Pakistan will be among hardest-hit economies by coronavirus crisis, says UN report

Published March 31, 2020
Mohammad Saeed, 55, father of six and a construction laborer, waits for work during a lockdown after Pakistan shut all markets, public places and discouraged large gatherings amid the outbreak of coronavirus in Karachi on March 31, 2020. — Reuters
Mohammad Saeed, 55, father of six and a construction laborer, waits for work during a lockdown after Pakistan shut all markets, public places and discouraged large gatherings amid the outbreak of coronavirus in Karachi on March 31, 2020. — Reuters

Developing countries, including Pakistan, will be hit hardest by the economic shockwaves caused by the novel coronavirus crisis that has shaken the world and will need a support package of up to $2.5 trillion to cope with the damage, a United Nations report has predicted.

According to a report by the UN Conference on Trade and Development (UNCTAD), which was released on Monday, Pakistan, Argentina and the Sub-Saharan African countries would face a "frightening combination" crises including mounting debts, a potential deflationary spiral as well as a disastrous impact on the health sector.

Their economies will take “enormous hit” from high capital outflows, lost export earnings due to falling commodity prices and currency depreciations, with an overall impact likely worse than the 2008 crisis, the report said.

“It's going to be really bad,” said Richard Kozul-Wright, director of globalisation and development strategies at UNCTAD who oversaw the report.

“The international institutions have to take these sorts of proposals very, very seriously as it's the only way that we can see to prevent the damage already taking place and which will get worse,” he added.

In what he said was likely a conservative estimate, Kozul-Wright said the coronavirus would cause a $2-$3 trillion financing deficit over this year and next.

In an early sign of the impact, portfolio outflows from main emerging economies were $59 billion a month between February and March compared to $26.7 billion in the immediate aftermath of the 2008 crisis, the report said.

Developing countries will need a $2.5 trillion support package this year to face the economic crisis, the report said. Needed measures will include a $1 trillion liquidity injection and a $1 trillion debt relief package and another $500 million will be needed for emergency health services and related programmes, on top of capital controls.

The figures in the report titled “The Covid-19 Shock to Developing Countries” echoed an earlier estimate by the International Monetary Fund.

UNCTAD considers around 170 countries to be developing but the financing gap figure stripped out China and South Korea.

“If G20 leaders are to stick to their commitment of 'a global response in the spirit of solidarity', there must be commensurate action for the six billion people living outside the core G20 economies,” Kozul-Wright said.

Leaders of the Group of 20 major economies had pledged on Thursday to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”.

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Spy games
Updated 02 Oct, 2022

Spy games

The audios leaked so far appear to have been carefully curated: they apply pressure but do not do major damage.
‘Geopolitical football’
02 Oct, 2022

‘Geopolitical football’

THE US-China rivalry is by all measures one of the globe’s most dangerous competitions for power and influence. ...
Fuel price reduction
02 Oct, 2022

Fuel price reduction

ISHAQ Dar is back; so are his signature policies. The reduction of a little over 5pc in fuel prices announced by him...
Untruths and politics
Updated 01 Oct, 2022

Untruths and politics

It would arguably be in the national interest for the Supreme Court to take up the cipher and settle the matter.
Farmers’ protest
01 Oct, 2022

Farmers’ protest

SEVERAL hundred farmers have converged on Islamabad for the last three days to protest against the soaring costs of...
Dasht-i-Barchi bombing
01 Oct, 2022

Dasht-i-Barchi bombing

ON Friday morning, Kabul’s Dasht-i-Barchi neighbourhood was rocked by a terrorist attack targeting an educational...