The worst is yet to come

Pakistan’s economy was already performing at its lowest rates in over a decade before the coronavirus disrupted whatever growth potential it could possibly have had. Over the last eighteen months due to utter mismanagement and poor economic policies which were mainly designed to get a loan from the IMF, Pakistan’s economy was in dire straits. GDP growth was at its lowest in almost a decade after having hit 5.8 percent in 2018-19, the highest in 13 years. The inflation rate before the coronavirus hit was 14 percent and food inflation 24 percent, manufacturing industry contracted for eight straight months with closures in numerous industries. All indicators suggested that unemployment and poverty had grown immensely since the PTI took over in August 2018. And now on top of that, we have this.

Even the most dynamic and vibrant economies in the world which were growing at unprecedented rates, such as that of the US, have been hit hard by the coronavirus and are facing a downturn not seen in almost a century. Pakistan’s economy was in a really bad shape before the virus hit and is about to face its biggest crisis in a generation.

The World Bank has already predicted that Pakistan’s GDP growth for this year will be only 1 percent, which is less than half Pakistan’s population growth. In fact, I think that growth might continue to fall even further in the next fiscal year. There are estimates that there is going to be a huge surge in unemployment and poverty on account of the economy shrinking, if not collapsing completely. Even Pakistan’s main source of income, remittances from the Middle East, will start drying up as employment there contracts sharply and as workers return adding to the pool of the unemployed.

While the PTI government has taken some urgent measures through the Benazir Income Support Programme, they are not enough, since a very high proportion of the poor and the unemployed fall outside of the BISP net. While a lockdown was essential, it was also essential to ensure that the poor and the unemployed are guaranteed food, essential items and some income to be provided at their doorstep. The two policies needed to work together. Moreover, lowering the interest rate at this moment is hardly going to have an impact on industry or economic activity since there is none to start with. One can expect that exports won’t pick up for many months since this is a global economic crisis where demand globally will be low.

The only way lives can be saved, both to deal with the virus and to deal with the economic crisis, which is upon us, is for the government to take strong initiatives to ensure that food and essentials are provided to all who need it and to have a short to medium plan to revive the economy. This would mean suspending the IMF programme and taking decisions which actually focus on the people and the economy.

If the last eighteen months are any evidence to go by and assess the government’s intentions and abilities, we can only be sure of one thing: the worst is yet to come.

S. Akbar Zaidi is a political economist.