Pakistan’s economy faces headwinds as coronavirus, food shortage threats loom

LAHORE: As the debate and post-budget details unfold, the government has set its goals and targets for the coming financial year 2020-21 in the wake of the pandemic crisis and the locust threat that is piling up in various provinces. , which could exacerbate food shortages worldwide. Pakistan.

Considering the precarious financial situation and stagnation, the economy has been in almost two years and the lukewarm economic growth showed signs of slow recovery before the pandemic was canceled in a matter of a few months.

The spread of the coronavirus put a key to the works of the finance ministry and the State Bank of Pakistan (SBP) was forced to take immediate steps to reduce interest rates that were already facing strong criticism from the business community and others for same. high.

Despite fiscal constraints hindering the government, the government implemented a budget that some analysts have called "traditional." The capital market anticipated some relief measures that would help shore up the Pakistan Stock Exchange, but most brokerage firms in their reports called it a disappointment.



Unlike in previous years, the screaming and noise during the budget presentation were more nuanced due to the 25% limitation of the NTMs present in the National Assembly. Budgets have typically been poor quality and abusive matters displayed as an exercise in confusion or to repudiate the current administration for all the financial ills that plague the economy. Ironically, the rinsing and repeating process in Pakistan's history is not a shock or a setback, this has been an existential problem for decades.

Today, Pakistan's economy is in support of the fans and the pandemic has struck her in the center of her heart. As the first wave of coronavirus cases increases and our overwhelmed but inadequate healthcare system teeters on the brink of collapse, the cost of lost and rising human lives will reverberate in the years to come.

There is no doubt about Pakistan's potential, as its population of which young people form a large part is entering the economy at a stage where unemployment is high and the lack of job opportunities is limited. Debt obligations remain high as the G20 has provided some form of relief recently that could provide a respite for the acting administration to manage its finances.

The locusts that swarm around various provinces and wreak havoc create a severe shortage and food security as crops are devastated. Provincial governments in conjunction with the center have tried to eradicate the locust threat that could cause catastrophic damage to our agricultural sector that constitutes more than 20% or more of our gross domestic product (GDP).

The balance of payments crisis (BoP) remains the biggest threat to the government as in previous fiscal years. Net foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased from $ 266 million to $ 10,096 billion, during the week ending June 5, 2020.

Since the end of April, foreign exchange reserves have declined steadily due to repayments of external debt. The largest weekly decline in a decade of $ 1.712 billion in SBP's foreign exchange reserves was recorded during the week ending May 29.

However, despite the pandemic that affected receipts, the Federal Revenue Board (FBR) was left behind before that. Furthermore, on the remittance front, the upcoming fiscal year will be a major challenge as many expatriates residing in the Middle East have been fired or sent back to Pakistan, depriving the economy of one of its main sources of foreign exchange.

With the economy facing its first recession in nearly sixty-eight years, the finance ministry and economic planners face a daunting task to resurrect an economy that has already faced its share of boom-bust cycles in recent decades. As external debt obligations mature over the next fiscal year 2020-21, the rupee could come under sustained pressure and further depreciate against the US dollar.

This would affect the poor and the middle class the most, as their household budgets would be cut and expenses would emerge as the rupee loses its value, making things difficult for households.

Speaking about the budget, Arsalan Soomro, Managing Director of KASB Securities on Twitter, said: “The budget points to higher tax revenue on optimistic recovery bets despite the adverse impact of the coronavirus. L