COVID-19 a chance to initiate structural reforms in Pakistan: WB
LAHORE (INP): The World Bank has said that Pakistan is not immune to the economic shock caused by the coronavirus and its exports have been hit hard, as the country recorded $1.39 billion in merchandise exports in May 2020, showing 34 percent drop with respect to the same period in 2019.
The World Bank Senior Economist Gonzalo Varela, in an online interaction session with the members of APBF, observed that every crisis presents an opportunity, whereas the COVID-19 provided the world and Pakistan an opportunity to initiate the structural reforms in institutions. The All Pakistan Business Forum had arranged this meeting with him to discuss the current economic situation of Pakistan and recommended some key steps with a view to revive and sustain the economic growth in post-corona slowdown.
The World Bank Senior Economist said that the short-term global trade prospects don’t offer room for optimism as experts forecast contractions in exports in the months ahead. At such a time, exports are crucial to Pakistan’s recovery because they are labor-intensive and provide plenty of good jobs for Pakistanis. He said that global and regional trade integration offers Pakistan tremendous potential in driving and sustaining growth and poverty reduction.
He suggested the need for protecting the exporters through smart export promotion, whereas structured reforms were going to be crucial for recovery. He said that the government needs to take actions to help speed up its export recovery by making it competitive by lifting barriers to exports – including easing up import restrictions. Firms need to import to export successfully.
Speaking on the occasion, President APBF Syed Maaz Mahmood appreciated the debt relief measures taken by the G20 countries, IMF and the World Bank for the developing countries including Pakistan. He urged the multilateral development partners, including WB, to play their due role by investing in social sector rather than mega development projects only, which would help in bringing the focus of member governments back to social sector development. He said Pakistan’s health care system was not equipped to handle such emergencies, whereas WB was working with the government to help enhance health capacity to respond to the challenge effectively, which is appreciable.
Syed Maaz Mahmood observed the initial relief packages of $1.4 billion by the IMF and $1 billion by the World Bank would have substantial impact and provide much needed fiscal space to Pakistan which should be used for the wellbeing and welfare of the public.
While noting that the Covid-19 pandemic has posed unprecedented health and economic challenges, he underlined that a global recession might become worse than the Great Depression. A global pandemic cannot be contained without strong, coordinated and well-crafted global response, he stressed.
On this occasion, APBF national and provincial board members called for announcing special incentives for cash-strapped SMEs, which represent more than 90% of around 3.2 million business enterprises in Pakistan.
They suggested the significant cut in import duties, announcing zero tariff for basic industrial raw materials which is not available locally and waiver of sales tax, income tax and additional income taxes. They asked the government to simplify the complicated system of obtaining loans from the banks for the SMEs, besides sizable reduction in fuel prices, major cut in key policy rate to at least 4%, regionally competitive energy rates and quick refunds payment.
The government should adopt a procedure to extend interest-free finance to SMEs to meet the running operations, including salaries, building rent and utility bills etc.