IMF predicts Pakistan’s economy to recover in FY21

The International Monetary Fund (IMF) on Friday said that it expects Pakistan’s economy to recover in the next year mainly due to government-led interventions to reopen businesses and industries. 

It said “a gradual recovery is expected in FY 2021 as the economy reopens.”

The outlook was shared in the IMF’s report titled “Policy Actions Taken by Countries” in which it reviewed the actions taken by countries in response to the Covid-19 pandemic. The report notes that the short-to-medium term outlook for Pakistan remains bleak, however keeping in view the steps taken by the government, the economic recovery seems highly likely in next year. 

The IMF estimates Pakistan’s GDP growth at negative 0.4 per cent in FY2020. 

The report said the government in coordination with the provinces has been successful in lifting lockdowns without causing a major spike in coronavirus cases. It said the government has reopened low-risk retail sectors and industries under the standard operating procedures. 

“Since mid-April, the federal government, in coordination with provinces, has been gradually easing lockdown arrangements, by allowing ‘low-risk industries’ to restart operation and ‘small retail shops’ to reopen with newly developed Standard Operating Procedures,” said the IMF report.  

“In addition, restrictions on domestic and international movements have been lifted (e.g. domestic flights, train services, and international flights have resumed). Educational institutes are expected to restart on July 15. ‘Selective’ lockdown arrangements remain in place, through the closure of shops on weekends and the sealing of specific areas of high risk,” it adds while highlighting the PM Imran Khan’s strategy to impose smart lockdown in Covid-19 hotspots. 

PM Khan has said the decision to impose blanket lockdowns across the country was a poor strategy and the government should have started with smart lockdowns to help keep the economy afloat. 

Moreover, the IMF report says the Rs1.2 trillion package was also announced to help cushion the impact of economic slowdown on the small and medium businesses. The key measures of the relief package include cash transfers to 12 million at-risk families and 6.2m daily wage workers, lifting duties on products to allow imports of emergency health care equipment, fastening the pace of tax refunds to the exporters etc.