Special Report by TechBuraq:
The motorcycle manufacturing plant in Balochistan adjacent to Karachi was temporarily shut down last year when the government imposed a lockdown in the wake of the coronavirus’s spread in the country.
The plant was closed for 20 to 25 days in March and April last year, severely affecting its production capacity. The plant is owned by a group of companies whose director, Naveed Pirani, says the government’s lockdown last year severely affected their plant’s production capacity.
According to Najam, last year saw a 70 percent drop in sales of motorcycles manufactured at his plant, which led to a loss-making plant the previous year.
He told TechBuraq that although production at his plant started under Smart Lockdown after the complete lockdown was lifted in May-June, he was still working to reduce last year’s harmful economic impact.
Najam said he was forced to lay off several employees when production at his plant stopped. He said that before the lockdown, more than a thousand people were working in his plant, but due to the plant’s closure, he had to lay off 30% of the employees.
He says the lockdown has led to a wave of unemployment in the country, which has hit his sector hard as people’s purchasing power has dwindled and reduced their purchases of motorcycles.
Najam Raeesani has expressed concern over a new possible lockdown in the country due to the third wave of Corona aftCoronang economically affected by last year’s lockdown.
According to him, if there is a lockdown in the country to curb the third wave of Corona, evCoronalight improvement in the economy in the last few months will come to an end.
Like his motorcycle factory, many of the country’s manufacturing sectors have been shut down in the past after the coronavirus caused a lockdown in the country.
Its effects on the economy were very adverse, and the country’s economic growth rate was negative at the end of the last financial year. With the onset of the current financial year, the prospects for improvement in the manufacturing sector began to emerge, and the country’s large-scale manufacturing sector seemed to be improving. The country’s exports were on the rise.
Now, while concerns are being raised about the harmful effects of the third wave of Corona, quCoronas are being raised about the economic recovery due to the implementation of the International Monetary Fund (IMF) terms for obtaining a loan.
And these concerns are confirmed by the World Bank’s latest report on the Pakistani economy, which points to a slowdown in the economy due to the IMF program.
What are the estimates of growth in the national economy?
Pakistan’s Finance Minister Hamad Azhar has claimed in a Twitter message that Pakistan’s economy will grow faster this year than previously predicted. Hamad Azhar did not give figures on how much the country’s economy would grow by the end of this year but expected that the GDP growth rate would be 4% for the next fiscal year.
Hamad Azhar did not mention the growth rate in his message, but the World Bank and the IMF have forecast the economy to grow by 1.3 percent and 1.5 percent this year, respectively. It should be noted that last year the country’s economy went into the negative zone, and its rate was recorded at minus 0.40%.
The budget for the current financial year had set a growth target of 2.1% for the economy. In a statement issued after the last meeting of its Agricultural Policy Committee, the State Bank of Pakistan (SBP) said that its growth rate had been 3%, and it is likely to increase further.
What do global organizations say about an economic recovery?
In its latest Pakistan Development Update, the World Bank has predicted that the country’s economic recovery will slow down due to the newest wave of corona cases in the country. The World Bank has also cited the IMF program as one reason for the slowdown in economic recovery.
It may be recalled that the IMF last month revived its $ 6 billion loan program from Pakistan, which included, among other conditions, an increase in electricity tariffs and the elimination of tax breaks.
The World Bank has forecast a slowdown in the recovery of the economy due to fiscal discipline under IMF conditions. On that basis, the World Bank has projected a growth rate of only 1.3 percent.
Commenting on the third wave of coronavirus, the World Bank said that the economic recovery would also be slow due to the emergence of new victims and questions over the supply of vaccines.
On the other hand, the IMF has predicted that the country’s growth rate will be 1.5 percent and has also indicated the possibility of rising inflation and rising unemployment in the country.
How could the third wave of Corona affect the economy?
Commenting on the growing number of victims of the third wave of Corona in Coronaan and the provision of vaccines to prevent it, the World Bank has raised concerns about the risks to the economy.
Industrialist Najam said that if the government goes for a complete lockdown due to the new wave, it could be hazardous for the economy.
He said that although there is no complete lockdown in the country, there are lockouts in the world due to this dangerous virus which is also hazardous for Pakistan. Most of the raw materials of our manufacturing sector are imported from abroad. And its supply is in trouble right now.
Citing the example of his sector, he said that while the supply of raw materials from the outside world is being affected, the local market’s raw materials are also getting higher prices.
He said that the economy’s downturn also affects the purchasing power of the people, so due to lack of demand, the production is reduced, which is detrimental to the country’s overall economic development.
The Federal Chamber of Commerce and Industry of Pakistan said that the third wave of Corona had coronated business to some extent as two days of business under the wise lockdown policy in different parts of the country.
He said that the third wave of Corona has coronated when the country’s manufacturing sector is producing large quantities of products on the occasion of Ramadan and Eid. Still, the limited business hours are affecting the production process.
President told TechBuraq said that lockdown effects are severe when the government takes a unilateral decision and imposes it on industry and trade. “If the government goes for a complete lockdown, the productive sector will inevitably be affected, but with it the ordinary working and wage earners will suffer severely.”
Khurram Shehzad, an economy Expert at the UMT, said Pakistan, like the rest of the world, has been affected by the coronavirus. Economic activity had not yet reached the level it was before the coronavirus outbreak. The third wave of the virus in the country has begun to affect the economy and business.
Economist Ahmed Sheikh agrees that a severe lockdown will inevitably affect the economy and business, as seen last year when the production process went down sharply.
Could the IMF program be a threat to economic recovery?
The World Bank has blamed the IMF program for Pakistan for the slowdown in the economy. In this regard, Ahmed said that growth in the economy means how many products are being produced and how many services are being provided and what is being spent on them.
He pointed out that 20% of the expenditure is borne by the government and 80% by the private sector in our economy.
The IMF wants the government to reduce its spending to reduce the budget deficit. At the same time, the IMF wants to increase tax collection, which includes the introduction of new taxes and the elimination of tax breaks for industrial sectors.
Ahmed Sheikh says that when higher taxes are levied and tax exemptions are abolished, it will inevitably impact the productive sector. “At the same time, rising electricity tariffs have a negative impact on their production by increasing business costs.”
Commenting on this, Ahmed Sheikh says that under the terms of the IMF, when the rates of utility services (electricity, etc.) increase and the government have to cut the development budget, the direct effect will be on the economy. Falls on the growth rate.
However, he said that even before the IMF program, the country’s economy’s growth rate was not encouraging.
At the end of this government’s first fiscal year, the country’s growth rate was 1.9 percent, as against 5.5 percent in the last fiscal year of the previous government.
Akmal Sumro said electricity rates were still high for the country’s manufacturing sector and that an increase would be more dangerous for those sectors of the economy under IMF conditions.
He also called the 7% interest rate a high level, saying that the interest rate is still the reason for the increase in business costs, and it would be dangerous to increase it under the IMF program.
Ahmed Sheikh disagreed on the way to control inflation through raising interest rates, saying that inflation in Pakistan was due to rising food prices, which was due to supply disruptions and not inflation.