JOIN USPakistan says COVID-19 to take heavy toll on economy, fears 18.5 million job losses
Pakistan has estimated that up to 18.5 million people in the country could lose their jobs and the economy will sustain a loss of nearly Rs 2.5 trillion in three months due to the coronavirus pandemic, according to a media report on Friday.
The assessment is based on limited, moderate and complete lockdown, The Express Tribune reported.
The country seems to have passed the limited level and is at the moderate phase in terms of restrictions on movement and is inching towards complete restrictions, the report said.
The estimates of loss emerged during an inter-ministerial meeting held at the Ministry of Planning on Thursday, where official discussed the preliminary estimates based on information received from various government entities and initial research conducted by the Pakistan Institute of Development Economics.
The Ministry of Planning has assessed losses at Rs 1.2 trillion in limited lockdown scenario, Rs 1.96 trillion in moderate and Rs 2.5 trillion in case of complete restrictions on movement, which symbolises a curfew-like situation.
The government has assessed the losses on the basis of the impact of the restrictions -- imposed to stop COVID-19 from spreading -- on business, tax revenue, international trade and cost of unemployment for three months.
The initial official estimates are higher than the first independent assessment by two former government functionaries, Dr Hafiz Pasha and Shahid Kardar, who put the losses in the range of Rs 891 billion to Rs 1.6 trillion in case of less to severe shocks.
"It is widely believed that the impact of the virus and severity of lockdowns on the overall economy may have a severe impact on the economic performance parameters," deputy chairman of the planning commission Dr Jahanzeb Khan said.
Initial estimates show that in case of limited restrictions, about 1.4 million jobs will be lost, which are equal to 2.2 per cent of the employed workforce. In monetary terms, the three-month wage loses will translate into Rs 66 billion.
In a moderate scenario where private offices and most shops are closed, but essential shops are open, the government estimates 12.3 million job losses.
"On employment, we can assess that under moderate restrictions, employment loss could be up to 12 million, around 20 per cent of the employed labour force," the deputy chairman said. In monetary terms, the loss of wages will translate into Rs 561 billion for three months alone.
In case of a complete shutdown, the government has assessed that 18.53 million people or 30 per cent of the labour force will be unemployed. These people will sustain Rs 783 billion losses.
In this scenario, two-thirds of workforce is daily wagers, 30 per cent is working on the piece rate and the rest are street vendors, according to the ministry.
The Kardar-Pasha duo worked out that the temporary unemployment resulting from a lockdown/curfew could be of as much as 10.5 million workers, including daily wage and contract/casual workers in establishments.
"We have coordinated our efforts to assess the quickly evolving situation and initial estimates put a business loss amount at over Rs 450 billion for the fourth quarter," the deputy chairman said.
The government has assessed Rs 9.3 billion losses for the aviation sector, Rs 250 billion initial loss in the stock market, Rs 30 million losses being sustained by the Ministry of Maritime Affairs, Rs 136 billion by the Ministry of Energy, Rs 55 billion by the agriculture sector and Rs 8 billion by the Ministry of Railways.
However, there are question marks on the losses being shown by the Ministry of Energy on account of circular debt, delay in tariff adjustments and deferred electricity payments. All these amounts will eventually be recovered. Similarly, the loss figures of the agriculture crops appeared exaggerated, as the COVID-19 has not impacted this sector.
On the government's revenue side, it is expected that the Federal Board of Revenue could see a decrease in revenue and cash outflow of around Rs 600 billion in the fourth quarter of the fiscal year, he added.
As compared to Rs 600 billion official assessment, Pasha and Kardar's assessment showed the revenue losses in the range of Rs 150 billion to Rs 290 billion. The government also expects a sharp slowdown in trade activities.
Jahanzeb Khan said, "On the trade side, there is an expected sharp slowdown in imports from 35 per cent up to 60 per cent, depending upon the severity of the crisis".
He said that exports could potentially go down by up to 10 per cent in dollar terms in the fourth quarter.
"Impact of trade contraction only on GDP could be up to 4.6 per cent if combined imports and exports go down by 20 per cent," the deputy chairman said.
The preliminary estimates show that in case of a 2 per cent decline in imports and nil in exports, the fourth quarter GDP would be shaved off by 0.3 per cent that will translate into Rs 45 billion.
If both exports and imports decline by 10 per cent each, the fourth quarter GDP would take a hit of 2.3 per cent or Rs 345 billion. Similarly, a 20 per cent decline in imports and exports in the fourth quarter would cause losses of 4.7 per cent of the GDP or Rs 700 billion, the report added.
The Ministry of Health Services said that Pakistan's coronavirus cases jumped to 2,450 on Friday. Thirty five people have died due to the pandemic, while 126 have recovered so far.