ISLAMABAD: Pakistan’s economy is likely to get on the recovery path in the second-half of 2021, predicts former finance minister Dr. Hafiz Pasha.
In his recent article for Narratives magazine, Dr. Pasha — a world-renowned economist — elaborated how Pakistan’s economy was hit by the first and second waves of the pandemic at a time when some structural reforms had started to yield results.
In 2018, Pakistan’s current account deficit hit a record high of $18.9 billion, which was not sustainable. The government’s efforts to curtail this
unbridled genie were successful, but it came with a cost: the economic growth slowed down, and inflation rose to high levels. From 4.0 percent GDP growth in 2018, it slipped to below 2.0 percent in 2019, while the inflation, which had been at 5 percent in 2018, jumped to 10.2 percent in2019, the article noted.
However, the government also succeeded in filling the foreign exchange reserves from dangerously low levels of $8.5 billion in 2018 to $11.3 billion in 2019. There was optimism all around about the economic stability and growth, but in early 2020 COVID-19 hit the country, wiping out all hopes, the article said.
Giving details, Dr. Pasha wrote that Pakistan’s exports fell by 18 percent in the first half of 2020, but its impact was offset by a 30 percent decrease in exports, which is why the country’s external balance of payments remained unscathed. The current account deficit gradually continued coming down and reached below $1 billion in the first half of 2020. As coronavirus entered Pakistan in Feb-March 2020, the hot money started flowing out of the country. This was partly compensated by the IMF, which provided access to Rapid Financing Facility, amounting to $1.4 billion.
The country’s economy started showing signs of recovery after the first wave of coronavirus was over. The second wave hit Pakistan, and the economy went into another tailspin, the former finance minister wrote.
After giving an overview of the economy under the current government, Dr. Pasha presented his estimation about prospects. He predicted that the economy would likely get back on the recovery path in the second quarter of 2021. Exports will grow at a relatively fast rate, but the rise in oil prices would add almost $3.0 billion to import the bill, resulting in higher inflation.
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