KARACHI: Pakistan will need to achieve a growth rate of 6.6% to accommodate new job seekers of around 1.3 million each year, according to the State Bank of Pakistan (SBP).
Independent economists anticipate a notable slowdown in the economy to 4.8% in the ongoing fiscal year, barely a year after Pakistan achieved a 13-year high growth rate of 5.8% in fiscal year 2018, according to official figures.
The trend suggests the number of unemployed people would sharply surge this year from the estimated 3.5 million at present.
The central bank, however, remained optimistic that the country may create comparatively higher number of job opportunities this year due to development taking place on the multi-billion dollar China-Pakistan Economic Corridor (CPEC) and through supporting the Small and Medium-sized Enterprises (SME) sector.
“Empirical evidence on the relationship between growth and employments suggests that every percentage point increase in growth results in creation of 0.2 million jobs (in Pakistan),” the central bank said in its latest quarterly report on the state of economy for FY18.
Better infrastructure is one of the important ways to promote employment opportunities as it facilitates business activities. In the context of Pakistan, CPEC-related infrastructure development is projected to spur business growth, especially with development of Special Economic Zones, it said.
Second, integration with the global markets enhances productivity and thereby real wage rate. “Recently, Pakistan’s exports have started showing signs of recovery under supportive government policies and recovery in global demand,” it said.
Lastly, planned urban development plays an important role in job creation, since metropolitan areas are hubs connecting a country to the outside world and act as engines of its growth. Mega city development projects (especially mass transit) in Pakistan have boosted economic activity and the same is expected after completion of ongoing developmental projects, it said.
In addition to GDP growth, Pakistan can absorb more entrants per unit of growth through two sources. First, a slight change in growth mechanics can spur employment growth. In particular, SME-led growth can provide more employment opportunities than highly capital-intensive large scale industries.
Second, within SMEs, a renewed focus on women entrepreneurial incubators would yield high social welfare returns. Women-led SMEs are more inclined to hire women than men-led ones. A national outreach program to motivate and attract female participation could also unlock a substantial employment potential. “Here, the regulatory bodies (SBP, SECP and SMEDA) need to enhance collaboration amongst them to provide a platform for SMEs to grow and expand. Moreover, they may support women-led SMEs to break the glass ceiling,” the SBP said.
The central bank also announced a policy for promotion of SME Finance in December 2017. “The SBP SME framework set certain benchmarks for 2020, which include an increase in SME share in private sector credit, from existing 8% to 17% and increase in number of borrowers from existing 164,000 to 500,000.
“These actions are likely to contribute towards employment generation going forwards,” it said.
Published in The Express Tribune, July 13th, 2018.