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CORONAVIRUS - The situation in Pakistan
1. General situation
The COVID-19 situation in Pakistan is once again getting precarious. Since the last two weeks the daily average death rate is near 100/day and daily confirmed cases have been above 3500. While the national positivity rate is +9%, many large cities show much higher positivity rates (Gujranwala 32%, Multan 21%, Muzaffarabad 21%, Rawalpindi 19%, Peshawar 19%, Lahore 12%, Islamabad 10% & Faisalabad 10%). Major hospitals in larger cities are approaching full capacity.
2. Preventive measures
Following the recent rise in COVID incidence and death figures the government has announced imposition of social restrictions from 15 March including:
- Micro Smart Lockdowns in areas showing multiple positive cases imposed in larger cities
- All commercial markets, amusement parks to close by 18:00 pm (excl. essential food, pharmaceutical, medical, mechanical and technical services)
- All restaurants, community centers, marriage halls closed for indoor services (excl. home delivery, take-away)
- Cinemas closed – Face masks obligatory in public places
- 50% work from home policy imposed
- All sports, cultural and other events banned
- Large gatherings limited to less than 50 persons
- Schools closed.
Vaccination: Pakistan received a second lot of 0.5 Million doses of the Chinese SinoPharm COVID-19 vaccines on 18 March. The government has announced import of 3 million CanSino vaccines next month. This would be a bulk order and the vaccines would be formulated and packaged in Pakistan. The Government has capped the max retail price of COVID-19 vaccines imported by private sector at PKR 8,449/2 doses for Sputnik V (Russia) and PKR 4,225/single dose CanSino (China).
3. Exit strategy
The State Bank of Pakistan kept the interest rate unchanged at 7% while revising the economic growth forecast to 3% mainly due to the healthy recovery in the manufacturing sector. The Monetary Policy Committee of the SBP projected the inflation rate to remain around 9% during the current FY, well above the official target of 6.5%.
February 2021 saw imports growing by 11% to reach $4.62 Billion while exports declined by 3% to reach $2.07 Billion. Market analysts expect the imports to remain at $4.5 to 5 Billion and exports to stay at $2 Billion during the remaining 4 months of the current FY (March-June).
Imports Feb 2021
Product Imports Change Against
Construction Eqp. $13.3M (-)56.76% $30.8M in Feb 2020
Spices $17.8M (+)36.37% $13.7M in Feb 2020
Power Gen. Mach. $198.4M (+)39.7% $142M in Feb 2020
Palm oil $217.6M (+)19.9% $181.5M in Feb 20
LPG PKR 5Bln (-)31.7% PKR 7.3Bln Jan 21
Textile machinery $39.3M (+)13.8 % $35.6M in Feb 2020
Plastic materials PKR 31.8Bln (-)10.83% PKR 35.6Bln Jan 21
Aircrafts, ships, $50.1M (-) 544% $7.8M in Feb 2020
Office machinery $37.4M (+) 14.82% $32.6M in Feb 2020
The large-scale manufacturing sector grew by 7.9% in the 1st 7 months of the current FY, the 5th successive month when the sector showed a positive growth. The sectors showing positive growth are: textiles +2.6%, minerals +22.3%, fertilizers +6.7$, food & beverages +19.1%, chemicals +9%, automobiles +13%, pharmaceuticals +12.3%. Sectors posting negative growth are: iron & steel -1%, electronics -25%, leather -42%, engineering products -30% and wood -56%.
The Asian Development Bank has approved a loan of $300 Million to finance the construction of a 300-MW hydropower plant on the river Kunhar near Balakot city in the KPK Province. The government will invest around $175 Million in the project. A project co-financing loan of $280 Million from the Asian Infrastructure Investment Bank is also been requested.
a. Economic impact
FDI in various sectors in Pakistan (power, telecom and financial services) dropped by 30% to $1.3 Billion during the 1st 8 months of the current FY as global investors remained undecided amid the COVID-19 pandemic. The FDI remained at $1.85 Billion during the same period last year. Major investors are China ($493 Million), Netherlands ($117.8 Million) and Hong Kong ($106 Million) while the major sectors receiving FDI are power ($536 Million), financial services ($196 Million) and oil and gas ($142 Million).
Pakistan’s trade deficit widened by 98% to reach $3 Billion in March 2021. Exports stood at $2.35 Billion (highest in the last 3 months) with an increase of 29.3% or $531 Million. On the other hand, imports rose by 60% to a record $5.3 Billion in March 2021.
b. Trade barriers
No new trade barriers imposed or lifted.
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c. Economic outlook
As part of the $6 Billion assistance program to Pakistan, the IMF has approved the pending reviews of the country’s economy and the release of the third tranche of $500 Million which will bring the IMF’s total disbursement from the $6 Billion program to around $2 Billion. The IMF has already disbursed $1.45 Billion in the previous two tranches.
Foreign lenders disbursed over $7 Billion in loans during the 1st 8 months of the current FY, which is 12% higher than the same period last year. China remained the largest lender with $2.4 Billion. The Asian Development Bank provided $1.2 Billion and the World Bank disbursed $887 Million.
The Pakistan Rupee has emerged as the best performing currency in the world as it appreciated the most against the US$ in the past three months. The PKR maintained its upward trend against the US$ as it touched the two-year high at PKR 153.09 to a US$ following the approval of $1.3 Billion assistance including $600 Million for the Ehsaas program (poverty alleviation to counter the impact of COVID-19) by the World Bank. The PKR has recovered more than 9.1% since the last 7 months (from PKR 168.43/US$ in Aug 2020).
Pakistan borrowed $2.5 Billion through Eurobonds offering lucrative interest rates in the range of 6% for 5-year bonds, 7.735% for 10-year bonds and 8.875% for 30-year bonds. The country raised $1 Billion through 5-year bonds, $1 Billion through 10-year bonds and $500 Million through 30-year bonds.
The government signed an agreement with the Japanese government for the provision of a grant in aid valued at JY 4.1 Billion (PKR 6 Billion) for the improvement of water treatment and distribution system in Faisalabad.
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.
We are planning a Belgian Business Contact Day in Multan to be held in collaboration with the Multan Chamber of Commerce & Industry. The proposed date for the event is around end-March or later depending on the COVID-19 situation the country. An agreement has been reached with the MCCI to hold the event as soon as the restrictions on social gatherings are lifted.
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 email@example.com.