Every day thousands of Pakistanis are losing jobs as the ongoing economic crisis deepens further. Just how many millions will become jobless in 2023? Nobody can say for sure. But let’s rephrase the question: What will be the total number of unemployed people by the end of this year, including those that couldn’t find work even before 2023?
Estimates vary. But given the current pace of business closures, temporary shutdowns, and planned reduction in industries’ outputs, around 6.205 million people or 8.5 per cent of the total workforce of 73m may remain unemployed during this year.
If the actual rate of unemployment turns out to be greater, the number of people who can take up jobs but cannot find ones will be even higher. The government is set to present a growth-constraining mini-budget shortly to pave the way for the much-needed revival of International Monetary Fund (IMF) lending.
The measures to be announced in that mini budget (like increase in gas and electricity prices, imposition of an additional levy on petroleum products, increase in withholding taxes on property and hiking of sales tax on goods on import and wholesale stages) will fuel “stagflation”.
The already high inflation (24.5pc in December 2022) will rise to newer heights, and achieving even 2pc economic growth this fiscal year will become too difficult. The State Bank of Pakistan’s forex reserves ($4.601bn as of January 13) are insufficient to cover even one month of imports.
So, the government is desperately looking for the revival of the IMF loan programme in the absence of which even friendly countries are unwilling to provide financial support. That means the mini-budget cannot be skipped. And that, in turn, means increased joblessness.
What will happen in our poorly governed country of 225m people when 6.205m, all adults and able to take up jobs, remain out of work?
One can easily imagine what may happen to our poorly governed country of 225m people when 6.205m of them (all adults and able to take up jobs) remain out of jobs.
Will such massive joblessness not feed the networks of organised crime? Will it not become a more fertile breeding ground for poverty, ignorance, exploitation, extremism and terrorism?
All indicators show Pakistan’s economic crisis will not go away in 2023. And the factors that are expected to mitigate its severity are temporary (expected inflows from the IMF and commercial loans from friendly countries) and will further increase the country’s debt burden. This means 2024, too, will be a tough year.
Accelerating economic growth amidst increased external debt servicing will be too difficult, and the consequent low GDP growth in 2024 will compound the unemployment issue further. The World Bank says Pakistan’s economy will grow just 2pc during this fiscal year (ending in June) and 3.2pc next year.
Sizable job creation at such low levels of growth is out of the question, particularly when the global economic slowdown is bound to have spillover effects on Pakistan’s domestic manufacturing and export sectors. The global economy is projected to grow just 1.7pc in 2023 and 2.7pc in 2024, according to the latest World Bank estimates.
For the past few months, key sectors of manufacturing, including refineries, textiles, iron and steel, automobiles, and fertilisers, have been reporting business closures, scaling down and temporarily suspending operations.
In the textile industry alone, 700,000 people are estimated to have lost jobs after the last year’s super floods and amidst this year’s energy and foreign exchange crisis. As the forex crisis worsens day by day, commercial banks continue to deny the opening of new import letters of credit (LCs) and even decline to clear those opened earlier.
Trading and services sectors also feel the pinch of it. Business activity in the services sector has decreased and lots of people associated with this sector have lost jobs.
A few days ago, the Pakistan Bureau of Statistics released large-scale manufacturing (LSM) data, which shows that in July-November 2022, overall LSM output fell about 3.6pc compared with July-November 2021. Production of automobiles, cement and petroleum products showed yearly decline of 28.7pc, 16.4pc and 13.6pc respectively. Production of cotton yarn and textiles also fell 11pc and 2.5pc. Behind these numbers lie countless stories of job losses.
With the energy and forex crises at their peak, with aggregate demand on the decline amidst stubbornly high inflation and a tight monetary policy in place, there is little hope for LSM output to gather enough pace to create jobs on a large scale in 2023.
The presence of a sizable informal economy has always been a great support for jobless Pakistanis. But when economic growth falters, its spillover effects on the informal economy can also be felt, especially if the country suffers from multiple crises. Currently, around 5,700 containers laden with food, medicines and industrial raw materials are stuck at Karachi port amidst a deepening forex crisis.
Does this affect only the activities of the formal economy? It equally hurts those who run undocumented small businesses. If the crisis prolongs, most of them will be gone, leaving many people jobless.
Published in Dawn, The Business and Finance Weekly, January 23rd, 2023