Global Economic Review:
The world changed dramatically during the fiscal year FY2020; an attempt to amend Hong
Kong’s extradition law triggered the worst crisis in the Asia’s biggest financial center since
its handover to China in 1997. In August 2019, Indian government abolished decades-old
laws that gave autonomy to the Indian-held Kashmir, leading to a suspension of trade
between the two rival nuclear states: India and Pakistan. United Kingdom’s exit from EU,
which was mutually agreed, changed EU forever, also deepening the Euro crisis. Trade war
between the US and China, which started in July 2018, rumbled on in FY2020 and oil prices
crashed drastically on the back of increased supplies and lowering demands due to the
global economic slowdown.
While the world players were trying to balance of above disruptions, a novel virus,
(COVID-19), emerged in Wuhan, China, and WHO on March 11 declared COVID-19 a
pandemic. Since then, the virus has engulfed the entire world, disrupting the supply chains
and paralyzing the continents. The pandemic is not only inflicting unprecedented damage to
human lives but it has also taken a heavy toll on global economic activity. In particular,
various necessary measures to control the spread has brought much of the global economic
activity to a halt. Consequently, countries are now facing multiple crises—a health crisis, a
financial crisis, and a collapse in commodity prices.
On one hand, the pandemic has put the whole world in a Lockdown and changed the
dynamics of ongoing and future economic activities, while on the other, the pandemic wiped
out any mentionable economic performance of any economy. “The Lockdown”, is shaping
up into the worst crisis since The Great Depression of 1930s.
The economic impact of COVID-19 depends on the pathway of the pandemic, the
effectiveness of containment measures, the magnitude of supply disruptions, the impact of
tightening in global financial market conditions, changes in spending patterns, behavioral
changes and unstable commodity prices. The World Economic Outlook (April, 2020)
projects global growth to contract sharply by -3 percent in 2020 and the loss to global GDP
over 2020 and 2021 could be around 9 trillion dollars due to the pandemic crisis. The global
growth is projected to rebound to 5.8 percent in 2021. However, growth outcomes will be
depending on the course pandemic will chart and therefore they have the potential to be
much worse. Above forecasts are based on the assumption that the pandemic will peak
during the second quarter of 2020 and fade in the second half of the year, with business
closures and other containment measures gradually being relaxed. In the advanced economies, most of the countries are experiencing widespread outbreaks
and responding with stringent containment measures. As a result, their growth is being
projected at negative 6.1 percent in 2020. A sharp contraction in economic growth is
expected in countries like United States, Japan, United Kingdom, Germany, France, Italy
and Spain. Within emerging markets and developing economies, the growth rate is projected
to contract by negative 1.0 percent in 2020. Excluding China, the growth rate for the group
is expected to be negative 2.2 percent. The economic growth in Emerging Asia is projected
to be positive one percent in 2020: more than 5 percentage points below its average in the
previous decade. Within the region, India and Indonesia are expected to witness a modest
growth in 2020, while Pakistan is projected to experience contraction in growth during 2020.
Pakistan Economic Review:
The fundamental weaknesses of Pakistani economy: low tax to GDP ratio, poor savings rate
and minimal export growth with negligible value addition etc. were further attenuated by
misaligned economic policies like loose monetary policy and overvalued exchange rate
which have made it difficult to control twin deficits; the fiscal and the current account. This,
in the short term, fueled demand and short-term growth, but has gradually eroded
macroeconomic buffers, increased public debt and depleted international reserves. Moving
along this path was unsustainable as it was moving the country towards ever slowing growth
and eventual default.
The shift in economic policy undertaken by the present government, through its policy of
adjustments and structural reforms, has changed the course entailing readjustment in the
fiscal and monetary policies. The stabilization process gained momentum with the
commencement of the IMF’s 39-months Extended Fund Facility (EFF) arrangement
program in July 2019. The stabilization measures implemented to reduce the twin deficits
had a profound impact on economic activity during the year.
As the new fiscal year FY2020 began, the economy started to witness a remarkable
turnaround which confirmed that the Government has taken appropriate policy actions to
address the macroeconomic imbalances. The stabilization efforts paid off in terms of
sustained adjustment in current account deficit and continued fiscal prudence. For the first
time in many years, the current account deficit posted a surplus in October, FY2019. While
primary balance continued to remain in surplus during the current fiscal year. During July March, FY2020, fiscal deficit has been reduced to 4.0 percent of GDP, while current
account deficit reduced by 71 percent during July-April, FY2020. In addition stable
exchange rate, healthy growth in FDI (126.8 percent), improved ranking in World Bank’s
ease of doing business index, and ‘Stable’’ credit outlook to B3 from ‘Negative’ by
Moody’s, reaffirmed the successful policies of Government in stabilizing the economy and
laying a foundation for robust growth.
Nevertheless, the government remained cognizant of painful impact of these stabilization
measures in terms of economic slowdown, rising inflation, low pace of job opportunities and
resultantly its impact on the lowest income groups of the society. In the wake of these
challenges, the government initiated reforms in key sectors of the economy with bringing improvement in the real sector growth through inclusive growth in agriculture, industrial and
services sectors.
To control the price hike, the government made efforts through ensuring smooth supply of
commodities, checking hoarding, smuggling and undue profiteering. Further, vigilant
monitoring of prices both at federal and provincial level was ensured. In addition, to check
inflationary impact, borrowing from SBP has been discontinued and restriction has been
imposed on supplementary grants to control aggregate demand and ease out inflationary
pressures. The emphasis has been on price control through different policy, administrative
and relief measures.
To cushion the impact of needed stabilization policies on the poor, targeted poverty
reduction interventions have been made through Ehsaas program, BISP, SehatSahulat
program and expanding coverage of Waseela-e-Taleem program etc.
Job creation is one of the key objectives of economic reform agenda of the Government for
which National Agriculture Emergency Program, “KamyabJawan Program (low cost loans
to youth for business)”, “Naya Pakistan Housing Program” to construct 5 million houses in 5
years and Ten Billion Tree Tsunami have been launched, which have the potential to create
1.5 to 2 million jobs by December, 2020. PSDP allocation has also been increased from
Rs 561.7 billion to Rs 701 billion in FY2020 stimulating private manufacturing and
construction sector.
Above Government policy actions and implementation of comprehensive economic reform
agenda helped the economy in averting the otherwise imminent balance of payments crises
and subsequently all macro-economic indicators moved towards stabilization. However, as
the economy was transitioning from stabilization to growth, the outbreak of Coronavirus
(COVID-19) during the second half of current fiscal year brought multifaceted challenges
for Pakistan to preserve the economic gains achieved as a result of various efforts to
improve the fundamentals of the economy.
Similar to the entire world, Pakistan’s economy has also been affected due to COVID-19
outbreak through various channels like decline in domestic as well as global demand, down
turn in tourism and business travel, Trade and production linkages and Supply disruptions
etc. The rapid spread of the COVID-19 virus since February 2020 has brought economic
activity to a near-halt. However, magnitude of economic losses will depend on intensity and
duration of COVID-19.
As the economy has been subjected to demand and supply shocks, the outgoing fiscal year
2020 has witnessed a contraction in economic activity. The provisional GDP growth rate for
FY2020 is estimated at negative 0.38 percent on the basis of 2.67, -2.64 and -0.59 percent
growth in agricultural, industrial and services sectors respectively. For FY2020, the negative
performance of both Industry and Services overshadowed the growth in the agriculture
sector. With the objective of reducing the propagation of COVID-19, social distancing was
implemented which resulted in lockdown which severely affected activity in contactintensive businesses. Thus, the negative impact of COVID-19 was so pronounced that the services sector posted negative growth of 0.59 percent.
To invigorate the growth, the government announced Rs 1.24 trillion relief package. The
SBP has also taken various steps including reduction in interest rate to 8 percent, refinancing
schemes for medical centers and various incentives for export-oriented industries etc.
There has been considerable support from the international lenders. The IMF has given a
one-year relief to Pakistan amid the pandemic and a US$1.386 billion were given under the
Rapid Financing Instrument to address the economic impact of the COVID-19. Aid
packages from Asian Development and the World Bank, along with inclusion by G-20 in
their debt relief program, will enable the economy to greatly make up for the projected loss.
As the economy slowly reopens, it is expected that the adverse impact of COVID-19 will be
bottoming out. However, the framework for recovery will depend on various factors like
extent of adverse impact on various sectors, duration as well as severity of lockdowns and
the associated risks. The outlook therefore carries challenges due to uncertainties associated
with it. However, fiscal stimulus package of Rs 1.24 trillion announced by the Government
along with measures taken by State Bank of Pakistan for providing liquidity support to
households and businesses will counteract the current economic downturn and provide much
needed relief to the population in need.
EXECUTIVE SUMMARY
Growth and Investment:
Although, provisional GDP growth rate for FY2020 is estimated at negative 0.38 percent,
however, macroeconomic stabilization measures undertaken by the government over the
past year resulted in significant reduction in Saving-Investment Gap which was mainly
driven by reduction in trade deficit and increase in workers’ remittances. It is also
mentionable that fiscal deficit remained contained in first three quarters of FY2020.
Historically, Private Consumption had significantly contributed in Pakistan’s economic
growth. The pattern was likely to continue, however, due to COVID-19, private
consumption suffered significantly. In percentage of GDP, it dropped to 78.5 percent in
FY2020 compared to 82.9 percent in FY2019. Private Investment as a percentage of GDP
dropped to 9.98 percent from 10.29 percent in FY2019 while Public Investment (including
General Government investment) has shown improvement as it remained 3.8 percent
compared to 3.7 percent last year. However, there was 13.2 percent growth in Public
Investment (including General Government investment) during FY2020, while it declined
by 21.6 percent last year.
The economy of Pakistan like other economies has a diverse structure with three main
sectors -agriculture, industry and services. The agriculture sector, as mentioned earlier, grew
by 2.67 percent. The crops sector has witnessed positive growth of 2.98 percent during
FY2020 mainly due to positive growth of 2.90 percent in important crops.
According to Pakistan Bureau of Statistics, fourth quarter has been estimated by keeping in
view the lockdown situation faced by the industrial sector due to COVID-19. Significant impact has been observed in the manufacturing sector, particularly Large-Scale
manufacturing and Small-Scale Manufacturing. The provisional growth in industrial sector
has been estimated at -2.64 percent mainly due to a negative growth of 8.82 percent in
mining and quarrying sector and decline of 7.78 percent in large-scale manufacturing sector.
Due to lock down situation in the country, the growth estimates of Small-Scale Industry for
FY2020 are 1.52 percent.
Similar to the industrial sector, services sector of the economy has also witnessed significant
impact of the lock down situation in the country due to COVID-19, particularly in
Wholesale and Retail Trade and Transport Sectors. The services sector has declined
provisionally at 0.59 percent mainly due to 3.42 percent decline in Wholesale and Retail
Trade sector and 7.13 percent decline in Transport, Storage and Communication sectors.
Finance and insurance sector witnessed a slight increase of 0.79 percent. The Housing
Services, General Government Services and Other private services have contributed
positively at 4.02, 3.92 and 5.39 percent respectively.
Agriculture:
The agriculture sector recorded strong growth of 2.67 percent, considerably higher than 0.58
percent growth achieved in last year. Regarding “Kharif” crops, Rice production increased
by 2.9 percent to 7.410 million tonnes and Maize production by 6.0 percent to 7.236 million
tonnes while Cotton production declined by 6.9 percent to 9.178 million bales and sugarcane
production by 0.4 percent to 66.880 million tonnes. Wheat is the most important crop of
“Rabi”, which showed growth of 2.5 percent to reach 24.946 million tonnes.
Other crops showed growth of 4.57 percent mainly due to increase in production of pulses,
oilseeds and vegetables. Cotton ginning declined by 4.61 percent due to decrease in
production of cotton crop. Thus, the crops sector experienced a remarkable growth of 2.98
percent due to increase in growth of important crops by 2.90 percent.
Livestock Sector achieved the growth of 2.58 percent. The Fishing sector grew by 0.60
percent, while Forestry sector increased by 2.29 percent.
During 2019-20, the total availability of water for the Kharif crops 2019 reached 65.2
million MAF showing an increase of 9.4 percent over 59.6 MAF of Kharif 2018. During
Rabi season 2019-20, the total water availability reached 29.2 MAF, showing an increase of
17.7 percent over Rabi 2018-19 and 19.8 percent less than the normal availability of 36.4
MAF.
Fertilizers production during FY2020 (July-March) increased by 5.8 percent over the same
period last year on the back of additional supply of gas for fertilizers. The fertilizer import
decreased by 20.7 percent. During FY2020 (July-March), there was an uptick in agriculture
credit disbursement, the banks have disbursed Rs 912.2 billion higher by 13.3 percent than
the disbursement of Rs 804.9 billion made during the same period last year.
Manufacturing and Mining:
The Large-Scale Manufacturing (LSM) declined by 5.4 percent during July-March FY2020 as compared to 2.34 percent decline during the same period last year. There are number of
factors which contributed to negative growth of LSM. Pak rupee depreciated by 3.9 percent
during July-March FY2020 which increased the cost structure of industries in general and
for those relying on imported raw materials in particular. Furthermore, policy rate was kept
high to contain inflation which discouraged investment. Subdued demand further hampered
the overall production and performance of the industry. Certain sector-specific issues also
contributed to the decline in LSM. Automobile sector alone accounted for major portion of
contraction in LSM. Its prices witnessed multiple upward revisions due to PKR depreciation
which held the potential buyers from making booking and purchases. Upward adjustment in
electricity prices dented domestic steel producers’ margins.
The Mining and Quarrying sector showed negative growth of 8.82 percent during FY2020
as against 3.19 percent decline last year. This sector is lagging behind despite huge potential
due to interconnected and cross cutting issues like poor regulatory framework, insufficient
infrastructure at mines sites, outdated technology installed, semi-skilled labor, low financial
support and lack of marketing. Minerals that witnessed negative growth are Coal 6.34
percent, Natural gas 6.36 percent, Crude Oil 10.55 percent, Chromite 54.5 percent,
Magnesite 55.9 percent, Lime Stone 14.71 percent, Marble 3.62 percent and Iron Ore 32.73
percent. However, Barytes, Quartz, Ocher and Dolomite posted a positive growth of 241.6
percent, 130.8 percent, 68.8 percent and 16.27 percent, respectively.
Fiscal Development:
The fiscal outcomes remained strong during the first nine months of current fiscal year after
sharp deterioration in FY2019. Government’s stringent fiscal strategy to improve the
revenues along with expenditure rationalization helped in improving all fiscal indicators.
Particularly, the imbalances on fiscal side reverted to the path of fiscal discipline and fiscal
consolidation.
The fiscal deficit has substantially reduced to 4.0 percent of GDP during July-March,
FY2020 against 5.1 percent of GDP in the comparable period last year. Similarly, a
remarkable turnaround is visible in primary balance, which posted a surplus of Rs 194
billion during July-March, FY2020 against the deficit of Rs 463 billion. Overall, the
improvement in fiscal account is largely attributed to higher provincial surplus and sharp
rise in non-tax revenues.
FBR tax collection grew by 10.8 percent to Rs 3,300.6 billion during July-April, FY2020
against Rs 2,980.0 billion in the comparable period last year. Various policy measures such
as charging sales tax on more items at retail price under 3rd Schedule, reinstatement of taxes
on telecom services, an upward revision of tax rates on various salary slabs, an upward
revision in the federal excise duty (FED) rates and end of preferential treatment for certain
sectors provided impetus to tax collection were taken during FY 2020.
Non-tax revenues grew sharply during July-March, FY2020 on the back of SBP profit and
rise in receipt of telecom licenses renewal fees. It stood at Rs 1,095.6 billion during JulyMarch, FY2020 against Rs 421.6 billion in the same period of FY2019. Thus, total revenues
grew by 30.9 percent during July-March, FY2020 against 0.04 percent growth in the comparable period of FY2019.
Total expenditures grew by 15.8 percent during July-March, FY2020 over the same period
last year. Within total, current expenditure posted 16.9 percent growth in nine months of
current fiscal on account of higher mark-up payments, grants for social spending and
expenditures on social protection. Similarly, PSDP spending witnessed a significant rise
both at federal and provincial levels. Overall PSDP expenditures grew by 24.9 percent
during July-March, FY2020 over previous year.
Fiscal position till March, 2020 indicated improved fiscal performance, however, the
COVID-19 pandemic has brought significant challenges for the economy; in particular,
fiscal accounts are expected to come under significant pressure. At present, the government
is increasing the expenditures on public health and strengthening social safety net programs,
along with introducing various other measures to lessen the impact of the COVID-19 on
economy. Similarly, achieving revenue targets of both tax and non-tax segments would be
challenging due to disruption in economic activity. The short term economic impact of
COVID-19 is expected to be significant creating large fiscal and external financing needs.
Money and Credit:
In order to absorb the inflationary pressure and to contain an overheated economy through
domestic demand, SBP increased the policy rate by 100 bps to 13.25 percent in the
beginning of the fiscal year 2020. However, SBP has reversed its monetary policy stance
due to improved outlook for inflation on the back of decreasing domestic food prices, sharp
fall in global oil prices and decline in demand pressures due to COVID-19. It reduced the
policy rate by cumulative 525 bps to 8 percent in four consecutive decisions between March
17th and May 15th
.
In addition, SBP has introduced number of measures and some concessional refinance
schemes to address both the demand and supply side conditions for businesses such as
Temporary Economic Refinance Facility, Refinance Facility for Combating COVID-19 and
Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of
Business Concerns. These measures are aimed at facilitating the businesses to remain afloat
during the crisis times.
Broad money has increased to Rs 1,481.3 billion during 01 Jul-24 Apr, FY2020 showing a
sharp expansion in the Net Foreign Assets (NFA) of the banking system which reached to
Rs 893.7 billion. Credit to private sector contained to Rs 304.7 billion during 01 Jul-24 Apr,
FY2020 as compared to the expansion of Rs 581 billion in the corresponding period due to
slowdown in economic activities.
Under the IMF’s Extended Fund Facility (EFF) program, the government had committed not
to borrow from the SBP to finance its deficit and most of the demand has been met by
scheduled banks. For budgetary support, government has borrowed Rs 1,023.91 billion
during 01 Jul-24 Apr, FY2020 against the borrowing of Rs 990.87 billion last year.
Government has retired Rs 736.47 billion to SBP against the borrowing of Rs 3,204.72
billion in last year. On contrary, Government has borrowed Rs 1,760.38 billion from scheduled banks against the retirement of Rs 2,213.85 billion last year.
Capital Markets & Corporate Sector:
Capital markets help to channelize savings to the most productive investments. In FY2020,
Pakistan’s capital markets faced challenges on multiple fronts. High inflation, austerity
measures, oil price crash and COVID-19 pandemic jolted the capital market. As a result,
Pakistan’s benchmark KSE-100 index recorded a modest growth of 0.61 percent in the first
ten months of FY2020.
The index kicked-off with 33,901.58 points on July 1st, and reached the year’s peak of
43218.67 points on January 13th, 2020. After the COVID-19 outbreak, capital began
flowing out of the Pakistan stock market and the index plunged to 27228.8 points and
market capitalization closed at Rs 5380.17 billion on March 25th. However, the
Government’s stimulus package provided relief to investors as KSE-100 index gained
6877.84 points (↑25.25 percent) since March 25th and index closed at 34111.64 points on
April 30th. Similarly, Market Capitalization increased by Rs 991.54 billion (↑18.4 percent)
since March 25th and closed at Rs 6376.71 billion on April 30th.
SECP took a number of measures to facilitate the market and to absorb the prevailing
shocks. The duration of index-based market halts has been increased from 45 minutes to 60
minutes; securities brokers have been allowed to activate and operate the Disaster Recovery
terminals for trading purposes during normal operations of PSX. SECP has also notified
Corporate Rehabilitation Regulations, 2019 and Corporate Restructuring Companies Rules,
2019.
Inflation:
To correct the macroeconomic imbalances, Government made difficult decisions of upward
adjustment in overdue gas and electricity prices, market-based exchange rate adjustments
etc. Furthermore increase in commodity prices in international market also pushed up the
domestic prices. During first seven months of CFY, inflationary pressures were observed
and headline inflation rose to 14.6 percent in January 2020.
The inflation rate started easing out due to government policies after January and for the
period July-April FY2020 recorded at 11.2 percent against 6.5 percent during the same
period last year. The other inflationary indicators like Sensitive Price Indicator (SPI)
recorded at 14.3 percent against 4.2 percent over the same period last year. Wholesale Price
Index (WPI) recorded at 12.2 percent during Jul-April FY2020 compared to 16.2 percent
same period last year.
The government is making all out efforts to ensure smooth supply of essential items and is
also committed to taking strict actions against anti-competitive practices. Economic
Stimulus Package, Ehsas Emergency Relief Programme, Subsidies to USC and reduction in
petroleum prices, etc., will provide multidimensional positive impacts to all segments of
society especially poor families. All these measures helped in contracting the CPI to single
digit which fell to 8.5 percent in April 2020. This was third successive month showing
decline in inflation, whereas it dropped more than 6 percent in last three months.
Trade and Payments:
Exports during July-April, 2019-20 remained $ 19.7 billion compared to $ 20.1 billion
during July-March, 2018-19, posting a decline of 2.4 percent. A sharp decline in REER due
to market based exchange rate and the government’s initiative to provide cheaper electricity
to the textile sector have enhanced the competitiveness of the Pakistani products in the
global market. The total imports during July-April FY2020 declined to $ 36.1 billion as
compared to $ 40.3 billion same period last year, thus registered a decline of 16.9 percent.
During Jul-April FY2020, remittances increased to $ 18.8 billion as compared to $ 17.8
billion during same period last year, with a growth of 5.5 percent. During July-March
FY2020, current account deficit (CAD) reduced by 73.1 percent to US$ 2.8 billion (1.1
percent of GDP) against US$ 10.3 billion last year (3.7 percent of GDP). The significant
reduction in CAD reflected mainly the impact of macroeconomic stabilization measures
taken by the government.
Pakistan’s total liquid foreign exchange reserves increased to US$ 17.1 billion by end March
2020, up by US$ 2.6 billion over end-June 2019. The improvement in the Foreign Exchange
reserves led to 3.6 percent appreciation of Pak rupee against US dollar during Jul-February
FY2020.
The COVID-19 pandemic has generated both demand and supply shocks across the global
economy and has posed significant challenges for exports to increase further in coming
months. Pakistan, as net oil importer, would benefit from the decline in global oil prices in
terms of reduced import bill and contraction in CAD. Despite adverse impact of pandemic
on economy the overall external account liquidity has actually improved due to decline in oil
and other international commodity prices.
Public Debt:
Pakistan’s strategy to reduce its debt burden to a sustainable level includes commitment to
run primary surpluses, maintain low and stable inflation, promote measures that support
higher long-term economic growth and follow an exchange rate regime based on economic
fundamentals.
Total public debt was recorded at Rs 35,207 billion at end March 2020 compared with
Rs 32,708 billion at end June 2019, registering an increase of Rs 2,499 billion during first
nine month of current fiscal year while Federal Government borrowing for financing of its
deficit was Rs 2,080 billion. This differential is mainly attributable to depreciation of Pak
Rupee, increase in cash balances of the Federal Government and difference between face
value (which is used for recording of debt) and the realized value (which is recorded as
budgetary receipt) of PIBs issued during the period.
Public debt portfolio witnessed various positive developments during the ongoing fiscal
year. Most of the net domestic debt raised was through medium-to-long-term government
securities (Pakistan Investment Bonds) and National Saving Schemes. The cost of
borrowing through long term government bonds declined. No new borrowing was made
from SBP during ongoing fiscal year. To diversify investor base in government securities and capitalize liquidity available with Islamic Financial Institutions, government has started
issuance of 5-Year Floating Rate Sukuk. All of the net external debt raised during first nine
months of current fiscal year was from multilateral and bilateral sources on concessional
terms.
Domestic debt was recorded at Rs 22,478 billion at end March 2020. Domestic borrowing
operations remained quite successful during ongoing fiscal year despite challenging
macroeconomic situation. External public debt stock reached US$ 76.5 billion (Rs 12,729
billion), witnessing an increase of US$ 3.0 billion during first nine months of current fiscal
year. Interest expense is expected to remain significantly less than the budgeted amount in
2019-20 owing to re-profiling of short-term debt into long-term debt and sharp decline in
cost of borrowing in longer tenor.
Over the medium term, government objective is to reduce its “Gross Financing Needs
(GFN)” through various measures mainly including (i) better cash flow management
through a treasury single account; (ii) lengthening of maturities in the domestic market
keeping in view cost and risks trade-off; (iii) developing regular Islamic based lending
program and (iv) availing maximum available concessional external financing from bilateral
and multilateral development partners to benefit from concessional terms and conditions.
Government also aims to bring and maintain its Debt-to-GDP and Debt Service-to-Revenue
ratios to sustainable levels through combination of greater revenue mobilization,
rationalization of current expenditure and efficient/productive utilization of debt.
Education:
Government has formulated National Education Policy Framework to overcome multiple
challenges facing the education sector that includes: decreasing out of school children and
increasing school completion; achieving uniformity in education standards; improving the
quality of education; and enhancing access to and relevance of skills training.
According to PSLM Survey 2018-19, the literacy rate of the population (10 years and above)
is 60 percent as compared to 58 percent in 2015-16. Province wise analysis suggests that
Punjab leads with 64 percent followed by Sindh and Khyber Pakhtunkhwa (Excluding
Merged Areas) with 57 percent, Khyber Pakhtunkhwa (Including Merged Areas) with 55
percent and Balochistan with 40 percent.
Public Expenditure on education was estimated at 2.3 percent of GDP in 2018-19, as
compared to 2.4 percent in 2017-18. The education-related expenditure increased by 4.7
percent (to Rs 868.0 billion) in 2018-19 as compared to last fiscal year .
The Federal PSDP 2019-20 allocated an amount of Rs 4.8 billion for 11 on-going and 21
new development projects under Ministry of Federal Education & Professional Training. An
amount of Rs 1.1 billion had also been allocated for 8 on-going & new education related
projects being handled by Finance, Defence, Interior and Kashmir Affairs & Gilgit Baltistan
Division.
During Fiscal Year 2019-20, the government has allocated Rs 29.047 billion to HEC for implementation of 138 development projects (128 ongoing & 10 new projects) of Public
Sector Universities/ Higher Education Institutions. During July-March, FY2020 an amount
of Rs 22.738 billion (around 80 percent of the total allocation) has been authorized to HEC
for meeting expenditure against ongoing projects activities.
The present government is making efforts to introduce Single National Curriculum all over
the country. The phase-I of Single National Curriculum for class 1 to 5 has been developed
and its implementation would be completed by March 2021. Similarly, the phase-II of
Single National Curriculum for class 6 to 8 would be ready by March 2021 and implemented
by March 2022, while phase-III curriculum for class 9 to 12 would be ready by March 2022
and enforced by March 2023.
Health and Nutrition:
Access to good health can contribute positively to the economic and social development of a
country. Good nutrition has a direct impact on overall health and quality of life. According
to the National Nutrition Survey (NNS) 2018 of Pakistan; 40 percent under five children are
stunted and another 29 percent are underweight. NNS further revealed that almost 18
percent (38 million) of our population is severely food insecure. The economic costs of
malnutrition are very high and persistent in terms of loss of GDP which is 3 percent ($7.6
billion) every year in Pakistan.
Government is keen for increasing health spending to fight against fatal diseases like
malaria, tuberculosis, HIV/Aids, diabetes, cancer, heart diseases etc. Cumulative health
expenditures by federal and provincial governments during FY2019 increased to Rs 421.8
billion from Rs 416.5 billion last year showing a growth of 1.3 percent. As a percent of
GDP, it is 1.1 percent. Various programs and projects have been supported by the
Government through PSDP during FY2020 in fulfillment of the Global commitment of
Sustainable Development Goals (SDG) agenda to improve the health status of the people
and to reduce the burden of communicable and Non-Communicable Diseases. During
FY2020, PSDP allocations of Rs 24 billion were made for 62 health sector projects and Rs
11.5 million were released up to 10-04-2020.
The COVID-19 pandemic was confirmed to have reached Pakistan on 26th February 2020,
when first patient in Karachi tested positive upon returning from Iran. Cognizant of the
situation, the government has constituted a high-level National Coordination Committee
(NCC) that evaluates the evolving situation on day to day basis to prevent the spread of
pandemic. A Command and Control Center has also been established to ensure effective
coordination among the federal and provincial governments to control COVID-19. Due to
timely measures taken by the government in collaboration with the provinces, the outbreak
has so far been prevented from getting worse. Present government is committed to improve
the health care facilities and provision of good nutrition for effectively utilizing the human
potential of the country.
Population, Labor Force, and Employment:
Pakistan is the fifth most populated country in the world. According to the National Institute for Population Studies, population projected for 2019 is 211.17 million. Hence, population
density stands at 265 per Km.
Presently, population composition of the country is skewed towards working age population.
61.4 percent of population is falling in the age group 15-64 while 12.1 percent of population
is between the ages of 0-4 years and 22.1 percent is between 5-14 years. If this demographic
dividend is harnessed and equipped with desired skills to meet domestic and international
market requirements, the youth bulge would yield increased industrial productivity and
higher foreign remittances. The government, being well aware, is stringently focusing on
various employment generation programs for youth.
Employment is considered as key mechanism through which the benefits of the growth can
be trickled down to the vulnerable segments of the society. With population growth rate of
2.4 percent, a large number of young labor force is adding every year. According to Labour
Force Survey 2017-18 the total labour force was 65.5 million, while unemployment rate is
5.8 percent. According to that survey, the highest unemployment (11.56 percent) was
prevalent among the age 20-24 indicating youth unemployment.
According to the preliminary estimates conducted by Pakistan Institute of Development
Economics (PIDE), the COVID-19 pandemic can have adverse impact on employment
generation during the last quarter of 2019-20. In case of limited restrictions, about 1.4
million jobs will be lost, under moderate restrictions employment loss could reach to 12.3
million and 18.53 million people will be unemployed in case of a complete shutdown .
Pakistan‘s youth bulge has tremendous energy and talent and the government is making
sincere efforts to provide them ample opportunities to harness their potential. Accordingly,
Kamyab Jawan Program and Hunermand Jawan Programmer (Skills for All) launched by the
government is helping the youth to enhance their skills which will, thus, play a pivotal role
in the socio-economic reconstruction of the society.
Transport and Communication:
Pakistan’s Highway network comprises of 39 national highways, motorways, expressways
and strategic roads. The existing portfolio of National Highway Authority (NHA) consists of
40 on-going projects with an allocation of Rs 117,514.836 million in PSDP 2019-20.
Pakistan ranks at 22nd position worldwide for the size of its road network as per road length
of 263,775 Km. The country is likely to improve its ranking significantly with the
construction of new mega projects under the China Pakistan Economic Corridor.
Pakistan Civil Aviation Authority (PCAA) has been spending substantial amount on
undertaking various projects all over the country. PIAC has managed recovery of B-777, A
320 and ATR grounded for last 13-22 months using own resources without funding from
GoP. Profitable routes have also been started which include: Sialkot- Paris – Barcelona,
Peshawar- Sharjah, Peshawar-Al-Ain and Multan-Sharjah.
During FY2020 (July-February), gross earnings of Pakistan Railways grew by 8.4 percent
and amounted to Rs 36,916.85 million against Rs 34,066.12 million during the same period
last year. PNSC Group has managed to achieve 6 percent increased profit of Rs 1,411 million for July
2019-March 2020 as against Rs 1,332 million in the corresponding period last year.
Cumulatively, Group achieved a turnover of Rs 9,621 million as compared to Rs 7,859
million for the corresponding period last year.
As per Ministry of IT & Telecom, 07 million SIM Cards and 10,000 Banking Cards are
being imported in Pakistan every month. There has been a consistent growth in IT & IT
enabled Services (ITeS) remittances over the last 5 years, with a compound annual growth
rate of 19.5 percent, the highest growth rate in comparison with all other industries, and the
highest in the region. Pakistan’s IT&ITeS exports have crossed $4.1 billion during FY2019
with export remittances nearing $1 billion. Micro enterprises, independent consultants and
freelancers have contributed an estimated $500 million in IT&ITeS exports, whereas annual
domestic revenue exceeds $1billion. IT&ITeS export remittances have surged to US$
550.503 million at a growth rate of 24.71 percent during July-December 2019, in
comparison to US$441.435 million during the same period last year.
During July 2015 to Dec-2019, telecom sector has attracted over US$ 1.5 billion FDI
Inflow, whereas a total of US$ 8.5 billion have been invested by telecom players in Pakistan
since 2002. During the first two quarters of the FY2020, telecom sector contributed Rs 142
billion to the national exchequer. Annual revenues from telecom sector have reached an
estimated Rs 551.9 billion during FY2019, up from Rs 440 billion last year, registering an
annual growth of 12.9 percent. Revenues from telecom sector have reached an estimated
Rs 132.3 billion in the first quarter of FY2020. Pakistan Electronic Media Regulatory
Authority (PEMRA) has issued 254 Licenses for FM Radio and 4,062 Cable TV Licenses.
PEMRA collected advance tax from license issuances and their renewal and has deposited
over Rs 1.0 billion in national exchequer.
Energy:
The consumption of petroleum products in Pakistan is 19.68 million tons per annum against
the supply of 11.59 million tons per annum from local refineries, while rest of the 8.09
Million tons per annum is being imported. Refineries in Pakistan are old version except
PARCO and produce more than 40 percent of Furnace Oil, the lowest price value product.
The total supply of LPG during July - March 2019-20 was 739,785 Metric Ton. Currently,
there are 11 LPG producers and 200 LPG marketing companies operating in the country
having more than 7,000 authorized LPG distributors. During July-March 2019-20, an
investment of Rs 3.72 billion approximately has been made in LPG infrastructure. LPG
accounts for only 1.2 percent of the total primary energy supply in the country due to supply
constraints and higher price of LPG in relation to competing fuels like natural gas, wood etc.
The current size of LPG market is around 1,061,447 MT/Annum. Around 76 percent of the
LPG consumed is met with Local Production in Pakistan, whereas the rest is imported.
Pakistan produces around 4 Billion Cubic Feet Per Day (Bcfd) of indigenous natural gas.
Pakistan has an extensive gas network of over 12,971 Km Transmission 139,827 KM
Distribution and 37,058 Services gas pipelines to cater the requirement of more than 9.6
million consumers across the country. Pakistan Atomic Energy Commission supplied about 7,143 million units of electricity to the national grid during 1st July 2019 to 31st
March 2020.
The volume of import cargo during July-December 2019 stood at 21.878 million ton, as
against the 20.125 million ton handled during corresponding period last year, showing an
increase of 8.7 percent. The major non-containerized imports were Coal, LNG, POL,
Chemicals, Palm oil and Grain. The Coal imports were the largest imported cargo which
represented over 34 percent of total imported cargo.
Government is focusing on exploiting the abundant potential of wind, solar and other
Alternate Renewable Energy resources for power generation whilst benefiting with the
declining prices of RE technologies through optimum mode of development.
Social Protection:
Pakistan is committed to alleviate poverty as per SDGs targets. In the wake of COVID-19,
the government approved a relief package of Rs 144 billion to provide immediate cash relief
of Rs 12,000 to 12 million poor families under Ehsaas. BISP budgetary allocation has also
been increased from Rs 102 billion in FY2016 to Rs 180 billion in FY2020 to support
unconditional cash transfer to the poorest segments of the society. Number of beneficiaries
now stands at 4.5 million who are being paid through biometric based payment solution
developed by BISP.
Unconditional Cash Transfer Programme is now improved and strengthened as Kafaalat
Programme, through which monthly cash stipends of Rs 2000 will be given to at least 7.0
million most deserving and poorest women all over the country. At first, 4.2 million women
of BISP beneficiaries have been included in Kafalat program and further approximately 3.0
million deserving women will be added this year and total number of beneficiaries will
increase to 7.0 million by the end of 2020. Pakistan Poverty Alleviation Fund since April
2000 to March, 2020 has disbursed Rs 224.64 billion to its Partner Organizations in 144
districts across the country.
Pakistan Bait-ul-Mal (PBM) is providing assistance to destitute, widows, orphans and other
needy persons irrespective of their gender, caste, creed and religion through its
establishment at the district level. During July to March FY2020, PBM has disbursed an
amount of Rs 2.705 billion through its core projects/Schemes.
Workers Welfare Fund during July-March, FY2020 utilized Rs 2,426.31 million on 35,594
scholarship cases while Rs 432.27 million have been disbursed as Marriage Grant
(@100,000/- which benefitted 4,323 workers’ families. WWF has also disbursed Rs 476.00
million as Death Grant (@500,000/-) to 952 cases of mishaps of workers all over the
country. In addition to other programme Zakat, Employees Old Age Benefits (EOBI) and
Microfinance Institutions are contributing in alleviating poverty from the country.
Climate Change:
Pakistan has been consistently ranked as one of the most affected countries by climate
change. The population is facing natural hazard challenges like floods, droughts, and cyclones. The policy makers, scientists, developers, engineers and many others around the
world are using geographic information system technology to better understand this complex
situation and offer tangible solutions in different climate change scenarios.
To improve the forest cover the government has countrywide launched Ten Billion Tree
Tsunami Programme to combat the adverse effects of global warning. This umbrella project
covers all the provinces including AJK and GB with provincial budgetary share. All
segments of society such as students, youth, and farmers have been actively involved in this
mega afforestation activity.
Government has also launched the Eco-system Restoration Initiative for facilitating
transition towards environmentally resilient Pakistan by main streaming adaptation and
mitigation through ecologically targeted initiatives that includes afforestation, biodiversity
conservation and enhancing policy environment etc.
Way forward:
The Coronavirus outbreak is a human tragedy, affecting hundreds of thousands of people
globally. It is also having a growing adverse impact on the global economy including
Pakistan. In the current situation the government has dual challenge; to contain the spread of
the COVID-19 pandemic and to mitigate the socio-economic losses to protect the most
vulnerable. This is the first time in hundred years that the world is facing a rapidly spreading
fatal virus for which there is no authentic prevention /treatment to overcome the pandemic.
A cure is the only sure way to move forward, but “until such medical interventions become
available, no country is safe from the pandemic”.
Global value chains have been disrupted. Stock and commodity prices are falling around the
world. Long term bond yields are heading south in fear of global recession. Airlines and
tourism businesses are fearing massive losses. Most of these businesses are SMEs, there will
be loss of employment and small business owners will face reduced liquidity. Many
businesses face problem in managing cash flows. Strategic interventions in specific
industries are being undertaken to safeguard the common man and accelerate economic
activities.
Under the current crisis top priority of the government is to protect the vulnerable segments
of the society. Therefore, prime focus areas of the government are health, social safety,
industry, farming, trade etc. The government is constantly monitoring the COVID-19
situation in the country and accordingly taking all out measures to mitigate its adverse
effects on the economy and general public.
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