Pakistan facing upto 18m layoffs as economy shutters due to coronavirus, claims study

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ISLAMABAD: Pakistan could expect between 12.3 million to 18.5 million layoffs in different sectors of economy in the aftermath of a partial or complete shutdown due to the countrywide outbreak of the coronavirus, reported The News on Tuesday.

Three renowned economists belonging to the Pakistan Institute of Development Economics (PIDE), namely Dr Nasir, Naseem Faraz, and Mahmood Khalid, outlined their findings in a research paper. 

Titled Sectoral Analysis of the Vulnerable Employed COVID-19 and Pakistan’s Labor Market, the study noted that all provinces in Pakistan were under lockdown to control the spread of the virus.

Also read: Coronavirus updates, March 24: Latest news on the coronavirus pandemic from Pakistan and around the world

The paper highlighted three stages through which the impact of the virus on the economy could be understood. The average monthly loss of Stage-I was estimated at Rs22 billion, Stage-II at Rs187 billion and Stage-III at Rs261 billion. 

The estimated monetary value of the layoffs in each sector of the economy was also calculated. The researchers advised the government to think about possible mechanisms to reach out to laid-off workers. 

It is worth mentioning here that the estimated losses in the study are monthly losses. As the period of lockdowns extend, the losses would also increase proportionally. According to experts, if the lockdown of clusters or cities can be phased out, the monthly losses can be mitigated.

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The researchers claimed that it is imperative the government uses all its resources to track the virus spread to create firewalls through selective lockdowns in order to hold the losses down. 

"These lockdowns would have economic effects which could emerge through several channels, including, but not limited to, sharp declines in domestic demand, decreased tourism and business travel, production linkages, supply disruptions, and health effects," the study underlined.

The research stated that under Stage-I, the education, hospitality, wholesale and retail trade sectors would be strongly affected. These sectors are also very vulnerable across the three stages. Job losses in these sectors have already begun.

Also read: WHO warns of 'accelerating' pandemic, expects Olympics decision soon

The most hit sectors in Stage II would be the wholesale and retail trade, agriculture, manufacturing, transport and communications, the study found. Vulnerable employment is high in these sectors and they are also more sensitive to lockdowns, the study noted.

Based on the estimates, the majority of layoffs as a result of the economic shutdown would be of daily-wage workers, the study claimed.  

Also read: Lockdown in Pakistan: Army called in for help amidst coronavirus outbreak

The study highlighted several possible ways to address the crisis, some of which are listed below.

  • Out-of-the-box solutions for doing business are needed. For example, it is estimated that restaurants are going to face up to 20% reduced sales. Government should reduce GST on the sales of takeaways.
  • Directed credits at lower cost can be provided to those businesses which employ daily and low wage workers to compensate for the output loss while still employing a certain number of workers. 
  • Such pandemics have short and long-run economic costs related to them. Considering the low to zero real growth scenario, significant tax collection shortage will happen both this year and in the next fiscal year. The current tax collection target will need to be revised downward to prevent the FBR from unnecessary revenue pursuit. 
  • In order to provide relief to businesses which engage the most vulnerable workers (especially daily wage workers) the GST on their products should be waived. 
  • For exporters whose containers are stranded at sea or importers have asked to wait for 6 months, the government should grant six months to convert letters of credit on zero rate, on the condition that they will not lay off their workers.

Originally published in The News