Pakistan’s reeling economy takes new hit from protests

Firms and gig workers see losses piling up amid internet shutdowns in big cities.

Supporters of Pakistan's former Prime Minister Imran Khan celebrate after Supreme Court decision, in Peshawar, Pakistan, Thursday, May 11, 2023. Pakistan’s Supreme Court has ordered the release of Khan, whose arrest earlier this week sparked a wave of violence across the country by his supporters. (AP Photo/Muhammad Sajjad)
The latest protests in Pakistan will likely delay the resumption of its bailout programme from the IMF [Muhammad Sajjad/AP]

Karachi, Pakistan – On a hot day in Karachi, Mohammad Junaid, an employee of Pakistan Railways, stops his motorcycle by the roadside to ask passersby if they need a ride. Junaid works part-time for a ride-hailing service provider and earns about 800 Pakistani rupees ($2.7) daily.

“My salary is not enough to meet expenses,” he told Al Jazeera. “I must work for Bykea [the ride-hailing startup] to provide for my family.”

However, the suspension of internet services has diminished his income as rides are booked on the app, which needs the internet.

The same is the case with thousands of app-based food delivery service riders.

Severe internet connectivity issues were reported across the country’s big cities in the last three days following the arrest of Imran Khan, chairman of the Pakistan Tehreek-e-Insaf political party. Protests erupted throughout the country after the arrest, including one in front of the Pakistan Army’s general headquarters. Many cities witnessed violence.

The Pakistan Telecommunication Authority said on Tuesday that mobile broadband services had been suspended at the direction of the interior ministry but has not given a timeline for their restoration. Khan was ordered to be released on Thursday, after the country’s top court termed his arrest illegal. However, the mobile broadband shutdown was not lifted.

The decision came as Pakistan’s economy is struggling on many fronts.

Headline inflation in April hit a record high of 36.4 percent. Workers’ remittances, which contribute more than 8 percent to the economy, dropped by 29.2 percent in April on a year-on-year basis. Exports were down 26.68 percent in April year-on-year. The World Bank has revised Pakistan’s expected growth rate from 2 percent to a mere 0.4 percent.

The political turmoil in the country pushed the Pakistani rupee to a new low of 298.93 against the United States dollar in the inter-bank market on Thursday.

“Pakistan has perennially struggled with the twin deficits – a current account and a fiscal deficit,” Ehsan Malik, the CEO of the Pakistan Business Council, a pan-industry advocacy group, said. “They have now been overtaken by a third deficit, which is the trust deficit. The latest developments are a continuation and buildup of this deficit.”

“The IMF [International Monetary Fund] does not trust the current or the previous government,” Malik said, explaining the trust deficit. “Our traditionally friendly countries are shy to come forth with assistance [as Islamabad has not met all IMF bailout conditions]. The politicians don’t trust each other. The judiciary is divided and the government is at loggerheads with [the judiciary’s] decisions.”

He said while demand was severely contracted by inflation, supply was affected by a shortage of forex reserves.

“People, mainly skilful ones such as IT specialists and engineers, are leaving Pakistan to find opportunities abroad,” he said.

Samiullah Tariq, the head of research and development at Pakistan Kuwait Investment Company, said the latest turmoil may push back the resumption of the IMF programme, which was tied to Islamabad securing funding from partners.

“The recent turmoil could delay the arrangement of the required funding from bilateral and multilateral partners,” he said.

Moreover, tax collection is likely to go down with the reduced economic output, while unemployment will go up and the gig-economy workers who depend on mobile internet will be disproportionately affected, he added.

‘Political circus’

Pakistan protests
The political turmoil has led to the government shutting down the internet across several cities, hurting businesses and gig workers [File: Sabir Mazhar/Anadolu]

Wille Eerola, the chairman of the Finland Pakistan Business Council Chairman, said the current “circus” in Pakistan was damaging its international image and hindering foreign direct investment (FDI).

“The political circus going on in Pakistan is absolutely nonsense from the international point of view and things like that are only harming – or even destroying – the image of Pakistan as a country for international business and FDI,” he said.

“Do we really want to create an image of a country with large demonstrations, unstable politics and demonstrations everywhere? Like the so-called banana republic? And even they would be doing better. And still, we wish to have foreign investors interested in Pakistan? It can’t happen.”

Aamir Ibrahim, the CEO of mobile network Jazz, said mobile broadband is the lifeline of the digital ecosystem and a critical enabler of productivity across all sectors.

“The disruption not only limits people’s ability to communicate with friends and family but it also deprives 125 million Pakistanis of access to essential services such as education, healthcare and commerce, which are critical for their wellbeing,” Ibrahim said.

“It also stops them from participating in the global economy as freelancers also remain severely affected by this suspension.”

Telecom operators have incurred an estimated revenue loss of 1.64 billion rupees ($5.4m), while the government has lost approximately 574 million rupees ($1.9m) in tax revenue, as a result of the service disruption, an industry source told Al Jazeera. Fearing repercussions from government authorities, the source requested anonymity.

Ibrahim Amin, chairman of the Pakistan Freelancers Association, said that the IT freelance industry is making a loss of almost $2m a day due to the suspension of internet services.

He added that it is also creating a very bad image for Pakistan’s IT sector, which will affect the country’s IT business in the future.

Meanwhile, Israel-based Fiverr, an international platform for freelancers to connect with people needing services such as content writing and software programming, is putting Pakistani IDs in unavailability mode automatically due to the situation.

Fiverr says on its website that freelancers from Pakistan are located in a region currently experiencing internet disruptions. It adds these freelancers may not be able to fulfil orders as quickly as possible.

Jehan Ara, a member of the Gender Advisory Council of the World Bank, said that people from her international network, after seeing horrific images of violence, message her to ask how she is holding up.

“Investors put a hold on investments because it is not just the dollar-to-rupee rate, inflation or the State Bank policies that they are worried about any more. They are worried about the shutting down of the internet and mobile services, the impact on business continuity, on growth,” said Ara, who is also the founder and CEO of Katalyst Labs, a tech accelerator in Karachi.

“Our e-commerce businesses, which were growing due to the steady increase in digital adoption, have all been hit in one fell swoop – the ride-hailing services, the online marketplaces, food delivery businesses etc have all taken a hit, which includes drivers and delivery boys who depend on the daily wages they earn.”

“Imran Khan’s arrest has angered a lot of young people who see him as the only hope for this country,” she added.

Source: Al Jazeera