–Extreme poverty to increase by 9.2pc, Finance Ministry tells Senate
ISLAMABAD: The Finance Ministry submitted a written response to the Senate on Friday, revealing that according to the government’s estimate, around three million people would lose their jobs in the “initial round’ of the coronavirus outbreak.
The upper house was informed that industrial sector is likely to lose one million and the remaining two million would be lost in the services sector. The ministry added that the Pakistan Institute of Development Economics had estimated unemployment to surge by 18 million in agricultural, services and industrial sectors collectively.
The ministry had submitted a response to a three-part question by Senator Mushtaq Ahmed, who asked about the estimated loss to the economy, increase in budget deficit, debt and dollar value, and the government’s plan to cope with the challenges.
In its answer, the finance ministry said that the proportion of those living in poverty would increase from 24.3 per cent to 33.5 per cent.
The fiscal deficit is also expected to rise from the initial target of 7.5 per cent to 9.4 per cent of the gross domestic product (GDP) due to revenue shortfall and an “increase in public spending due to fiscal stimulus package”. The ministry added that the increase in debt burden will depend on the fiscal deficit.
Furthermore, exports may fall to $21-22 billion owing to low commodity prices and decreased economic activity in the United States, European Union, United Kingdom and the Middle East. Before the pandemic, they amounted to $25.5 billion.
Remittances are also expected to fall from $23 billion to $20-21 billion. The Federal Board of Revenue (FBR) may also not be able to achieve its target and tax revenue is expected to fall from Rs4,800 billion to Rs3,905 billion. Between April and June, the FBR is expected to incur a loss of Rs700-900 billion.
The ministry also informed the Senate about the currency value, which depreciated by 7.5 per cent in March over February. The value of rupee against the dollar in February was Rs154.23 but in March, it decreased to Rs166.70. In April, the value of rupee had increased to Rs160.17 as the “volatility observed in domestic financial and foreign exchange markets […] somewhat subsided”, the finance ministry said, adding that value of the rupee fell slightly to Rs163.10 in May.
It stated that before the pandemic, GDP growth for fiscal year 2020 was estimated as 3.24 per cent out of which the agricultural sector was expected to record a 2.85 per cent growth, industrial sector was expected to record a 1.95 per cent growth and services sector was expected to record a 4.04 per cent growth.
However, the year posted a negative growth of 0.4 per cent, out of which industrial sector recorded -2.64 per cent, agricultural sector 2.67 per cent and services sector -0.59 per cent.
The finance ministry also provided details of the relief package of Rs1,240 trillion that was announced “to mitigate the impact of Covid-19 on economy and vulnerable sections of society”.
The economic relief package covers emergency response, relief for citizens and business support, the ministry explained.