ADB projects broader economic recovery in Pakistan

Syed Umarullah HussainiWeb Editor

15th Sep, 2020. 11:44 am

The Asian Development Bank (ADB) has forecasted that the scaling up of the Ehsas Program will result in broader economic recovery of Pakistan.

According to the details, in its latest report, ADB said the COVID-19 impact will subside by the end of 2020—the end of the second quarter of FY2021—allowing global conditions to normalize and economic sentiment to improve.

The report also assumes the resumption of structural reform under an ongoing IMF Extended Fund Facility program to address macroeconomic imbalances.

ADB was of the view that the flagship Ehsaas program will be scaled up from Rs190 billion in FY2020, or 2.3pc of government expenditure, to Rs230 billion in FY2021, or 2.6pc.

ADB expects that the agriculture sector would continue to lend impetus to GDP growth.

The fiscal deficit is forecast to decline to the equivalent of 7.0pc of GDP in FY2021.

Revenue is projected to increase, reflecting ambitious revenue-mobilization targets following initiatives to withdraw tax exemptions, rationalize tax concessions, and broaden the tax base.

Exports are expected to grow in FY2021 with the likely pickup in economic activity in Pakistan’s major trade partners.

Imports too will rebound from a low base in FY2020 and, more importantly, in response to economic recovery in FY2021—and despite higher tariffs on imports of nonessential goods.

According to the report, the inflation rate is projected to drop to 7.5pc in FY2021, lower than the April forecast in ADO 2020 driven by the expected economic recovery, “but tempered by expenditure reform, and the government’s decision to stop borrowing from the central bank, which should help slow growth in the money supply to 14.2pc in FY2021.”

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