Friday, March 27, 2020

Coronavirus: Pakistan's Exports Crash Amid Global Health Crisis

Pakistan Textile Industry was celebrating a big milestone with 20% jump in exports in February 2020 when coronavirus struck a heavy blow. Some western retailers canceled orders while others put them on hold as the virus spread to Western Europe and the United States in late February and early March. Then came the lockdown in Pakistan that shut down factories and halted transport in Pakistan.

Here's how Guido Schlossman, President and CEO of Synergies Worldwide, a global supply chain management firm with an office in Pakistan, summed up the situation for Sourcing Journal: “Most clients have either cancelled or put orders on hold...That would have huge ramifications and losses, and the fear is that most small factories may shut, whereas the mid and big factories will have huge financial liabilities and losses.” “Ninety-five percent of clients have either cancelled, put on hold or given new delivery dates ranging from 4-6 weeks delay to about 8-10 months,” Schlossman said. “That is how huge the holding period and losses would be for the factories.”

“All over Pakistan it’s a complete lockdown in all the provinces everywhere,” Hafiz Mustanser Ahmed, managing director of Lahore-based factory  U.S. Apparel and Textiles, told Sourcing Journal last week.U.S. Apparel & Textiles, which typically produces 100,000 garments a day, is seeing “huge, huge” order cancellations, Ahmed said.

“The transportation when it comes to taking the employees to the factories or the public transportation, it’s all 100 percent closed. All the factories are closed.” For now, moving goods back and forth between the ports and Lahore, Pakistan’s second-biggest textile manufacturing hub after Karachi, is still allowed, but there simply aren’t many goods to move, said Ahmed, whose factory produces denim bottoms for Levi’s, Target, H&M, J.Crew, Primark and Costco, to name a few.

Other Asian garment exporting nations face a similar situation. Bangladesh has issued stay-at-home orders and India has ordered a 21-day nationwide lock-down. The difference is that Pakistan exports had just begun to recover when the COVID-19 global pandemic struck. Now demand for apparel in the western markets is not likely to materialize for at least a month or two. Meanwhile, job losses in Pakistan are almost certain. A prolonged slump in the west will spell disaster for Pakistan's exports and delay the nation's economic recovery.

Pakistan's service economy will also suffer in a prolonged lock-down. Service sector accounts for  50% of the world GDP and 54% of Pakistan's GDP.  Social distancing will significantly impact the services, particularly retail, restaurants, travel, transport and education sectors. Imran Khan has expressed fear that the pandemic will devastate the economies of developing countries. “My worry is poverty and hunger," Khan said. "The world community has to think of some sort of a debt write-off for countries like us, which are very vulnerable, at least that will help us in coping with (the coronavirus).”

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Rashid A. said...

Very sad and tragic for Pakistan. Any ideas how we can help?

May be increase in charity? Fund raising to support families?

Riaz Haq said...

Rashid: "Very sad and tragic for Pakistan. Any ideas how we can help? May be increase in charity? Fund raising to support families?"

I think a global recession has already started. It will impact Pakistan in terms of declining exports and remittances.

Exports support jobs in Pakistan. Remittances are a lifeline for many poor and lower middle class families in the country.

Millions of families in Pakistan and other developing countries will probably be among the worst affected.

Those of us who can should increase our charitable contributions to reputable organizations registered in US like TCF, Hidaya, HDF, Edhi Foundation, etc.

Anonymous said...

Pakistan has 30% more coronavirus cases than India despite India testing more per capita and having 7x population.what is the reason ?

Riaz Haq said...

Coronavirus Testing in Pakistan (2,000) vs India (14,500) is about the same per capita as of March 19. Pakistan has ramped up testing and the latest figure from NIH Pakistan is over 13,000 tests (vs 27,000 in India) as of March 28, 2020.

Number of cases in Pakistan is probably higher than India because of large numbers of people traveling between Pakistan and Iran which is a coronavirus hotspot. Testing in Pakistan is mainly targeted at that group and their family members and contacts in Pakistan.

So far, vast majority of coronavirus infections are among people who came in from Iran. There are a lot fewer local transmissions in Pakistan.

Anonymous said...

After rupee devaluation of 20% this year can Pakistan service its dollar denominated debt ? CPEC loans are also dollar loans IIRC.

Riaz Haq said...

Trying to beat #coronavirus in #Pakistan: 'So far we are managing it'. "I think lockdown was the only option - the only solution for this disease. "Our government took the step very quickly and after that we were able to control this ... spread." #COVID19

A Pakistani businessman said strict lockdown of the country's 204 million people was causing serious hardship, but it was saving lives.

The Al Jazeera news agency reported 40 deaths so far from Covid-19 in Pakistan, and more than 2600 cases of infection.

Aly Hossain is a businessman in the Punjab capital Lahore - a city of 12m, now in its 21st day of lockdown, after what was meant to be 14 days.

He said it was causing a lot of hardship, but there was little option for containing the spread of the deadly virus.

"I think lockdown was the only option - the only solution for this disease.

"Our government took the step very quickly and after that we were able to control this ... spread."

News agencies reported that Pakistan, despite its close proximity with China, remained coronavirus-free until the 26 February when a young man from Karachi tested positive after returning from Iran - one of the worst-hit countries.

After a brief hiatus following the first case, Covid-19 cases spiked as more pilgrims returning from Iran tested positive for the virus.

Hossain said Lahore was right now deserted, which he had never before seen.

"It feels like ... it's a very different kind of situation, right now. We have never seen it like this before, in my life.

"Everything is closed, businesses are closed and people are scared of what will happen in the future."

Hossain said the country faced many problems.

"I talk about my business, which is currently closed. I have to manage a little factory so we are closed, and we are at home and we don't do anything."

He said the government was trying to help but it did not have sufficient funds to relieve the scale of need.

The World Bank announced at the weekend it had approved a $US200m ($NZ340m) package to help Pakistan take effective action against the Covid-19 pandemic by strengthening the country's national healthcare systems and mitigating socio-economic disruptions.

The focus would be on the health sector, but would also help the poor and vulnerable cope with the immediate impact of the pandemic through social protection measures, food rations, and remote learning education.

Hossain supported his wife and young daughter, his parents and siblings, and said many were relying on charity and family to survive.

He was not sure when they might begin to see any improvement, but hoped it would be soon.

"We don't have any clear picture right now about what is going to happen but the government is telling us to prepare for 10 more days, then this lockdown will be over and we will be back to business."

Hossain said that in general, and despite the difficulties, the population seemed calm and hopeful of a good outcome.

"They are always very optimistic - they don't do panic and they always try to manage in any condition and in any situation, and so far we are managing it.

"We are hoping for the best."

The World Bank Group said in a news release at the weekend that it was rolling out a $US14 billion ($NZ24b) fast-track package to strengthen the Covid-19 response in developing countries and shorten the time to recovery.

The immediate response included financing, policy advice and technical assistance to help countries cope with the health and economic impacts of the pandemic.

Riaz Haq said...

#Pakistan reopens factories with precautionary measures with only essential employees and ensuring regular #disinfection. Exporters such as Interloop Ltd., which supplies to Nike Inc. and Puma SE, have reopened their factories. #COVID19 #exports #economy

Pakistan is reopening some factories amid a national lockdown to counter the deadly coronavirus pandemic as the south Asian nation expects its exports will decline by 50% in the next two months.

The companies with export orders will start working again with precautionary measures including calling in only essential employees and ensuring regular disinfection, Abdul Razak Dawood, the commerce adviser said in a phone call, late Thursday. Exporters such as Interloop Ltd., which supplies to Nike Inc. and Puma SE, have reopened their factories.

The International Monetary Fund plans to approve and disburse an additional $1.4 billion in emergency financing to Pakistan next week to help the nation shield its economy. This is in addition to Prime Minister Imran Khan, who has warned the pandemic may spread in coming weeks, announcing multiple stimulus packages including its largest-ever cash payouts and for the reopening of the construction industry starting next week.

Pakistan’s decision to reopen some factories comes after a global slowdown and the IMF predicting the world economy this year will suffer its worst recession since the Great Depression. A Bloomberg survey forecast Pakistan’s $315 billion economy will expand 0.8% this year, compared with the earlier forecast of 2.6%. The country’s exports fell 8.5% in March.

Pakistan had pinned its hopes of getting out of its regular economic boom and bust cycle through exports but they will fall by as much as 50% over the next few months, Dawood said. There will be a “slow recovery, very slow recovery,” he added.

The virus outbreak has infected 4,489 people and 63 have died amid low testing in Pakistan. The government has said it will take a decision on April 14 whether to extend the nationwide partial lockdown.

Riaz Haq said...

Pakistan PM Seeks #Debt Relief for Developing Nations to Fight #CoronaVirus. #ImranKhan's appeal coincided with Wold Bank report warning of the worst economic performance in 40 years in #SouthAsia. #India #Pakistan #Bangladesh #economy #lockdown #COVID19

Pakistani Prime Minister Imran Khan appealed to the international community Sunday to provide developing countries with an urgent debt relief to help tackle the COVID-19 crisis facing them.

Khan made his “global initiative on debt relief” appeal on a day when a Wold Bank report warned countries in South Asia, including Pakistan, India, Afghanistan and Bangladesh, are on course to experience their worst economic performance in 40 years in the wake of the coronavirus outbreak.

In his nationally televised speech, Prime Minister Khan said the developed world is focused on containing the deadly pandemic through lockdowns and dealing with its economic impacts at the same time.

But he lamented struggling economies like that of Pakistan have been hit hard by restrictions on movement that have halted economic activity, caused widespread unemployment and triggered new challenges.

While stopping the virus from killing people, the “biggest worry” for the developing world now is that people are dying of hunger as a result of the lockdown , Khan lamented.

“The problem they face now is a lack of fiscal space. We don’t have the money to spend on already the overstretched health services and to stop people from dying of hunger.”

Khan insisted that rich countries have come up with trillions of dollars of relief packages for their people to offset immediate economic fallout, but that luxury is not available to his and other developing nations to manage the unfolding challenges.

“To give an example of Pakistan, with a population of 220 million, so far the maximum stimulus (relief package) we could afford is $8 billion, and this is the issue with most of the developing world,” he said.

Khan’s government rolled the largest social protection program in Pakistan’s history last week to pay nearly $1 billon to more than 12 million poverty-stricken families, or an estimated 80 million individuals, to help alleviate the economic fallout of the outbreak.

“Therefore, I will be appealing to the world leaders, to the heads of financial institutions, to the Secretary General of (the) United Nations to launch an initiative that will give debt relief to developing countries to combat the coronavirus.”

Pakistan, where an estimated 40% of people live in poverty, owes more than $100 billion debt to international lenders and a large chunk of the national budget is consumed by debt servicing.

World Bank Report

The world’s most populous region of South Asia which houses 1.8 billion people, “finds itself in a perfect storm” in the wake of the pandemic outbreak, according to the World Bank report.

It forecasted the regional growth is likely to drop to between 1.8% and 2.8% in 2020 from the pre-pandemic projection of 6.3%.

“Tourism has dried up, supply chains have been disrupted, demand for garments has collapsed and consumer and investor sentiments have deteriorated, international capital is being withdrawn and inflows of remittances are being disrupted,” the report warned.

Unlike other nations worst-hit by COVID-19, South Asian countries have so far reported fewer than 15,000 cases of infections, with India, the largest country in the region accounting for more than 8,000. Pakistan recorded 5,200 infections, with at least 88 deaths, as of Sunday.

But experts fear the region, with some of the world’s most densely populated cities, could become the next coronavirus hotspot.

Riaz Haq said...

World Bank: South Asia Economic Focus, Spring 2020 : The Cursed Blessing of Public Banks

The economic outlook for South Asia is dire. South Asia will likely experience the worst economic performance of the last 40 years. Because of the unparalleled uncertainty, this report presents a range forecast, estimating that regional growth will fall to a range between 1.8 and 2.8 percent in 2020, down from 6.3 percent projected six months ago. Hardest hit is Maldives where GDP is expected to decline by between 8.5 and 13 percent this year, as tourism has dried up. Also, for Af- ghanistan, Pakistan, and Sri Lanka, the full range of their forecast GDP growth for this fiscal year is in negative territory. In a worst-case scenario, the whole region would experience a contraction of GDP.
The dire forecast is based on the analysis of several adverse impacts. South Asia finds itself in a perfect storm. Tourism has dried up, supply chains have been disrupted, demand for garments has collapsed, consumer and investor sentiments have deteriorated, international capital is being withdrawn and inflows of remittances are being disrupted. On top of the deterioration of the international environment, the lockdown in most countries has frozen large parts of the domestic economy.
The crisis will reinforce inequality in South Asia. Even more worrisome than the grim macroeconomic outlook is the realization that the impact on the poorest in the population will be much harsher than the consequences for more affluent people. Analysis shows that poor people have a higher likelihood of having lost their work, and domestic migrant workers who had escaped rural poverty by finding work in cities are being forced back into rural poverty again. Many of the poorest face higher risk of food insecurity.
Policy makers are in unchartered territory and must consider innovative policies. In their immediate response, the fo- cus has been rightly on mitigating the spread of COVID-19. While doing that, conditions should be created to jumpstart the economy, once countries emerge out of the immediate health crisis. A combination of temporary work programs and a moratorium on debt servicing and rent payments could help prepare for the restart of the economies. After tackling the immediate COVID-19 threat, South Asian countries must keep their sovereign debt sustainable through fiscal prudence and debt relief initiatives. In the longer run, South Asia would do well by diversifying its international connections, while there are great opportunities to expand digital technologies for payment systems and distant learning to unlock remote areas in South Asia.

Riaz Haq said...

'Starving' #Bangladesh #garment workers protest for pay during #coronavirus #lockdown. BD apparel factories account for some 84% of its $40 billion export sector, which is facing a crisis after H&M, Walmart, Tesco and others cancelled orders- France 24

Thousands of garment workers who produce items for top Western fast fashion brands protested against unpaid wages in Bangladesh's streets Monday, saying they were more afraid of starving than contracting coronavirus.

Bangladesh's apparel factories account for some 84 percent of the country's $40 billion export sector, which is facing its worst crisis in decades after retailers including H&M, Walmart and Tesco cancelled orders because of the pandemic.

Protesting workers say many factories have not paid them after the orders were cut.

Workers shouted slogans such as "we want our wages" and "break the black hands of the owners" as they blocked roads despite a nationwide lockdown to combat the spread of the deadly disease.

"We are afraid of the coronavirus. We heard a lot of people are dying of this disease," protesting worker Sajedul Islam, 21, told AFP.

"But we don't have any choice. We are starving. If we stay at home, we may save ourselves from the virus. But who will save us from starvation?"

The lockdown, which started on March 26, also forced the closure of the vast majority of the country's garment factories.

"We have not been paid for two months. We are starving," said another protester, who gave her name as Brishti, from the Tex Apparel factory in the capital Dhaka.

"If we don't have food in our stomach, what's the use of observing this lockdown?"

Some 5,500 workers protested on Monday while 20,000 turned out on Sunday, police inspector Islam Hossain told AFP.

"Some workers broke doors and glasses of a factory. But they were largely peaceful," Hossain told AFP. No one was arrested.

Bangladesh has announced $590 million in loans for export-oriented factories to pay workers.

The South Asian nation is the world's second-biggest garment maker after China, with $35 billion dollars of exports a year.

Riaz Haq said...

Some Nations Face an Awful Question: #Death by #Coronavirus or by #Hunger? So far, 90% cases and deaths are in countries with average temp under 63 deg Fahrenheit, and most of those are rich, developed countries. #US #UK #Italy vs #India #Pakistan- NYTimes  by Ruchir Sharma

Though many rich economies have ground to a halt under strict lockdowns to contain the coronavirus, many low- and middle-income countries have decided they can’t afford an all-out fight. Brazil’s president has taken the most controversial stand against shutdowns, saying “we’re all going to die one day,” but he is not alone.

A recent study by UBS, the Swiss bank, found that emerging nations account for most of the “moderate” lockdowns and few of the “severe” lockdowns. Turks between the ages of 20 and 65 are still on the job even as confirmed cases soar. Pakistan has left open key export industries, including textiles. For nations that lack a social safety net, “full lockdowns will only lead to more hunger, starvations and death,” says Luhut Pandjaitan, a senior minister in Indonesia, which was slow to issue travel restrictions and stay-at-home orders.

So far, 90 percent of the reported cases and deaths are in countries where the average temperature is under 63 degrees Fahrenheit, and most of those are rich, developed countries of the Northern Hemisphere. The worst of the economic and financial fallout, however, is hitting the warmer nations of the emerging world, which is now expected to experience its first contraction in the post-World War II era.

The full economic damage has to yet to be assessed, as growth forecasts for 2020 keep falling, but the financial carnage registers daily. While stocks in the United States have hit a bottom 35 percent below their all-time highs, this drop is similar to one in a bear market during a recession, and barely half as bad as in 2008. Six major emerging markets — including Brazil, Turkey and Mexico — have seen falls of more than 70 percent from their all-time highs, and many are trading below their 2008 lows. If there is any silver lining here, it is that the scale of these crashes suggests that markets have already “priced in” more bad news to come for the hardest-hit emerging economies.

This is only the eighth global recession in the past century, and it is confronting emerging countries with unique challenges. They don’t have the resources to match the enormous stimulus programs that are preventing an even deeper recession in the developed world. Their crowded living conditions make it hard to slow the pandemic with social-distancing rules. And if emerging nations do impose lockdowns, their weak welfare systems can’t support unemployed workers for long.

The United States has already committed to spend a sum equal to nearly 10 percent of its annual economic output on stimulus measures to keep growth alive. Germany, Britain and France plan to spend 15 percent or more. But rich nations have the capacity to borrow and spend freely, because in general global markets trust them to make good on their payments, no matter how large.

But the balanced budgets have deteriorated into large budget deficits. When the pandemic hit, many big emerging economies like those of South Africa, Nigeria and Argentina faced a large “twin deficit” in both the government budget and the current account — a measure of how much nations need to borrow abroad to finance their spending habits. Now spooked investors are fleeing to the relative safety of the U.S. dollar, weakening the currencies of emerging economies — and further undermining their ability to pay their bills.

Riaz Haq said...

India, Pakistan plan to restart some #economic activity during #coronavirus #lockdown. Top leadership in Pakistan to meet Monday to decide. #India has 9,152 confirmed cases, including 308 deaths. #Pakistan has 5,374 cases, including 93 deaths. #economy

India and Pakistan are planning to partially reopen their economies to minimise the cost of restrictive measures imposed to halt the spread of the novel coronavirus, officials in the two countries said on Monday.

Indian Prime Minister Narendra Modi said on Twitter he will address the nation on Tuesday, at the end of a 21-day lockdown that has severely disrupted economic activity and left millions of its 1.3 billion people out of work.

Two Pakistani cabinet ministers told Reuters the civil and military leadership would meet on Monday to decide whether to extend countrywide restrictions there beyond April 15.

The World Bank has said economic growth in India and other South Asian countries is likely to be the slowest for four decades this year because of the coronavirus outbreak.

Although India’s shutdown is likely to be extended as most states have requested, officials say its terms could be softened to help households and businesses.

Modi has asked his cabinet colleagues to come up with plans to open up some crucial industries, a government source involved in the deliberations said.

A government note seen by Reuters said some manufacturing could be restarted, with firms in the autos, textiles, defence and electronics sectors allowed to operate at 25% capacity while ensuring social distancing.

“As the prime minister has indicated, we will have to move towards economic activity, while taking utmost care of the lockdown and social distancing,” said Manohar Lal Khattar, chief minister of the northern state of Haryana.

He said he planned to divide his state into three zones — a red zone where there have been the most cases of coronavirus, orange with fewer cases, and green where no outbreak has been reported. The federal government may employ a similar plan, officials said.

“In the green zone, small and medium industries will be allowed to start operations, provided the entrepreneur gives us an undertaking to fulfil the guidelines in letter and spirit. We want small industries to start operations at lower capacity first,” Khattar, a close Modi ally, said.

Officials said the number of coronavirus cases in India was 9,152 on Monday, including 308 deaths, a swift rise from fewer than 1,000 two weeks ago.

The government is trying to increase testing for the virus, which causes COVID-19, a respiratory disease, from about 15,000 samples a day to around 40,000.

Riaz Haq said...

"BlackRock says coronavirus has weakened the #investment case for #Indian assets". #India’s #economy was already slowing when the #coronavirus pandemic hit, weakening the case for investors to buy the country’s #stocks and #bonds. #Modi #BJP #Hindutva|twitter&par=sharebar

India’s economy has come under pressure from the coronavirus pandemic at a time when growth was already slowing, said Neeraj Seth, BlackRock’s head of Asian credit.
That has weakened the case for for investors to buy the country’s stocks and bonds, he said.
“India entered the whole situation of Covid on a weaker footing ... and if anything, the lockdown and the slowdown of economy only put more pressure on the banking system,” he added.

The country’s banking sector has long been plagued with troubles such as large amounts of bad debt, which has hurt the economy. Growth in India’s economy — the third largest in Asia — slowed to 4.7% in the quarter ended December 2019. It was the weakest pace in more than six years.

With the country now in lockdown as the government attempts to slow the spread of the coronavirus, Seth said the Indian economy could even contract in the coming quarters.

Official data in India showed total confirmed cases of Covid-19 standing at 10,363 as of Tuesday morning, with 339 deaths. Indian Prime Minister Narendra Modi on Tuesday extended the coronavirus lockdown until May 3. The initial 21-day nationwide restrictions were supposed to have been lifted today.

Slower economic growth means that company earnings will be hurt, and that would hit the prices of stocks and certain bonds, said Seth, adding that BlackRock has been “cautious” on Indian credit at the “lower end” of the ratings spectrum.

But with India’s central bank — the Reserve Bank of India or RBI — expected to cut interest rates further, fixed income investments could benefit, he said.

“So overall, the case for fixed income, probably positive because we do expect the RBI to cut rate and the direction of monetary policy is still towards easing; the case for Indian credit, a little bit more nuanced, a bit more mixed depending on quality ... and also case for equities also remain mixed here,” said Seth.

Riaz Haq said...

#Pakistan included in #G20 & #IMF #DebtRelief plans. The plan will provide immediate deferral of $10-12 billion in debt service due in Fiscal 2020-21, a big boost for Pakistan's #economy facing huge impact of #coronavirus pandemic. #COVID19

Prime Minister Imran Khan on Thursday appreciated the debt relief measures by G20 countries, the International Monetary Fund (IMF) and the World Bank for developing countries, including Pakistan.

The premier lauded the debt relief measures after Finance Advisor Dr Abdul Hafeez Sheikh called him and informed him about the planned approval of an additional $1.4 billion concessionary financing from IMF to deal with the economic impact of coronavirus.

The advisor also updated the premier about the progress on various components of the Economic Stimulus Package announced by the government.

Meanwhile, Foreign Minister Shah Mehmood Qureshi said the decision by G20 countries to give debt relief to developing countries will have "substantial impact” on Pakistan, allowing the country a much needed "fiscal space” to focus on the downtrodden against the backdrop of Covid-19.

He told reporters said the initial debt relief was for one year but added the period could be extended since the situation was still evolving.

Asked to share the benefits for Pakistan, the foreign minister said Pakistan annually spent $10 to $12 billion on debt servicing. He said while the details were being worked out by the finance ministry, the impact of debt relief for Pakistan would be ‘substantial’.

Since the outbreak of Covid-19, Prime Minister Khan has been seeking debt relief for developing and poor countries. On April 12, he formally launched an appeal urging the international financial institutions and developed world seeking debt relief.

Qureshi said prior to the prime minister’s appeal, the foreign office in consultations with the relevant ministries prepared a comprehensive plan for the debt relief.

For this purpose, he said he wrote letters and spoke to 30 foreign ministers over the past few weeks, seeking their help for Prime Minister Imran’s global initiative for debt relief.

The foreign minister said the decision of G-20 was historic and would give major relief to the developing countries.
Qureshi credited the debt relief for developing countries to the prime minister, who was one of the first world leaders calling for such reprieve for developing countries.

To a question, Qureshi urged President Donald Trump to review his decision of suspending funds to the World Health Organisation (WHO). He said this was the time all countries should be united against the fight against coronavirus.

He said the premier’s debt relief initiative has benefited Pakistan as well as the developing world that is grappling to deal with the effects of the pandemic.

Riaz Haq said...

#Pakistan set to request #debt repayment standstill. First large #EmergingMarkets economy to avail of #G20 initiative in response to #coronavirus pandemic. via @financialtimes

Pakistan is set to become the first large developing country to apply for a debt repayment standstill under an initiative of the G20 group of wealthy nations, the country’s finance ministry said on Wednesday.

Islamabad hopes to defer repayments due to bilateral lenders this year of about $1.8bn and use the savings to address the coronavirus crisis, the ministry told the Financial Times.

“The savings will all be Covid-related. The impact of the epidemic in terms of cases and deaths is small compared with the US, Europe and China but the economy has come to a standstill as if the whole country had Covid.”

An emerging market debt portfolio manager at a large asset management company said finance ministry officials discussed the planned request with investors at a conference call on Tuesday.

Pakistan’s central bank expects the economy to contract by 1.5 per cent this year as a result of the crisis, after growing 3.3 per cent in 2019.

Last week, the IMF approved a $1.4bn zero-interest loan to Pakistan to help it address the economic impact of the pandemic.

Imran Khan, Pakistan’s prime minister, called Donald Trump on Wednesday and thanked the US president for his support for the country at the IMF.

According to Pakistan’s readout of the call, Mr Khan underlined to Mr Trump that the country had put together an $8bn package to support people and businesses affected by the pandemic. It said Mr Trump promised to send rapid testing machines.

Pakistan has supported US efforts to bring its war in Afghanistan to a close as it seeks to withdraw its troops following a deal brokered between the US and the Taliban earlier this year. The fragile truce will depend on support from Islamabad and Kabul if it is to be successful.

A senior US official told the Financial Times that Mr Trump had helped to secure the G20 debt deferral.

“The administration continues to work with our multilateral partners, including global financial partners like the IMF and World Bank, to help developing nations bounce back from the historic economic challenge of the Covid-19 pandemic,” said the official.

Last week, Steven Mnuchin, US Treasury secretary, defended the administration’s decision not to back a bid to provide IMF liquidity to emerging economies in difficulty, despite appeals to do so from European and African leaders.

The finance ministry said Islamabad would submit a request to the G20 for the repayment freeze as soon as the group published a format for doing so. The initiative, announced last week, is due to run from May 1 until the end of this year, with a possible extension into 2021.

repayment relief from commercial lenders because of the risk that to do so would make it harder to borrow on capital markets in the future.

The official said Pakistan was due to make repayments of $2.3bn to private creditors during the rest of the financial year ending on June 30, all of which had been covered by refinancing commitments from lenders. He predicted that a further $3.2bn in private repayments due over the following 12 months would also be covered by new borrowing.

repayment relief from commercial lenders because of the risk that to do so would make it harder to borrow on capital markets in the future.

The official said Pakistan was due to make repayments of $2.3bn to private creditors during the rest of the financial year ending on June 30, all of which had been covered by refinancing commitments from lenders. He predicted that a further $3.2bn in private repayments due over the following 12 months would also be covered by new borrowing.

The G20 stressed that its initiative does not alter the amount owed by debtor countries, which will be allowed to reschedule their repayments over three years, preceded by a one-year grace period.