Coronavirus forecast to render 18.5m jobless in Pakistan

Ministry says economy to sustain Rs2.5tr losses due to ‘severe shocks from coronavirus outbreak’


Shahabaz Rana April 03, 2020
A fruit vendor waits for customers as he sells guava from a wheelbarrow along a closed market during a lockdown, following an outbreak of coronavirus disease (COVID-19), in Lahore. PHOTO: REUTERS

ISLAMABAD: The Ministry of Planning has estimated that 12.3 million to 18.5 million people in the country will lose their jobs and the economy will sustain Rs2 trillion to Rs2.5 trillion losses in just three months due to “moderate to severe shocks from the coronavirus outbreak”.

The ministry in an inter-ministerial meeting on Thursday discussed the preliminary estimates, which are based on information received from various government entities and initial research conducted by the Pakistan Institute of Development Economics.

The assessment is based on limited, moderate and complete lockdown. The country seems to have already passed the limited level and is at the moderate phase in terms of restrictions on movement and is inching towards complete restrictions.

The ministry has assessed losses at Rs1.2 trillion in limited lockdown scenario, Rs1.96 trillion in moderate and Rs2.5 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 the 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 Rs891 billion to Rs1.6 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,” Dr Jahanzeb Khan, the deputy chairman of the Planning Commission said while responding to The Express Tribune queries.

Job losses

Initial estimates show that in case of limited restrictions, about 1.4 million jobs will be lost, which are equal to 2.2% of the employed workforce. In monetary terms, the three-month wage loses will translate into Rs66 billion.

In a moderate scenario where private offices and most shops are closed, but essential shops are open, the government has worked out 12.3 million people becoming jobless.

“On employment, we can assess that under moderate restrictions employment loss could be up to 12 million, around 20% of the employed labour force,” the deputy chairman said. In monetary terms, the loss of wages will translate into Rs561 billion for three months alone.

In case of a complete shutdown, the government has assessed that 18.53 million people or 30% of the labour force will be unemployed. These people will sustain Rs783 billion losses.

In this scenario, two-thirds of workforce is daily wagers, 30% 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.

PHOTO: REUTERS PHOTO: REUTERS

Business, revenue losses

“We have coordinated our efforts to assess the quickly evolving situation and initial estimates put a business loss amount at over Rs450 billion for the fourth quarter,” the deputy chairman said.

He said that the government would continue to assess the situation and information from other sectors is coming.

The government has assessed Rs9.3 billion losses for the aviation sector, Rs250 billion initial loss in the stock market, Rs30 million losses being sustained by the Ministry of Maritime Affairs, Rs136 billion by the Ministry of Energy, Rs55 billion by the agriculture sector and Rs8 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 decrease in revenue and cash outflow of around Rs600 billion in the fourth quarter of the fiscal year, he added.

As compared to Rs600 billion official assessment, Pasha and Kardar’s assessment showed the revenue losses in the range of Rs150 billion to Rs290 billion. It seems that the FBR is passing its inefficiency on to the COVID-19 outbreak.

PHOTO: REUTERS PHOTO: REUTERS

Trade losses

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% up to 60%, depending upon the severity of the crisis.”

He said that exports could potentially go down by up to 10% in dollar terms in the fourth quarter.

“Impact of trade contraction only on GDP could be up to 4.6% if combined imports and exports go down by 20%,” the deputy chairman said.

The preliminary estimates show that in case of a 2% decline in imports and nil in exports, the fourth quarter GDP would be shaved off by 0.3% that will translate into Rs45 billion. If both exports and imports decline by 10% each, the fourth quarter GDP would take a hit of 2.3% or Rs345 billion. Similarly, a 20% decline in imports and exports in the fourth quarter would cause losses of 4.7% of the GDP or Rs700 billion.

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