Investor Presentaiton

Chapter VIII - MSMEs - Revitalizing Punjab's Economy Finance Department, as part of the budget making exercise for FY2020-21, also solicited proposals from the citizens at large as to identify the priority areas of intervention. A significant majority of the citizens have termed employment generation and economic revival as the key priority area, besides healthcare interventions in the wake of COVID-19 (See Chapter on Inclusive Budgeting for details). Based on the preceding, the Government of Punjab has realized the following key challenges being faced by businesses, particularly the MSMES: Lack of liquidity and cash across the entire spectrum of value chain - direct impact on jobs particularly in non-formal and non-bankable MSMEs Accessibility to credit is a challenge due to major proportion of the MSMEs being out of formal financial and taxation net Broken supply chains due to partial lockdown restrictions still in place COST Operating businesses under the restrictions due to COVID-19 situation - Traditional wholesale businesses located in older and denser parts of the cities are particularly challenged Additional operational expenditure due to protective measures Lack of availability of inputs to manufacturing Aggregate demand shock resulting due to loss of income, unemployment, closure of businesses during lockdown (consumption has typically been considered a major contributor to Punjab's GDP with contribution up to 78%) Government's Strategic Response for MSMEs Sustainability While being fully cognizant of the challenges faced by the economy, Punjab Government's strategic response to support MSMEs is constrained by fiscal space. Revenue collection in the wake of COVID-19 economic lockdown has remained below its target for FY2019-20 which has directly impacted the federal fiscal transfers to the Province considerably. Similarly, tax relief announced by Punjab Government has dented the own source revenue collection. The shortfall in FY2019-20 has been exacerbated by the fact that sizeable revenue resources have already been shifted to healthcare sector, social protection and relief measures. So, a proportion of liabilities already accrued has been pushed forward to FY2020-21. In FY 2020-21 too, considerable fiscal resources are still needed to ward off the disruption caused by COVID-19 through healthcare, relief and social protection apportionments. This has consequences for other desirable interventions such as bailout for the MSMEs. So, the strategy adopted by Government of Punjab for FY2020-21 is based on three key complementary pillars - first, leveraging the interventions spearheaded by Federal Government and State Bank of Pakistan to revive the economy; second, direct support to MSMEs through Development portfolio of the Punjab Government in FY2020-21 under Punjab Rozgar and other schemes; and third, short-, medium- and long-term policy interventions to create an enabling environment which is supportive of MSMEs sustainability and growth. Broad contours of the three pillars of the strategy are briefly discussed here: 01 Leveraging Existing Initiatives of Federal and Punjab Government in FY2020-21: Initiatives already undertaken in FY2019-20 and continuing in FY 2020-21 include both fiscal and monetary measures. On the fiscal side, Federal & Provincial Governments in Pakistan have announced PKR1.2 trillion relief and Stimulus package in order to reduce the impact of Corona virus outbreak. It aims to provide relief to vulnerable MSMEs, construction industry, deferment of utility bills of lower income groups, deferment of principal and interest for business and reduction in fuel prices etc. Government has launched "Ehsaas Emergency Cash Program" with total allocation of PKR 144 Bn to provide immediate cash relief of PKR 12,000/- to 12 Mn families of daily wage earners and low-income households, whose livelihood has been severely affected by the pandemic. Punjab Government has contributed PKR 10 Bn to these resources. Finance Department has implemented an initial relief package of PKR 18 billion through relaxing provincial taxation, fees and licenses to help businesses with their cashflow challenges. Page 68

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