The PTI government inherited an economy in a shambles and has been gamely trying to put it on the road to recovery. Before the pandemic hit the country, macroeconomic indicators had visibly improved but afterwards the situation turned more challenging.
The government was faced with the task of controlling the virus with lockdown while also keeping the wheels of the economy turning. Another challenge was to protect the vulnerable sections of society hit by a suspension of economic activities. It, therefore, adopted a smart strategy, creating a balance between saving lives and keeping the economy going to save the poorer sections of society and daily wage-earners.
The strategy worked as, based on the positive trends in macroeconomic numbers, the World Bank forecast 1.5% GDP growth in the current FY 2020-21, the Asian Development Bank (ADB) projected around 2.5% GDP growth and the State Bank of Pakistan (SBP) has projected it to be around 3%.
Some of the positive economic indicators include rapid expansion in remittances and foreign direct investment and the primary balance in surplus. During the first three quarters of the current fiscal year 2020-21, remittances grew 26.5%, foreign direct investment (FDI) rose 9.1%, tax collection went up 10%, and the primary balance has been in the surplus worth Rs258 billion.
The government’s policies also bolstered large-scale manufacturing (LSM), which registered a 4.8% growth, while the cement sector expanded 20% at 100% capacity utilization. Significant increases were witnessed in the sale of cars, motorbikes and tractors during July-March, 2020-21.
All the data shows the economy in a “recovery” mode amid the coronavirus pandemic. No wonder, Moody’s upgraded Pakistan’s economic outlook to “Stable” in August 2020. It said that Pakistan had registered an upward trend in foreign remittances and FDI, indicating growing investor’s confidence in Pakistan’s economy. According to a recent survey, consumers are now 7% more confident about the overall health of the economy and their personal finances than they were in mid-2020.
Following a liberal foreign investment policy, the government has introduced measures to promote Ease of Doing Business (EoDB) in the country, leading to an improvement in Pakistan’s ranking from 147 and 136 in 2018 and 2019, respectively, to 108 in 2020. This has boosted the morale of both local and foreign businesspeople.
Strict financial discipline has led to a reduction in government expenditure and an increase in revenue. A market-driven exchange rate has boosted exports and discouraged imports. At the same time, Pakistan has witnessed an improvement in fiscal and current account deficits.
At another level, several initiatives have been launched to facilitate agriculture and construction sectors to accelerate economic recovery. The government approved a Rs24 billion package to slash the input costs for farmers, whereas a relief package for small and medium-sized enterprises (SMEs) acted as a shield against insolvency and joblessness. The Rs144 billion Ehsaas Emergency Cash Programme provided cash relief worth Rs12,000 each to 15 million families of daily wage-earners.
To jumpstart the economy, the government gave the status of an industry to the construction sector and announced a package of multiple incentives for investors in the sector. The construction industry is linked to almost 40 other industries, including steel and cement, which as envisaged, has shown very positive results. The provision of loans for low-cost housing is another laudable step to supplement the initiative taken to revive the construction industry as also to enable poor people to build affordable houses.
Needless to say, agriculture is the backbone of Pakistan’s economy and no sustainable progress can be made without energizing the sector which has a pivotal role in the overall development of the country. Acknowledging its vitality, the government has approved a Rs.24 billion package to reduce input costs for farmers.
No doubt, much has been achieved in the last two years, but there is still a long way to go to stabilize the economy. The price situation has been worsening day by day and so far all government efforts have failed to stop the rot. New employment opportunities also need to be created for the swelling numbers of educated youths. Another urgent need is to reduce the burden of debt which has piled up over the years.
However, an era of trust, transparency and cleansing the mess has begun. This raises the hope that in the days ahead, the country will be able to overcome the challenge of turning around the economy so as to maximize the benefits for the common people.