ISLAMABAD: Pakistan has arranged about $4 billion additional financial assistance from multilateral lending and aid agencies to shore up foreign exchange reserves and budgetary support for fighting adverse impacts of the coronavirus pandemic.
“We have made progress in mobilisation of additional funds,” said Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh, adding that discussions with the International Monetary Fund (IMF) were in progress for $1.4bn additional funds for fast track disbursements on same terms as the ongoing fund programme.
Leading a team of economic members of the federal cabinet at a news conference on Wednesday, the adviser put the total size of the emergency response and fiscal stimulus package announced by the prime minister at Rs1.24 trillion. He explained that it would take a couple of weeks to put in place a mechanism for some relief measures to reach targeted sectors without leakage of public money.
He announced abolition of the capital value tax on capital markets.
Financial assistance to help counter adverse impact of pandemic on economy
Replying to a question, he said Pakistan was not seeking additional funds from $50bn special fund created by the IMF for Covid-19 because it required a certain level of economic loss to be eligible for the emergency fund and Pakistan would hopefully not go to that extent. “Our priority is to secure commitment for additional funds for quick disbursement even if we do not qualify for the emergency fund”, he said.
Also, the government had asked the World Bank for $1bn assistance, including diversion of unutilised funds for other projects for early disbursement, he said. In addition, the Asian Development Bank would provide $350 million immediately and a request had been made for another $900m disbursement by June this year to meet emerging needs.
Minister for Economic Affairs Hammad Azhar explained that total additional flows from the ADB and the World Bank had been committed at $600m while there were unutilised funds for some projects or funds originally committed for projects that were moving slowly which would now be diverted to fast moving projects for early disbursements.
The minister said he also had begun talks with the Japan International Cooperation Agency and Department for International Development of the UK and other countries for rescue assistance as United Nations agencies engaged in loss assessment due to Covid-19. In the next phase, he said, the government would step up efforts with various lending agencies for financial assistance for budgetary support and economic support.
Dr Shaikh repeatedly evaded questions relating to estimates of overall economic losses to the country and as to what extent these losses could be minimised by injection of Rs1.24tr of public money.
However, he said the economic indicators were stabilising when unfortunately Covid-19 emerged, which would definitely have negative consequences given the weakening economies in the region and other countries where demand for Pakistani exports would suffer right at the time of nascent expansion of the country’s exports.
Likewise, the remittances from overseas Pakistanis had been rising for the last four months that would be affected to the extent of weakening economies and lockdowns in regions like the Middle East and Europe and countries like the UK and the US having major concentration of Pakistani diaspora.
Moreover, domestic commerce would be affected owing to lower economic activities and consequently tax collections would also be affected, the adviser said. In the given difficult circumstances, the federal government has come up with an economic response and expects the provinces to join hands given the constitutional roles and responsibilities.
Dr Shaikh said Prime Minister Imran Khan had come up with the country’s largest ever stimulus amounting to Rs1.24tr to mitigate the impact of Covid-19 on economic activity and vulnerable segments of society, but declined to say as to how much of its burden would be on the federal budget, saying spending in some areas was slow and would now be expedited to support the affected sections of society.
For example, he said the Benazir Income Support Programme (BISP) expenditure so far had amounted to about Rs50-60bn against an annual allocation of Rs192bn and now first priority would be to exhaust the allocation in full and then provide more funds if required. “You can say the expected savings to the government would now be converted into expenditure,” he said adding the number of BISP beneficiaries would increase by 7m to 12m for four months from its existing roll of 5m.
Finance Secretary Naveed Kamran Baloch said the government had strictly blocked supplementary grants which would have to be relaxed in the given circumstances, but it was not yet clear as to what extent the fiscal deficit limits might be breached as assessments were in progress.
Mr Shaikh divided the Rs1.24tr package into three broad categories, including Rs190bn emergency response, Rs570bn relief for people and Rs480bn support to business and economy.
He said the Rs190bn emergency response included Rs25bn allocations to the National Disaster Management Authority to meet health and emergency relief needs, Rs50bn for providing facilities and incentives to health workers and Rs100bn emergency fund for evolving needs. Another Rs15bn would be in the shape of elimination of all taxes (i.e. Customs Duty, GST, WHT) on 61 essential health machinery, equipment and food items.
He said the Rs570bn relief to citizens included Rs200bn to protect jobs and incomes of industrial and business labour and daily wage workers.
Asked about the mechanism, Dr Shaikh said a mechanism would be developed in consultation with business community and the provincial governments who would also put in their share over and above Rs200bn allocated by the Centre. The social security institutions and the Employees Old-age Benefit Institution would also be utilised for this purpose.
Another Rs150bn relief would be to vulnerable families through the BISP and expansion of Panahgah network, Rs70bn in the shape of reduction in petroleum prices, Rs50bn additional support to Utility Stores to ensure supply at affordable prices of key kitchen items like wheat, sugar, rice, cooking oil and pulses. Also, Rs100bn relief has been envisaged for electricity and gas consumers with less than 300 units monthly consumption and less than Rs2,000 gas bill, respectively.
Of the Rs480bn support to business and economy, he said, the exporters would be released their Rs100bn refunds, of which Rs30bn (Rs10bn each under GST, duty drawback, DLTL) would be disbursed by the end of current month. He said the State Bank of Pakistan with the consultation of relevant banks would put in place a mechanism to ensure 3-6 month deferment of principal and interest due to the entire business community.
Another Rs100bn relief would be in the shape of a gap in repayment of principal and interest and concessional loans to small and medium enterprises, cheaper fertiliser and other subsidies on agriculture. Moreover, Rs280bn will be separately used for procurement of 8.2m tonnes of wheat.
Published in Dawn, March 26th, 2020