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Covid-19 and Pakistan’s Economy By Khayyam Munawar

The Corona Virus, codenamed COVID-19 was first traced and reported back on the 1st of November in the Wuhan city of China and has since wreaked havoc worldwide. With over 8.66 Million reported cases and approximately 460,000 deaths to date it was declared a global pandemic by WHO on the 11th of March-2020.Although the exact source of this RNA virus remains to be officially named, amidst numerous conspiracy theories and opinions it is believed to have been contracted from a species of bats and contrary to popular belief is neither caused by 5G towers nor does some multibillion dollar corporation have a stake in its spread.
A global recession seems inevitable as worldwide trade continues to contract which is predicted to be much more potent than the one caused in 1945 and 2009. With reference to the IEA Oil Market report, the worldwide average oil consumption is expected to contract by a record 9.3 mb/d comparative to 2019 in relation to the twin demand and supply shocks caused by containment measures across 187 countries. Oil prices reacted to the thinning demand and have decreased by 62.51% since January-2020. The impact of COVID-19 is widespread and the total exports across 46 major contributors to the world trade fell by 11% over the first 4 months of 2020 in comparison to 2019. Livelihood of millions is at stake as numerous small-scale businesses worldwide cease operations and widescale unemployment looms on the horizon.
The economy of Pakistan paints a similar picture: With the country being a low-income developing entity, its economic metrics were showing signs of mild improvement prior to the pandemic and inflation was expected to stay at a single digit figure after soaring to 7.3% in 2019. The State Bank of Pakistan suggested a modest figure of 3.3% in terms of actual GDP growth however the state had to impose a lockdown on the 23rd of march in line with the directions of WHO and the GDP growth as a result was revised to a negative 1.3% with serious implications to the low-income earning group ,125 million of which are expected to fall below the poverty line over the course of 2020.
Surviving the pandemic requires a collective effort. It is high time that we embrace that it is decidedly unlikely that the situation will improve and we’re looking at changes that might permanently be baked into our lives
With the spread of COVID-19, China had to restrict its trade, and the majority of that vacuum was redirected to the remaining Asian states. Loss of a major supplier meant higher lead times, inability to meet export orders and potential loss of international customers, all of which are conditions that raise doubt over the ability of an entity to operate as a going concern. The effects of this have trickled down to the sectors of Agriculture, Machinery and Equipment, Transportation, Textiles, Tourism, Financial Services, Telecom and IT, Automotive, Construction, Education, Power generation and Health and Care. Exports were cut short by U$ 2 Billion for the period March-May 2020 compared to the year 2019
The lockdown dictated a large part of how commodities were locally consumed and there was a drastic increase in the consumption and hoarding of consumables subsequent to the imposition of the lockdown (as seen in the case of perishable consumables and medical supplies). The transportation had halted in numerous parts of the country, timely delivery of consumables was affected creating a gap in the supply and demand which was further aggravated by import barriers as neighboring states exercised their individual lockdowns(import of food products during May-2020 was reduced by 21% relative to that in May-2019). However, employment in the particular sector remained relatively secure and insulated. The onset of COVID-19 impacted the Machinery sector in the form of unavailability of input materials, decline in local and export sided demand. Multiple expansion projects in relation to increasing the electricity transmission network have also either been scraped or delayed.
The Transportation sector accounts for 12.89% of the GDP and 5.7% of the national labor force and whilst courier services remained functional though limited, passenger transportation had completely halted in most instances. Services such as metro had to cease their primary operations (incurring further losses of PKR 500 Billion) and it became increasingly difficult to source airplane tickets, which in some cases were selling at a premium of up to 40%. The civil aviation authority bore losses of up to PKR 19 billion during the period flights remained suspended. Railways too had to limit their operations in compliance with the lockdown and were burdened with a loss PKR 10 Billion. Petrol prices were reduced by PKR 37/Liter over the period March-June and although there were attempts to create an artificial shortage on part of petrol pump owners to escape losses, Prime Minister Imran Khan has assured that such an activity shall not be tolerated and strict action be taken against offenders. Oil companies and authorities have been directed to ensure a smooth supply. The Textile sector contributes 8.5% to the total GDP and 56% to the total export basket and in most cases remains dependent on imports of raw materials from China (as in the case of MMF). Most mills were operating at maximum capacity when China drew out but as the global demand of textiles contracted (such is the case each time the consumer’s purchase power gets constricted, expenditure related to clothing are one of the first to be controlled), exports declined and exportable inventory began to saturate warehouses. Exports from the textile group decreased by 36% for the period March-May 2020 compared to last year and APTMA has demanded that aid be allocated to the industry in form of working capital and utility bill credit provision if the losses on exports are to be recovered.
Small scale businesses are limited to resources that are adequate enough to sustain a months’ worth of cash flow requirements at best in cases revenue is constricted, the majority of which were exhausted during the lock down. Reportedly, salaries of up to 50% were deducted in some instances in the private sector, capping the movement and purchase power of the consumer(especially in the consumption of luxury items).Commercial investment will be further hindered by the changing consumer sentiment which as a consequence will exert further stress on macroeconomic growth. The Ministry of planning has suggested that an approximate of 12.4-18.5 Million jobs are at a risk and has further assessed losses of up to PKR 1.2 Trillion during a lockdown situation.
The terms of the first lockdown were openly violated due to which the subsequent spike in positive cases was observed. As of 20th June, 171,666 active cases have been reported,144,192 of which pertain to the period after the first lockdown was lifted.3,382 patients have expired due to Covid-19 and WHO insists that a second much stricter lockdown be imposed to tackle the exacerbating situation. The state has been very active in their attempts to mitigate the spread of Covid-19 and has taken up multiple routes to educate the public.PM Imran Khan even went the extent to announce a relief package worth PKR 1.2 Trillion to facilitate the public ,disbursing PKR 131.8 Billion so far and serving 10.9 Million affectees. However, despite these efforts the final responsibility rests with the general public, as they play the most vital role when it comes to flattening the curve .The importance of adhering to the guidelines mentioned at http://covid.gov.pk/ cannot be stressed enough.
Fueled by our personal interests, we tend to ignore that we are all in the same boat, we tend to set aside the needs of the nation as a unit and focus over our individual needs. Surviving the pandemic requires a collective effort. It is high time that we embrace that it is decidedly unlikely that the situation will improve and we’re looking at changes that might permanently be baked into our lives. Until a cure is formulated, we have to accept the current circumstances as the new norm.
The writer is a freelancer
Source: https://dailytimes.com.pk/631160/covid-19-and-pakistans-economy/

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