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CPEC projects may face delay, disruption as virus crisis worsens

BusinessWeb DeskApril 25, 2020
Pakistan could benefit from business opportunities arising as a result of the pandemic, the report states

ISLAMABAD: *Pakistani authorities have warned about delays and disruption in China Pakistan Economic Corridors (CPEC) related multi-billion dollars projects after outbreak of coronavirus, The News reported on Saturday.*

⭕ *A detailed report tabled before high-powered National Coordination Committee (NCC) states that Chinese companies working on CPEC projects will suffer delays and higher costs, and with supply-chain and worker related disruptions will be witnessed.*

It states that Pakistan’s plan to expeditiously build Special Economic Zones (SEZs) will also be thwarted or at least face delays as _Chinese companies will find it hard to manage required human and capital supplies on an urgent basis._

SEZs effective tool to benefit post-crisis
In the second-round effect, the SEZs will be the most effective tool to harness benefit out of the crisis, it added. It is believed that G-8 countries aim to diversify global supply chains so that in case of emergency in one country, they can fall back upon other sources of supply.

*Even some business giants in China also subscribe to this thought, as they want to re-locate their production houses in different countries. Pakistan, on the back of its infrastructure availability, could be a contender to benefit from global business opportunities arising from the impact of COVID-19.*

A well-articulated policy is need of the hour, however, the response may be constrained by different factors, including uncertainty about the nature and duration of shocks may complicate policy response.

Also read:China pledges to strengthen Pakistan’s capacity in fight against coronavirus

Other factors could be that adequately finance demand of health systems and social safety nets within the confines of already squeezed budgets may not be sufficient. The need for a mix of timely and targeted policies on hard-hit sectors and segments of society through temporary tax relief and cash transfers could also rise, the report noted.

*The report recommended that the government reprioritise revenue and spending objectives as lower revenues resulting from lower imports coupled with additional spending requirements for pandemic mitigation are likely to widen fiscal deficit.*

Also read:China asks Pakistan to convene 10th JCC meeting under CPEC ahead of schedule: report

'Businesses to face liquidity problem'
In the second-round effect, the report says, many businesses will face liquidity problem and will look towards the financial sector for cheaper sources of financing.

Global markets will be tight, thereby constricting exports and remittances, fiscal adjustment will be painful, higher debt accumulation will be problematic, and development will be harder to find financing.

Revenues will be difficult to increase while expenditure demand will be immense, and in all this an intricate policy mix has to be in place for stable transition out of the crisis, the report concluded


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