The year 2020 has been a one hell of ride for countries all over the globe. Though, COVID-19 created a history of panic, but the post-COVID-19 pandemic economic stabilization always remained the main concern of every global economy from the start.

In Pakistan, the same debate of after effects of lockdown and sluggish economic growth took over the main topic of COVID-19 health measures & statistics. Why it shouldn’t have, from the start of the corona virus outbreak in Pakistan, every political & economic analyst focused more on lower GDP growth rate expectations, record low business activity and fears of high unemployment rate. Cherry on the cake was when the Prime Minister Imran Khan also unveiled his apprehension in his press conferences that lockdown may trigger a bigger financial disaster mainly hitting daily wages labors of the country.

Now as the first quarter of new fiscal year has started, the country is already experiencing high inflation rate, lower business & consumer confidence and increased fuel prices. Now the big question remains valid; Is it still possible for Pakistan to achieve its economic growth rate of 2.1 percent?

The State Bank of Pakistan recently addressed the concern and linked with effective utilization of funds allocated in the budget for the Public Sector Development Programme (PSDP). In its 3rd quarterly (January-March) report for financial year 2020 the SBP stated, “Achieving the target of 2.1% growth in real GDP (gross domestic product) during FY21 will require a parallel improvement in underlying demand, this (GDP growth) requires effective utilisation of PSDP as per its allocation in the budget for FY21, while SBP (financing) schemes continue to support liquidity needs of both businesses and consumers.”

The central bank suggest PSDP spending should  be utilized in infrastructure programs such as dams and roads which will revive industrial output as the budgeted development spending and eventually will help in demand & supply of goods in country’s economy.

SBP in its report also fears that though global oil demand is  keeping international oil prices on the lower side, however, decision of large cut in oil supply by OPEC could result in high prices and higher inflation. SBP also expects inflation to remain within the range of 7-9 percent during financial year 2021 due to low domestic demand of oil.

Fiscal deficit is expected to be around 9 percent of Gross Domestic Product (GDP) for the 4th quarter of FY2020 as compared to 4 percent during March to July 2020. The gross revenue target of Rs 6.57 trillion for the financial year 2021 also seem unachievable due to low economic activity environment. According to SBP, major share of revenues are to be consumed by interest payments and pensions, for which government needs to have an efficient debt management system.

Umer Akhtar

Umer Akhtar

Umer Akhtar has an diverse experience in commercial & corporate banking. He has been associated with several websites covering NYSE and NASDAQ. Mr. Umer Akhtar holds a command over fundamental & technical analysis of stocks and capital markets.

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