In the post-COVID-19 scenario, Pakistan’s GDP is projected at -1% to -1.5% for the outgoing fiscal year, however, it is expected that the country’s GDP will witness a growth of 2% in the next fiscal year, said Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh.
He was speaking at a webinar organized by the ICAP, “Pakistan Economy Post-COVID-19: government perspective.”
He noted that the real worry for the government is how to increase the gross domestic product (GDP) when there are so many tendencies towards its contraction. He further claimed that next year the GDP will be around 2%.
The adviser said that it is too early to say what will be the scenario after one year but the fiscal deficit was projected at 9% for the current fiscal year will need to be brought down next year, and the government will try to reduce the debt, which is another challenge.
Talking about the post COVID-19 situation, the adviser said that the International Monetary Fund (IMF) had predicted 3% global growth. The contraction in global economy had been affecting the country’s exports as had been witnessed in April during which the exports declined by 40% as compared to last April.
Likewise, unemployment is going up due to the lockdown and low economic activity while the revenue collection has also declined so the expenditure side is going to be affected. He said that the government had taken comprehensive measures and announced Rs. 1.2 trillion economic stimulus package to help businesses and vulnerable segments of the society deal with the challenges of the coronavirus.
The adviser said that with the reduction in interest rate, the cost of debt will also decline.
Shaikh said that the discussion with the IMF has been ongoing and they have been very supportive of the incentive package and extraordinary package to the construction industry. Hafeez noted that when the government came to power, the country was facing a severe economic crisis, however, efforts were made to get the country out of these crises while certain tough decisions were made which ultimately produced results.
He noted that the agriculture sector, which is facing a real threat with locust attack, will be important for revival, and if the overall global economy improved, the hit on exports will be lesser.
Shaikh said that taxes, a historical failure, will be corrected, and documentation and registration will continue.
Owing to those policies, he added, the current account deficit was reduced from $20 billion to just $3 billion. In addition, confidence was restored in global players and financial institutions after the country entered into the IMF program, which provided $6 billion whereas Asian Development Bank (ADB) and World Bank (WB) are also backing the country.
He further noted that textile is very important for Pakistan and the present government had provided subsidy on gas and electricity to support them and expedited their refunds.
He said that the challenge for the government is to keep trying that lockdown took place in hotspots as there is no such thing as a full lockdown.