Economy suffered loss of Rs3000 billion due to COVID-19: Hafeez Sheikh

ISLAMABAD (Dunya News) - Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh Saturday said the coronavirus pandemic was not an excuse as it had brought difficult times for the country by virtually inflicting a loss of around Rs3,000 billion to the national economy.

Exact loss to the economy could not be estimated as it could not be predicted how long the pandemic would continue and what would be its intensity, the advisor said while addressing here the post-budget press conference.

Hafeez Shaikh said the COVID-19 pandemic had hit the economy hard causing Rs 3,000 billion loss, with considerable reduction in the revenue collection against the actual target.

He said the government had revised the tax collection target to Rs4,700 billion, however, it would hardly collect Rs 3,900 billion by the end of ongoing fiscal year, which meant that there would be a loss of over Rs 700 billion on that account.

He said Pakistan was not the only country that was hit by the coronavirus, rather it had engulfed the whole world affecting the health and economic sectors.

The advisor said the industry, markets, transport and other business institutions, that keep the economic cycle running, had been closed, causing another problem of unemployment.

Despite financial constraints, he said, the government tried its best to help the people in the trying times and announced a Stimulus Package of Rs 1,200 billion, besides procuring wheat of Rs 280 billion to provide liquidity to the farmers.

The advisor said the economic stability was witnessed during the first nine months of current financial year, but the situation worsened in the post-COVID period when the pandemic badly inflicted losses to the economy.

He said the most important responsibility for the government in the next fiscal year would be to fulfill its international commitments and pay back loans of Rs 2,900 billion. The loans of about Rs 5,000 had already been repaid during the last year, he added.

He said the loan amount paid back was sufficient to launch more than 20 programmes like Ehsaas to help the poor.

Hafeez Shaikh said the government was tying its best to reduce expenditures and it had to take take tough decisions to achieve the objective.

The adviser said despite limited resources and the COVID-19 pandemic, the government had tried to provide maximum relief to the common man in the 2020-21 budget.

Talking about the economic situation, he said the government had inherited a deteriorated economy with increasing imports, decreasing exports, depleting foreign exchange reserves, and widening current account and fiscal deficits.

The foreign exchange reserves were under immense pressure due to increasing imports and decreasing exports while the current account deficit had swelled to $20 billion, which was brought down to $3 billion by the current government, he added.

The advisor said the government took tough decisions and introduced fiscal and financial discipline, besides reducing all non-developmental expenditures to bring economic stability.

Due to the continuous efforts, he said, the economic indicators had started showing growth and the revenue collection witnessed remarkable increase of 17% while non-tax income reached Rs 1,600 billion.

He said the government’s economic reforms programme was widely hailed by the international credit rating agencies like Mooody’s and development partners, including the International Monetary Fund and the World Bank.

The recognition of international forums had restored the confidence of both local and foreign investors as foreign investment showed about 137% growth, he added.

All the government efforts, he said, were dented with the emergence of COVID-19 pandemic, which had also affected the global economy as well as millions of people.

He said according to the IMF estimates, the overall global income was likely to decrease by 1.4%, and that situation also had a negative impact on Pakistan’s local trade and industrial sectors.

The advisor said despite limited resources, the government launched a relief programme to provide financial assistance to the people to fulfill their daily needs. Over 10 million people without any political, regional or religious discrimination, had benefitted from the programme, which was executed in an transparent manner.

He said in order to promote the agriculture sector, the government had decided to procure wheat for Rs 280 billion, which would help the farmers to fulfill their needs.

The government had also allocated Rs 50 billion for the subsidy on fertilizers, he added.

He said the government had also provided financial assistance to small enterprises, which were affected hard due to the pandemic. Over 600,000 businesses were benefitted from the programme, he added.

Hafeez Shaikh said the foreign debt payment was a huge issue for the country.

The government wanted to increase its public sector development budget and spend more on education and health, but it would have to pay back Rs 2,900 billion foreign debt during the upcoming fiscal year (2020-21).

The government had decided to decrease its running expenditures so it could allocate more funds for economic growth, he added.

The advisor said it was decided not to impose any new tax. The government announced about 1,623 zero rated tariff lines in the budget 2020-21 for encouraging the export sector. It had also decided to reduce the tax duties on 200 tariff lines and regulatory duty (RD) on 166 tariff lines again to encourage the local exports.

The purpose of lowering the tariff lines was to reduce the cost of business for different potential sectors of the national economy, he added.

Hafeez Shaikh said the government had also decided to abolish 10 different existing withholding taxes and also reduce the import duties from 5 to 2 percent on different import items.

The advisor said the government had provided a huge relief package to the construction industry, besides reducing the capital gains tax on the sector for industrial growth and increase employment opportunities in the country.

“We have also reduced the federal exercise duty (FED) on cement to provide relief to the construction industry as well as the people by decreasing the cost of business,” he added.

“We incentivized the construction sector for growth in the national economy and provided employment opportunities to the people.“

Hafeez Shaikh said the government had encouraged the automation in the Federal Board of Revenue (FBR). “We decided to provide more relief to the tax payers, who pay their taxes through automated process in the FBR.”

He said the government had also abolished import duty on medical equipment, including testing kits of different deceases, including cancer, COVID- 19 and HIVs, so the same could be available in local market at minimum prices.

He said the government had also prioritized the regulation of businesses sector. It also wanted to increase its spending on the Public Sector Development Programme (PSDP) and Ehsaas Programme to provide more relief to the common people, he added.