“Impact of

Coronavirus on GDP
of Pakistan ”

Pakistan’s GDP affects during this pandemic

These are extraordinary times. Economies all over the world, including Pakistan, have come to a
screeching halt. An economy that was only just recovering from an external crisis that saw the
country go back to the International Monetary Fund (IMF) for another bailout has now been dealt a
body blow whose impact is unimaginable. During every major economic crisis in Pakistan—and there
have been several of them—the wheels of the informal economy have chugged along. Today, the
informal sector stands to lose the most, particularly the tens of millions of workers who rely on this
cash-based sector to provide them with the bare-minimum income required to meet their daily
needs.
In many ways it was the concern for what awaits vulnerable segments of society that led Prime
Minister Imran Khan to waver on a country-wide lockdown. The human and economic cost of this
indecision cannot be calculated for the time being, but one must recognize that it was empathy for
the vulnerable and not an anti-science worldview that delayed the Pakistan federal government’s
response to this crisis.

Where the federal government has faltered, some provincial governments have stepped up. In
particular, the Pakistan People’s Party (PPP) government in Sindh, maligned for its alleged corruption
and incompetence, has been astutely led by Chief Minister Murad Ali Shah. A poor response in Sindh
would have invited disaster in the city of Karachi, Pakistan’s most populous city and the beating
heart of its economy. In Khyber-Pakhtunkhwa, where the Pakistan Tehreek-e-Insaf (PTI) rules, Health
Minister Taimur Khan Jhagra has led his government’s response in an effective manner as well. A
weak response there would have meant that clusters would have popped up on either side of the
Durand Line.

That provincial governments have been able to step up in a big way is also a vindication of the 18th
constitutional amendment, which devolved power to the provinces. Passed over a decade ago at a
time when Pakistan was just beginning its democratic transition, this amendment has its critics. Once
this crisis abates, perhaps even its critics will agree that this amendment enabled an effective and
timely response from the government during the most serious crisis Pakistan has ever faced.

In recent days Pakistan’s federal government has also started to take action to deal with the
economic ramifications of this crisis. A Rs. 1.2 trillion (~$7 billion) economic plan has been unveiled
with a focus on minimizing the economic damage on vulnerable segments of society.

Under this program, direct cash support will be provided to 10 million households in the coming
weeks. This will be achieved by expanding the monthly transfer received by beneficiaries of the
Benazir Income Support Program (BISP) by 50 percent to Rs. 3,000 per month for the next four
months, benefiting almost 4.5 million households. Secondly, 3 million additional households will be
identified through the National Socio-Economic Registry (NSER) and given a cash transfer of Rs.
3,000 per month for the next four months. Finally, the government will identify an additional 2.5
million households and verify them through the local district administration setup. Once verified,
these households will also be provided financial support by the federal government.

In addition, the government has also announced support funds for businesses which includes Rs. 100
billion in tax refunds and an additional Rs. 100 billion in deferred interest payments. The State Bank
of Pakistan has swiftly cut rates by 225 basis points in the last few days, giving breathing room to
both the federal government—the largest borrower in the country—and to businesses facing cash
flow problems.

Provincial governments are also preparing their own financial packages and they have some fiscal
room to expand the federal government’s cash transfer measures. As this crisis continues, both the
federal and provincial governments will almost surely announce more measures to rescue the
economy, especially for the vulnerable.

All of this is happening at a time when Pakistan’s financial capacity to bear the costs of this pandemic
are severely limited. This means that the country will need assistance from multilateral institutions
like the IMF and the World Bank—talks are already ongoing—and from strategic allies such as China.
The ongoing IMF program will also have to be renegotiated, and rightfully so, because Pakistan
cannot continue to pass on the costs of a stabilization program onto its citizens at a time when its
economy has come to a grinding halt.
As Khurram Husain, business editor at Dawn recently wrote, “business as usual will not work” and
dealing with this pandemic will require “every ounce of creative energy and close coordination.” For
Pakistan, this means that both domestic and external institutions must extract every ounce of
boldness and creativity to rescue and re-stabilize the country’s economy.

Pakistan economy to loose 2.5 trillion due to

coronavirus
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.