Pakistan's Economic Crisis Leaves Millions Unemployed

Remember last year's economic crisis in the island nation of Srilanka, an economic turmoil of similar proportion is happening in our neighbour country Pakistan. As if the political instability was not enough for the nation to find answers to, Pakistan is plagued with a host of compounding problems, unemployment being one of them. 

Many sectors face the unemployment gloom

Lack of availability of raw materials for industrial production, closure of mobile assembly plants and halt in textile production have caused major unemployment in Pakistan. To put things in perspective, The textile industry is the largest manufacturing industry in the country and employs approximately 38% of the total labour force according to a report published by the State Bank of Pakistan (read 15 million). The sector which is believed to be the backbone of Pakistan's GDP with a contribution of 8.5 % is said to be witnessing a never seen before slump in employment. As per a report published by Dawn News, it has been estimated that around 7 million people are facing unemployment in the textile sector alone. 

While some cite a lack of textile exports amid declining forex reserves, others blame the government for a lack of policy and timely reforms to address the sectoral issues in the aftermath of covid 19 pandemic.

Giving a general sense of the situation, North Karachi Association of Trade and Industry (NKATI) Chairman Faisal Moiz Khan was quoted by the Dawn News as saying that around 25 per cent of the industries have shut down their units rendering more than 100,000 contractual employees unemployed while 75 per cent of industries have scalled back their production.

Decline in exports

If media reports are to be believed, unemployment in terms of numbers presents a very bleak picture with many sectors taking a hit due to a slowdown in economic activity. The foreign exchange reserves have dried up to go with restrictions on imports of raw materials and a decline in industrial production.

And when a nation's economy hits rock bottom, inflation and cost of living skyrocket disproportionately. Drawing parallels to the fall of the Srilankan economy, the rising fuel prices and the acute shortage of gas only go on to show the sorry state of affairs for Pakistan's economy.

Financial deficit at an all-time high

Developing countries like Pakistan often fall prey to higher public expenditure for the purpose of industrialisation and meeting the infrastructure needs of the nation. However, when the expenditure outgrows the revenue generation and leads to a decline in industrialisation, it comes across as an ironic situation on the face of it. 

As per a report published by Dawn News, the government of Pakistan had borrowed  PKR 239 billion in credit from the State Bank of Pakistan. The pressing need to service the increasing domestic commercial debt requirements was such that the government of Pakistan had carried out the exercise against the law. 

The coverage of Pakistani media on the growing economic crisis and the consequent unemployment has also highlighted a lack of policy and reform to address economic and employment pressures. A large segment of the labour force in Pakistan's unorganised sector does not help the cause either.

Tough terrain for economic recovery and employment generation 

Noted Pakistani economist, Hafiz A Pasha had earlier reported that the unemployment rate is likely to touch the 10 percent mark for the first time. With major sectors reporting business closures and considering that the agriculture sector was hit hard by last year's floods, the road to economic recovery and simultaneous employment generation seems tough for Pakistan amid the forecast. The gap in demand and supply in Pakistan's employable youth adds to the woes.

Considering it is seeking financial help from International Monetary Fund and countries willing to come on board to rescue the Islamic nation, Pakistan will need some major policy changes to create employment as it looks to come out of a financial emergency-like situation.