According to the latest surveys, thousands of Pakistanis are losing their jobs every day due to the ongoing economic crisis. Given the growing pace of business closures, industrial shutdowns and layoffs, around 6.205 million people or 8.5 per cent of the total workforce of 73m are now jobless. The mini-budget recently announced by the government, including a hefty hike in petrol and gas prices, has worsened the situation.

A number of complex factors have combined to bring about the situation. These include massive economic loss caused by last year’s floods which decimated large parts of the agricultural sector. On top of this restrictions on imports since October 2022 have adversely affected output in various sectors, including manufacturing, construction and wholesale and retail trade. The third factor is the falling value of the rupee.

For the past few months, key sectors of manufacturing, including refineries, textiles, iron and steel, automobiles, and fertilisers, have been reporting scaling down and temporary suspension of operations. In the textile industry, 700,000 people are sad to have lost their jobs after last year’s floods and the energy and foreign exchange crisis. As the forex crunch 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. Business activity in the services sector has decreased and lots of people associated with the sector have lost their jobs.

According to the latest figures released by the Pakistan Bureau of Statistics, during July-November 2022, overall LSM output fell about 3.6pc compared with July-November 2021. Production of automobiles, cement and petroleum products showed a decline of 28.7pc, 16.4pc and 13.6pc respectively. Production of cotton yarn and textiles also fell by 11pc and 2.5pc respectively. Resultantly, joblessness in all these sectors has spiked.

The total impact of the floods and contractionary monetary and fiscal policies, along with large depreciation of the rupee, has resulted in the worst- ever stagflation in the country. This has put a devastating impact on the lives of the people in the form of a quantum jump in unemployment and incidence of poverty.

With the energy and forex crises at their peak, aggregate demand on the decline amidst high inflation and a tight monetary policy in place, there is little hope for LSM output to gather new momentum to create jobs on a large scale during the ongoing year.There is thus the likelihood of at least 1% decline in the size of the GDP which would cause a proportionate drop in employment, especially since the labour-intensive sectors have been affected more, including agriculture, construction and wholesale and retail trade.

Estimates from various sources show that 8 million workers will be unemployed in 2022-23. The number of the unemployed will increase by over 2 million during the year and the unemployment rate would approach 10% for the first time in the country’s history.

What are the prospects for the coming months and the year ahead? All indications point to the fact that the economic crisis will persist through the whole year of 2023. The prime reason for this is that our debt burden continues to rise with no relief in sight. Economic growth amidst increased external debt servicing is an impossible proposition. Continued low GDP growth in 2024 will further compound the unemployment situation. Another looming danger is that the global economic slowdown would have a spillover effect on Pakistan’s manufacturing and export sectors. It may be added here that according to the World Bank, the global economy is projected to grow just 1.7pc in 2023 and 2.7pc in 2024.

The current situation is pushing more and more people below the poverty line. In the face of a projected fall in real per capita income of over 3% in 2022-23, increase in food prices of at least 10 percent and higher income inequality due to a bigger increase in unemployment of less skilled workers, there is likely to be a big increase in the incidence of poverty in Pakistan in 2022-23. Various estimates put the incidence of poverty at over 40 percent currently in Pakistan.

All said, the IMF or no IMF, ultimately we will have to find an indigenous solution to the economic crisis we are facing. On the one hand, we should raise our agricultural industrial production and exports and, on the other, we should go for fiscal reforms in a big way. Progressive taxation targeting the rich and the super-rich and a cut in government expenditure, especially the overgenerous perks like free petrol, are a must. Simultaneously, energy costs should be reduced to stimulate industrial growth and employment.