Protests and lockdowns push Pakistan’s economy into Rs760bn tailspin

As the nation watched the Pakistan Tehreek-e-Insaf’s-led protests and speculated about the political future, businesses faced significant disruptions amid the costly standoff between the government and the opposition. Early estimates suggested Pakistan has suffered financial losses amounting to Rs760 billion over the past four days, alongside the human cost of unrest. 

The economy faces significant losses on account of large-scale government-imposed lockdowns that have disrupted supply chains and brought critical systems to a standstill, compounding the struggles of an already fragile economy.

After initially resisting the pressure from the political turmoil, the capital market finally succumbed to negative sentiments yesterday. Not only did it halt the upward trajectory, but plummeted dramatically. “Street clashes in Islamabad between PTI protesters and law enforcers significantly raised political temperature, eroding the market’s earlier resilience”, observed a broker.

The KSE 100 index, which reached a historic high of 98,079 on Monday, suffered a record single-day loss of 3,505 points, closing at 94,574 on Tuesday, signifying the market’s sharp response to escalating instability. According to Topline Research posting Pakistan Stock Exchange lost Rs481 billion in a day on 25th November.

In addition to crackdown on the opposition, arresting leaders and workers, the government implemented extensive measures to keep PTI supporters from reaching Islamabad. Authorities barricaded motorways, suspended public and private inter-city transport services, shut down educational institutions, sealed hostels and hotels in the capital and closed shopping malls and restaurants. Internet access was blocked, telephone services were suspended and Rangers and the army was deployed to maintain law and order.

“These sweeping actions aimed to neutralize the PTI’s call for mass participation caused massive disruption in the country. They affected the mobility of passengers and cargo, raising fears of shortages of necessities like fuel and edibles across the country. There are reports of pressure on prices of perishables already in many cities of Pakistan,” noted an analyst.   

Trade bodies and business platforms were closely monitoring the situation, strategizing to mitigate the impact of ongoing unrest amid an already deteriorating security situation, particularly in Balochistan and KP. In business circles efforts were under way to adapt to the evolving challenges. Several associations, when approached for estimates of losses, indicated that the cost is going to be significant but they are still in the process of evaluating the full extent of the disruption.

The government has shared estimates of potential economic losses that it attributed Pakistan Tehreek-e-Insaaf’s (PTI) indefinite protest in the capital. During a recent press conference, Finance Minister Muhammad Aurangzeb estimated daily losses at Rs190 billion in Pakistan due to transport disruptions and business shutdowns. By the fifth day of the lockdown, initiated on November 22 to counter PTI’s November 24 protest, the total losses based on FM projections, had reached Rs760bn.

FM Aurangzeb highlighted that the ongoing crisis would severely impact tax revenues and export earnings while increasing the government security expenditures, undermining the stabilization process. He also noted that the IT and tech sector would face significant setbacks.

Aurangzeb revealed that the ministry of finance has compiled a detailed report quantifying the daily economic cost of the current disruption across key sectors. According to the report, Pakistan’s GDP sustains a daily loss of Rs144bn, while missed export opportunities could cost Rs26bn per day. Foreign direct investment inflows may decline by Rs3bn daily. The agriculture and industrial sectors are also projected to incur daily losses of Rs26bn and Rs20bn respectively, further exacerbating the economic challenges.

“The prolonged restrictions continue to take a heavy toll on the economy, with no clear resolution in sight”, remarked a prominent business leader in Islamabad. 

While several businesspeople were approached for their insights, most were reluctant to speak on record, opting instead to share their perspectives confidentially. A majority was not inclined to absolve the government of the responsibility, attributing the deepening crisis to its handling of the situation. 

“The condition is undeniably complex, as the opposition leader remains steadfast in refusing to negotiate or engage, even from jail. However, the government’s disproportionate response to PTI’s protest call in Islamabad has highlighted its lack of confidence and limitation in both capacity and strategy”, observed a Karachi-based business tycoon.

He added, “Despite declaration of preventing protestors from entering Islamabad, the government ultimately failed to achieve this. Instead, the protest reaffirmed the unwavering public support for the PTI leader Imran Khan, exposing the authorities’ inability to control the situation effectively”.    

Discussing the business class aversion to street protests, an executive once shared an insightful perspective. “Business thrives in a peaceful environment. Public protests carry risk of spiraling out of control endangering employees, disrupting operations and causing property damage”, he remarked.

He further elaborated on approach of his class towards governance, “For us, the form of government is secondary. If a military dictator can ensure policy consistency and suppress unrest effectively, I’d prefer that stability over uncertainty.”