Daily Times

While Balance of Trade (BoT) is improving in right direction, coronavirus (COVID-19) has become threat to the pace of development. Asian Development Bank (ADB) stated in its report that the virus outbreak could cost the Pakistan economy in the range of $16.387 million to $4.95 billion, or 0.01 % to 1.57% of Gross Domestic Product (GDP). United Nations (UN) estimates international tourism to drop 3% due to virus resulting a loss up to $50 Billion globally, is another bad news for the government which is committed to increase tourism exports.

International Monetary Funds (IMF) closely monitoring the grim situation and announced $50 Billion program to fight the aftermath of virus outbreak. It expects 2020 global growth rate will be below the 2.9% rate for 2019.The US Federal Reserve announced a 50 basis point cut recently followed by the Bank of Canada to ease out monetary policy for supporting business activities halted by virus fear. Whatever the case may be, Pakistan is determined towards improving economic situation of Pakistan.

Prime Minister Imran Khan recently advised the related departments to control inflation, ease out interest rates and to encourage business activities by focusing on ease of doing business. Apart from clinical steps advised by PM, Pakistan is all set to get benefit from EU GSP plus status specially in the field of Textile where the orders towards Pakistan increasing while China is partially shut down. Here, a point should be noted down that it is not merely the COVID-19 in China which isshedding orders in favour of Pakistan but the consistent economic policies of government towards export based economy starting from Financial Year 2019 (FY19) by introducing free floating exchange rate and increasing discount rate to tackle ever widening Current Account Deficit (CAD).

Besides GSP status from Europe after Brexit, United Kingdom (UK) signalled to double its trade with Pakistan on back of improved security situation of the country. Good news is that the virus impact on China Pakistan Economic Corridor (CPEC) activities will be negligible as stated by Pakistan’s envoy to China.

The country’s 8 months balance of Trade i.e. July to February 2019 – 2020 (8MFY20) has improved by 26% from $21.46 Billion in 8MFY19 to $15.77 Billion as reported by Pakistan Bureau of Statistics (PBS). Exports recorded a growth of 3.65% during the period i.e. increased from $15.1 Billion to $15.65 Billion whereas imports declined 14.06% i.e. from $36.56 Billion to $31.42 Billion during the period under discussion. Year on Year (YoY) country’s exports registered a growth of 13.82% from $1.88 Billion to $2.14 Billion in the month of February whereas imports showed a decline of 1.71% i.e. from $4.144 Billion to $4.073 Billion.

Apart from regular international business activities Pakistan is also focusing on alternative ways for International Trade with US sanctioned Iran

It means country’s BoT improved 14.61% i.e. from $2.26 Billion to $1.93 Billion in the month of February. Month on Month (MoM) BoT witnessed improvement of 10.43%i.e. from $2.16 billion in January 2020 to $1.93 billion in February 2020. In this regard PM stated that Pakistan is moving on the road to development where stable rupee, 73% decrease in CAD, growing exports and accelerated development spending leading the country to right direction. PM Advisor for Commerce, Industry and Investment, Abdul Razzaq Dawood stated that the rise in exports is another sign of improvement in Economic activities.

He further stated that a comprehensive policy is being formulated for sugar, cotton, agriculture products and exports where it is focused to boost exports of value added products in the agriculture sector. Advisor revealed that in addition to facilitating Textile industry for encouraging exports Government is taking keen interest in the export of information technology and software.

On the other hand outbreak of novel Coronavirus is ready to affect government’s efforts towards increasing pace of export based economic development including tourism exports. According to a UN body International tourist arrivals to drop 3% due to the fear. This will lead to an estimated loss of $30 – $50 Billion in international tourism receipts. Asian Development Bank (ADB) released a study where it quantifies the impact of COVID-19 on Asian trade with certain projected scenarios.

It studies the impact on various sectors of the continent including but not limited to agriculture, mining and quarrying, business, trade, public services, hotels and restaurants and other personal services, light/heavy manufacturing utilities, and construction and transport services. The range of scenarios determined in the analysis suggests a global impact in the range of $77 billion to $347 billion, or 0.1 percent to 0.4 percent of GDP. In best case scenario, the impact on Pakistan would be limited to a $ 16.4 Million.

However, if the outbreak in China is more widespread and last longer, with travel bans and precautionary measures, the impact on Pakistan would be around $4.95 Billion besides loss of 0.9 million employment.

Despite of virus fear, government is determined to increase business activities in the country. For said reason PM ordered relevant departments to put all efforts for ease of doing business in the country. In this regard Mr Asad Umer is given task to speed up establishment of Special Economic Zones (SEZs) and related laws to facilitate business community with favourable environment to generate more economic activity in the country. Resultantly, 7 SEZs to be established in Balochistan, Sindh, Khyber Pakhtunkhwa and Punjab provinces. The meeting was told that after approval of law for the SEZs in 2012, only seven economic zones were set up in the country till 2018, while the present government had notified six new economic zones in one year (2019).

The prime minister stressed the relevant team for utilizing the tourism potential of Gilgit Baltistan and the establishment of special economic zones there.Further to such incentives PM has hinted business community for decrease in interest rate which is the need of the day for allowing businesses to borrow funds on lesser finance cost especially when the virus fear has increased the input cost of supplies as China shut down.

On international side of economic situation, luckily, price war sentiments within Oil Producing Countries (OEPC), making oil prices trending downward which will benefit Pakistan. UK recently planned to double the size of the British High Commission trade team and further support economic development and technical expertise in Pakistan where bilateral trade between the countries currently stands at £3.3 Billion in total i.e. $4.3 Billion. On the other side of BREXIT, Pakistan has been extended GSP status by Europe according to Ministry of Commerce.

On the economic front, Pakistan remained a significant beneficiary of the benefits availed by 9 GSP Plus beneficiary countries. Out of total export of 6.739 Billion Euros of Pakistan to EU in 2018, our exports worth 5.885 Billion Euro availed tariff concessions. Since the grant of GSP Plus in 2014, Pakistan’s exports to the European Union have enhanced from 4.538 Billion Euros in 2013 to 7.492 Billion Euros in 2019, registering an increase of 65% mostly in Textile sector. Apart from regular international business activities Pakistan is also focusing on alternative ways for International Trade with US sanctioned Iran. For this purpose Pakistan’s embassy in Tehran has proposed some suggestions to the Ministry of Commerce as to how trade relations with Iran can be possible.

This includes establishing credible banking channel, free trade agreement and trade mechanism to settle outstanding payments with the sale price of electricity being imported by Pakistan. Please note that Iran is willing to import rice and other commodities from Pakistan against cost of electricity being imported from Iran in Balochistan. Pakistan is keenly looking into this side of untapped international trade and intends to get one off waivers from USA to trade with Iran as other countries are doing, especially when US-Pakistan bilateral relations are getting better.

The writer is Corporate Finance Specialist and a Chartered Banker (UK)