal year,” Dawn, 12 June 2020)
 
The editorial in Dawn pitches for the poor to be at the center of government incentives
The recent Economic Survey published has given a dark picture of the economy of Pakistan. As the data released covers only the first nine months of the fiscal year, Covid-19 cannot be a major reason for this economic downturn. The editorial has pointed out that the relief package and the incentives given by the government to the wealthy business people were aimed to pass down to the poor working class but it has not come into reality. Hence the article urges the government to keep the poor as centric and provide the relief incentives directly without mediating through the wealthy. (“Economy in distress,” Dawn, 12 June 2020)
 
APTMA seeks energy package to increase textile exports
All Pakistan Textile Mills Association (APTMA) has written a letter to PM asking for the energy package to continue for provisioning electricity. As the energy package helps immensely to increase the volume of textiles which has turned competitive in the global market although prices are at fall. The letter necessitated that to maintain the Balance of Payments, Pakistan needs to ensure the energy to the industry as the accumulation of debt is not viable. (“Textile industry seeks continuation of energy package,” The News International, 12 June 2020)
 
Population growth control a challenge to Pakistan
The Population growth rate in Pakistan has been going down with a percentage of 1.89 from 2.4 as per the Economic Survey. The survey has reported that the population consists of people belonging to the working category and has turned difficult for the government to mobilize resources effectively to control the growth. The report said, "The population is now a cross-cutting issue and needs to be dealt with a consolidated strategy encompassing social as well as economic factors.” (“Population growth rate down to 1.89%,” The News International, 12 June 2020)
 
A radical change in economic policy is needed: Editorial
An editorial in the News International titled, “Economic Survey 2019-2020,” looks into the Economic Survey 2019-20 which was presented by the Special Assistant to the Prime Minister on Finance stating that as expected data in the survey depicts harsh economic downfall as a result of the COVID-19. With the economy already in a bad position, this pandemic has left the economy in the same position where it stood at the end of the previous fiscal year. Critical of the situation, the editorial states that without a radical change in economic policy it would be impossible to make any improvement in the condition of the people. (“Economic Survey 2019-2020,” Dawn, 12 June 2020)
 
Exports on the downward trajectory
The Economic Survey 2019-20 showed exports from are on a downward trajectory. According to the survey, the country recorded an export value of 19.7 billion dollars during July-April 2019-20 compared to 20.1 billion dollars in the same period of the previous fiscal year, depicting a decline of 2.4 per cent. Further, efforts have taken to enhance exports, however, international buyers have requested local entrepreneurs to add value to get a bigger share in the global trade market since Pakistan enjoys the GSP Plus status. (Shahram Haq, “Pakistan’s exports on downward trajectory,” The Express Tribune, 12 June 2020)
 

 


"Since the period covered by the data includes mostly the first nine months of the fiscal year, meaning July 2019 to March 2020, much of what is portrayed cannot be attributed to the disruptions from Covid-19. The numbers betray troubling indicators deep inside the grooves of the economy, beyond the headline GDP growth figure, which is negative 0.38pc, a rare occurrence"

- Dawn editorial

 

In Focus and In Brief sections are prepared by Lakshmi V Menon, Abigail Miriam Fernandez, A Padmashree and P Harini Sha.

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