The World Bank has said that Pakistan is not immune to the economic shock caused by the coronavirus and its exports have been hit hard, as the country recorded $1.39 billion in merchandise exports in May 2020, down 34% compared to the same period in 2019.
World Bank Senior Economist Gonzalo Varela, in an online interactive session with members of the All Pakistan Business Forum (APBF), noted that “every crisis presents an opportunity, whereas Covid-19 has provided the world and Pakistan with an opportunity to initiate structural reforms in institutions”.
The APBF arranged the meeting in order to discuss the current economic situation in Pakistan and come up with some key steps to revive and sustain economic growth during the post-corona slowdown.
The World Bank senior economist said short-term global trade prospects did not offer room for optimism as experts forecast contraction in exports in the months ahead.
“At such a time, exports are crucial to Pakistan’s recovery because they are labour-intensive and provide plenty of good jobs for Pakistanis,” he added. “Global and regional trade integration offers Pakistan a tremendous potential in driving and sustaining growth and poverty reduction.”
Varela stressed the need for protecting exporters through smart export promotion, whereas structural reforms were going to be crucial for the recovery. He maintained that the government needed to take action to help speed up export recovery by making it competitive through lifting barriers to exports, including easing up import restrictions. “Firms need to import to export successfully,” he emphasised.
APBF President Syed Maaz Mahmood, on the occasion, appreciated the debt relief measures taken by G20 countries, the International Monetary Fund (IMF) and World Bank for developing countries including Pakistan.
He urged the multilateral development partners, including the World Bank, to play their due role by investing in the social sector rather than mega development projects only, which would help in bringing the focus of member governments back to social sector development.
The business forum president stated that Pakistan’s healthcare system was not equipped to handle such emergencies whereas the World Bank was working with the government to help enhance its health capacity to respond to the challenge effectively, which was appreciable.
Mahmood was of the view that initial relief packages of $1.4 billion by the IMF and $1 billion by the World Bank would have a substantial impact and provide much-needed fiscal space to Pakistan, which should be used for the wellbeing and welfare of the public.
While noting that the Covid-19 pandemic had posed unprecedented health and economic challenges, he underlined that the global recession might become worse than the Great Depression. “A global pandemic cannot be contained without strong, coordinated and well-crafted global response,” he stressed.
On the occasion, APBF’s national and provincial board members called for announcing special incentives for cash-strapped small and medium enterprises (SMEs), which represented more than 90% of around 3.2 million business enterprises in Pakistan. They suggested a significant reduction in import duties, zero tariffs on basic industrial raw material, which was not available locally, and exemption from sales tax, income tax and additional income tax.
They asked the government to simplify the complicated system of obtaining loans by the SMEs from banks, besides a sizable reduction in fuel prices, a major cut in the key policy rate to 4%, regionally competitive energy tariffs and quick release of tax refunds.
The government should extend interest-free financing to the SMEs to help them meet running operations, including salaries, building rent, utility bills, etc.
Published in The Express Tribune, June 30th, 2020.