ISLAMABAD: The International Monetary Fund (IMF) on Monday expressed concerns over coronavirus’ impact on Pakistan’s economy as a spillover effect of slowing down of Chinese economy might negatively affect Islamabad’s GDP growth endeavours for the current fiscal year, reported The News.
The concerns by the visiting delegation of the Fund were put forward during a meeting yesterday. Pakistani authorities, however, rejected any negative impact on its economy in totality and argued that there would be no negative impact, which means the GDP growth target of 3.3 per cent and inflation hovering around 11 to 12 per cent must remain intact.
The new coronavirus that emerged in central China at the end of last year has killed more than 1,000 people and spread around the world. The latest figures from China show there are more than 42,600 people infected in the country.
A senior Pakistani official have earlier this month rejected the perception that the ongoing health crisis will impact the China-Pakistan Economic Corridor and trade activities between the two countries.
Pakistan and the IMF mission kick-started policy level talks to finalise policy prescription on fiscal, monetary, external and energy sectors and evolving consensus which could pave the way for striking staff-level agreement with Pakistan and the IMF visiting mission.
The IMF mission while speaking about the impact of coronavirus on Pakistan’s economy said they feared that it might result in further slowdown of the economy in the current fiscal year.
Pakistani authorities argued that there was a need to understand linkages between Pakistan and Chinese economies before ascertaining its real impact.
China’s economic size stood at over $14 trillion having 16 per cent share in the global economy. The Chinese GDP possessed contribution of agriculture sector to the tune of eight per cent, industry 40 per cent and services sector by 52 per cent.
Wuhan, the capital of Hubei province, that remained the worst-hit area of coronavirus, possesses around 4.5 per cent share in China’s overall GDP growth with contribution of industry 46 per cent, service 43 per cent and agriculture 11 per cent. Major industries located in this area are related to automotive, textile, steel, iron, petrochemicals, electronics, food processing and manufacturing having major destinations of exports included USA, South Korea, Netherlands, India, Germany, Japan, UK, Singapore and Brazil.
Its major imports are from Japan, South Korea, Taiwan, US, Germany, Australia, Malaysia, Saudi Arabia and Brazil.
Now Pakistan’s share of export to China stood at $937 million or 7.6 per cent while import from China was $4.9 billion (22.0 per cent) during July-December period of the current financial year 2020. The major exports to China included food $216 million or 23.1 per cent, raw material (7.1 per cent; 67 million) and Textile (59.9 per cent; $561 million).
The impact on Pakistan’s economy depended on the time length of handling coronavirus and its intensity of spreading in surroundings.
The import from China slows down traditionally during the severe winter season every year because the government closes down the Pak-China border on November 30 and opens it in the first week of April due to heavy snow which makes transportation impossible. The slowdown in China will not negatively impact Pakistan immediately as traders have sufficient stocks of Chinese products if the impact continues after April.
Pakistan’s textile industry and exports may increase as Hubei’s textile was going to slow down and Pakistan’s textile industry may get more orders from the global market.
It is expected that Chinese currency Yuan will depreciate three to five per cent, import bill of Pakistan may decline $200 million to $300 million.
There is a projection that commodity prices will decline e.g. crude oil and palm oil/soya bean oil, these are our major import items, so their decline will have a favorable impact on our trade balance and ease out inflation/domestic prices, they further argued.
Originally published in