Pakistan economy to loose 2.5 trillion due to coronavirus: report

Official estimates show employment loss could be up to 12 million, around 20% of the employed labour force

Mehtab Haider

ISLAMABAD: The federal government on Thursday worked out the impact of losses of pandemic COVID-19 virus on some sectors of the national economy and shared the initial assessment that total losses stood at the whopping figure of Rs 2.5 trillion, reported The News.

Official estimates first time shared with a selected group of reporters in the aftermath of the outbreak of coronavirus reveal that under moderate restrictions, employment loss could be up to 12 million, around 20% of the employed labour force of the country.

The total labour force in the country stood at 60-65 million and moderate estimates calculated by the Pakistan Institute of Development Economics (PIDE), an affiliate of Planning Commission, showed that the lingering pandemic could result into unemployment ranging from 12 to 20 million. The PIDE had assessed that the monthly average losses of losing jobs stood at Rs180 billion to Rs260 billion, so in the worst-case scenario basis, the estimated losses could go up to Rs780 billion in the next three months. However, the government has decided to provide Rs4,000 monthly stipend to expected job losers.

The Planning Commission, under Deputy Chairman Planning Commission Dr Mohammad Jehanzeb Khan, worked out the initial losses caused by COVID-19 pandemic on a few selected sectors of the economy in consultation with ministries/divisions and international donors in more than last two-week period. These estimates have been worked out such as government-owned/department business losses, tax revenues collected by the Federal Board of Revenue (FBR), massive reduction in import and export (trade figures losses) and these estimates did not include losses on account of GDP growth rate.

The top official said it was widely believed that the impact of the virus and the severity of lockdowns on the overall economy may have a severe impact on economic performance parameters.

“We have coordinated our efforts to assess the quickly evolving situation. Initial estimates put a business loss amount over Rs450 billion for the fourth quarter (April-June) period of the current fiscal year. Please bear in mind we continue to assess the situation and information from other sectors is coming,” said the official. When asked about more details, the official sources said that these were assessed through incurring losses of PIA, Pakistan Railways and other public sector entities. They said that the Security and Exchange Commission of Pakistan (SECP) shared information that the stock market tumbled and it so far caused losses to the tune of Rs200 to 250 billion. The government’s business loss might escalate further because it did not include the overall losses on account of GDP growth and important sectors like agriculture, manufacturing and services sectors amid halting economic activities in all sphere of lives.

On the government's tax revenue side, the official said that it was expected that the FBR could see a decrease in revenue/cash outflow of around Rs600 billion alone in the fourth quarter (April-June) period of the current fiscal year. Initially, the FBR had estimated revenue losses of Rs380 billion but they revised upward their losses in the wake of additional Rs200 billion losses on account of deferment of utility bills, including electricity and gas and then release of stuck-up refunds to the tune of Rs100 billion.

The official sources said that these figures of revenue losses were shared by the FBR. However, it is not yet known that the FBR took a revised target of Rs 5.2 trillion or Rs4.8 trillion. However, the FBR sources said that the tax collection could maximum go up to Rs4.2 trillion but the possibility of Rs4.4 trillion seemed out of question.

Renowned economist Dr Hafeez A Pasha in the Shahzeb Khanzada show at Geo TV stated that the FBR could collect Rs4 trillion maximum till the end of the current fiscal year.

On the trade side, the Planning Commission’s estimates showed that there was an expected sharp slowdown in imports of up to 60pc, exports could potentially go down by up to 10% “Impact of trade contraction only on GDP could be up to 4.6% in the last quarter if combined imports and exports go down by 20pc,” the official estimates showed. This figure of 4.6% losses in GDP during the last quarter could be roughly quantified around Rs700 to Rs800 billion losses in the April-June period of FY2020 if the exchange rate in terms of the dollar versus rupee is estimated at Rs165 against the dollar. The researchers of PIDE argued that they had not yet calculated the exact figures because there was no estimation of quarterly growth figures in Pakistan. However, the Planning Commission and the PIDE are working jointly to come up with exact estimates on trade losses accounts assessed for the last quarter of the current fiscal year.

“On employment, we can assess that under moderate restrictions employment loss could be up to 12 million, around 20% of the employed labour force. Please keep in mind that the above numbers are preliminary figures and will most likely change as the situation evolves,” concluded the top official.

Originally published in The News