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”.

Opinion

Last call
Updated 23 Sep 2021

Last call

The exchange rate alone can no longer absorb the full impact of the deterioration in the current account.
Appeasing terrorists
Updated 22 Sep 2021

Appeasing terrorists

The policy of appeasement has not worked in the past and it certainly will not work now.

Editorial

Dialogue, at last
Updated 23 Sep 2021

Dialogue, at last

The govt has attempted to make the ECP controversial at a time when its input is critical for the poll reforms
AUKUS controversy
Updated 23 Sep 2021

AUKUS controversy

Instead of flexing its military muscle, the Western bloc needs to engage China at the negotiating table.
Provocative act
Updated 23 Sep 2021

Provocative act

Afghan Taliban flags have been found hoisted at Jamia Hafsa seminary three times since Aug 21.
22 Sep 2021

Interest rate hike

THE State Bank’s decision to raise its key interest rate by 25bps to 7.25pc underpins its acceptance of emerging...
PCB chief’s challenge
Updated 22 Sep 2021

PCB chief’s challenge

The Taliban takeover of Afghanistan has propelled fears of regional insecurity.
22 Sep 2021

No need for secrecy

THE government should not make a mountain out of the Toshakhana molehill. That would only encourage speculation of...