HBL Bank, Pakistan’s largest bank, is worried that the pandemic might force China to put the break on the China-Pakistan Economic Corridor (CPEC) project.
Risha Mohyeddin, global treasurer at HBL Bank, says the bank is watching closely for any indication that Pakistan’s giant neighbour will have to slow down the CPEC project.
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The China-Pakistan Economic Corridor (CPEC) is an assortment of infrastructure projects currently under development in Pakistan. The cumulative value of all CPEC projects is $62bn (around £50bn) with future projects expected to amplify the valuation considerably.
CPEC intends to massively improve the Pakistan economy by rapidly enhancing the country’s infrastructure including modern transportation networks, energy projects, and special economic zones.
Meanwhile, coronavirus cases continue to increase in Pakistan.
Sixteen cases and counting
This week, Pakistan confirmed eight new coronavirus cases, all located in the southern city of Karachi, the nation’s capital. The new infections raise the total number of patients across the country to 16.
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By GlobalDataAt least six of the patients had travelled to war-stricken Syria, according to a statement from the health department of the Sindh province, where Karachi is located.
The new coronavirus cases were announced two days after Pakistan’s first COVID-19 patient was discharged from hospital as having “fully recovered”. The majority of patients in the country have a history of travelling to neighbouring Iran, which has reported the highest number of deaths after China and Italy.
Pakistan confirmed its first case of the coronavirus on 26 February in Karachi, where a 22-year-old male who had recently visited Iran was found to be infected.
Following the latest cases, authorities have further tightened screening at airports and borders.
An economic setback
The coronavirus outbreak occurred just as Pakistan’s balance of trade was improving in right direction, the government said. The virus, it added, represents “a threat to the pace of development”.
Asian Development Bank (ADB) stated in its report that the virus outbreak could cost the Pakistan economy in the range of $16.387m (£13.09m) to $4.95bn, or 0.01 % to 1.57% of Gross Domestic Product (GDP).
The coronavirus pandemic has also dealt a severe blow the government’s recent efforts to promote tourism in the country.
“Significant and tragic human cost”
Below are comments from Risha Mohyeddin, global treasurer at HBL Bank, Pakistan’s largest bank:
“There will undoubtedly be a significant and tragic human cost if Covid-19 takes hold in the Pakistan population as much of the population lives in close proximity to each other. That said, there are factors that may slow spread of the disease into Pakistan. Screening is being introduced at airports; while Pakistan’s land border with China is impassable at this time of year, and any travellers from there will be quarantined for 15 days. Movement between Pakistan and Iran is now blocked, and travel to or from India and Afghanistan is very limited in any case.
“The impact on the economy will largely be dictated by government action and any impact on Pakistan’s export sectors. Thus far the government has not declared Covid-19 an epidemic and few measures have been taken that will hinder economic activity. Anyway, we believe the government will weigh the risk from the disease in the context of other existing health risks in the population. Given the domestic focus of the economy it should be less impacted by travel bans and slowing international trade than other more externally-facing developing economies. Pakistan’s textile export sector relies on China for the bulk of its capital goods inputs, so there will be an impact if there is a protracted closedown of the Chinese economy.
“One thing we will be watching closely is any signs that – due to the Covid-19 outbreak and the associated measures taken by the respective governments – the Chinese authorities are forced to slow down their rollout plans for the China-Pakistan Economic Corridor and the development of the Gwadar international deep water port and its associated infrastructure, which offers western China direct access to international shipping routes.
“Despite the uncertainties ahead, Pakistan’s economy has stabilised greatly in recent years. Until a few years ago, the security situation and lack of reliable power supplies had discouraged foreign direct investment and local investment. Both of these are much improved. The rupee was unsustainably high – this led to a ballooning of imports. Following the devaluation, the import quotas on capital goods have eased and the currency is at a more competitive level from which the economy should be able to enjoy a moderate level of sustainable growth (4.5%-5% pa).
“While we cannot assume oil will remain in the mid $30s, the Pakistan economy, as a net oil importer, should benefit from lower oil prices.”
