A high-level meeting Tuesday underlined several challenges the country was likely to face on the economic front due to the impact of COVID-19 on the national, regional and global economy.
The meeting chaired by Adviser to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh and attended by leading development partners, including World Bank, Asian Development Bank, DFID and UNDP, agreed that while it was too early to predict the impact of COVID-19 but if the crisis persisted then the manufacturing and service sectors as well as the exports were likely to be severely affected in the year 2020 while agriculture growth was likely to remain intact in Pakistan.
The participants of the meeting also predicted that due to an extended economic crisis, the fiscal deficit could rise to 9.6 per cent of the GDP while the impact on the poverty figures could also be higher due to closure of businesses and restricted economic activity due to the lockdown situation. In a worst-case scenario, the growth rate could remain negative at -1.57 per cent of the GDP.
During the meeting, it was pointed out that the COVID-19 crisis had drastically affected the global economy that could shrink by 3 per cent. Similarly, it was also felt that there would be negative growth throughout 2020 and the chances of recovery were expected from the start of 2021.
The meeting underlined the need for pursuance of a clear, transparent and unified plan of action combining a “whole of the country” approach backed by necessary constitutional measures to sail out of the crisis. Expenditure rationalization, particularly reduction of low-impact spending, and revenue generation were also emphasized as key areas of focus in coming months. It was felt that the construction sector could provide the key for resurgence of the economic activity.
The meeting also warned against the relaxation of the lockdown which could further increase the infection rate and put unbearable burden on the healthcare system which was already finding it hard to provide regular healthcare services due to increased focus on dealing with the COVID-19. It was suggested that Pakistan would be required to “reset and reboot” its economy to get above the red-line. It was felt that the second tranche of cash grants to those vulnerable segments who were adversely affected by the lockdown and closure of businesses would be required to further the relief efforts. Asian Development Bank informed the meeting that they are interested in giving local currency loan to Small and Medium Enterprises adversely affected by this crisis.
It was also noted in the meeting that the speed, efficiency, and transparency with which Pakistan has already disbursed more than 75 billions to its millions of vulnerable population is unprecedented not only in Pakistan but in the entire region and such a thing was unimaginable in recent past of the country.
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