Lockdowns causing a whopping Rs190b loss daily

Punjab, K-P communication comes to standstill

ISLAMABAD:

Pakistan suffers a whopping Rs190 billion economic loss daily due to shutdowns caused either by protests on the call of the opposition or by the government's unwise move to bring the country to a standstill by closing motorways and highways.

The nation on Saturday witnessed worst lockdown ever imposed by the government in the country in an effort to ward off any untoward incident during the Pakistan Tehreek-e-Insaf's protest march on Islamabad.

The government ordered the closure of all motorways and highways even 48 hours before the start of the protest. The decision crippled normal life and businesses in the two provinces—Punjab and K-P—in addition to bringing misery to the people of Islamabad Capital Territory.

The official reason for closing the country's transport arteries is "repair work". Information Minister Attaullah Tarar also threatened that during the upcoming promotion board meeting those bureaucrats, who would play any role in the political agitation, will be strictly dealt with.

Last month, the Ministry of Finance prepared an internal report for the federal cabinet about the losses due to the PTI's call for jamming Pakistan in October.

The report states that "current unrest affects society, the economy, and politics in the long term". It added that political instability is hurting the economy and sending a message to the world that Pakistan is unstable, which could reduce investment.

"Unrest affects transportation, hospitals, retail, healthcare and telecommunications, with immediate and long-term effects," stated the finance ministry with the PTI in its mind. Ironically, the damage was done to these sectors not by the PTI, but by the government when it closed the road network on Saturday.

Due to the shutdown, production, consumption and individuals working on daily wages are directly hit. The exports will be affected by the agitation-induced closure of the economic activity, stated the finance ministry last month.

The ministry stated that "a rough estimate (of the losses) is around Rs189 billion or 0.6 % of quarterly GDP per day". This includes Rs144 billion in nominal GDP, Rs16 billion due to low exports and Rs26 billion in FBR tax collections. Another Rs3 billion per day loss was estimated on account of less foreign direct investment Inflows.

However, the expenditure cost to the exchequer has not been included in the losses. The cost of loss of revenues on the motorways and highways is also not included in the estimate because last month the government had not shut the motorways and highways around Punjab and Khyber-Pakhtunkhwa.

The ministry's internal report stated that GDP, which is projected to grow by 3.6% in this fiscal year, will sustain daily losses because of the agitation. It has estimated daily loss to the agriculture sector is Rs26 billion, industry (Rs20.4 billion) and the losses in the services sector is estimated at Rs66 billion.

The ministry stated that approximate daily GDP will be Rs198 billion instead of Rs342 billion due to political agitation and shutdowns. Thus, "it is expected that an approximate loss of Rs144 billion per day will occur", according to the finance ministry.

The ministry stated that due to both forward and backward linkages among different growth components, supply chain disruption might impact the economic growth in several ways. It added supply chain disruption impacts industrial production which in turn affects exports and domestic production.

It said that the exports target of goods during FY 2025 is $32.4 billion, implying almost $89 million per day export. Assuming 65% of exports will be affected by agitation, $57.9 million equivalent to Rs16 billion per day loss will occur in exports.

Likewise, consumption and domestic production will also be affected. Due to supply chain disruption, pressure will be exerted on prices, especially, there is a significant probability of a rise in food inflation due to supply interruption, said the ministry.

The ministry stated that the target of the FBR for the current fiscal year is Rs12.97 trillion, approximately Rs36 billion per day. The FBR has to collect approximately 11% of whatever GDP is created.

Assuming the road closure has affected Punjab and K-P limits, the GDP is estimated at Rs198 billion per day, said the finance ministry last month. This implies FBR collection will be Rs21.8 billion per day instead of Rs37.4 billion. Thus, causing a loss of Rs15.6 billion per day, it added.

This agitation will increase federal expenditures which along with a shortage in FBR tax collection will affect the fiscal deficit and hence increase the financing gap, it added.

The Finance Ministry stated that in August 2024, the foreign direct investment Inflows remained at $296.4 million. At the level of August 2024, per day loss is $9.6 million or Rs2.6 billion, it added.