Economy of Pakistan rebounded strongly in FY2021 and posted growth of 3.94 percent

which is not only substantially higher than the previous two years (-0.47 and 2.08

percent in FY2020 and FY2019 respectively) but also surpassed the target (2.1 percent

for FY2021). Despite strict fiscal constraints, timely and appropriate policy measures

taken by the government resulted in a V-Shaped economic recovery.

Start of 2021, amid worldwide vaccination campaigns, the global economy started

showing healthy signs of recovery, however, third wave of the pandemic tempered the

pace of economic recovery. The pandemic which has already induced shocks like

lockdowns, border closures, collapse of trade, travel bans and financial market volatility

globally. Third wave in Euro Area, UK, India and many other countries further intensified

these restrictions thus affecting the global supply chains. Experts started projecting

difference in recovery on the basis of divergent circumstances of each country and the

idiosyncrasies of its policy response. It was argued that success in the post-pandemic

era will reflect a constellation of policies and capacities peculiar to each country,

including national vaccination rates, integration into major economic blocks, the ability

to provide fiscal and monetary stimulus and the restoration of solvency in the private

sector. For Pakistani economy, this pandemic also became a severe challenge as country

was already under the pressure of stabilization required to address Balance of Payments

crisis emerged in FY2018. Thus, both consecutive adverse shocks; stabilization pressure

owing to Balance of Payments (BoP) crisis and COVID-19 pandemic put the economy far

below its potential level which resulted in a negative growth in FY2020. First wave of

pandemic started in April 2020 (Fig-1), depressed majority of economic activities. Beginning of new fiscal year was better in term of containment of pandemic and

economic recovery, however second wave in late October 2020 and third wave in March

2021 made government efforts more challenging for containing the pandemic and

keeping the economic activities to continue.

Real GDP growth of 3.94 percent in FY2021 is V-shaped economic recovery which shows

concerted efforts of government for addressing structural issues to avoid further

macroeconomic imbalances. The government also took some immediately requisite

measures for sustainable and robust growth along with protecting the most vulnerable

segments of the society. Given fiscal constraints, the government had also to address

public health issues faced because of pandemic, uplift the weaker segment of society that

suffered due to lockdowns and keep the economy moving. Further unlike past, the

government restricted itself in borrowing from SBP and also followed expenditure-

control measures in context of the structural changes for conducting fiscal policy

measures. Relief provision to vulnerable segments and growth support was

government's utmost priority. However, high interest payments (July-March FY2021

Rs 2.1 trillion ($ 13.1 billion); 4.6 percent of GDP; 32 percent of Total Expenditures)

restricted expenditure side from going all out with options, while the fiscal position

further became weaker due to sharp decline in non-tax revenues (7.3 percent decline in

July-March FY2021 compared to corresponding period last year). Still government has

not made any compromise on relief provision to vulnerable segments. In FY2021,

allocation for Ehsaas Programme has been increased from Rs 187 billion ($ 1.17 billion)

to Rs 208 billion ($1.30 billion) to provide relief to vulnerable segments of society which

was affected by pandemic in term of health and livings. Under "Ehsaas Emergency Cash

Program", 14.8 million families were benefited. It was the commitment which also made

the Programme globally recognized. According to World Bank report on "Social

Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures"

published on May 14, 2021, Pakistan is ranked Fourth in terms of number of people

covered while Third in terms of the percentage of population covered, and remained

amongst those that covered over 100 million people. This is an indication that contrary to earlier trickle-down approach, the government

followed growth-oriented policies along with protection of vulnerable segments. The government is also considering bottom-up approach for economic growth. Since COVID- 19 outbreak,

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