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The biggest challenges faced by our world have been the financial crisis of 2007-2008 and the ongoing coronavirus pandemic. While the former impacted the more modernized interconnected economies, the latter has wreaked havoc throughout the globe – and the impact of this is not limited to only one sector. The global health system has been rendered paralyzed in addressing this issue. However, as the more developed economies resume a semblance of normalcy following mass vaccination, countries in the Global South are still finding it hard to deal with the pandemic. However, Pakistan, bordering pandemic-ravaged India has miraculously thrived despite the pandemic. In a recent report, Forbes has stated that Pakistan’s economy is expected to grow at 4%. In this blog we will uncover all the many initiatives that led the process for the revival of Pakistan’s economy.
As per the Forbes’ report, this stabilizing or persistent growth in the economy is attributed to the expansion in the services sector which the magazine forecasts at 4.43% growth, in addition to agriculture at 2.77%, and industrial sector at 3.57%. These numbers seem promising, and can be directly linked to the timely and properly-chalked out plan by the government and its relevant bodies.
Revival Of Pakistan Economy
Stabilizing Of The Economy
The first thing Pakistan has been able to do is to introduce fiscal and monetary policy, in light of global economic disruptions. In review of the pandemic, the State Bank of Pakistan (SBP) kept its policy rate unchanged at 7%, and slashed its interest rate to 7% as well.
In addition to these policy measures, the Government of Pakistan injected an economic stimulus of 5% GDP to kickstart the economy, by introducing time-bound liquidity relief for borrowers, loan restructuring, as well as new and temporary refinance facilities to prevent layoffs (Rozgar scheme), support for health facilities, and promotion of investment (TERF). This has borne fruit as Pakistan’s debt to GDP ratio remained unchanged for this fiscal year as compared to other countries in the region.
Moreover, Prime Minister Imran Khan kept the economy afloat by not prolonging the extensive lockdown, and adopting a lifting of restrictions under a sector-wise approach. The first sector to experience a removal of restrictions was the construction sector. This was done in addition to the Construction Relief Package which paved the way for rapid activity in associated industries as well such as glass, cement, and steel. In addition to this, the SBP notes that an expansion has been observed in automobile, textile, food, and manufacturing sectors.
Inflows & Outflows
Since being elected as the Prime Minister, Imran Khan has vowed to increase the volume of remittances and termed overseas Pakistanis the backbone of the economy. To make sending money back home easier, PM Khan also introduced Roshan Digital Accounts (RDAs) in collaboration with top banks of Pakistan for remittances. This too has resulted in a record-high of cash flows in April, reaching USD 2.8 billion on a monthly basis, and USD 24.2 billion on cumulative basis.
In addition to this, exports have also increased by a whopping 14%, year-on-year basis, as a result of high-value added textiles, and competitive prices. As a result of these, Pakistan was also able to complete the 2nd and fifth review of the International Monetary Fund Program, and gained back its positives in the international markets by raising capital of USD 2.5 billion, through Eurobond yields issued below price guidance. The IMF has also given Pakistan Extended Fund Facility (EFF) worth USD 6 billion.
Overall, Pakistan has been able to turn its current account deficit of USD 19 billion to a surplus of USD 900 million. In the same period, the country’s foreign reserves have also increased from USD 7.2 billion to USD 16 billion. Moreover, the Pakistan Stock Exchange (PSX) also witnessed the highest ever buying and selling of 1.56 billion shares and 2.21 billion shares, respectively. All of these are movements in the right direction.
While Pakistan has always been criticized for correcting its imbalances through borrowing, these changes have been observed, primarily through economic means which have resulted in a revival of Pakistan economy.
Now with the economy moving in the right direction, against all odds, the most frequently asked question is whether or not this is the right time to invest? The answer to this is, right now. Here’s why.
Why This Is A Good Time To Invest
As the economy is experiencing stabilization and moving towards rapid growth, as is stated by the SBP Governor Reza Baqir, there has never been a better time to buy or invest in anything. As the construction sector was the first sector to be opened up, it has led the path for rapid activity as well. But many attribute it to the Tax Amnesty Scheme and relief measures for the construction sector. these can be summarized as:
- Developers and builders of the low-cost housing projects across the country now enjoy a 90% tax exemption.
- Developers and builders have also been exempted from paying the withholding tax on the purchases made for different types of construction materials and other related services.
- Capital Gains Tax (CGT) of 5% to 20% has been abolished, and people who sell off their
properties during this time, will not be required to pay any amount.
- Tax on sales of immovable properties has also been halved from 10% to 5%.
- Under FBR and Construction Relief Package 2021, investors will continue to enjoy tax exemptions by disclosing their sources of income.
- The deadline for the completion of the projects onboard with the FBR tax amnesty scheme has also been extended till the end of 2021.
- The State Bank of Pakistan (SBP), and commercial banks will continue offering loans worth PKR 378 billion till December 2021 under a mortgage financing scheme.
- For low-cost houses’ construction, the government will also offer a subsidy with an allocated budget of PKR 30 billion. The government will also provide an additional grant of PKR 300,000 for each of the first 100,000 constructed houses.
Moreover, the government is also working towards timely completion of projects under the Naya Pakistan Housing Program, an affordable housing scheme with economic benefits. These are all directions towards a thriving economy that will ensure higher returns from medium to short term.
With the economy thriving and real estate options at the ready, keep checking Pakistan’s largest property blog, Zameen Blog for the latest information. For any queries regarding the property sector, you can contact us at blog@zameen.com.
