May 2020



Amin Ahmed Updated May 27, 2020

ISLAMABAD: The Asian Infrastructure Investment Bank (AIIB) will provide budgetary support worth $500 million to Pakistan to mitigate the significant negative economic and social impacts caused by Covid-19, it was learnt here on Tuesday.

Supported under the ‘Covid-19 Crisis Recovery Facility’, the AIIB loan for the government’s health sector and counter-cyclical development expenditure programme will be co-financed by the Asian Development Bank (ADB) to effectively manage the coronavirus outbreak and reduce its immediate social and economic damages.

Under the financing plan for the programme, the AIIB will provide $500m, while the ADB loan will amount to $500m. The estimated loan closing date has been set for December 2021.

A report of the AIIB on the proposed loan said Covid-19 has significantly impacted Pakistan’s ability to continue with the ongoing economic recovery programme initiative and sustain high and inclusive growth.

The ADB estimates that both exports and remittances will decline by $2 billion during the fiscal year ending June 2020. Total revenue is expected to decline by almost $6bn and will contribute maximum to Pakistan higher fiscal deficit of two per cent during the fiscal year 2020. These impacts have already led to significant job losses — both in formal and informal sectors.

The AIIB says the government has acted quickly to approve a health sector and counter-cyclical development expenditure programme package of $7.2bn which consists of three broad areas to support: health, social safety net and economic stimulus measures.

Additionally, the government has also approved a comprehensive Covid-19 Strategic Preparedness and Response Plan including $595m in financing for priority activities. These expenditure allocations contain specific strategies for protecting the poor and vulnerable, including women; augmenting the health sector capacity and supplies; and protecting productive sectors and small businesses from economic downturn.

AIIB’s financing under the ‘Covid-19 Active Response and Expenditure Support’ programme is provided through general budgetary support for the purpose of meeting gaps in Pakistan’s development financing needs.

Under this programme, it has been anticipated that the government, by December 2020, would import 10,000 additional ventilators and additional 10,000 Covid-19 protective kits for medical staff. The health ministry would establish centralised and age- and sex-disaggregated online coronavirus data base management system and one for each province.

The government would disburse cash assistance totaling $1.20bn to 3m daily wagers, of which at least 23pc are women. The government would disburse $0.44bn cash grants among 12m families under the ‘Kafalat Programme’, of which 4.5m would be new families added under the Benazir Income Support Programme.

Under the financial inclusion strategy, at least 6m female beneficiaries have the bank account. At least 25pc beneficiaries of the loan under the ‘Kamyab Jawan Programme’ are women entrepreneurs. The Federal Board Revenue would release pending Rs75bn tax refunds, and the State Bank of Pakistan would reduce the capital conversion buffer to 1.5pc to increase the size of loanable funds.

Published in Dawn, May 27th, 2020


BR Web Desk May 28, 2020

Asian Development Bank (ADB) is implementing the “Thal Canal Irrigation Investment Programme”, which will control Agri-Poverty in Punjab.

According to official sources, The Greater Thal Canal irrigation scheme was partially constructed by the government, while actually this project will support the construction of the remaining parts of the scheme and will provide support for on-farm development, with the financial assistance of the ADB.

Under new development of the project, three new branches of the Greater Thal Canal Irrigation System will be constructed and would be completed in next phase. The new plan would improve farmer’s on-farm and water management capacity, while strengthening institutional system for irrigation scheme management. The completion of the project will increase agricultural production in the project area.

According to sources, the proposed ADB policy focuses on principles, led by a new overarching principle of “clear, timely, and appropriate disclosure”. Other principles are largely unchanged from the PCP and are underpinned by a presumption in favour of disclosure with limited exceptions. Going forward, while the policy principles will remain in place until changed by the board, the implementation arrangements can be updated as needed-to reflect new products or processes, for example – with ADB Management approval.

This shift should ensure implementation clarity and disclosure predictability. Providing up-to-date guidelines on, which documents and when documents need to be routinely disclosed is intended to help ADB improve timeliness and policy effectiveness.

With regard to disclosure of independent evaluation reports, the implementation arrangements reflect the current practice of disclosure of completed reports or other arrangements as may be required in any future Board-approved policy governing ADB’s Independent Evaluation Department.

Furthermore, other proposed changes from the PCP include the removal of background information sections, which had become outdated, and ADB’s public communications section. ADB’s public communications approach describes the bank’s institutional communications practices.

Copyright Business Recorder, 2020


By Our Staff Reporter | 5/31/2020

ISLAMABAD: The World Bank on Saturday agreed to join hands with the government to strengthen disaster resilience and ecosystem restoration efforts through more reliable and timely weather forecasting and improved disaster-risk management services.

The assistance will also help Pakistan tackle growing environmental challenges, the climate change ministry`s focal person Muhammad Saleem told Dawn.

`The World Bank conveyed its willingness to the government of Pakistan to fund an ambitious five-year $188 million `Pakistan Hydro met and Ecosystem Restoration Services (PHERS)` project.

The project will conclude in 2024-25,` he said while sharing details of the bilateral partnership.

He said that the Prime Minister`s Adviser on Climate Change Malik Amin Aslam and World Bank Country Director to Pakistan Illango Patchamuthu will sign an agreement on June 1 at the climate change ministry during a ceremony.

The ceremony would be attended, among others, by top key officials of the ministry, Economic Affairs Division, Aviation Division, chief executive officer of the National Disaster Risk Management Fund Pakistan, Pakistan Meteorological Department and National Disaster Management Authority, the focal person said.

Spelling out more details, he said that the project would be implemented through the National Disaster Risk Management Fund (NDRMF), and managed by the climate change ministry.

Explaining about components, Mr Saleem told Dawn that the project was split into two components, which include hydro-meteorological and climate service and disaster risk management.

The climate change official remarked that Pakistan had gained credible and proven experience by undertaking a much wider eco-system restoration initiative by successfully implementing a world acclaimed five-year Billion Tree Tsunami project. Now through implementation of the upscale initiative `10 Billion Tree Tsunami Programme`, which aims to restore Pakistan`s green cover and protect wildlife, their habitats and conserve biodiversity ecosystems and rapidly depleting natural resources such as land and water.

`However, the new ambitious project `Pakistan Hydromet and Ecosystem Restoration Services` to be implemented from this year in partnership with the World Bank and various government entities is actually a plan of actions. It builds on evidence and experience of the eco-system restoration gained as a part of the UN Decade for Eco-System Restoration (20202030) programme,` Mr Saleem said.



The Newspaper’s Staff Reporter Updated May 20, 2020

ISLAMABAD: The Asian Development Bank (ADB) has approved a $300 million emergency assistance loan to strengthen Pakistan’s public health response to the coronavirus pandemic and help meet basic needs of vulnerable and poor segments of society.

The project will support purchase of medical supplies and personal protective equipment (PPE) for hospitals and their frontline health workers, upgrading of medical facilities and training of health workers.

The project also involves purchase of vehicles to strengthen rescue capacity in remote border areas and improve Covid-19 awareness among marginal communities with limited television or internet connectivity.

The project will provide cash assistance for directly benefiting women of poor households through the government’s Ehsaas Emergency Cash Assistance Package, launched in response to the Covid-19 pandemic. The government’s cash assistance package is delivered through its Ehsaas Kafaalat social protection and welfare programme.

“These payments are designed to meet the basic food needs and necessary living expenses of poor and vulnerable women and families that are the bedrock of Pakistani society,” said Zheng Wu, ADB project administration unit head and co-team leader of the project.

He said unconditional cash transfers helped improve nutritional intake of poor households and boosted women’s economic empowerment.

ADB Vice President Shixn Chen said the financing through the project would fast-track the ADB’s assistance to strengthen Pakistan’s public health capabilities, provide immediate support to vulnerable women and their families and facilitate knowledge-sharing with Pakistan’s neighbours and other countries in the Central Asia Regional Economic Cooperation region.

“The Covid-19 pandemic is having a significant detrimental impact on the health and economic prospects of the people of Pakistan,” Mr Chen said. This project would build Pakistan’s capacity to cope with the Covid-19 pandemic and other health emergencies.

The government of Norway has contributed $5.28m in grant proceeds for Pakistan’s Covid-19 response, which will be administered by the ADB.

Last month, the ADB reallocated $30m from the National Disaster Risk Management Fund (NDRMF) Project and the NDRMF board of directors allocated an additional $20m from the interest earned from the Endowment Fund capitalised under the project to procure medical equipment to strengthen hospitals and other medical facilities.

In March, the ADB approved $2.5m in grants to help Pakistan purchase PPE and other medical supplies.

On April 13, the ADB tripled to $20bn its initial package to address the immediate needs of its developing member countries, including Pakistan, as they respond to the Covid-19 pandemic. The ADB also approved measures to streamline its operations for quicker and more flexible delivery of assistance.

Published in Dawn, May 20th, 2020


Amin Ahmed Updated May 24, 2020

ISLAMABAD: The World Bank will provide financing worth $200 million for a project of Khyber Pakhtunkhwa to improve the availability, utilisation and quality of primary healthcare and elementary education services in selected districts of the province.

The financing from the International Develop­ment Association (IDA) involves $137.50m as soft loan and $62.50m as grant assistance.

The project will target four districts: Peshawar, Nowshera, Swabi and Haripur, which cover close to a quarter of the provincial population, and host two-thirds of the Afghan refugee population.

Under the project, the delivery of quality primary health care services will be strengthened by contributing to improved efficiency and resilience of the health system in the four districts, including supporting those districts dealing with the Covid-19 pandemic.

An important element of the project is to improve availability and quality of educational opportunities to all children, especially refugees and girls, in selected refugee hosting districts of Khyber Pakhtunkhwa. The proposed interventions would benefit both in-and out of-school children and take into account the need to cater to for the current school disruptions resulting from Covid-19.

Specific attention is required for girls, given the province’s large gender gap in education, and for refugees as a core vulnerable group. Districts with the largest concentration of refugees tend to lag behind in human development outcomes.

On average in such districts, children complete fewer than five years of schooling and one in five children are not receiving full immunisation.

Female refugees face considerable constraints in accessing education and employment.

Published in Dawn, May 24th, 2020


The World Bank will provide a loan of $75 million for Pensions Reform Project.

According to the concept paper of the project, the civil pension expenditure has been risen exponentially during the last three decades which poses a challenge to the government that needed to be addressed.

Other governments facing similar situations have established various pension systems like the Defined Contribution Scheme (DCS), enabling the investments of pension contributions in funds operated under state laws and regulations to cater to the future needs.

To analyze the prevailing situation in Pakistan, the World Bank had extended technical assistance and submitted in December 2019 an option of Defined Contribution Scheme.

The report and in-house deliberations provide a starting point. To proceed into the matter the Finance Division will formulate a comprehensive pension plan and complete all necessary steps from inception to launch and operations of pension scheme after completion of the project. According to comments of technical section of the Planning Commission the project has been designed on the basis of World Bank’s report 2019.

The main objective of the proposed project is to prepare a comprehensive pension plan. The activities (i.e. Rs50 million for equipment and Rs20 million for local/ foreign training/experts) proposed under the project do not support the project objectives. The sponsors may align the project activities with its objectives.

Copyright Business Recorder, 2020



The Newspaper’s Staff Reporter May 12, 2020

LAHORE: Chief Minister Usman Buzdar on Monday received a flight carrying Rs100 million worth personal protection equipment (PPE) at Lahore Airport. The PPE articles have been donated by Chinese provinces Shandong, Jiangsu and Ningxia to help fight the coronavirus pandemic in Punjab.

The chief minister said the donation reflected strong Pakistan-China brotherly relations, adding that China had always helped the Pakistani nation in every hour of trial.

Donation include protective suits, N-95 and surgical masks, gloves and disposable medical protectors for medical professionals and janitorial staff engaged in the battle against coronavirus. Chinese Consul General Long Dingbing said that Pakistan was a trustworthy friend of China.

Published in Dawn, May 12th, 2020


Khaleeq Kiani Updated May 12, 2020

ISLAMABAD: The government on Monday said that Pakistan’s $1.8bn debt servicing to G20 countries till Dec­ember was currently under process of rescheduling and it was not seeking rescheduling of any commercial loan.

The Economic Coordination Committee (ECC) of the Cabinet authorised the Ministry of Economic Affairs on April 17 to hold talks with representatives of G20 countries for the debt relief they had announced for the poor countries.

The ECC had also asked the ministry of economic affairs to formally hold talks with 11 bilateral creditors for suspension of bilateral debt.

The ECC had also advised the economic affairs ministry to get back to the ECC after holding talks with bilateral creditors for formal approval of debt rescheduling agreements.

The overall debt relief would mean suspension of $1.8bn payable by Pakistan to 11 countries during May this year to June next year, both in the shape of the principal amount of the loan and its interest. These amounts would then be built into the remaining repayment schedule.

Pakistan’s total debt payable to these nations stands at about $20.7bn under 155 loans. Pakistan does not have any loan from the remaining nine members of the G20 countries. The meeting was informed that about $415 million, including $320 million as principal amount and $95.3 million as interest, was due to be paid in May and June this year.

Likewise, an amount of $1.380bn, including the principal amount of $1.178bn, will become payable between July and December during this period. As such, the total debt payable between now and December this stands at $1.795bn, including $1.409bn as principal amount and $386 million as interest on the loan.

The total debt to be paid by Pakistan to 11 bilateral lenders between May 2020 and June 2021 currently stands at $2.580bn. The biggest amount payable by Pakistan during this period is $625 million to Saudi Arabia, followed by $615 million to China and $578 million to Japan. Also, about $281 million is due to be paid to France, $193 million to the US and $148 million to Germany. Other debt payable during the period includes $73 million to Korea, $34.5 million to Canada, $21 million to Russia, $9 million to Italy and $1.32 million to the UK.

In this context, ambassadors of Germany and France Bernhard Stephan Schla­gheck and Dr Marc Barety and Economic Counselor Mrs Anais Boitiere met Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh and discussed details of the debt rescheduling offered by G20 countries and the need for any further loans, a finance ministry statement said.

The adviser told the diplomats that Pakistan’s firm stance in favour of debt rescheduling drive at the G20 forum was based on the belief that poorer countries genuinely required this assistance though Pakistan specifically had benefited lesser from the relief.

He told the ambassadors that Pakistan was not seeking any commercial loan rescheduling till now. He also briefed them on the overall picture of the country’s economy amid the Coronavirus pandemic and its future impact on the overall progress of the economy.

He said that before the pandemic, Pakistan was successfully able to control its current account deficit and was expecting a growth rate of 3pc during the ongoing financial year after observing strict financial discipline. However, after the outbreak of the Covid-19 the growth projections had become difficult to realise and it would now remain between -1pc and -1.5pc.

The adviser said that the finance division would adhere to requirements of the Debt Limitation Act before planning to take up additional loans as most of the loans would be for the purpose of clearing old debt.

Published in Dawn, May 12th, 2020


By Our Correspondent Published: May 15, 2020

ISLAMABAD: The International Monetary Fund (IMF) would continue to cooperate with Pakistan for sustainable economic growth in future, said IMF Resident Representative Teresa Daban Sanchez.

In a meeting with Federal Minister for Economic Affairs Makhdoom Khusro Bakhtiar on Thursday, the two sides exchanged views on the looming global economic crisis, negative impact on communities due to the coronavirus pandemic and cumulative global response to combat the Covid-19 shock. The minister praised the IMF’s support of $1.4 billion under the Rapid Financing Instrument to cushion the socio-economic impact of the Covid-19 outbreak.

He highlighted that the government and IMF were working together for much-needed structural reforms for fiscal consolidation and long-term sustainable growth.

Bakhtiar expressed hope that the IMF and Pakistan would collaborate to mitigate the impact of the pandemic on a regular basis and would address the emerging situation while keeping focus on social safety nets for the vulnerable section of society to navigate through the crucial time.

Published in The Express Tribune, May 15th, 2020.


Amin Ahmed Updated May 17, 2020

ISLAMABAD: The Asian Development Bank (ADB) will provide project preparation support for schemes aimed at upgrading roads in and improving regional connectivity among Punjab, Sindh and Khyber Pakhtunkhwa.

Project identification and preliminary technical reviews are currently being carried out with either ongoing loan proceeds of the provincial government’s own resources. The federal government has cleared the concept papers for the ensuing projects, which ADB has already included in the Country Operations Business Plan (2020-22) for Pakistan.

According to details, the transaction technical assistance facility will provide project preparation support to a series of ensuing projects comprising Punjab provincial highway project; Khyber Pakhtunkhwa rural development project; and the second phase of Sindh provincial road improvement project. All projects aim to rehabilitate or upgrade existing provincial roads or rural roads while improving regional connectivity with other provinces.

An ADB document prepared for the project says the technical assistance facility is considered complex, because the loan amount for an ensuing project may exceed $200 million. The technical assistance facility is estimated to cost $1.6m, of which $1.5m will be financed on a grant basis by ADB’s technical assistance special fund.

Despite the high reliance on road transport, the quality and capacity of the road infrastructure severely constrains free and safe traffic flow. While the quality of the national highways has improved considerably from continuous capital spending such as China-Pakistan Economic Corridor (CPEC) programme and better road asset management, the overall condition remains below the target to eliminate those roads with condition of poor and very poor — only 11 per cent of national highways are assessed to be in ‘good’ and 67 per cent in ‘fair’ condition. This is partly due to aging road and bridge infrastructure.

Published in Dawn, May 17th, 2020



By APP Published: May 4, 2020

ISLAMABAD: The World Bank (WB) has said that it has prepared a $247.5 million programme to support Pakistan’s frontline healthcare staff and those whose lives have been affected by the novel coronavirus pandemic, which has aggravated the human and economic sufferings across the globe.

According to an article published by the bank, “The WB’s Pakistan team stepped up to handle the challenge by preparing the $200 million Pandemic Response Effectiveness in Pakistan (PREP) project, supported by an additional $47.5 million from our existing projects.”

The WB further stated in the article that PREP was a uniquely nimble project that progressed from inception to implementation in just 10 days.

“Processes that usually take 10 months or more, such as opening designated accounts, were greatly accelerated. As of April 23, the project has disbursed $69.8 million to enable an early response to the emergency. This was made possible because of the close working relationship between the bank and the government, and an exemplary collaboration across a team spanning multiple sectors and time zones.”

It said that the WB’s support had already helped those people whose lives had been affected by the emergency coronavirus-induced lockdown.

Besides, the project provided personal protective equipment (PPE) – masks, gloves, protective suits, gowns, coveralls, shoe covers, goggles and face shields — to doctors and paramedics in order to protect them as they had a high risk of infection.

“The first consignment of PPE has already been delivered,” it stated.

Additionally, PREP would help in establishing quarantine facilities in collaboration with public and private hospitals and would supply diagnostic test kits, ventilators, and other essential equipment.

It will also strengthen laboratory capacity and train staff to enhance the country’s detection capacity.

Turning this crisis into an opportunity for revolutionising the education and learning agenda through technology, the Pakistan government, with support from the PREP, has launched the Teleschool initiative.

“This platform is a dedicated TV channel operating between 8am and 6pm, with educational content for students (Grades I to XII), to compensate for school closures due to the lockdown,” stated the article.



Pakistan has been able to get access recently to the IMF’s Rapid Financing Facility in light of the adverse impact of the Covid-19 on the ‘lives and livelihoods’ of the people in the country. This quick support from the IMF must be appreciated. The amount received is $1.4 billion, equivalent to 50 percent of the SDR quota of Pakistan. It can also be used in the form of budgetary support.

The inflow from the IMF has partly compensated for the large and very fast outflow of ‘hot money’. The amount received in the form of investment in short-term treasury bills was over $3.6 billion. By the end of April, almost $2.9 billion had exited from Pakistan.

The consequence had been a visible dip in the foreign exchange reserves from $12.8 billion at the end of February 2020 to $10.9 billion by the middle of April 2020. Following the receipt of the IMF loan, reserves are back to $12.1 billion. The rupee which had depreciated by almost 9 percent in the immediate aftermath of the epidemic has recovered most of its lost value.

However, there remains some lack of clarity about the status of the program with the IMF of over $6 billion under the Extended Fund Facility (EFF). The IMF Executive Board was expected to review the case for release of the second tranche linked to the successful completion of the Second Review. But this has not happened and the EFF to Pakistan is effectively in a state of suspension.

The result of this suspension is that there will be no release of the second and third tranches until after June 2020, probably after the presentation of the Federal Budget for 2020-21. Therefore, in effect, Pakistan has received only approximately $500 million extra from the IMF up to June 2020, as each tranche is of $450 million.

The IMF Staff have prepared a report on the request for purchase under the Rapid Financing Instrument along with a statement by the Executive Director for Pakistan. This statement highlights the fact that ‘the economic situation in Pakistan has changed dramatically and the external and fiscal position of the country has come under stress. Therefore, while the authorities remain committed to the policies and reform agenda agreed under the EFF, the sudden and massive impact of the pandemic has understandably shifted their near-term priorities more towards combating the pandemic’. The statement also recognizes the urgent need to increase public spending to contain the outbreak and support the economy.

The Staff Report also contains projections of the likely economic outcome in 2019-20 and the medium-term projections up to 2024-25. This includes the projections of the macroeconomic framework, balance of payments, general Government budget and the monetary survey.

The primary objective of this article is to assess these projections. Do they adequately reflect the negative macroeconomic impact of COVID-19 in the last quarter of 2019-20 and the consequential changes in the earlier projections for 2019-20 by the IMF? How do they capture the speed of recovery subsequently? These projections are important because they could become the basis for setting of future performance criteria following the resumption of the EFF.

The short-term projections for 2019-20 by the IMF Staff do partly reflect the large negative consequences of COVID-19. First, the GDP growth rate is likely to fall to a negative 1.5 percent in comparison to the original projection of a positive 2.4 percent. In effect, this implies that the GDP will fall massively in the last quarter of 2019-20 by over 13 percent. Second, the inflation rate projection has been reduced from the average of 11.8 to 11.3 percent for 2019-20. Third, a big drop is also seen in private investment.

However, the tendency towards optimism is visible in the balance of payments and budgetary projections for 2019-20. In particular, the issue is with the expected magnitude of the drop in exports and remittances in the last quarter of 2019-20. The anticipated drop in exports by the IMF staff is 11 percent. First indications are that it could even exceed 40 percent. Consequently, the current account deficit for the year could be higher by almost $1.8 billion.

Further, for reasons that are not clear, inflow of assistance to the Government in the financial account of the balance of payments is expected to go up from $2.3 billion in the fourth quarter of 2019-20 to over $11 billion, an increase of 379 percent. Some of it reflects the net additional inflow of $500 million from the IMF in the 4th quarter. However, at a time when inflows into developing countries are falling, the question is where are the large inflows to Pakistan going to come from?

The result is that the IMF staff projections indicate that at the end of June 2020 the foreign exchange reserves will be in a relatively comfortable position at over $11 billion, equivalent to a reserve cover of 2.7 months of imports. However, if exports fall more or inflow of assistance is lower, then Pakistan could be at a near crisis level with reserves below $8 billion, providing import cover of less than two months.

The same optimism has been displayed in the government budgetary projections. There is, of course, the recognition that the budgetary position would be significantly affected by the big contraction in the tax bases and the resulting loss of tax revenues in the last quarter of 2019-20. However, it is not clear if the fiscal and monetary implications of the existing and proposed relief interventions have been taken fully into account.

The total public expenditure is expected to be only 0.2 percent of the GDP higher than the original pre-Covid-19 projection. The level of national PSDP spending, in particular, is expected to be lower by Rs 484 billion. Federal development spending has been projected at Rs 488 billion when releases of over Rs 560 billion have already taken place. Further, grants and subsidies are expected to be higher by Rs 297 billion only when the budgetary impact of the relief interventions has been estimated by the IMF staff at almost Rs 500 billion. Therefore, the likelihood is that the budget deficit could approach 10 percent of the GDP in 2019-20 as compared to the IMF projection of 9.3 percent of the GDP.

The IMF Staff projections for 2020-21 are even more optimistic. They indicate a very sharp process of recovery in the economic growth process in the country, big moves towards stabilization of the economy and significant rise in foreign exchange reserves.

This picture of emerging trends is in sharp contrast to the perception of the economy of Pakistan being relatively more vulnerable to financial crisis. It also runs counter to global projections by multilateral agencies that negative economic growth, decline in world trade and high unemployment will persist till the end of 2020 and possibly even thereafter for some more time.

The first questionable projection is that the GDP growth will rise from a negative 1.5 percent in 2019-20 to a positive 2 percent in 2020-21. As highlighted above, the last quarter of 2019-20 is likely to witness negative GDP growth of over 13 percent. With the world economy in a state of recession, Pakistan’s exports are likely to remain depressed. Further, private investment will remain shy, both domestic and foreign, and private consumption spending constrained by the high level of unemployment. It is more likely that negative growth of the GDP will persist for at least the first two quarters of 2020-21 and that the GDP increase in 2020-21 could be near zero or even marginally negative.

The inflation rate has been projected at 8 percent in 2020-21. It has already fallen to 8.5 percent by April 2020. Further, there has been a big precipitate drop in domestic oil prices. The rate of inflation is likely to be significantly lower in 2020-21 also due to the overall depressed level of aggregate demand in the domestic economy (especially owing to a crippling of private investment and consumption) and continuation of low import prices. It will, therefore, not be surprising if the rate of inflation falls to between 5 and 6 percent in 2020-21.

The degree of optimism is even more pronounced in the balance of payments and government budget projections for 2020-21. First, exports are projected to increase by almost 5 percent despite the lack of buoyancy in world trade, and the private sector’s own estimates of the contraction of its exports. Exports of textiles, leather and products, sports goods, etc., are expected to continue declining by at least 40%, going by projections of orders and estimates of future capacity utilization.

Second, the IMF staff projection anticipates that remittances will stop falling sharply and stay, more or less, at the same level as in 2019-20. This will be despite the sharp decline in oil prices and the associated compression in spending on infrastructure projects or on the maintenance of existing setups (a significant number of Pakistanis have already lost their jobs in Saudi Arabia and the Gulf states).

Third, foreign direct investment is expected to rise by almost 30 percent in a highly uncertain environment. Overall, the current account deficit is projected to increase by only $2 billion but somehow the financial account inflow will rise by 17 percent and lead to an overall balance of payments surplus of $2.5 billion and with the resumption of the IMF EFF, foreign exchange reserves will jump to $15.6 billion, equivalent to 3.3 months of imports by June 2021. This will happen despite the drying up globally of outflows to developing countries and in the case of Pakistan an exponential increase in debt servicing liabilities next year, unless, of-course, there are large rollovers of the debt servicing obligations due in 2020-21.

The outlook for the Government budget of the IMF staff is also similarly sanguine. Tax revenues are expected to show unprecedented growth of 34 percent despite nominal GDP growth optimistically of 10 percent. This will imply additional taxation of Rs 800 billion in the forthcoming budget. Whatever residual life there is left in the economy will be crushed. No lessons are being learnt from the experience of over-targeting tax revenues in 2019-20 even prior to COVID-19.

Simultaneously, non-debt servicing related Federal current expenditure is projected to actually fall by 3 percent, contrary to the expectation of the IMF Executive Director. The interest rate on domestic debt is expected to remain high at close to 11 percent. Clearly, the IMF staff does not see any significant relief interventions, either on the fiscal or monetary side in 2020-21, not even in the initial months of the year. Consequently, the amount for grants and subsidies combined has been reduced by 18 percent in 2020-21.

Overall, the budget deficit is expected to fall by almost 3 percent of the GDP and the primary deficit by 2.5 percent of the GDP; seemingly even after accounting for the power sector obligations for capacity payments and 2019-20s unpaid liabilities pertaining to the circular debt which are overdue and need settlement. All the above projections by the IMF staff are clearly well beyond the realm of possibilities.

What could be the motivation for such projections which, more or less, completely ignore the potentially large and lingering negative impacts of the Covid-19? One possible explanation is that the projections have been consciously kept on the positive side to create the perception in the IMF Executive Board that Pakistan remains creditworthy and that the risk in approving emergency assistance to the country of $1.4 billion is not worrisome.

Also, the projections may have been made as a bargaining ploy to compel the Authorities in Pakistan to undertake strong and wide-ranging reforms even in a difficult economic environment to achieve ambitious targets as part of the Program under the EFF following its resumption.

The unfortunate consequence of these optimistic projections for 2019-20 and 2020-21 is that they may convince the international community and the multilateral agencies that Pakistan does not warrant any further special support for Covid-19 relief, post-relief stimulation or debt relief. This runs counter to the appeal by the Prime Minister that Pakistan needs sizeable debt write off or deferment of its external debt repayment commitments at this time.

(The writers are former Federal Minister and Governor of the SBP, respectively)

Copyright Business Recorder, 2020


By Shahbaz Rana Published: May 4, 2020

ISLAMABAD: Pakistan has formally requested members of G-20 nations for debt relief with a commitment of not contracting new non-concessional loans, except those allowed under the International Monetary Fund (IMF) and World Bank guidelines.

The formal requests were sent to individual countries on Friday under the G-20 Covid-19 Debt Service Suspension Initiative, a senior official of the economic affairs ministry confirmed to The Express Tribune on Monday.

The government has not mentioned the debt relief in the request letters, although it has assessed the cumulative relief quantum at $1.8 billion for May-December 2020 period.

Pakistan has also intimated to the IMF, the World Bank and the Paris Club about its decision to formally seek debt relief. Last month, the IMF’s Resident Representative to Pakistan Teresa Daban had said that Pakistan did not officially make any request to G-20 countries for debt relief.

Pakistan owes $20.7 billion to 11 members of the Group of 20 rich nations. Out of this sum, an amount of $1.8 billion would mature by December 2020, including the interest payments, according to the economic affairs ministry.

On April 15, the G-20 nations announced a freeze on debt repayments from 76 countries, including Pakistan, during May to December 2020 period, subject to the condition that each country would make a formal request.

However, one of the eligibility criteria were that the beneficiary country would not “contract new non-concessional debt during the suspension period, other than the agreements under this initiative or in compliance with limits agreed under the IMF Debt Limit Policy (DLP) or WBG policy on non-concessional borrowing”.

In these eight months, Pakistan will have to make $1.8 billion repayments to its 11 members. This includes $1.47 billion principal loans repayments and $323 million interest on the loans. Also, $613 million Saudi debt and $309 million Chinese debt will mature, according to the economic affairs ministry.

In this period, Pakistan is also required to return $23 million to Canada, $183 million to France, $99 million to Germany, $6 million to Italy, $373 million to Japan, $47 million to South Korean, $14 million to Russia, $1 million to UK and $128 million to the US.

Under an IMF condition, the $7.5 billion loans that the PTI government had secured from China, Saudi Arabia, United Arab Emirates and Qatar cannot be returned during the IMF programme period. These loans were secured only for one year to avoid default on international debt obligations but the IMF had put a condition that this money would be rolled over every year until the programme ends in 2022.

If the G-20 member countries accept the request, Pakistan will have four years period to return the amount, including one year of grace period.

Pakistan assured the G-20 members that it would not contract new non-concessional debt during the suspension period other than the agreements under the initiative or in compliance with the limits agreed under the IMF Debt Limit Policy or World Bank Group Policy on non-concessional lending.

An April-16, an IMF report had estimated Pakistan’s post-Covid-19 external financing requirements at $25.8 billion with a financing gap of $2 billion. For the next fiscal year, the IMF projected Pakistan’s gross financing requirements at $29.3 billion and a financing gap of $1.5 billion.

The IMF had approved $1.4 billion emergency loans, which largely bridged the projected financing gap but the amount fell short of the full needs. Pakistan’s exports and foreign remittances were projected to be affected by the “Great Lockdown”, which had put additional burden on the official foreign exchange reserves.

The IMF report stated that though Covid-19 shock had increased near-term risks, with strong policy implementation under the EFF and continued support by multilateral and official bilateral creditors, Pakistan’s debt remained sustainable over the medium-term.

The IMF had projected that Pakistan’s debt-to-GDP ratio would increase to 90% by June this year before slightly receding in next fiscal year. However, the World Bank showed further increase in debt-to-GDP ratio at 91.3% by June 2021.

The G-20 countries had announced the debt relief to help the poorest countries to use the created fiscal space to increase social, health or economic spending in response to the crisis. A monitoring system was expected to be put in place by the international financial institutions.

The debt relief will last till end of 2020 but the G-20 countries might consider a possible extension, taking into the account a report on the liquidity needs of eligible countries by the World Bank and the IMF.


Amin Ahmed Updated May 07, 2020

ISLAMABAD: The World Bank will assist Pakistan in developing a new model of non-formal education that it said would combine literacy, labour market skills and life skills development for uneducated and illiterate children, youth and young adults in selected districts of Punjab and Sindh, it’s learnt.

The government has been developing the new roadmap for the country’s education system under the new leadership since the summer of 2018. The education ministry at federal level and education departments at provincial levels have unanimously said that out-of-school children is one of the critical issues that needs to be addressed.

The proposed project will be built on the existing initiatives on out-of-school children, supported by development partners including Japan International Cooperation Agency (JICA), USAID, and Unicef, and it will be implemented in collaborative efforts with these agencies.

Despite the urgency of the issues, the federal and provincial governments’ interventions on non-formal education is limited. Due to the daunting challenges in the public education, the government’ emphasis of educational development is on improving the public education systems.

While the governments mainly aim to address out-of-school children by increasing access to and retention in public education, there are still service delivery gaps which results in out-of-school children. The proposed interventions are to fill in the gaps.

The project is also aligned with the international agenda including the Susta­inable Development Goals (SDGs).

The government’s priority on addressing out-of-school children has been aligned with the SDG targets and is supported by the development partners.

The project will offer Accelerated Learning Programmes (ALPs) to out-of-school children at primary school age (age eight to 10 years) and secondary school age (age 10-16 years) through a non-formal education model with the aim to facilitate mainstreaming of those children to the formal school system.

In Pakistan, primary schools accept new students at age five to seven years, and children at age eight and above typically find it difficult to enter formal primary schools.

To support those who miss the entry to primary schools, the ALP primary (ALP-P) has been developed including curricula, corresponding teaching and learning materials, and systems for training and assessment.

The programme has been approved in Punjab and Sindh provinces under Literacy Department (LD) and School Education and Literacy Department (SELD) respectively.

The project will conduct a rapid survey of out-of-school children and conduct enrollment and awareness campaigns in the villages.

The programme allows children to complete five years of the primary education with approximate 1,250 hours of learning, which usually take 24 to 36 months depending on the set up of Non-Formal Education (NFE) service delivery. Students will be able to sit in the class fifth School Leaving Examination upon the completion of the program and officially obtain a class fifth certificate.

Published in Dawn, May 7th, 2020


By TAHIR AMIN on May 8, 2020

The International Monetary Fund (IMF) has projected total government net debt at 78.3 percent of the GDP for 2020 against 75.2 percent in 2019 that is an increase of 3.1 percent of the GDP.

According to the IMF report, Fiscal Monitor’s statistical appendix, government revenue is projected at 14.3 percent of the GDP in 2020, and 15.8 percent in 2021, against 12.8 percent during the same period of 2019.

The fund has projected general government overall balance at -9.2 percent of the GDP for 2020, against -8.8 percent in 2019.

Further, the general government primary balance is projected at -2.7 percent for 2020, against -3.4 percent in 2019. The government expenditure is projected to increase to 23.5 percent of the GDP in 2020, and 22.3 percent in 20210, compared to 21.6 percent in 2019.

Copyright Business Recorder, 2020


Anwar Iqbal Updated May 09, 2020

WASHINGTON: Some debts were not sustainable and needed to be restructured, re-profiled or written off, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in an interview recorded earlier this week.

In this interview to ITV News, Ms Georgieva also urged governments to spend more money on health workers to protect the most vulnerable.

“There is a possibility that in some cases debt simply is not sustainable and therefore some action has to be taken either to re-profile or restructure or in some cases write off this debt,” she said.

Although G20 countries have promised some debt relief, a transcript of the interview, released by the IMF headquarters in Washington, indicated that Ms Georgieva believed the crisis required them to go further.

Imran has argued that heavy debt burdens are preventing countries from focusing on the challenge of saving people from pandemic as well as hunger

Last month, Prime Minister Imran Khan appealed to the leaders of rich countries, the UN secretary general and heads of financial institutions to give debt relief to developing countries like Pakistan so that they could combat the deadly Covid-19 in a better way.

The prime minister argued that heavy debt burdens were preventing some countries from focusing on the real challenge of saving their people from the deadly pandemic and hunger that extended lockdowns would trigger.

The IMF chief, while acknowledging the need to restructuring loans, also said the first priority was to combat the disease that has already killed hundreds of thousands and infected several millions across the globe.

“The only thing we ask countries is please spend more money for your doctors and nurses — and please, please use the money to protect the most vulnerable,” she said.

The interviewer, Julie Etchingham, noted that loans usually came with conditions — such as tightening public spending — that were difficult to implement during the Covid-19 crisis.

Ms Georgieva said she was aware of the risks ahead for the IMF. “We are looking to the transparency and accountability in countries. They themselves are coming up with commitments to audit the use of the funds we provide, but there are no strings attached,” she said.

The IMF chief said that more than 100 countries had reached out to them for help to fight the pandemic and 50+ requests were swiftly approved for a total of about $18 billion.

Asked to assess the scale of the crisis facing the global economy, Ms Georgieva did not mince her words. “It is the worst crisis since the Great Depression. But it is more than that because it is a combination of a health crisis and an economic shock,” she said. “And it is truly global.”

The IMF now has about $1 trillion dollars lending capacity — four times more than in the last financial crisis.

The IMF approved $1.386 billion of assistance for Pakistan under the Rapid Financing Instrument to address the economic impact of the Covid-19 shock.

Published in Dawn, May 9th, 2020



ISLAMABAD: The International Monetary Fund (IMF) has projected Pakistan’s gross financing need at 51.2 percent of the GDP in 2020. According to the IMF report Fiscal Monitor “Policies to Support People during the COVID-19 Pandemic,” the country’s debt to average maturity is estimated at 34.8 percent of the GDP in 2020. Further, an increase in government gross debt is projected by 1.9 percent to 85.4 percent of the GDP in 2020, against 83.5 percent in 2019.


Amin Ahmed Updated May 10, 2020

ISLAMABAD: The Asian Development Bank (ADB) under its ‘Supply Chain Finance Programme’ has dedicated $200 million to support companies that make and distribute medicines and other items needed to combat coronavirus in the developing member countries of the Bank.

The programme aims to stabilise the supply chain for products such as N95 marks, test kits, gloves, personal protective equipment (PPE) for healthcare providers, ventilators, hygiene items, and other critical goods.

The ADB assistance is targeted at channeling fund to manufacturers, their suppliers, and the distributors of critical goods through post-shipment post-acceptance finance, pre-shipment loans, and distributor financing.

Export bans of key materials have worsened the shortage of face masks in 22 economies, including Pakistan, Bangladesh, Canada, Czech Republic, Egypt, France, Germany, India, Indonesia, Iran, Japan, Jordan, Kazakhstan, Kenya, Malaysia, Poland, China, the Russian Federation, the Republic of Korea, Taipei, Thailand and Ukraine. The export bans are in place in these economies since March 18.

Pakistan among nations that faced shortage of masks due to ban on export

A $800m increase in ADB’s Trade Finance Programme will also be mobilised and along with the increase in capital comes flexibility to support domestic and cross-border trade in times of emergency. The programme is an effective crisis response vehicle because it has strong relationships with many banks, both inside developing Asia and globally, the latter particularly helpful to mobilise co-financing, involving private sector resources to leverage the impact of ADB’s direct support.

An ADB report says that surging demand, partly joined with panic buying, hoarding, and misuse of PPE amid the Covid-19 pandemic, is disrupting global supplies and putting lives at risk. Demand has surged, overwhelming global production capacity.

The dramatic rise in demand for surgical masks, goggles, gloves, and gowns has depleted stockpiles, prompted significant price increases, and led to production backlogs of 4 to 6 months in fulfilling orders.

The most significant challenge is to ensure that critical PPE products are sourced and allocated to frontline health workers and other responders in affected countries, especially those most vulnerable to the spread of coronavirus.

The global market for PPE in the health sector was estimated to be worth $2.5 billion in 2018. Gloves have the highest share of sales revenues at 25 per cent, followed by suits or coveralls at 22pc. Face masks and hats came in third with a share of 14pc.

By region, the United States had the largest market share (33pc), followed by Asia and the Pacific (28pc), and Europe (22pc) in 2018.

The PPE supply chain has not been properly functioning to meet a surge in demand due to the constraints in production and logistics. Prices of PPE products have risen dramatically since the beginning of the Covid-19 outbreak: a six-fold increase for surgical masks; threefold for respirators; and a doubling in the price of gowns.

Among the major sources of the identified backlogs in the production and distribution of PPE, with a focus on face masks, are transport and shipping constraints caused by roadblocks and quarantine measures, and lower availability of transportation and freight containers, hoarding, profiteering, and limited workforce capacity due to illness, also contribute to the shortage.

Published in Dawn, May 10th, 2020