Pakistan is braving a dire economic crisis, as the devastating impact of recent floods, coupled with supply shortages and stringent import restrictions, has led to a staggering loss of real wages and rising unemployment, said Dr. Muhammad Afzal, a member of the Economic Advisory Council of the Planning Commission, while talking to WealthPK. Dr. Afzal pointed out that the economic turmoil has had a particularly negative impact on the labour-intensive sectors of agriculture, manufacturing, and construction. These sectors have seen their output shrink significantly, leading to widespread unemployment.

Agriculture — the backbone of the economy — has registered a decline of 3.2 percent in its major crop sub-sector, which is due to several factors, including the ongoing drought, rising cost of inputs, and a decline in export demand. “Large-scale manufacturing has suffered an even more substantial contraction of 10%. This is due to a slowdown in domestic demand, high cost of energy, and shortage of raw materials. Construction activity has plummeted by nearly 6% due to a decline in investment, shortage of credit, and the rising cost of materials,” he added. "The wholesale and retail trade sector has also been impacted, with a decline of 4.5%. This sector, second only to agriculture in employment, has been significantly impacted, especially for the self-employed," said Dr Afzal.

Dr. Afzal added that the ripple effect of this economic downturn is causing severe distress in the national labour market. He cited the Beaconhouse National University (BNU) Macroeconomic Model, which estimates that the unemployment rate in Pakistan has reached 9.6% — the highest ever recorded. The year 2022-2023 saw a substantial decline in real wages, reaching up to 29% since December 2018. Surprisingly, a relatively unskilled labour has experienced a slightly lesser decline in real wages, but overall, income inequality appears to have widened between the capital owners and workers in Pakistan,” he said.

“The rise in the number of idle young male workers, aged 15 to 29, from 6 million in 2018-2019 to over 8 million in 2022-2023 is a concerning development. These individuals pose a special risk, given their susceptibility to engaging in criminal activities, adopting fundamentalist ideologies, and resorting to illegal migration.” “As the economic conditions continue to deteriorate, the overall unemployment rate is anticipated to reach its zenith at 9.7%. Simultaneously, real wages are expected to decline by up to 13%. With a meagre GDP growth rate of nearly 2.5% projected for 2023-2024, the unemployment rate may escalate to a troubling 10%,” he explained.

Critics argue that the government has not paid sufficient attention to the mounting unemployment crisis and plummeting real wages. They suggest that efforts should be focused on promoting diverse employment generation schemes rather than solely concentrating on raising the pay and pensions of government employees. The economic plight of Pakistan remains a matter of grave concern, demanding immediate attention and comprehensive policy measures to alleviate the suffering of its workforce and restore stability to the nation's economy.

Credit: Independent News Pakistan (INP)