Collapsing confidence

According to a survey conducted by the Overseas Investors Chamber of Commerce and Industry, business confidence in Pakistan has been falling since August 2019. The survey says that this is due to factors which include high inflation and interest rates, currency devaluation, the economic stabilization programme and then Covid-19 with the lockdown and uncertainty it has brought. The survey states that the overall Business Confidence Scope in Pakistan stands at a negative 50 percent, a further drop by five percent since August 2019. This is a reflection of pessimism across business sectors including manufacturing and services. Most respondents said they have declining hope in the economy.

This situation affects many people, including those not directly involved in business or trade. High inflation has affected almost every household in the country and the unemployment rate continues to rise – with companies forced to reduce the number of employees, and smaller businesses such as restaurants shutting down. According to surveys, at present even those holding PhD degrees are unable to find jobs. The situation continues to worsen for white collar workers as more and more are laid off or offered work on contract on a part-time basis. For labourers the problems began even before Covid-19 due to the rise in inflation and the consequent collapse of many sectors as uncertainty grew.

One of the issues is that there appears to be no clear-cut governmental policy to tackle the problem. Prime Minister Imran Khan had asserted in the past that he wished to protect the poor and avoid job losses. Before the elections of 2018 he had pledged a huge rise in employment numbers. This has not happened. In addition, there are no signs of economic recovery and business continues to suffer with buying power hitting an all-time low. The lack of clarity from the federal government on what it plans to do has created further instability and lack of confidence that is shown up by the survey. The present instability will trigger a worsening situation for months to come. It is true that this is part of a global economic crash. But even before Covid-19 hit the country was struggling to manage its economy or build faith within the business and trading community. Now, things are considerably worse. The government’s economic team is yet to put forward a plan to salvage the situation, with experts warning that tax collection and other targets set in the budget will not be met. This does not augur well for the future and will have an impact on almost every sector in the country.