IMF Covid-19 Policy Response Tracker observation: Coronavirus spreading rapidly in Pakistan

The International Monetary Fund (IMF) COVID-19 Policy Response Tracker has noted that the coronavirus has been spreading rapidly since the past month in Pakistan with 4,489 confirmed cases claiming 63 deaths as of April 9, 2020.

The Fund, in its "Policy Response Tracker" taken by 193 countries and uploaded on its website, stated that in response to the COVID-19, both the federal and provincial governments have implemented a range of measures to delay and contain the spread of the virus including quarantining more than three thousand travelers from Iran, closing borders with neighboring countries, international travel restrictions, school closures, social distancing measures, and lockdowns in cities and provinces across the country.

Pakistan Army troops were deployed starting Monday, March 23, to help provincial governments in their measures to contain the spread of the virus.

Key Policy Responses as of April 9, 2020 include a relief package worth Rs1.2 trillion announced by the authorities on March 24, 2020.

Key measures include: (i) elimination of the import duties on imports of emergency health equipment; (ii) relief to daily-wage workers (Rs 200 billion); (iii) cash transfers to low-income families (Rs150 billion); (iv) accelerated tax refunds to the export industry (Rs100 billion); and (v) financial support to SMEs (Rs100 billion).

The economic package also earmarks resources for accelerated procurement of wheat (Rs280 billion), financial support to utility stores (Rs50 billion), relief in fuel prices (Rs70 billion), support for health and food supplies (Rs15 billion), electricity bill payments relief (Rs110 billion), an emergency contingency fund (Rs100 billion), and a transfer to the National Disaster Management Authority (NDMA) for the purchase of necessary equipment to deal with the pandemic (Rs25 billion).

In terms of monetary and microfinance policies the State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate twice by a cumulative 225 basis points to 11 percent in the span of less than two weeks in March 2020.

On March 17, the SBP announced two new refinancing facilities: first, the "Temporary Economic Refinancing Facility (TERF)" worth Rs100 billion in bank refinancing to stimulate investment in new manufacturing plants and machinery at 7 percent fixed for 10 years; and second, the "Refinance Facility for Combating COVID-19 (RFCC)" worth Rs5 billion to support hospitals and medical centers to purchase equipment to detect, contain and treat COVID-19.

On March 26, the SBP undertook temporary regulatory measures to maintain banking system soundness and sustain economic activity including: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increase in the regulatory limit on extension of credit to SMEs by 44 percent to Rs180 million ; (iii) relaxation of the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients' payment of principal on loan obligations by one year; and (v) relaxation of regulatory criteria for restructured/rescheduled loans for borrowers who require relief beyond the extension of principal repayment for one year.