T

he lockdown or the partial lockdown as one may call it has been lifted and most sectors of the economy have opened up and are trying to return to the state in which they were in March this year. Around that time, the government had closed down most sectors including large-scale and small and medium scale manufacturing, wholesale and retail businesses, services sector excluding health services, local and international travel, tourism, educational institutions and so on.

The economy also suffered due to a steep fall in demand of non-essential items as the biggest concerns amid the pandemic were food security and healthcare. One remembers how the fear of shortage of food items led to panic buying.

However, of late, there is news of recovery in several sectors of the economy and claims by the government that this is due to the measures it has taken. A few examples include increase in foreign remittances, reduction in trade deficit, increase in collection of revenue, rise in exports, reduction in imports, increase in sale of motorcycles and rise in KSE index.

The question here is whether these trends are sustainable and backed by fundamental structural dynamics or short-term and caused by transient circumstances only. There are different opinions in this regard but the fact that the economy is showing signs of recovery is not challenged by many.

Dr Kaiser Bengali, an esteemed economist, is of the opinion that the government must not mislead people by false claims like paying off foreign debts and taking credit for building up foreign reserves. “They are taking more loans to pay off previous loans and celebrating the increase in foreign remittances coming at the cost of job losses faced by Pakistani labour migrants,” says Bengali. He says instead of worrying about the fate of workers who have been forced to return and their rehabilitation, the rulers are presenting the excess inflows as a success. In fact, these funds are savings, severance money and final settlements of laid off workers, he adds.

Bengali says that some sectors of the economy are opening up but what is not being discussed is that lost jobs are not being restored. “People have faced salary cuts and are being forced to do the work of those laid off, which is sheer injustice.”

A rising trend has also been observed in the KSE-100 index which has crossed 40,000-point mark. However, most experts are attributing this spike to the lack of sufficient investment opportunities offering good returns and low interest rates offered by banks. A general criticism in this context is that stock market here is a non-performing sector of the economy and does not create enough jobs. Besides, it reacts to speculation and is not backed by corresponding growth of business in real terms.

An encouraging news after a lull in economic activity is that Pakistan’s exports have increased by 26 percent to $2 billion in the month of July as compared to June this year. Textile exports which have a greater than 65 percent share in the country’s overall exports crossed the $1 billion mark in July to reach $1.27 billion. These have shown 33 percent growth on a month-on-month and 14 percent on a year-on-year basis.

Business journalist Nasir Jamal says that a sudden surge in textile exports is because of several reasons. For example, he says, when lockdowns were imposed globally earlier in the year, ready stocks were held back and with the passage of time the demand for textiles accumulated. With lockdowns lifted gradually, he says, textile exports increased to meet this pent-up demand.

Jamal says Pakistan’s textile exports mostly comprised basic products and home textiles and the share of high-end value-added stuff remained limited. This trend will continue as renowned international brands have cut down on their inventories and are not placing fresh orders for readymade garments, he adds. “However, the average products put on sale by budget chains like Walmart, K-mart etc are still in demand.”

He thinks Pakistan must increase its production capacity, install modern textile machinery and go for production of technical textiles like face masks, safety suits, fireproof cloth etc which will be in demand.

Jamal says that Pakistan was lucky as its rural population and the economy were spared by Covid-19 and good agricultural yields brought prosperity to villagers. Record production and sales of motorcycles in a month (300,000 in July 2020) is another evidence of this trend. This figure was shared by Muhammad Sabir Sheikh, chairman of the Association of Pakistan Motorcycle Assemblers (APMA).

Naeem Mir, secretary general of the All Pakistan Anjuman-i-Tajiran (APAT), is also of the opinion that the jacked up activity at wholesale markets, retail level and in general is because of suppressed demand in the previous months. That accumulated demand is now being met and people are spending their money. He believes that the country's domestic economy shall not be influenced much by the global economic slowdown as its trade with the world is not that significant. The curbs on imports have further shrunk the volume of this trade, he adds.

Mir says there is a severe liquidity crunch especially among small scale businessmen who have spent their savings and capital during the lockdown on their personal and household needs. "We have requested the government to offer small loans to them on easy terms against personal guarantees so that they can withstand the shock."

The country has pinned hopes on the real estate and construction sector and offered incentives to investors like relaxation in taxes and waiving off the condition of declaring the source of income till December 31. However, people are cautious because they fear they might be asked to declare the source later on, may be years down the road, as is happening at the moment, says Syed Ather Ali Kazmi, a leading real estate advisor based in Lahore.

He urges the government to give assurance to potential investors that they will not be questioned about the source of investments coming in to real estate sector during this period of concessions, he adds. He says there is a lot of potential in this sector because people have abstained from investing during the last two years. “It has become difficult to invest unexplained money in real estate but this relaxation till December 31 can be a good incentive provided their trust in the government is restored”, he adds.

Bengali believes the confusion is still far from over and decisions are being taken in a speculative mode. If there is news about a breakthrough in vaccine development the gold prices rise and if it’s about resurgence of the virus they see a dip, he explains. 

The writer is a staff member. He can be contacted at shahzada.irfan@gmail.com