In addition to the severe human cost, the coronavirus crisis has forced Pakistan’s already suffering economy to a grinding halt. In the current fiscal year, Pakistan is estimated to have faced an economic loss of up to Rs 2.5 trillion because of the pandemic.
In a meeting presided by Advisor to Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh, it was informed that almost every sector of the country has been badly affected by the pandemic.
Despite a $7.5 billion relief package, both central and provincial governments have struggled to respond as the number of confirmed cases continues to rise daily. As the situation stands, much more will be needed for Pakistan to effectively address the crisis.
Let’s take an in-depth review of the economic loss of Pakistan due to the novel coronavirus.
Economic losses
1. GDP: The size of the national economy as measured by the gross domestic product (GDP) had shrunk from Rs44 trillion to about Rs41.5 trillion, down by Rs2.5 trillion. The GDP was originally estimated to grow by 3 percent during the current fiscal year, but it actually contracted by 0.4 percent, which meant the total GDP loss of 3.6 percent or Rs1.58 trillion.
2. Unemployment and Inflation: The Ministry of Planning has estimated that 12.3 million to 18.5 million people in the country will lose their jobs due to coronavirus outbreak. Due to the epidemic, the current rate of poverty in the country is likely to increase from the current rate of 24.3% to 33.5%. Inflation rises in the country after the Corona outbreak, rupee was depreciated by 7.5 percent in March. Last month, the inflation rate rose to 0.42 percent.
3. Revenue collection: The FBR estimates that the coronavirus is expected to cause a loss of Rs 850 billion in annual revenue to the country this year. The International Monetary Fund has conceded that Pakistan will only be able to collect PKR 3.9 trillion in FY20, a shortfall of PKR 1.6 trillion.
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. The government also expects a sharp slowdown in trade activities.
Conclusion
Such pandemics expose the inadequacies of the responses of successive governments to poverty, healthcare, and inclusive social protection and governance. Pakistan should translate the catastrophic COVID-19 crisis to an opportunity for undertaking reforms in its economy, polity, and foreign and security policy.
There is also an emerging opportunity in the post-COVID-19 world order, which Pakistan can take advantage of to reform the economy. Dramatically low oil and commodity prices (the imported inputs), will create a buffer within our current account, even after considering a 15-20% drop in exports and remittances.
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