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CORONAVIRUS - The situation in Pakistan

1. General situation

Following a new spike in the COVID-19 figures, the federal government has placed 24 major cities, including Islamabad, under new restrictions till 15 September; markets to close at 8:00 pm, 50% work from home for all public and private offices, indoor dinning banned.

Sind provincial government has also imposed a 10-day partial lockdown. The lockdown covers closure of markets, government offices, cancellation of exams. However essential business; like grocery stores, food, fuel stations, banks will remain open.

Inbound international flight operation is still reduced by 20% with rapid antigen testing upon arrival imposed, in some cases followed by self-isolation. Larger social, religious, political gatherings are still banned.

Vaccination:

Pakistan has passed the 59 million mark for total COVID-19 vaccine doses administered of which 18 million persons are fully vaccinated, 45 million have been administered the first dose. The government has announced booster shots for overseas travelers to be administered at a cost of PKR 1,270.

2. Exit strategy

Asian Development Bank has approved a loan of $500 million to Pakistan to procure 39.8 million doses of COVID-19 vaccines and related material. The government can claim $150 million of the load on account of previous purchases and the remaining amount will be available for future procurements.

Credit disbursement to the agriculture sector increased by 12% on year-on-year basis to PKR 1.37 trillion in FY21. According to the state bank of Pakistan, 49 financial institutions managed to achieve 91% of their assigned credit target of PKR 1.5 trillion for the year.

3. Economy

Pakistan received a total of $1.8 billion from expatriate Pakistanis since the launch of RDA (Roshan Digital Account) in the first 10 months if its launch launched by the State Bank of Pakistan in September 2020. Two thirds of this inflow ($1.28 billion) have been invested in the Naya Pakistan Saving Certificates issued by the government. Pakistan received the 3rd largest overseas workers remittance amounting to $2.71 billion in July 2021. July was the 14th successive month in which overseas remittances remained above $2 billion. The workers remittances surged by a record $29.4 billion in FY21 compared to the previous record of $23.1 billion in FY20. Major contributors were Saudi Arabia ($641 million), UAE ($531 million), UK ($393 million) and USA ($312 million).

The ministry of finance has announced major incentive for the IT and telecom sector including a PKR 10 billion fund to cash awards to IT companies against their exports and offer of 5% rebate on IT exports.

Following Pakistan Telecommunication Authority’s Mobile Device Manufacturing policy, local manufacturing of mobile devices (12.27 million including 4.87 million 4G smartphones) has surpassed imports which were recorded at 8.29 million during the period Jan-July 2021.

Cement sales in Pakistan posted a growth of 35.98% as total domestic sales increased from 2.80 million tons in Aug 2020 to 3.81 million tons in Aug 2021.

Lakson Group signed an agreement with Air Arabia group to launch Fly Jinnah, Pakistan’s first low-cost airline serving domestic and international routes from Pakistan.

The number of cars sold in Pakistan soared by 114% to 24.918 units in July 2021 (compared to 11.659 units in July 2020) due to a decline in auto financing mark up and a reduction in car prices in the budget. During the last financial year car financing also increased by 46%.

Airlift a Pakistani startup has announced securing a series-B financing of $85 million by overseas financers. The financing is one of the largest technology startup investments in MENA region. The company is building a platform for consumers, drivers and SMEs to move consumer goods. While Pakistani startups received $77 million in funding in 2020, they managed to invite investment of around $228 million in 2021 till July.

Engro Corp has announced that it will enhance its investment in telecom infrastructure sector to PKR 21.5 billion through its subsidiaries EngroConnect and EnfraShare Ltd focusing on providing optic fiber infrastructure to its BTS mobile towers.

Imports June 2021

  • Power generation mach.          $325.3 M +18.4%  $274.7 M - June 2020
  • Palm oil                                 $271.3 M +98.6% $136.6 M - June 2020
  • Sugar                                     PKR 69 M + 56.82% - May 2021
  • Milk & Dairy products             $15.8 M +33.5% $11.9 M - June 2020
  • Iron & steel                             PKR 22.8 Bn (-)31.37% PKR 33.2 Bn - May 2021
  • Tires & Tubes                          PKR 5.3 Bn +52.66% PKR 3.4 Bn - May 2021
  • Tea                                        PKR 6.8 Bn (-)9.55% PKR 7.5 Bn - May 2021
  • Aircrafts, ships                       PKR 12.3 Bn +73.95% PKR 7.1 Bn - May 2021
  • Office machinery                    $44.5 M +17.4%  $37.9 M - June 2020
  • Wood & cork                          PKR 2.2 Bn +36.67% PKR 1.6 Bn - May 2021

Imports July 2021

  • Textile machinery                    $64.6 M (-)36.13% - June 2021
  • Mobile phones                        PKR 19 Bn(-)40.46% PKR 32 Bn - June 2021
  • LNG                                       $271.7 M +111.7% $128.3 M - July 2020

a. Economic impact

The current account deficit in Pakistan stayed at negative $773 million in July 2021 compared to a surplus of $583 million in the same month last year following increase in imports. However, this deficit was less than the deficit of $1.62 billion in June 2021.

b. Trade barriers

No new trade barriers imposed or lifted.

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c. Economic outlook

Pakistan has received a funding of $2.77 billion from the IMF as part of its program to boost global economy and supporting emerging and low-income countries in dealing with the mounting debt and COVID-19 crises. There is no loan return date and no conditions attached to this low interest loan which is not part of the ongoing IMF program for Pakistan.

According to a survey conducted by the Overseas Investors Chamber of Commerce and Industry the overall Business Confidence Score in Pakistan stands at +9%, an improvement of 59% from the previous (-)50% score in the survey conducted in 2020.

In view of Pakistan’s progressing economy and implementation of economic reforms, S&P Global Rating has given a B- (long term) & B (short term) rating with a ‘stable outlook’.

Power sector in Pakistan reported an all-time high level of generation and transmission of 24.467 MW in a single day in 13 August. The increased demand for power generation and consumption is attributed to a resurgence of activities in all the three major sectors, industry, agriculture and services.

The large-scale manufacturing sector grew at a 16-year high level of 14.85% in the fiscal year ending June 30 following the government’s pro-growth policies leading to expansion in food, textile, automobile and construction-related industries. This growth comes after a negative growth of 9.8% in July 19-June 20. Out of a total 15 subsectors 10 reported positive growth while remaining 5 subsectors posted negative growth. Significant production increase was posted in textiles, food, beverages, tobacco, coke and petroleum products, pharmaceuticals, chemicals, non-metallic minerals, automobiles, iron and steel, fertilizers and paper & board sectors.

Net FDI in various sectors in Pakistan like energy, telecom and banking slowed down to $89.9 million in July the 1st month of the current FY2021-22. The drop in the inflow of FDI was due to higher outward payment by local projects being run on foreign investments.

d. 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. Pakistani companies have started contacting this office with new trade leads which are being forwarded to FIT.

e. 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.

13 september 2021