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CORONAVIRUS - The situation in Pakistan

1. General situation

  • Tests: +/- 1.398.352
  • Confirmed cases: 231.818
  • Deaths: 4762
  • Recovered: 131.649

COVID19 situation is worsening in Pakistan. The country has crossed the 225,000 cases mark. During the past week, an average of 50+ deaths/day and 4,000+/- new cases/day has been registered. However, this slowdown in the numbers cannot be termed as a definitive “peak” in the spread of the COVID19. Domestic and international flights, intercity transport and reduced train service are operational. Due to safety concerns, the state airline has been banned from traveling to EU by the EU Aviation Safety Agency (EUASA). Commercial and industrial activity is resuming slowly. Selective lockdown has been imposed again in certain neighborhoods in various large cities according to emergence of new cases. 

2. Preventive measures

While the COVID19 numbers show a relative slowdown, it cannot be translated as the pandemic having reached a peak. Therefore, the government has imposed lockdown again in selected area in various large cities (LHR, ISB) according to emergence of new cases.

All travelers coming from abroad are screened at the airport & only those with symptoms are quarantined the rest are allowed to go home.

Wearing of facial masks in all public places has been made mandatory by the Federal government. Travelers, flying out of Pakistan are bound to present result of COVID19 test done in the last 96 hours before they can be issued tickets. 

A state-owned research organization has announced success in 100% local production of ventilators; the first lot would be made available to local hospitals shortly.

3. Exit strategy

The State Bank of Pakistan is envisaging the financing of two large scale housing projects in the public and private sector following the incentive scheme launched by the government to promote activities in the construction sector.

The government has increased the prices of various petroleum products. The increase ranges from 27% to 66% for different products.

Pakistan received a commercial loan of US$ 1.3 billion from China which allow the country to meet the foreign exchange target of US$ 12 billion by the end of the year 2019-20 as agreed to with the IMF. Last week the WB, ADB, AIIB disbursed a total of US$ 1.75 billion in fresh loans to Pakistan.

4. Economy

a. Economic impact

The fall in exports from Pakistan slowed down slightly in June 2020 when the decline was only -6.3% compared to -33.6% and -54% for the previous two months of the year. The slowdown of the decline is attributed to recovery in export orders mainly in textile and apparel sectors.

According to Dun & Bradstreet (D&B) Pakistan/Gallup Pakistan 54% of the respondents of a survey have either faced salary cuts or have been laid off by their employers in an attempt to reduce operational expenses.

The State Bank of Pakistan (SBP) has reported that Pakistan achieved current account surplus of $13 million in May compared to a deficit of $530 million in the previous month of April and $1 billion in May 2019. This surplus was primarily achieved due to the drop in exports (US$ 1.27 Billion) and import payments (US$ 2.8 Billion).

b. Trade barriers

Custom duties and other taxes have been waived on the import of the finished injectable Remdesivir used in the treatment of COVID19. The authorities have already exempted 61 medical and testing equipment used for COVID19 till 30 September 2020.

c. Measures for economic relaunch

The National Assembly passed and adopted the budgetary proposals for the FY 2020-21. The federal budget announced incentives for various sectors including duty exemptions, reductions or incentives applying to hot rolled coils, scrap, raw materials for beverage can manufacturing, life-saving drugs, inputs for ready-to-use supplementary foods, diagnostic kits for cancer and COVID19, raw materials for packaging industry, palm stearin for soap industry, cement, edible oils / oilseeds, accessories for textile industry, imported coal. In proposed and adopted amendments to the budget major incentives are announced for cement & construction sectors and import of electric vehicles.

According to the Federal Board of Revenues, sales tax exemptions on import of goods are valued at PKR 256 billion or 49.3% of total exemptions granted during 2020-21.

The Ministry of National Food Security has announced the “Agriculture Fiscal Package” including the following support measures offered to nearly 8.2 million farmers in Pakistan: subsidy on purchase of fertilizers, reduction in markup of agriculture loans, subsidy on seeds and certain pesticides, subsidy on local tractors.

The State Bank of Pakistan has cut the interest rate by 100 basis points to 7% to push up growth. This is the 5th rate cut since the spread of COVID19 in March. Since then the SBP has slashed the policy rates by 625 basis points from 13.25%.

Under the Export Enhancement Package, the Federal Government has released Pkr 6.2 Billion as cash subsidies to the textile sector.

d. Economic outlook

In a recent report the Federal Board of Revenue has announced a slight increase of almost 4% in federal revenues, rising from PKR 3.82 trillion in last fiscal year to PKR 3.96 trillion in 2019-20. The revised target for the year was PKR 3.90 trillion.

The Chinese group Shanghai Electric Power has renewed its offer to acquire 66.4% shares of the electric utility in Karachi, K-Electric.

The International Finance Corp (IFC) has announced an investment of PKR 500 million ($ 3.2 million) for the construction of low-cost affordable housing schemes in Pakistan through the Pakistan Mortgage Refinance Co Ltd (PMRC).

The Asian Development Bank has announced that Pakistan is likely to hold the economic growth to a projected 2% in the next fiscal year once the COVID19 impact subsides.

e. Short term opportunities

Flemish companies continue to write to the post in order to prepare the grounds for the opening of the market when the situation in Pakistan normalizes again.

f. Long term opportunities

Apart from the healthcare & medical and building & construction sectors, the long-term opportunities for Flemish countries would depend on the offer and expertise of Flanders region which are already well regarded in Pakistan (steel, metals, chemicals, raw materials, industrial machinery and goods, etc.)

5. Useful links

National Institute of Health (NIH COVID-19 Dashboard real-time): http://covid.gov.pk

6. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

6 juli 2020