The International Monetary Fund (IMF) has warned that owing to coronavirus (COVID-19) outbreak, oil importing regional countries would likely be affected by second-round effects, including lower remittance inflows and weaker demand for goods and services from the rest of the region.
This warning was made through a blog written by Jihad Azour, IMF Director for Middle East, Caucasus and Central Asia - the region that includes Pakistan.
In his blog, "COVID-19 Pandemic and the Middle East and Central Asia: Region Facing Dual Shock", Azour said that in addition to the economic disruptions from COVID-19, the region's oil exporters are affected by lower commodity prices.
The Annual Plan (2019-20) envisaged exports to reach $ 26.187 billion in fiscal year 2019-20 from $24.656 billion in 2018-19. According to the Finance Division, remittances during July-February fiscal year 2019-20 reached $ 15.1 billion. The Division had claimed that due to this increasing trend in remittances, the remittances will exceed $22 billion at the end of fiscal year 2020.
However, background discussion with exporters and economists maintained that due to the Corona virus outbreak both the targets are unlikely to be achieved.
Javed Balvani, Chairman Pakistan Apparel Forum (PAF) said that country' exports need to be $70 million per day to achieve the target of over $26 billion for the year. If industry remains closed due to lockdown in the country for one month, exports target would be negatively impacted by around $2.1 billion, said Balvani, adding that in the current scenario it is difficult to achieve export target set for the current financial year.
Former Advisor to Finance Ministry Dr Ashfaq Hassan Khan said that decline in oil prices would have positive as well as negative impact on Pakistan's economy. The depressed oil prices would help in cutting the import bill as oil is around one third of the total import bill, government can collect additional revenue in shape of petroleum levy and inflation would come down if the impact is passed on to consumers, he added.
However, at the same time if crisis in oil producing countries is prolonged and oil prices remain depressed for a longer period, Pakistani workers would be affected and resultantly remittances would be hit negatively. Further with economic slowdown, the demand for Pakistani products would decline, and resultantly the country's exports may be negatively affected, Khan added.
The IMF Director further maintained that the immediate policy priority for the region is to protect the population from the corona virus. Efforts should focus on mitigation and containment measures to protect public health. Governments should spare no expense to ensure that health systems and social safety nets are adequately prepared to meet the needs of their populations, even in countries where budgets are already squeezed.
Beyond that overarching imperative, economic policy responses should be directed at preventing the pandemic-a temporary health crisis-from developing into a protracted economic recession with lasting welfare losses to the society through increased unemployment and bankruptcies. However, the uncertainty about the nature and duration of the shocks has complicated the policy response. Where policy space is available, governments can achieve this goal using a mix of timely and targeted policies on hard-hit sectors and populations, including temporary tax relief and cash transfers, Azour concluded.