Economic survey report and budget expectations

Advisor to the Prime Minister on Finance Abdul Hafeez Shaikh had presented the Pakistan Economic Survey 2020-21 on Thursday, highlighting the state of the Pakistani economy in the outgoing fiscal year.

The economic survey is considered as the most authentic document of the government and is launched every year before the announcement of the budget of the next year.

For the first time in 68 years, Pakistan’s economy is set to contract in the outgoing fiscal year with a negative 0.38 percent due to the adverse impact of the COVID-19 epidemic coupled with the already weak financial situation before the pandemic hit the country.

Summary of Economic report

In the report, Shaikh revealed that the GDP is expected to contract 0.38% in FY 2020 despite 2.67% growth in the agricultural sector, as the industrial and services sectors see the growth of -2.64% and -0.59% respectively this year.

He revealed that the GDP is expected to contract 0.38% in FY 2020 despite 2.67% growth in the agricultural sector, as the industrial and services sectors see the growth of -2.64% and -0.59% respectively this year.

Talking about steps taken by the government to arrest ballooning internal and external imbalances, Shaikh admired Prime Minister Imran Khan and army chief Gen Qamar Javed Bajwa for their role in managing expenditures.

Noting that the state had cut down its expenditures, the advisor highlighted that at the same time, public spending had been augmented.

Shaikh highlighted that the government did not take any loans from the State Bank of Pakistan the entire year and did not give any supplementary grant to any department as it wanted to make sure the public’s money was spent carefully. He said that the government had returned loans worth Rs 5,000bn over the course of the year.

He said that Pakistan’s revenue had declined due to a decline in its exports and that the government had doubled the money for the COVID-19 fund despite the economy suffering from setbacks due to the outbreak.

Speaking about the COVID-19 epidemic, the advisor said that it was not possible to ascertain when the epidemic would end. Shaikh said that the government had tried to maintain a balance between saving people’s lives and at the other end, protecting the economy as well.

The report made note of several developments in the global economy in FY 2020 which reverberated around the world. 

He disclosed that the pre-COVID-19 current account deficit (July-March, FY20) had reduced further by 73% to $2.8bn (1.1% of GDP) against $10.3 bn (3.7% of GDP) in the same period the previous year.

Impact of COVID-19

Pakistan suffered significantly due to the COVID-19 outbreak through a decline in domestic and global demand, suspension of tourism and business travel and the disruption of trade and production linkages and supply lines.

Due to these shocks, “the provisional GDP growth rate for FY2020 is estimated at negative 0.38% on the basis of 2.67%, -2.64% and -0.59% percent growth in agricultural, industrial and services sectors respectively.”

The importance of budget in the context of COVID-19

The coronavirus is spreading rapidly across the country, infecting more than 125,000 people and had killed over 2,400.

The COVID-19 appears to have a contagious economic impact on Pakistan. As federal and provincial authorities sit together reporting situations in their respective sectors and areas, much larger than previously estimated economic losses are coming to the fore and counting.

Initial estimates for the losses range from a minimum of $10 billion (more than Rs1.5 trillion) and will keep increasing in case of prolongation of lockdown efforts.

 The lending and donor agencies are committing financial help and more than $600 million loans and grants have so far been firmed up. The government had also started working on a rescue package for various sectors of the economy.

Government urged for relief

People have urged the authorities to provide relief in the budget for the fiscal year 2020-21, as the COVID-19 lockdown has hit their income badly after business activities are paralyzed across the country due to the global pandemic.

Government promises and consolations

While presenting the economic survey yesterday, Finance Advisor Hafeez Sheikh said that the government is trying not to impose new taxes on the people in the next budget.

Pakistan is estimated to have faced an economic loss of up to Rs2.5 trillion because of the Covid-19 pandemic in the current fiscal year and government figures project that around three million jobs are expected to be lost in the “initial round” of the novel coronavirus outbreak.

Those Pakistanis who have suffered the most from the economic impact of the outbreak on lives and livelihoods are primarily the country’s daily wage workers and urban slum dwellers. The people have pinned very positive hopes on the government’s budget in every field.

Key sectors

The government should allocate an adequate budget for every sector of life, especially, health, agriculture trade industry education so that the problems faced by the people can be addressed. Promises not to impose new taxes are in place, but relief is also needed in taxes that are already in place.