Tird wave of Covid-19 a challenge to growing economy of Pakistan

ISLAMABAD:Owing to timely and prudent policies of the incumbent government, the country’s economy had been showing signs of recovery, with construction and manufacturing sectors in lead, however, the economic revival had once again been pitched against the stronger than ever third wave of Covid-19, official sources said on Tuesday.

The economy had registered positive signs during first nine months of financial year (FY) 2020-21 as indicated by various economic indicators.

The remittances grew by 26.2% from July 2020 to March, 2021 while the revenue collection by the Federal Board of Revenue grew by 10.9 % to reach Rs3.4 trillion in the first three quarters of the current financial year, according to the official data.

The careful expenditure management and effective resource mobilization helped in containing the fiscal deficit within reasonable limit while primary balance continued to remain in surplus.

Likewise, the large scale manufacturing exhibited 7.5% growth during July-February, FY 2021 compared to negative 2.8 percent last year. Cement sector registered 17 percent growth during July-March, FY 2021 with 100 percent capacity utilization; significant increase in sale of cars, motorbikes and tractors signifies that economic revival was taking place.

The country recently launched triple-tranche Euro bonds raising UD$ 2.5 billion while on other side, the overall liquid foreign currency reserves reached at $23 billion, which helped in building the valuable foreign exchange reserves.

The sources said in order to control inflation, the government had adopted a policy of close monitoring of the supply and demand side of essential food items as well as providing essential commodities at affordable prices through the support of assisting mechanisms like Utility Stores, Sasta Bazaars and providing subsidies on essential food items like sugar, wheat flour, vegetable oil etcetera.

Under “Ramazan Relief Package” of Rs7.8 billion, the Utility Stores Corporation would provide 19 essential items at subsidized prices to facilitate the marginalized segments of the society during the holy month through its chain of outlets across the country.

On the other hand, the government envisaged gradual reduction in overall fiscal deficit from 7.4% of the gross domestic product (GDP) during FY 2021-21 to 4.4% in FY 2023-24 through revenue mobilization with a higher growth trajectory, rationalization of current expenditure and prudent financial management.

The economy showed greater resilience as debt-to-GDP ratio witnessed minimal increase of 1.1 percent at the end of FY 20 and stood at 87.2 percent at end June 2020.

Despite the challenging macroeconomic environment, the government had not borrowed from State Bank of Pakistan during FY 20 and 21.

The stock market had also performed very well and Bloomberg ranked it as best performing in Asia.

Pakistan’s current ranking on ease of doing business index had improved from 147 (2018), 136 (2019) to 108 in 2020. Pakistan ranked among ‘top ten best improvers’ in World Bank’s ease of doing business index 2020.

Amid all these positive developments, the third wave of pandemic was particularly challenging and Pakistan was faced with a difficult choice to strike a balance between need for fiscal consolidation and ever rising demand for economic stimulus amid COVID-19 and in post-COVID scenario.

“Our economic revival has once again been pitched against the stronger than ever third wave of COVID-19,” the sources added.

The government had been successful in reviving the economy, which it inherited in very bad shape in 2018 and also managed it well during the first wave of Covid-19 to mitigate the negative effects on people and economy to a large extent.