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ESSAY ASSIGNMNET

Abid Hussain khajjak CMS-ID: 011-18-0057 Summer program

Introduction

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orld Health Organization (WHO) has stated that pandemic Covid-19 has affected human kind globally, especially economic factors particularly developing regions. Owing this State Bank of Pakistan (SBP) and Security Exchange Commission of Pakistan (SECP) has taken robust and timely action to address these challenges effecting general public and employees. (SBP) issue several policies to counter possible economic impact of novel coronavirus in Pakistan's financial institution and Bank of Khyber Book for safety and continuity of banking and financial services Covid-19 centric Standard of Procedure sop’s has been adopted as:        

Provision of Hand Sanitizers in ATMs and Banks. Awareness campaign and promotion on Sops Limiting crowd flow into banks, advising to use alternate banking services. Introducing new series via ATMs, Mobile Banking and help reduce physical customer and Bank interaction. inter and Inters banks Funds Transfer Mobile Top ups Direct Check Deposited Facility Drop Boc for Check Collection Facilitate

Reports by World Bank (World Bank, 2020b) indicate Pakistan lose one 3rd of its revenue and exports has been decreased by fifty percent in the pandemic covid-19. Economist has warned of recession owing to pandemic and frequent long lockdowns (Junaid, Naqvi 2020)x Pakistan's GDP FY20 showed a 1.3% contraction in year 2020 because of slow economic activities nationally and globally (World Bank, 2020b). On 23 March 2020, Sindh announced lockdown. Karachi, a industrial hub and capital city of Sindh contribute 30% of export, a major sources of employment, investment, business, tourism and services. Owing to lockdown 2700 factories business halted (Hussain, 2020). It caused major unemployment, slow production of good and services, scarcity economic shortage. Hence, people lost jobs, no purchasing power, businesses in loss, saving consumed, no profits, transport standstill, travelling banned.

All this caused a barrier in circular few of money in economy. Hence State Bank and (SECP) has a major role to play in Covid-19 to bring bank economy and Banks into flow to support general public and business

Discussion On April 04 2020, it was issued by Security Exchange Commission of Pakistan (SECP) that borrower can defer repayment of principle loan via a year, the main beneficiary of this act was Non-Bank Finance Companies (NBFCs) and Non-Bank Microfinance Companies (NBMFCs) owing outbreak of Novel Coronavirus in Pakistan. On April 01 2020, Federal Cabinmate launched domestic Sukuk Bond to pool 700 billion to compensate budget deficit and finance counter Covid-19. On March 29 2020, central bank released DBR from 50% to 60% for consumer loans

Counter Measure by SBP and SECP November 2020, State Bank of Pakistan and Asian Developmental Bank (ADB) entered in dollar two million grant agreement to support counter Covid-19 measure in Pakistan Banking and Finance Sector. Moreover, in May ADB approved dollar 300 million emergency assistance loan to strengthen economy. It helped create a fiscal boost and business and job growth.

Liquidity and Saving are major area in demand i crises such aa Covid-19. Where Bank has to maintain minimum balance of payment to carry out its operations cost. Lockdown has caused unemployment and business shutdown. Hence, borrowers loan payment capacity is low. This situation led to liquidity crunch where lenders are not able to their investors

The barrier in transport, supply chain, rapid decline in global demand and large capital withdrawal caused a contraction in national economy. According to International Monetary Fund IMF developing and low-income countries has to suffer more compared to advanced countries. World GDP growth is projected to be 4.9%, advanced economies 8%, developing 3% and 1% for low-income economies.

In such situation national financial institution and administration aim to achieve inclusive growth and reduce income disparity amid Covid-19. It also effected infrastructure investment and Small and Medium Enterprises SMEs loan payment and repayment. Amid this, government has to manage medical services expense, emergency loan to SME and regain trust in infrastructure investment from investor locally and globally.

Hence, this led us to debate and test effectiveness of various mode and role of financing in achieve growth via attracting investments.    

GDP Growth Pakistan's Fiscal Resources of Government Infrastructure Development Short-term Financing Policies

Several short-term policies have been adopted to protect low-income strata from social and economic stress. Several strategies to accommodate private sector for its operation continuation, it is assumed that on the strong assumption that resources and money trickle down from top-tobottom. The fiscal and monetary incentive provided by national financial institution for private and public sector- help continuity of employment, income, stipends for vulnerable classes of society.

State Bank of Pakistan SBP has reduced its policy rate by five percent to incentivize private business. The collapse of income, borrowers badly effected payment of microfinance loan of seventy percent of low-income strata.

The repayment percent of microfinance was 98% prior to March 2020. Withing a month of Lockdown in March it falls to 81% and in may it went to 34% owing to collapse of income amid Covid-19 and Lockdown.

Policies implemented in normal time will prove bad in Covid-19 like crises. Such as loan officer in Microfinance Institution MFI are paid high incentive on new loans and repayment of previous loan. On contrary, in Covid-19 MFI loan officer should be paid steady salary by which they can work without worrying about income. By this, they can help and serve customer.

Moreover, MFI loan officers previously heavily relied on face-to-face interaction for new loan and recovery of previous loans. Even though digital revolution has brought ease and efficiency in Banking but still MFI need a physical touch for its customers.

Conclusion In time crises, there is always need of new policies and strategies. Hence, owing to Covid-19 SBP and SECP along with investors, regulators, private and public bodies to ensure access to resources and manage liquidity in pandemic like situations. In such times, when incoms collapses business halt and supply chain come to a standstill- there is need of rapid recapitalization and fast liquidity facilities

References 1. Malik, K., Meki, M., Morduch, J., Ogden, T., Quinn, S., & Said, F. (2020). COVID-19 and the Future of Microfinance: Evidence and Insights from Pakistan. Oxford Review of Economic Policy, 36(Supplement_1), S138-S168.

2. Nishat, F. (2020). COVID-19 Impact on NPLs in Corporate Sector-A study on Banking Industry of Pakistan.

3. Chaudhary, M. K., & Dhakal, A. P. (2021). COVID-19 Pandemic and its Impact on Sustainable Development Goals: An Observation of South Asian Perspective. Annals of the Romanian Society for Cell Biology, 01-14.

4. Akkas, E., & Al Samman, H. (2021). Are Islamic financial institutions more resilient against the COVID-19 pandemic in the GCC countries?. International Journal of Islamic and Middle Eastern Finance and Management.

5. Hess, J., Klapper, L., & Beegle, K. (2021). Financial Inclusion, Women, and Building Back Better.

6. Ayadi, R., & Shaban, M. (2020). Digital Financial Inclusion: a Pillar of Resilience amidst Covid-19.

https://www.unicef.org/pakistan/press-releases/adb-pakistan-sign-2-million-grant-agreementcombat-covid-19-through-unicef

https://www.sciencedirect.com/science/article/pii/S2590051X20300071

https://www.bok.com.pk/covid-19-measures-continuity-of-financial-services

https://home.kpmg/xx/en/home/insights/2020/04/pakistan-government-and-institution-measuresin-response-to-covid.html...