ISLAMABAD, Jun 11 (APP):Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh Thursday said the country’s economy was stabilizing before the outbreak of coronavirus pandemic (COVID-19), which inflicted losses of about Rs 3,000 billion and derailed it towards negative growth of 0.38 percent.
The advisor was addressing the launching ceremony of Pakistan Economic Survey for the outgoing fiscal year 2019-20. He was flanked by Advisor to the Prime Minister on Commerce Razak Dawood, Minister for Economic Affairs Khusro Bakhtyar, Special Assistant to the Prime Minister on Social Protection and Poverty Alleviation Dr Sania Nishter, Finance Secretary Naveed Kamran Baloch and other Finance Ministry officials.
Hafeez Shaih said the fiscal year 2020, before the coronavirus spread, showed dedicated efforts of the government for addressing structural issues that had caused macroeconomic imbalances back in the FY 2018.
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The economic reforms programme and its implementation, he added, was also acknowledged by the international financial institutions while International Monetary Fund (IMF) had declared that Pakistan’s programme was on track and bearing fruits for its economy.
He said the pre-COVID-19 economic recovery was also supported by macroeconomic indicators such as the decline in the current account deficit, build-up of foreign reserves and stable exchange rate on the external side.
On the fiscal side, he said, there were significant improvements in all major indicators and the trend continued till March 2020, implying that the fiscal consolidation was on track. The primary balance had witnessed a remarkable turnaround as it had posted a surplus of Rs193.5 billion during July-March FY2020 against a deficit of Rs 463.3 billion last year.
He said the government had repaid around Rs 5,000 billion loans and was successful in reducing its expenditures, while no ministry or division was provided any supplementary grant.
During the period, he added, the government even did not borrow a single penny from the State Bank of Pakistan. In addition the revenues had also witnessed significant growth of 17 percent, whereas there was also significant growth in non-tax revenues.
The advisor said the non-tax revenues also increased from Rs1,100 billion to Rs1,600 billion, which was a big jump.
However, Hafeez Shaikh added, due to the COVID-19 outbreak, the economy had suffered a lot and it was now estimated to grow at negative 0.38 percent against the predictions of around 3 percent.
Pakistan, he said, was not alone to face the hostile situation as the world economy had suffered a lot due the spread of coronavirus.
He said the International Monetary Fund (IMF) had predicted 3.4 percent downfall in the world GDP (gross domestic product). The developing economies, however, were likely to suffer more as their exports and remittances would decline owing to decreasing demand in the international market, he added.
The advisor said the coronavirus had inflicted a loss of around Rs 3,000 billion to the national economy, with considerable difference between the growth targets achieved and those projected before the COVID-19 outbreak.
He said the agriculture growth also declined to 2.67 percent whereas there had been negative growth of 2.64 percent in the industrial sector and negative 0.59 percent growth in the services sector.
Likewise, he said, the pandemic affected the country’s exports and was expected to affect the remittances, which had so far been on track.
The advisor said the revenues collection was also badly damaged by the coronavirus as against the expected target of Rs 4,700 billion, and might hardly reach Rs 3,900 billion during the current fiscal year.
Dr Hafeez Shaikh said during the outgoing fiscal year, the exchange rate of rupee remained stable at actual value contrary to the past when it was artificially kept low. It helped decrease imports and increase exports.
He said the fiscal deficit was 4 percent of the GDP during July-March 2019-20 as compared to 5.1 percent in the corresponding period of the last financial year.
Replying to a question, the advisor said Prime Minister Imran Khan was representing the common man and he wanted to provide maximum support to the people.
He said the government had announced a package of Rs 1,240 billion in response to the economic downturn during the lockdown imposed in the country to contain the spread of COVID-19 and had so far provided cash support to over 10 million families which was a historic achievement, which was being being commended the world over.
The State Bank of Pakistan (SBP), he said, was also supporting the common people, and the small and medium enterprises (SMEs) by providing subsidies in loans.
He said the fiscal stimulus package of Rs 1.24 trillion along with the measures taken by the SBP for providing liquidity support to households and businesses would counteract the current economic downturn.
He said during the outgoing fiscal year, the Foreign Direct Investment (FDI) in the country posted a reasonable increase of 137 percent which reflected the foreigners’ trust in the present political leadership.
Replying to another question about the public debt, Hafeez Shaikh said during the outgoing year, an increase of Rs 7.5 trillion in public debt was recorded, out of which only Rs 1.5 trillion was utilized for public expenditures and the remaining for repayment of principal debt amount and interest.
With respect to trade, he said during the pre-COVID period, Pakistan’s export sector was performing better than most of its competitors despite the challenging external environment. During July-February 2019-20, exports reached $15.6 billion as compared to $15.1 billion last year posting growth of 3.6 percent.
He said the government had no intention to collect taxes aggressively during the upcoming fiscal year 2020-21 due to the prevailing dismal conditions in the wake of coronavirus.
Minister for Economic Affairs Khusro Bakhtyar, in response to a question, said during the period 2013-18, then government had taken expensive commercial loans and floated bonds worth $15 billion, which were short term in nature and very costly.
He said by observing the good performance of present government in various economic sectors, the international financial institutions were cooperating with Pakistan in the hour of need. Pakistan had recently got a debt relief of $1.8 billion for the upcoming year whereas the Asian Development Bank (ADB) had also agreed to provide a loan of $500 million with interest rate of only 0.5 percent and repayment period of 15 years, he added.