Pakistan: The Year 2020 in Review

The COVID19 pandemic has been the biggest story in Pakistan and the rest of the world. It has complicated Pakistan's economic recovery as did the ever-present threat of political instability posed by the opposition parties trying to take advantage of the crisis. Gallup Poll data shows that 65% of Pakistanis are happy despite hardships of the coronavirus pandemic. On the external front, Pakistan faced India's massive global disinformation campaign against it. The year 2020 was a tough year for Pakistan and the world with both health and economic challenges. Pakistan's second COVID wave is now subsiding, the factories are humming, the exports are rising, and the remittances from overseas Pakistanis are at an all time high. Inflation is starting to come down. The nation has shown its resilience yet again by dealing with both challenges successfully.  Here's a quick rundown of the year 2020 in Pakistan:

COVID19 Pandemic:

Pakistan has very weak health care infrastructure. This raised serious questions about Pakistan's ability to effectively respond as the pandemic caused by the novel coronavirus hit the country in March 2020. While the crisis is not over yet but it appears that Pakistan has been spared the worst impact in terms of infections and deaths seen elsewhere in the world. World Health Organization has included Pakistan among top 6 nations it has praised for effective handling of the pandemic.  The key steps Pakistan took to contain the pandemic and soften its impact include:

1. Smart lockdown: Pakistan imposed targeted lockdowns in areas experiencing high rates of infections rather a nationwide lockdown imposed by others, including Prime Minister Narendra Modi's government in neighboring India. This action helped bring down the virus transmission while protecting the livelihoods of million of daily wage earners. 

2. Testing and Hospital Surge Capacity: Pakistan ramped up test capacity and rapidly converted expo centers and other large buildings to increase hospital beds availability with the help Pakistani military personnel. Government also procured a significant number of ventilators and large quantity of personal protective equipment (PPEs) for frontline health workers. 

3. Direct Cash Transfers: Prime Minister Imran Khan's government handed out Rs. 2,000 per family under Ehsaas Emergency Cash Program to the poorest households. 

4. Tree Planting Campaign: Pakistan government launched a program to plant hundreds of million of trees as part of its reforestation campaign to deal with the effects of climate change. 

COVID19 Positivity Rate in Pakistan. Source: Our World in Data

Economic Recovery:

1. Construction Sector: Cement sales soared in 16.61% in the  first 5 months (July-Nov 2020) of current fiscal year reaching an all time high of  24 million tons. Pakistan is on track to become the world's 6th largest cement producer by 2030. 

Pakistan government announced Naya Pakistan housing program which offers Rs. 33 billion in direct subsidies for down payments for the first 100,000 applicants, according to media reports. In addition, the commercial banks are required to allocate 5% of their portfolio amounting to Rs330 billion for construction activities under this program. Pakistan’s mortgage finance to GDP ratio is just 0.25%, among the lowest in the world, according to the World Bank. A person earning Rs30,000 to Rs100,000 can build a house on a 5-marla lot with the mortgage financing at 5% and that of 10-marla at 7%.

2. Large Scale Manufacturing: Large scale manufacturing continued its recovery with 5.46% growth in the first 4 months (July-Oct 2020) in spite of COVID19. Textile mills and garment factories reported to be operating near full capacity in November, 2020, indicating further growth in the LSM sector. 

3. Exports: Pakistan's exports for the month of December 2020 grew by 18.3% to highest-ever $2.357 billion, up from $1.993 billion in December 2019.  The nation's exports are rising in spite of the COVID19 pandemic, growing for the 4th consecutive month in December, 2020. In November, the exports rose to $2.161 billion, up 7.67% from $2.007 billion in the corresponding month last year, according to data released by Pakistan Bureau of Statistics. Exports grew in home textiles (20%), pharma (20%), rice (14%), surgical goods (11%), stockings & socks (41%), jerseys & pullovers (21%), women’s garments (11%)and men’s garments (4.3%). 

Pakistan Exports July-Dec 2020. Source: Arif Habib

Pakistan's technology export growth is continuing to accelerate with a 51% jump in November 2020 over the same month in 2019. The country's tech exports rose 39% in the first 5 months (July-Nov) of fiscal year 2021 over the same period last year. This came on top of a 21% increase in FY 2020 over FY 2019. 

Major Asian Economies Performance. Source: CNBC

Pakistan exported $763 million worth of services related to telecommunications, computers and information technology from July to November 2020 period. This represented a 39% increase from the same period in 2019. In November 2020, the country exported IT services amounting to $168 million, a 51% jump from tech exports November 2019. 

All-Time High Remittances From Overseas Pakistanis

4. Remittances: Pakistan saw a sharp increase of nearly 27%  to $11.77 billion in remittances from its diaspora in July-November period.  This set a new record of over $2 billion in remittances for six consecutive months. Rising remittances have made up for Pakistan's continuing trade deficits. In fact, Pakistan has reported a current account surplus of $447 million in November, making it the fifth consecutive month of current account surpluses. In November 2019, Pakistan reported a deficit of $326 million. The current account surplus has reached $1.64 billion so far in the current fiscal year in July-Nov 2020. Pakistan reported a deficit of $1.74 billion for the same period last year.   

5. Digital Economy:  Pakistan's digital gig economy surged 69% during the COVID19 pandemic, putting the country among the world's top 4 hottest online freelancer markets, reported  Payoneer, a global payments platform company based in Silicon Valley, in its latest report. Payoneer attributed it to government programs such as Punjab government's e Rozgaar program that has been offering free online courses in digital freelancing. The sudden rush to learn skills online boosted the demand for instructors. The Pakistan government filled this demand by hiring alumni of programs like e Rozgaar who were successfully participating in the gig economy.

6. Soaring Food Prices: Global food prices are soaring by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises are hitting the people in Pakistan and the rest of the world hard.  In spite of these hikes, Pakistan remains among the least expensive places for food, according recent studies. Annual inflation rate declined to 8% in December from 8.3% in November, 2020.  It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer. 

Pakistan's V-shape Economic Recovery in 2020

Political Opposition:

1. PDM Narrative: It took Stephen Sackur, a BBC journalist, to challenge the Pakistani Opposition's anti-military narrative twice in the last two years. First, Sackur did it with Hameed Haroon, the CEO of Pakistan's Dawn Media Group. More recently, Sackur did it again with Opposition politician Ishaq Dar.  Feverish spinning by pro-Opposition media spinmeisters suggests that  Sackur has done serious damage to the Pakistani Opposition's narrative about the Army and democracy in the country. By his aggressive questioning of Ishaq Dar, former Finance Minister and  former Prime Minister Nawaz Sharif's close associate, Sackur has not only dismantled the Opposition parties' narrative but also clearly established former Prime Minister Nawaz Sharif is a convicted criminal and a hypocrite. 

2. Najam Sethi's Analysis: Prominent Pakistani journalist and political analyst Najam Sethi, a strong critic of Prime Minister Imran Khan, sees desperation among the Pakistani Democratic Movement (PDM) leaders. In a recent interview with well-known journalists Raza Rumi and Murtaza Solangi on Naya Daur social media channel, Sethi said the Pakistani opposition, particularly PMLN, believe it is "now or never" for them.

Najam Sethi added that if the Pakistan Tehreek-e-Insaf government led by Prime Minister Khan survives the current 5 year term and succeeds in stabilizing the nation's economy,  the ruling party will be re-elected for another 5 year term in 2023 with the support of what Sethi calls "Miltablishment" (a euphemism for Pakistani military). This, Sethi said, would mean that the PMLN would break up and lose its relevance. Sethi acknowledges there is genuine support for PTI in spite of Imran Khan government's failures in the first two years. This support is particularly strong among the youthful voters who are willing to forgive PTI's poor handling of the economy. 

Modi's Anti-Pakistan Campaign: 

1. Disinformation Campaign: EU Disinfo Lab, an NGO that specializes in disinformation campaigns, has found that India is carrying out a massive 15-year-long disinformation campaign to hurt Pakistan. The key objective of the Indian campaign as reported in "Indian Chronicles" is as follows: "The creation of fake media in Brussels, Geneva and across the world and/or the repackaging and dissemination via ANI and obscure local media networks – at least in 97 countries – to multiply the repetition of online negative content about countries in conflict with India, in particular Pakistan".  After the disclosure of India's anti-Pakistan propaganda campaign, Washington-based US analyst Michael Kugelman tweeted: "The scale and duration of the EU/UN-centered Indian disinformation campaign exposed by @DisinfoEU is staggering. Imagine how the world would be reacting if this were, say, a Russian or Chinese operation". 

 2. Pakistan Dossier: Dr. Moeed Yusuf, Prime Minister Imran Khan's National Security Advisor, has said that "we have evidence to the T" of India's links to several terrorist attacks in Pakistan. In an interview with Indian journalist Karan Thapar, Dr. Yusuf mentioned specific terrorist incidents with Indian intelligence agency's fingerprints on them. Specifically, he mentioned terrorist attacks on Army Public School in Peshawar that killed 149 people including 132 schoolchildren. “Malik Faridoon who masterminded the attack from Jalalabad (in Afghanistan) was in touch with handlers at the Indian consulate as children were massacred in broad daylight,” he said. Yusuf also mentioned India's links to terrorist attacks on Chinese consulate, Pakistan Stock Exchange and Gwadar 5-star hotel. Kulbhushan Jadhav "has been caught with his pants down" India recently spent $1 million to bring about TTP, 4 other militant organizations' merger in Afghanistan Kashmiris should be made 3rd party in any India-Pakistan talks. 

Pakistan Defense:

Pakistan military launched its first Defense AI Program for a Cognitive Electronic Warfare (CEW) at its Center for Artificial Intelligence and Computing (CENTAIC), according to media reports. Modern connected weapon systems generate vast amounts of data requiring artificial intelligence and machine learning software for speedy analysis and rapid decision-making on the battlefield.  Modern electronic warfare requires the use of artificial intelligence and machine learning (AI/ML) to analyze vast amounts of data coming from a large number of sensors mounted on various military platforms deployed on the ground, in the air and on the seas. EW systems can collect a considerable amount of data about an enemy’s frequency use, radar deployment, and many other factors.

Happiness Survey. Source: Gallup Pakistan

Happiness Survey: 

Gallup "End of the Year 2020" Survey reported that 65% say they are happy in spite of the COVID19 pandemic. This is well above the 54% reporting they are happy in a global happiness survey. Among 41 countries surveyed by Gallup International, Pakistan ranks 4th on the Happiness Index, 17th on the Hope Index and 6th on the Economic Optimism Index.  


The year 2020 was a tough year for Pakistan and the world. There were simultaneous health and economic challenges. The COVID19 pandemic has been the biggest story in Pakistan and the rest of the world. It has complicated Pakistan's economic recovery as did the ever-present threat of political instability posed by the opposition parties trying to take advantage of the crisis. Polls conducted by Gallup Pakistan indicate that the government led by Prime Minister Imran Khan appears to be handling the dual challenge well. Poll data shows that 65% of Pakistanis are happy despite hardships of coronavirus pandemic. On the external front, Pakistan faced India's massive global disinformation campaign against Pakistan. Pakistan's second COVID wave is now subsiding, the factories are humming, the exports are rising, and the remittances from overseas Pakistanis are at an all time high. Inflation is beginning to decline. 

Related Links: 

Haq's Musings

South Asia Investor Review

Pakistan to Become World's 6th Largest Cement Producer By 2030

Naya Pakistan Housing Program

Pakistan's Response to COVID19 Pandemic

Pakistan Tech Exports

Pakistan Digital Economy Surged 69% Amid Covid19 Pandemic

Soaring Food Prices Hurting Pakistanis

Najam Sethi on Desperation in PDM Ranks

India's Firehose of Falsehoods Against Pakistan

Pakistan Launches Defense AI Program

Riaz Haq's Youtube Channel

PakAlumni Social Network


Riaz Haq said…
#Pakistan #PTI govt expects broad-based recovery in 2021 supported by “fast-tracked #CPEC projects,” revival of #industrial activities and increase in #exports. Finance ministry estimates the Ehsaas #poverty alleviation program will expand significantly.

Last year was a historically difficult year. How do you foresee the year ahead?

Pakistan has done better in terms of managing the Covid-19 crisis and stimulus measures taken by the government have led to a recovery of economic activity. The record Rs1,240 billion stimulus package, the largest in Pakistan’s history, provided cash assistance to 15 million vulnerable families, supported SMEs and private-sector businesses and large industries to shield workers and avoid bankruptcies. On top of this, the historical construction package announced by the prime minister has led to additional spending of Rs300bn in the construction sector, a significant boost to the economy and creation of new jobs. The agriculture sector and small farmers have benefited from higher support prices and subsidies on fertiliser, bank credit and other farm inputs (seeds, tractors etc).

We believe that the ground realities are supportive of a broad-based economic recovery in 2020-21 as already evident from strong growth in the manufacturing and services sectors.

The shift of the farming community towards more profitable crop options can threaten food security. Is there a strategy to ensure the production of sufficient food crops and cattle stock?

The agriculture sector has stagnated over the last decade with zero growth and its share in GDP has shrunk from 21.4pc in 2012-13 to 19pc in 2017-18 while the import bill of major agricultural commodities peaked at $4bn (2017-18). Crop yields are one of the lowest in the world and crops are not resistant to pest and weather challenges.

To tackle these problems and boost the farm output, the government launched the Prime Minister’s National Agriculture Emergency Programme in July 2019 involving 16 projects of Rs309.7bn to boost the yields of major crops. The share of the federal government’s spending will be Rs85bn, share of provincial governments will be Rs175bn and the share of farmers will be Rs50bn. In addition, to conserve and increase productivity of water, three projects costing Rs220bn focused on watercourse lining and small dams have been launched. Also, the government has earmarked Rs23.6bn for establishing four new markets and upgrading infrastructure in 54 existing agricultural markets in Punjab.

Supporting industrialisation is crucial but will the government audit the outcome of cheap credit, tax breaks, subsidies and concessions to the business community to assess the impact on jobs and revenue generation?

(The MoF did not comment if it has any plans to audit the outcome of cheap credit, tax concessions and other subsidies but blamed the “reckless policies of the previous regimes to have led to de-industrialization of Pakistan through loss of competitiveness”.) Not only did Pakistan industry lose its share in the global export markets but most manufacturers were unable to even compete at home due to cheaper imports.

Our government is focused on reversing this trend and has significantly scaled up support to the manufacturing industry, in particular the export industry in the shape of cheap energy and export incentives.

These incentives and subsidies are performance-based. The performance is monitored by the relevant ministries and government departments. We are encouraged by the results so far.

Did you see the suspension of the IMF programme in February last year a blessing in disguise as it opened a window to be generous towards businesses and offer an amnesty scheme for investment in the construction sector?

The IMF is a key development partner for Pakistan and has provided valuable financial and technical support during the current year. This includes $1.4bn support to Pakistan in April 2020 under the Rapid Financing Instrument (RFI) to support the Covid-19 response and stabilise the economy.

Riaz Haq said…
#Construction boom in #Pakistan: #Cement sales up 15.9% in first 6 months of FY 20-21 to 23.61 million tons from prior year's 20.38 million tons. #Exports up 14.6% to 5.017 million tons in July-December 2020 from 4.38 million tons in July-December 2019.

The cement industry in Pakistan kicked off the FY20-21 on an exciting note. During the first six months of the current fiscal year, total cement dispatches grew by 15.7 per cent, from 24.751Mt in July-December 2019, to 28.628Mt in July-December 2020. Local dispatches have increased by 15.9 per cent in July-December 2020 to 23.61Mt from 20.373Mt in July-December 2019. Exports also increased from 4.377Mt in July-December 2019 to 5.017Mt in July-December 2020, showing a growth of 14.6 per cent.

Sources note that this is the reflection of the uptick in demand accompanied by the government incentives for the construction sector and steady cement price recovery can further unlock value.

They also predict local dispatches and exports to grow by 16 and 38 per cent YoY, whereas total industry utilisation is estimated to reach 85 per cent in FY20-21. On the pricing front, cement prices are forecast to average at PKR558 (US$3.47) and PKR617/bag in the north and south, respectively in FY20-21.

Construction package
Prime Minister Imran Khan last week announced that the fixed tax regime for the construction sector that was introduced earlier this year had been extended to 31 December 2021. "I want to give [the construction sector] good news for the new year. We have extended the fixed tax regime to 31 December 2021," the Prime Minister said during a live address to the nation.

APCMA concerns
A spokesman of All Pakistan Cement Manufacturers Association (APCMA) mentioned that the rising trend of coal, electricity and diesel prices is affecting the cement sector. During the last six months coal prices have increased by almost US$35/t. Furthermore, duty and taxes on cement sector are also very high. Cement is subject to federal excise duty at PKR1500/t and PKR75/bag, and general sales tax at 17 per cent (PKR77/bag). Total direct taxes on cement per bag are PKR152/bag. He requested the government to give tax concessions on the cement sector which will reduce the cost of production, giving a boost to construction activities and employment in the sector.
Riaz Haq said…
“The natural, geographical and cultural environments of China and Pakistan are very different from each other, so during construction, we worked out measures to adapt to local conditions and shared our construction experience with our Pakistani friends.”

This was stated by Dong Zhihong, deputy general manager of Asia Pacific Division, China Civil Engineering Construction Corporation (CCECC), in an interview with China Economic Net (CEN).

Take the mountainous areas in Pakistan as an example. “It is difficult to conduct construction work there as the geological conditions are not that favorable.”

Therefore, “blasting, protection, and support of high slope, tunneling and excavation technologies are applied to the construction project site after certain improvement and optimization,” Mr. Dong added.

At present, the commencement order was issued by the employer, and work including the take over of the site, the construction of temporary camps for administration office and dormitory, the construction of temporary facilities (batch plant, canteen), and the removal of existing avionics facilities on the runway was completed.
Riaz Haq said…
Overseas #Pakistanis send in $14.2 billion in #remittances from July-Dec 2020, up 25% from the same period last year. This has helped #Pakistan have current account surplus of over $1.7 billion in the first half of FY 2021.

Prime Minister Imran Khan on Friday thanked Pakistani diaspora for keeping remittances above $2 billion for sixth consecutive month.

"I want to thank our overseas Pakistanis for yet another record-breaking month of remittances in Dec: $2.4 bn," the premier wrote on his official Twitter handle.

He said that first time in Pakistani remittances have been above $2 billion for sixth consecutive months.

"Total for 6 months of this fiscal year $14.2 bn - a 24.9% growth over last yr [year]," he further wrote on the microblogging site.

Cumulatively, in the first five months (July-November) of current fiscal year, remittances grew 27% to $11.77 billion compared to the same period of last year, revealed figures released by the State Bank last month.

The SBP said persistent efforts by the government and central bank to bring remittances under the Pakistan Remittance Initiative (PRI) and rising use of digital channels amid limited cross-border travel were some of the important factors behind the sustained improvement in workers’ remittances.

In a statement, the SBP pointed out that orderly exchange market conditions and improvement in global economic activity lent further support to the increase in remittances.

Taurus Securities Head of Research Mustafa Mustansir said that the growth in remittances came because Pakistanis, who had lost their jobs abroad, were transferring their savings ahead of their return home amid the Covid-19 pandemic.

The situation would normalise in the second half (January-June) of current fiscal year 2020-21, meaning that the spell of layoffs would come to an end and remittances would slow down during that period, he said. “Cumulatively, workers’ remittances are estimated to grow 6.5% to $24.6 billion in FY21 (compared to $23.1 billion in FY20),” he said.
Riaz Haq said…
#Pakistan launches Special Technology Zones Authority. #imrankhanPTI said that the main objective of the establishment of special #technology zones was to give incentives to the #IT sector to make it flourish for the benefit of the country. #Digital

Prime Minister Imran Khan said on Friday that information technology was a revolutionary sector that needed to be exploited by companies in the country to meet the demands of the contemporary world.

Addressing the launching ceremony of the Special Technology Zones Authority (STZA) here, he said that only those companies gained during coronavirus pandemic that adapted to IT well in time.

The premier said that the main objective of the establishment of special technology zones was to give incentives to the IT sector to make it flourish for the benefit of the country.

Urges companies to take benefit of information technology

He said that with the second biggest youngest population in the world, Pakistan could utilise the IT sector in providing employment to its youth. Also, the Pakistani nationals working in other countries could benefit from the special technology zones.

He said that a great responsibility lay on STZA Chairperson Amer Ahmed Hashmi for creating a boom in the IT sector of Pakistan.

Earlier, the prime minister launched the STZA which would focus on the growth of the scientific and technological ecosystem.
Riaz Haq said…
Tweet by Muzammil Aslam:

LSM hit double digit 14.5% in Nov-20, First 5 months 7.4%. As I predicted double digit growth will hit soon. My Full year forecast still intact 4-5%. So far no body had this confidence SBP, GoP, WB, ADB, IMF and local research houses & experts.


Tweet by Hammad Azhar:

LSM has posted a growth of more than 14% in November compared to same time last year.

Pakistan is successfully reversing the tide of deindustrialisation that began in 2008. Capacity enhancements, new investments and modernisations are already in play.


Tweet by Asad Umar:

Excellent news of large scale manufacturing (LSM) growth numbers for november. Jul to nov LSM growth is now 7.4% and the month of November growth is 14.5% vs Nov 2019. Industrial growth is clearly accelerating
Riaz Haq said…
#Moody's Investor Service:"Pakistan economy will return to growth in fiscal year 2020-21, gaining a modest 1.5 per cent and accelerate to 4.4 per cent in 2022." #Pakistan #economy #COVID19

Key takeaways

Economic activity will remain below pre-outbreak levels, although the economy should return to modest 1.5% growth in fiscal year 2021

GDP growth will accelerate to 4.4% in 2022

Long-term credit growth potential is strong, given Pakistan's large unbanked population

Profitability will come under some pressure in 2021 after a huge 625-basis-point interest rate cut last year

Private-sector lending to grow between 5% and 7% in 2021, below inflation expectations of 8%

Riaz Haq said…
#Pakistan’s #cement sales in the 2nd quarter of fiscal year 2020-21 touched an all-time high of 15.1 million tons, up 11% quarter-on-quarter as well as year-on-year. In the first half of FY21, cement sales rose 16% year-on-year to record 28.6 million tons

Pakistan’s cement sales in the second quarter of fiscal year 2020-21 touched an all-time high of 15.1 million tons, up 11% quarter-on-quarter as well as year-on-year, according to a report of Topline Securities.

In the first half of FY21, cement sales rose 16% year-on-year to 28.6 million tons, it revealed.

“Cement prices will register a further hike as capacity utilisation is increasing robustly,” Topline Securities’ Deputy Head of Research Shankar Talreja told The Express Tribune. “The power to influence prices is with manufacturers at present.”

Industry utilisation based on total sales came in at 91%, adjusted for closed capacities, in the second quarter (Oct-Dec) of FY21. Based on just local sales, the utilisation stood at around 77% with 86% in the northern region and 48% in the southern region.

The strong growth in cement sales could be attributed to economic recovery in the face of low interest rates, announcement of a construction package, allocation of banking sector liquidity to the construction and housing sector and beginning of construction of dams, he said. In the last three months, housing loans increased by Rs43 billion, he added.

“During the outgoing quarter, coal prices surged to an average of $60 per ton compared to $55 per ton about six months ago,” he said. “As a result, fuel cost per ton for major cement companies is expected to increase by 10% quarter-on-quarter.”

To pass on the impact to consumers, the cement producers hiked prices in December 2020 by around Rs20 per bag in the north to Rs570. JS Global analyst Arsalan Ahmed told The Express Tribune that steel prices were on the rising trend.

Pakistan Large-Scale Steel Producers (PALSP) Secretary General Syed Wajid Bukhari said due to shortage of scrap globally, its price had risen above $500 per ton and as a result, rebar rates were increasing in Pakistan. “Local companies, however, are working at margins of less than 5%,” he said.

He added that Pakistan was almost totally dependent on imported raw material for producing steel and requested the government to take urgent measures to contain the impact of price hike on the mega infrastructure projects as well as other ongoing construction projects.

The industry suggested to the government to remove sales tax for some time and reduce the cost of electricity to offset the impact of soaring raw material prices, which was a global phenomenon, he said.

However, the government did not take any measures to address the situation, he lamented.

“We believe that the steel sector has been ignored as it is not receiving much-needed attention from the government,” he said.

Recently, the demand for steel picked up but margins remained very low and most of the large units were working at 50-60% of their capacity, he said.

“In recent months, steel prices have increased by 55% in India,” he said. “In the US, prices are likely to touch $1,000 per ton, which is twice the rate being charged a few months ago.”
Riaz Haq said…
Telecom Sector Contributed Rs. 278 Billion to National Exchequer in 2020: PTA Annual Report

The telecom sector has emerged as a prominent contributor to Pakistan’s economy and its contribution to the national exchequer has shown an increase of 129 percent in 2020 as compared to 2019 despite the economy being under pressure due to the effects of the pandemic.

As per the Pakistan Telecom Authority (PTA) Annual Report 2020 released here today, the sector contributed Rs. 278 billion (including the PTA’s deposits to the national exchequer) in the FY 2020 as compared to Rs. 121 billion in the FY 2019 registering a Year-on-Year growth of 129 percent.

A surge in the demand for telecom services due to the lockdown had resulted in significant growth not only in the subscriber base but also in the usage of telecom services.

Today, data usage stands at 4,498 Peta Bytes (FY2020) as compared to 2,545 Peta Bytes (FY 2019), showing a growth of over 77 percent. This substantial growth would not have been possible if the networks had not been upgraded. The country currently has international bandwidth connectivity of 3.1 TeraBytes and around 47,000 cell sites, of which 90 percent are 4G-enabled sites.

According to the PTA’s Annual Report, the total broadband subscriptions in the country grew by 175 percent over the last five years. Today, broadband subscribers have crossed 90 million, showing a growth of around 8 percent in the FY 2020. Additionally, Pakistan had a total broadband penetration of 42.2 percent in the FY 2020.

The telecom networks are currently available for 87 percent of the population and PTA is working with operators to increase their network coverage for the remaining 13 percent of the unserved people in Pakistan. The total teledensity now stands at 82 percent with over 172 million Mobile subscribers and 2.2 million fixed-line subscribers.

In 2020, although the Foreign Direct Investment (FDI) across the economy had been affected by the global lockdowns, the telecom sector made an iconic share of 25 percent (USD 623 million) in the total FDI made in the country. The total investment made by the local operators grew by 14.25 percent, and a total of USD 734 million were invested locally.

The total revenues of the sector reached Rs. 537 billion in the FY 2020, which had mainly been generated by the mobile sector. The financial gains have been enjoyed equally by telecom consumers, the affordability of telecom services in Pakistan has improved over the years, and the per GB broadband prices are currently as low as USD 0.20, which is among the lowest in the region.

Similarly, due to the Device Identification & Registration System (DIRBS), the introduction of government revenues increased manifold with the collection of taxes on the import of handsets. The local manufacturing of handsets has enlivened the telecom ecosystem with growth in local 4G device manufacturing crossing 34 percent.

PTA Renews PTCL License for 25 Years

Pakistan also underwent trials of 5G services which were one of the few firsts in South Asia. The PTA is aiming for a spectrum auction of LTE and VoLTE services in 2021 as a precursor to 5G. It is also gearing up for an auction of a spectrum for high-speed broadband services in Azad Jammu and Kashmir and Gilgit-Baltistan.

The PTA Annual Report highlights that this year, the regulator awarded 110 licenses for numerous telecom services and issued 91 certificates for the commencement of service to operators.

The PTA conducted QoS surveys across Pakistan for data, voice, and SMS services, and the operators were directed to take corrective measures where they had underperformed. It also conducted a number of successful raids against illegal VoIP setups this year to curb grey telephony.

Riaz Haq said…
#Pakistan has #electricity overcapacity but it still suffers #power shortages because of lack of #grid capacity. #PTI govt to increase investment in grid and delay about 10,000 MW worth of planned #coal/#wind power projects. #cost #debt #economy #PMLN

After spending decades tackling electricity shortages, Pakistan now faces a new and unfamiliar problem: too much generation capacity.

The South Asian nation’s power supply flipped to a surplus last year after a flurry of coal- and natural gas-fired plants were built, mostly financed by the Belt and Road Initiative launched by Chinese President Xi Jinping in 2013. Pakistan is slated to have as much as 50% too much electricity by 2023, according to Tabish Gauhar, special assistant to Prime Minister Imran Khan for the power sector.

That is problematic because the government is the sole buyer of electricity and pays producers even when they don’t generate. To help tackle the issue, the government has negotiated with producers to end that system, lower their tariffs and asked them to delay the start of new projects, according to Gauhar. It is also trying to convince industries to switch to electricity from gas.

“We have a lot of expensive electricity and that is a burden,” he said.

While the Chinese financing and the surplus is a welcome change after years of shortages that left exporters unable to meet orders and major cities without electricity for much of the day, two main problems remain. The first is a creaking network, and the second is the need to supply cheaper power while keeping emissions in check.

“Pakistan has overcapacity, yet it still has power shortages because of the unreliability of the grid,” said Simon Nicholas, an analyst at the Institute for Energy Economics & Financial Analysis. “They haven’t invested in the grid the same way they’ve invested in power plants.”

The last nationwide blackout happened just last month after an outage at the country’s largest facility. While the new plants have also boosted coal generation to a record fifth of the power mix, Pakistan plans to increase the share of wind and solar to 30%, while another 30% will be generated from river-run dams.

Pakistan will pay private power producers 450 billion rupees ($2.8 billion) in overdue electricity bills in a deal to reduce future tariffs. The government targets to pay 40% of that bill by the end of February, with the second payment slated before December, according to Gauhar. A third of the payment will be made in cash, with the rest in fixed income instruments, he added.

About 8 gigawatts worth of government-owned power plants will also have tariffs reduced. And Pakistan plans to negotiate lower tariffs for mining and power generation at the Thar coalfield, said Gauhar.

The government aims to delay about 10 gigawatts worth of planned power projects, including coal and wind plants, since there won’t be any need for them next year, said Gauhar.
Riaz Haq said…
Circular debt

THE government’s plan to settle the outstanding dues of IPPs amounting to Rs450bn in three tranches is only the first step towards liquidation of the power sector’s circular debt. According to reports, the IPPs will get 30pc of their existing debt stock this month and the remaining amount in two equal tranches in June and December. Under the plan, one-third of the arrears will be paid to the power producers in cash and the remainder in the form of Pakistan Investment Bonds at the floating rate. The IMF also gave its nod to the plan after the government agreed to heftily increase the base electricity tariff as demanded by the lender of the last resort. The payment of the first tranche will immediately lead to materialisation of the MoUs signed between the government and power producers in August last year into formal agreements. The MoUs provide for changes in the terms of the existing power purchase agreements that will reduce the size of the guaranteed capacity payments or fixed costs paid to the IPPs, a major source of accumulation of the circular debt. The government is expecting savings of Rs850bn over a period of 10 years, following the modifications in PPAs. The IPPs, which had demanded full payment of their money before they agreed to implement their revised PPAs, seem to have moved away from their earlier position in the ‘larger interest of the country’ as the plan will also help them improve their tight liquidity position and make new investments in new schemes.

The settlement scheme covers the 50-odd IPPs which were set up in the 1990s and 2000s and had consented to the alterations proposed in their power purchase deals with the government. The majority of these plants have completed their life cycles or paid off their debts. Therefore, we should not expect an immediate resolution of the circular debt problem even after materialisation of the revised deals with the IPPs. In recent years, the major build-up in the circular debt has been caused by capacity payments to large power projects set up since 2015, primarily as part of the multibillion-dollar CPEC initiative, with Chinese money. So far, no progress has been made to get the terms of the PPAs with these companies renegotiated although we are told that contacts have been made with Beijing at the highest level. Until these contacts pay off, the resolution of the mounting power-sector debt will have to wait.
Riaz Haq said…
To gauge the relative performance of countries at different points in the pandemic, this Interactive tracked six measures of COVID-19 in the 98 countries for which data was available.

The period examined spans the 36 weeks that followed every country’s hundredth confirmed case of COVID-19, using data available to 9 January 2021. Fourteen-day rolling averages of new daily figures were calculated for the following indicators:

Confirmed cases
Confirmed deaths
Confirmed cases per million people
Confirmed deaths per million people
Confirmed cases as a proportion of tests
Tests per thousand people
An average across those indicators was then calculated for individual countries in each period and normalised to produce a score from 0 (worst performing) to 100 (best performing). Collectively, these indicators point to how well or poorly countries have managed the pandemic in the 36 weeks that followed their hundredth confirmed case of COVID-19.

of the average performance over time of countries in managing the COVID-19 pandemic in the 36 weeks following their hundredth confirmed case of the virus. In total, 98 countries were evaluated, based on the availability of data across the six indicators used to construct this Index. *

Pakistan with an average score of 36.9 ranks 69 among 98 countries. New Zealand (score 94.4) tops the rankings. Among Pakistan's neighbors, Sri Lanks (score 76.8) ranks 10, Bangladesh (score 24.9) ranks 84, India (score 24.3) ranks 86 and Iran (score 15.9) ranks 95. Brazil ranks at the bottom with a score of just 4.3.

Riaz Haq said…
#Pakistan to issue a $500 million green bonds to boost #hydropower. Engages JP Morgan to underwrite as part of #investment in #renewableenergy for #green #economic stimulus. It’s banning new #coal power plants and planting 10 billion #trees via @business

Pakistan’s government is planning to issue a $500 million green bond in the next few months to help boost its development of hydroelectric power.

The bond, denominated in euros, will be the government’s first to fund environmental goals, Malik Amin Aslam, an adviser to Prime Minister Imran Khan on climate change, said in an interview. It is set to be issued through the country’s state-owned Water & Power Development Authority, with JPMorgan Chase & Co. advising, he said.

“We’ve got a lot of hydro potential in Pakistan,” he said on Thursday. “The bonds are there to accelerate this.”

Khan’s government is investing in renewable energy to ramp up its economic stimulus in the wake of the pandemic. It’s also promised to ban new coal power plants and is looking to plant 10 billion trees. The nation’s cities rank among the worst globally for air pollution, according to IQAir.

The South Asian nation has a fragile economy that goes through regular boom and bust cycles. It received debt relief during the pandemic, restoring its $6 billion bailout program that it secured from the International Monetary Fund in 2019 to avoid bankruptcy.

Issuance of green bonds globally is seen surging to $375 billion in 2021 by Moody’s Investors Service, after record sales last year. While Europe has led the way, countries from Singapore to Brazil plan to sell their first to tap buoyant investor demand.

JPMorgan, the world’s top arranger of green debt, declined to comment.

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