Pakistan PM Imran Khan had recently stated that his country cannot afford a lockdown as it would ruin Pakistan’s economy. However, Pakistan has now implemented a partial lockdown with the Covid-19 cases increasing every day as a result of which the supply-demand curve in Pakistan is flattening.
The first casualty in Pakistan’s war against Covid-19 was Pakistan Stock Exchange which fell down like a house of cards since the beginning of March when the Kingdom of Saudi Arabia announced price war against Russia to capture the oil market.
The textile sector which accounts for almost 60 per cent of all Pakistan exports is reeling from a shortage of raw material – dyes & chemicals – as it is sourced from China, the country most severely affected by the outbreak.
The sector contributes the maximum to its foreign currency reserves and is already facing liquidity crunch as the Imran Khan government after ending zero-rated status of the important export-based industries, failed to refund the sales tax proceeds and custom duty rebates of these firms to the tune of $130 million.
Pakistan’s national flag carrier Pakistan International Airlines (PIA), which has been plagued by losses for decades, is expected to lay off workers if the situation persists for the next two to three months. The airline will is expected to post a running loss of about $63 million a month if its operations remain suspended for the next 25-35 days.
As per the Asian Development Bank (ADB), Pakistan’s economy may suffer a loss of up to $5 billion in the worst-case scenario of the coronavirus outbreak.
ADB estimates Pakistan to suffer a loss of $5 billion, of which $1.5 billion loss will be incurred in the agriculture and mining sector, $1.94 billion in business and trade, $253.7 million in hotel and restaurants, $671 million in light and heavy engineering, and $565.6 million loss in transport services.
The report also highlights that this loss would plunge Pakistan’s GDP by at least 1.57 per cent and trigger 9,46,000 job losses.
To offset these losses, Pakistan is doing what it does best – seek aid from international institutions and its key allies. Pakistan is seeking an additional $1.4 billion loan from the International Monetary Fund (IMF) to help it deal with the economic slowdown from the coronavirus, government finance adviser Abdul Hafeez Shaikh said.
The IMF agreed to a $6 billion financial aid programme for Pakistan last year. Pakistan has so far received billions in financial aid from friendly countries like China, Saudi Arabia and the UAE during the current fiscal year. The WB would divert USD 1 billion and the ADB will also provide USD 350 million on an urgent basis. In addition to this, the ADB will also approve USD 900 million in June.