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Pakistan to Face Severe Economic Crisis Even in the Next Fiscal Year

Just like the other countries in the world, Pakistan is also facing severe circumstances in the current coronavirus pandemic, however, the impact of this crisis will sustain at least for the rest of the next fascial year.

Economic experts are saying that the country will face $19 billion of debt payment, a huge downfall in remittances and exports, and up to 5 million job losses in a worst-case scenario.

The economist said that countries should introduce policies to protect their interests which would adversely affect the prospects for global trade and jobs.

While speaking at a webinar titled “Economic impact of COVID-19 on Pakistan” Planning Commission Macroeconomics Section Chief Zafarul Hassan Almas said, “There will be problems regarding the liquidity of banks, fiscal space constraints and resetting of International Monetary Fund (IMF) programme targets.”

“Next year, the country has to pay $19 billion on account of principal and interest on debt to international creditors. Pakistan will have to arrange the amount from the international market in the form of new loans. However, the tightening of financial conditions will complicate the refinancing of external debt,” he added.

In addition, exports and remittances have greater economic effects than imports. The economist highlighted that the government expects $24 billion in exports and the same volume in remittances.

Mr. Almas forecasted a rapid fall in remittances in the last quarter of the current fiscal year as Pakistanis overseas will continue to lose jobs, pushing remittances down by about $2 billion.

As per the official data, more than 30,000 Pakistanis have lost jobs in the UAE and other Gulf countries and the number is going to increase further.

“The employment market will not get a boost even in the post-crisis period and it will be a huge challenge to accommodate the returning ex-pats,” Mr. Almas shared.

“Pakistan has a labor force of 63 million, out of which 46 million are employed in the informal sector and are most vulnerable to layoffs. Even the most cautious estimates put job losses at around 3 million.” Mr. Almas predicted that the major loss would be observed in exports and imports with the country taking a hit of $1-1.5 billion in exports.

Furthermore, the government estimated that if only food, pharma, and retail sectors are allowed to operate during the lockdown, the GDP can fall by up to 2%.

However, in the services sector, the trend of digitalization and online delivery in both private and public sectors is quite common. Pakistan has also started the manufacturing of face masks and is also going for innovation in the production of ventilators.

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