Pakistan’s unprecedented economic crisis could be an opportunity

Pakistan’s unprecedented economic crisis could be an opportunity

Hassnain Javed

APRIL 19, 2020

 

Pakistan’s economy is surrounded by a prolonged history of rapid economic lapses, energy crises, the Kashmir issue, security concerns and health crises alongside political polarization and poor governance structures.

The country’s economic situation both in the short and long term is parallel to a patient on a ventilator, using a metaphor fit for a global pandemic. It is clear that the country’s economic fronts will suffer irrecoverable damages and losses in a post-Covid world. According to official estimates, Pakistan’s economy will incur initial economic losses amounting to Rs1.3 trillion and according to the Planning Commission of Pakistan, the size of the country’s Rs44 trillion strong GDP will face expected disruptions at minimum 10 percent losses in the last quarter alone, amounting to Rs1.1 trillion.

It is not Pakistan alone that is experiencing economic shocks and both fiscal and monetary imbalances. Indeed, developed economies like the US, European nations, Japan and even China got caught in economic tailspins and incurred $2.7 trillion in lost output.

Meanwhile, Covid-19 has certainly made human civilization shift towards a new normal.

If the situation persists and the pandemic lasts longer, it is quite certain Pakistan’s economic fronts could collapse. By May 2019, the Pakistani Rupee had already experienced depreciation of 30 percent against the US dollar. There was also the addition of debt amounting to more than $13 billion. Furthermore, the inflation rate in Pakistan accelerated to 12.93 percent which set off alarm bells for more price hikes in the future despite the income levels of middle to lower income groups remaining constant or decreasing.

Pakistan is an agro-based economy and entails the potential not only to meet its national food requirements, but even those of neighboring countries. However the price rises of essential food items result in imbalances in supply and demand.

Apart from this, the inhumane move to revoke the special legal status of Indian-administered Kashmir by Prime Minister Narendra Modi last August has led to higher security concerns along the border and present a huge added cost to the government.

This catastrophic situation provides some much need push for the future, with an opportunity to set national priorities straight. Covid-19 ultimately demands of both developing and developed economies to work together, to have more effective healthcare systems and extensive medical research to counter the effects of such devastating pandemics in the future. 

Hassnain Javed

Pakistan continues to be on the grey-list of the Paris-based global terror financing watchdog, the FATF– an added economic worry. There is an investment crisis amid the pandemic, with most industries shut and a rising emphasis on lockdowns. According to Federal Bureau of Revenue estimates, the lockdown in Pakistan is going to incur major revenue losses. For instance, if the current situation lasts till June 2020, the tax losses could exceed Rs380 billion.

It seems Pakistan will also suffer from further negative trade imbalances. According to the Federal Secretary of Commerce, the export sector might experience economic losses between $2-4 billion as most export orders were cancelled and a majority of the country’s export sector is dependent on the textile industry, which in turn is dependent on China for basic capital good inputs.

The tourism sector too, which had just been kickstarted in Pakistan in a big way, has experienced losses as global tourism dropped by 3 percent.

However, this catastrophic situation provides some much need push for the future, with an opportunity to set national priorities straight. Covid-19 ultimately demands of both developing and developed economies to work together, to have more effective healthcare systems and extensive medical research to counter the effects of such devastating pandemics in the future.

Pakistan should take Canada as a role model and revitalize its existing industries by manufacturing medical supplies and relevant items to treat and protect Covid-19 patients and keep its economy moving forward to overcome economic losses. This is the right time to promote the “Made in Pakistan” vision, and catapult it into becoming a reality.