Bracing for poverty and unemployment

It is becoming increasingly clear that the coronavirus pandemic will take a heavy toll of the economy, particularly employment and poverty trends. And it's no surprise that the ones to suffer first, and the most, are the lowest income groups. Still, the first quantifiable estimates that are now coming out make for some grim reading and should give policymakers much to think about. According to a report by Dun & Bradstreet Pakistan, not only can the ongoing slowdown almost double the country's poverty rate, from 23.4 percent to 44.2 percent, it can also put more than 12 million people out of work, which is approximately 20 percent of the total employed population. Even more importantly, it will most likely add 46.3 percent of the country's vulnerable workforce - defined as self-employed workers and contributing family workers, who are not very likely to have formal work - to the ranks of the unemployed as well. Since Pakistan has a very high percentage of vulnerable employment, 41.6 percent according to Pakistan Bureau of Statistics (PBS) figures of 2018, the expected poverty bulge becomes that much easier to understand. Going by the report, the biggest vulnerable employment layoffs will come in the transport and communication (90.26 percent) and hotels and restaurants (90.00 percent) sectors. Similarly, wholesale and retail trade should expect 70.11 percent and manufacturing sector 69.91 percent of its vulnerable workers to face the axe sooner rather than later. And so the list goes on.

Given that businesses and government alike didn't fully understand the kind of economic compromises that the lockdown would demand till as late as mid-March, and there's still no way of knowing just how long proper economic activity cannot resume, these figures can be taken as careful estimates at best. But they do give a pretty clear idea of the magnitude of the problem. The government must immediately work on an action plan to help the sectors that are most at risk; so their vulnerable workforce can be protected before it finds itself on the streets with no income. It is unlikely, given the size of the economy, that the government can make direct transfers of the huge sums of money that businesses need to avoid a liquidity crunch in the immediate term. So it will have to adopt a calculated and phased approach.

Whenever it is feasible to relax the lockdown, it will be important to stagger it in stages. Right now, only industry related to essential services is allowed to function. Next, export industry should also be allowed to resume operations along with allied industry that feeds the export sector. But it should be done in a staggered manner. Suddenly giving the green light after a cabinet meeting one fine day will not do the job. The government will have to make a priority list, for which it will have to hold discussions with all stakeholders and gather input from experts. It will also have to make sure that the more important industries, food and pharmaceuticals, for example, are given a higher position on the list than others. And it must do all it can to time the relaxation as perfectly as possible. Just the other day, the Sindh chief minister was advised by a delegation of doctors, along with owners and chief executives of private hospitals, to extend the lockdown beyond April 14 because there is still the threat of the virus spreading like a fire in a jungle. Needless to say, of course, that if the spread is not controlled the economy will almost certainly collapse, and no manner of stimulus or intervention will get it back on its feet.