USA MAGAZINE FORBES LAUDS PAK GOVT’S EFFORTS IN RAISING THE ECONOMY DESPITE COVID.EVEN USA&INDIA FACED VERY TOUGH TIME DURING PANDEMIC?

Pakistan’s Public Debt to GDP Remained Broadly Unchanged according To the IMF.Even giants like the United States and India have had difficulty dealing with the coronavirus pandemic. Donald Trump, Dwayne Johnson, and Ellen DeGeneres have all been infected by this virus. In this situation, Pakistan has succeeded in reviving its economy, which is expected to grow by nearly 4% in 2021, exceeding initial projections. Pakistan’s strategy to deal with Covid through NCOC-coordinated lockdowns and restrictions — aided in a quick recovery

1.    Pakistan’s Economic Growth. The State Bank of Pakistan (SBP) initially predicted a 3% growth in GDP, while the International Monetary Fund (IMF) and World Bank predicted 1.5% and 1.3% increases, respectively. The country's per capita income will rise 14.6% from $1,405 in 2020 to $1,610 in 2021.The services sector, which is forecasted to grow by 4.43% in 2020-2021, is responsible for the majority of the growth. This is certainly remarkable for a country like Pakistan which is becoming successful in expanding its services sector. The agricultural sector's predicted growth is 2.77%, while that of the industrial sector is 3.57%. 

2.  Measures Taken By The Government.The bleak situation in India, which has reported an incredible number of 28,441,986 cases and 338,013 deaths, has alarmed both government authorities and medical specialists in Pakistan. Due to the increase in awareness caused by social media in Pakistan, Pakistani citizens have begun to wear masks, which they did not previously.Last year, the country saw a surge in cases during the Eid-festival, but the government was quick to move this time, imposing partial lockdowns, closing non-essential enterprises, and prohibiting domestic tourism, which helped the country avoid a spike in cases. However, the restrictions imposed have jeopardized the labor class's livelihoods.

 3.   Vaccination Plan.The government hopes to have vaccinated 70% of the population by the end of 2021. 5.3 million citizens have been vaccinated so far. With the help of CanSino Bio, a Chinese company, Pakistan has developed its own "PakVac" vaccine, bolstering the country's vaccination program.

4 .Stock Market Sentiment.Last week Pakistan reported the highest traded volumes on the Pakistan Stock Exchange at 1.56 billion shares and 2.21 billion shares respectively on May 26 and May 27. Investors are optimistic because of the populist budget proposal and improved growth forecasts.

5 . Economic Growth.According to SBP’s Governor, Reza Baqir, the unexpected growth in GDP is due to accommodative monetary and fiscal policy. SBP quickly reduced its policy rate by 625 basis points to 7% and released a stimulus amounting to 5% of GDP. In addition, the governor said that the government was able to control the coronavirus situation reporting 12 new cases per million, compared to 62 new cases per million reported globally.

 6 .Public Debt to GDP.The IMF’s world economic outlook numbers Pakistan's public debt to GDP remained broadly unchanged in 2020 over the previous year, as reported in Bloomberg. This statistic for most emerging countries increased by 10% during the coronavirus pandemic. Reza Baqir explained that this was caused by a "prudent fiscal and aggressive monetary policy."

7. Inflation. Pakistan recently reported a CPI of 11%, up from 6% a few months ago. The country expects inflation to range between 7% and 9%, with experts predicting that it will be closer to the higher end. According to Reza Baqir, recent high inflation was caused by a small number of products such as energy and food. Because of supply-side factors, he described these factors as "one-time," but officials are prepared to respond quickly to demand-side pressures if they arise.

8 .IMF Program.The International Monetary Fund (IMF) has granted the country a $6 billion Extended Fund Facility (EFF). According to Reza Baqir, who worked at the IMF for nearly 18 years, Pakistan is transitioning from stabilization to growth. He stated that the government was successful in converting a $19 billion current account deficit into a $900 million surplus, as well as more than doubling the country's foreign reserves from $7.2 billion to $16 billion. These objectives were met not through borrowing, but through "high-quality measures."

9  .The Bottom Line.The successful management of the coronavirus pandemic and the success of the IMF program, as evidenced by the growth in GDP to 4%, demonstrate PakistaPakistan succeeded in reviving economy despite

10. Covid pandemic. Leading American business magazine Forbes has lauded the government's efforts to tackle pandemic and to stabilise and grow Pakistan's economy, saying that the government has been successful in reviving its economy through prudent policies which is expected to grow at 4%. To lessen severe impact on economy, govt introduced the largest-ever economic stimulus package for SMEs to shield them from insolvency Successful management to tackle the pandemic and the success of IMF programme, as evidenced by the 4% GDP growth, is a testament to Pakistan's growth potential and good investment opportunities, the magazine said.It said when countries like United States and India have had difficulties in dealing with the coronavirus pandemic. Pakistan has succeeded in reviving its economy, which is expected to grow at a rate of about 4%, exceeding initial estimates in 2021.The State Bank of Pakistan (SBP) initially forecast a 3% increase in the GDP, while the International Monetary Fund (IMF) and the World Bank forecast an increase of 1.5% and 1.3%, respectively.According to the report, the services sector, which is projected to grow at a rate of 4.43% in 2020-2021, contributes significantly to the overall growth. This is certainly noteworthy for a country like Pakistan which is succeeding in expanding its services sector. The growth rate of the agricultural sector is estimated at 2.77% while that of the industrial sector is 3.57%.The situation in India is dire, with an incredible number of 28,441,986 cases of corona and 338,013 deaths.

11 .Due to the increase in awareness on social media in Pakistan, citizens started wearing masks to protect against the novel coronavirus.Last year, the country witnessed a spike in cases during the Eid festival, but this time the government partially imposed a lockdown, taking steps such as shutting down unnecessary businesses and banning domestic tourism, which helped to contain the spread of infection.However, the sanctions caused difficulties for the working class. The government hopes that by the end of 2021, last week, on May 26 and 27, the Pakistan Stock Exchange (PSX) had witnessed the highest ever buying and selling of 1.56 billion shares and 2.21 billion shares, respectively. Pakistani investors and traders are optimistic and enthusiastic about the public budget and proposals for further growth. According to SBP Governor Reza Baqir, flexible monetary and monetary policy has led to unprecedented growth in Pakistan's gross domestic product (GDP). The SBP hastily reduced the policy rate by 625 basis points to 7%. An aid package equal to 5% of GDP was provided.

12 .The SBP governor said the government also controlled the coronavirus situation as the rate of new coronavirus cases is 12 out of 1 million people in Pakistan while the rate is 62 cases per 1 million people in the rest of the world.In the IMF's global economic outlook, the ratio of government debt to GDP in 2020 did not change significantly compared to the previous year. Bloomberg also reported the same, while the rate of debt of emerging economies has also increased in terms of GDP by 10%.Raza Baqir said that due to the prudent fiscal and monetary policies of the government, the debt rate in terms of GDP has not increased. According to the report, inflation is expected to remain between 7% and 9% in Pakistan. According to SBP Governor Raza Baqir, the recent rise in inflation was mainly due to energy and food items and one-time supply is a major factor, but authorities concerned are ready to respond to the pressure of possible demand in a timely manner.

13 .The report said that the IMF provided Pakistan with an expanded fund of $6 billion. According to Baqir, Pakistan is moving towards stability and growth. The government has managed to turn a $19 billion current account deficit into a $900 million surplus. Foreign exchange reserves increased from $2.7 billion to $16 billion. The report said that the successful management of the pandemic and the success of the IMF programme, as evidenced by the 4% GDP growth, have helped Pakistan to grow and offer good investment opportunities.

14 .The World Bank projected that Pakistan’s economy would grow by 1.3% in 2020-21. The IMF predicted 1.5% growth, whereas the State Bank of Pakistan (SBP) estimated 3%. But official (provisional) estimate of nearly 4% GDP growth exceeded all expectations. Pakistan’s economy has indeed made a comeback from the pandemic, with a bang!The services sector grew by 4.4%, industrial sector by 3.5% and agriculture 2.7%. Within services, the highest growth came from wholesale and retail trade, whereas within the industrial sector, it was the large-scale manufacturing that grew by 9%. Considering that these two sub-sectors together constitute 28% of the GDP and both suffered a serious contraction last year, these growth estimates are hardly surprising. Other major contributors to the growth include bumper crops of wheat, rice, sugarcane and maize, construction, finance & insurance and housing services.

15. Part of this growth may be attributed to our resilient economy with a rapidly growing population and a sizeable middle class. Then comes the low-base effect, owing to the contraction of our GDP last year. But attributing this entire growth miracle to low-base effect and resilience would be injustice to the government actions that contributed to this turnaround. Pakistan’s strategy to deal with Covid-19 — through NCOC-coordinated lockdowns and restrictions — aided in a quick recovery. The massive Covid-stimulus package worth Rs1.27 trillion (2.9% of GDP) greatly helped in battling the spread of the virus and provided much-needed targeted financial support to the poor and relief to businesses. Government’s construction package also had a big role to play, as manifested in 8.3% growth posted by the construction sector and a massive increase of 25% in the cement sector. A drastic reduction in interest rate by the SBP and measures like Long-term Financing Facility (LTFF) and Temporary Economic Refinance Facility (TERF) for the businesses also contributed in stimulating growth. The government can therefore rightly claim the credit for this turnaround.Some people have raised questions about the credibility of the data, but those claims do not seem to hold ground. These growth estimates reflect the performance of the previous finance minister. If anything, Shaukat Tarin would have benefitted from lower growth, which could have made next year’s numbers healthier. The out-of-whack projections, however, underscore the need for having regular quarterly estimates of GDP, which can prevent such miscalculations.Moreover, these numbers are not counter-intuitive. For instance, the growth in LSM is in line with long queues of booked orders for new SUVs and vehicles. Anecdotal evidence from textile industry also confirms that the factories are running at near-full capacity.

16 .But is this growth sustainable.Considering that the third wave of pandemic is subsiding, the recovery is likely to continue unabated. The indication that government will be holding off on tough IMF conditions and will instead be giving a pro-growth budget would also help. The government may be better off focusing on sectors that have performed poorly such as cotton, mining, and transportation & communication, which with some effort can yield greater dividends. But further growth without investment will increase inflationary pressure and will also boost imports. The inflation is already on the rise, confirming that we may not have much more excess capacity. The trade deficit is also touching $24 billion. For now, we are being compensated through high remittance inflows but if continued, this can lead to another current account crisis in the next three years. The government therefore needs to keep inflation under check, diversify exports and increase investment. All of this however is easier said than done and needs structural reforms. In short, while this growth cannot be sustained without structural reforms, the next two to three years look good and more promising. It is therefore time to celebrate!