Pakistan: Impacts of COVID-19 on Production, Poverty & Food Systems

International Food Policy Research Institute
This presentation has been developed under the Pakistan Agriculture Capacity Enhancement (PACE) program funded by
the United States Agency for International Development (USAID)
Updated: December 30, 2020
Produced under CGIAR’s Research Program on
Policies, Institutions, and Markets (PIM)
Disclaimer: The analysis presented in this slide deck are the IFPRI team’s own and does not necessarily reflect the views of IFPRI
Pakistan
Impacts of COVID-19 on Production, Poverty
& Food Systems
Contact:
Stephen Davies, Senior Research Fellow, International Food Policy Research Institute (S.Davies@cgiar.org)
Abdul Wajid Rana , Program Leader-PACE, International Food Policy Research Institute (A.W.Rana@cgiar.org )
Muhammad Saad Moeen, Zeeshan Haider, Sania Haider Shikoh, Noormah Rizwan, Amna Ejaz,
Stephen Davies and Abdul Wajid Rana

Lockdown Imposes Heavy Economic Costs
• Pakistan’s GDP is estimated to have
fallen by US$ 8.8 billion from mid-
March to end-June
(compared to a no-COVID scenario)
• Food system was adversely affected
by falling consumer & export
demand
(Agri-food GDP declined by US$ 1.4 billion,
despite exemptions to the agriculture sector)
• National poverty rate increased by
33 percentage points during the
lockdown
(70.4 million more people were temporarily living
below the national poverty line)
Source: Pakistan SAM Multiplier Results
Economic impacts during 14-week
period
(changes are relative to a no-COVID scenario)
8.8
1.4
70.4
Decline in national
GDP in US$ billions
Decline in agri-food
system GDP in US$
billion
Increase in number
of poor people in
millions
19.5
33.1
Percentage decline
in national GDP
Percentage increase
in national poverty
rate

Costs Likely to Persist Throughout 2020
• The economy is gradually
reopening & many restrictions are
easing
• But economic losses remain, even
with a faster easing (changes are
relative to a no-COVID growth
scenario)
• Average GDP & poverty rates for
2020 hide sharp mid-year
deteriorations
Many people and businesses may require
government support to cope and recover
Quarterly national impacts under faster
and slower recovery scenarios
-3.0
-5.0
-0.9
0.1
-3.0
-5.8
-1.6 -1.4
-11.8
-1.2 -1.1
-11.1-14
-12
-10
-8
-6
-4
-2
0
2
March April May June Q1 Q2 Q3 Q4 2020
First
quarter Second quarter Quarterly values Annual
Change(USDbillion)
lockdown slow recovery fast recovery
27.0
43.0
29.5
26.6
28.4
28.2
27.628.1
27.9 27.4
0
10
20
30
40
50
60
Base April May June Q3 Q4 2020
Second quarter Quarterly changes Annual
Povertyrate(%)
Base lockdown slow recovery fast recovery

COVID-19 Outbreak & Lockdown
Policies in Pakistan2

COVID-19 Cases & Policy Timeline

Sectors Affected by Lockdown Policies (1)
Sector Lockdown restrictions or exemptions in targeted regions Directly Affected?
Agriculture
• Farming activities exempted (essential sector)
• Movement restrictions occurred just after planting for winter crops
• Limited extension visits to farms, suspended development projects
Minimal
Mining & crude oil • Extraction operations fully shut down High
Manufacturing
• Food processing & medicines exempted (essential sectors)
• Movement restrictions affected many operations
• Nonfood producing companies closed
High
Utilities • Electricity & water distribution exempted (essential sector) Minimal
Construction • Construction projects/sites closed, including most public works Medium
Wholesale & retail
trade services
• Retailers of essential goods exempted, with limited trading times
• Social distancing restrictions affected market activity
Medium
Transportation,
storage & cargo
• Air travel closed; cargo/freight transport exempted (essential sector)
• Inter-district passenger transit closed
• Urban passenger transit reduced
High
Hotels & food
services
• Hotels, restaurant, cafés, closed apart from take-away foods
• Limited delivery options for food or other products
High

Sectors Affected by Lockdown Policies (2)
Banking, finance &
insurance
• Banks operating through digital platforms
• Other financial institutions closed or teleworking (e.g., insurance)
Minimal
Professional &
business services
• Almost all closed or teleworking (e.g., legal, accounting services)
• Activities involving in-person field visits affected (e.g., engineering)
High
Public admin &
law enforcement
• Public services & agencies remain open, but most staff teleworking
• Police & security services exempted (essential)
Minimal
Education services
• All public schools closed without much scope for online delivery
• All private schools closed with some online materials
Medium
Health services
• Health services exempted (essential)
• Elective operations reduced but rising number of COVID patients
Medium
Sports &
entertainment
• Sports & outdoor entertainment banned
• Some activities operating (e.g., newspapers, radio & TV)
Minimal
Other services
• In-person religious gatherings banned
• Informal repair firms limited due to movement restrictions
High

Global & Other Nationwide Shocks
Export demand
• Reduced international tourism & business travel
• Lower export demand for textile exports
• Lower export demand for agricultural, other products
High
Remittances
• Decline in value of remittances sent by nationals working abroad in
May and increase in June and July
Medium
Government
revenues
Nationwide
• Fall in tax revenues due to decline in economic activity
Some
See detailed sector-level assumptions about production &
demand shocks in Annex-I at the end of slide deck

Economywide Multiplier Analysis
• Lockdown policies & shocks have direct impacts on the operation
of certain sectors
e.g., closing businesses, restricting travel, etc.
• But they also generate indirect impacts on other sectors through
economic linkages in production and trade
i.e., input suppliers, export channel & effects on investment
• Multiplier analysis uses sector input-output data to measure
direct & indirect impacts throughout & across the economy
Includes impacts on GDP, jobs & household incomes
• The Pakistan model is based on the 2013/2014 social accounting
matrix (SAM), 2018-19 Pakistan’s Household Integrated Economic
Survey (HIES) and Pakistan Social & Living Standards
Measurement Survey (PSLM)
(results scaled to 2019 GDP & employment levels)

Economywide
Impacts
GDP | jobs
Incomes | poverty
Direct
impacts
Framework for Analyzing COVID-19
GlobalImpact Channels
(Due to partial or full lockdowns in other countries)
Indirect
impacts
DomesticImpact Channels
(Due to partial or full lockdowns in own country)
• Export demand
• Remittances & migration
• Foreign direct investments
• Agriculture
• Mining & crude oil
• Manufacturing
• Utilities (energy, water)
• Construction
• Whole & retail trade services
• Transportation, storage & cargo
• Hotels & food services
• Banking, finance & insurance
• Professional & business services
• Public administration & law enforcement
• Education services
• Health & social services
• Sports & entertainment
• Community & other services

Impact Channels & Shocks
• Lockdowns are simulated using a
range of impact channels
• Shocks to each channel are imposed on
the model & impacts are simultaneously
traced across all economic sectors
• The SAM Multiplier model separates
the Pakistan economy into 64 sectors
(Shocks from production restrictions are
imposed on final demand)
• Size of shocks is estimated by IFPRI
staff based on government
publications, sectoral analysis and
journalistic research.
(See Annex A-I)
Impact channels used to replicate lockdowns
1 Closing mining operations
2 Closing non-essential manufacturing operations
3 Closing most construction sites/activities
4 Closing non-essential wholesale/retail trade
5 Transport/travel restrictions
6 Closing hotels, bars and restaurants
7 Closing non-essential business services
8 Banning sports & other entertainment
9 Restricting domestic workers & other services
10 Reduced export demand
11 Falling foreign remittances

Adjusting for Geography & Seasonality
• All shocks are imposed nationwide given the scope of the
government’s lockdown directive.
• Government introduced national lockdown for 8 consecutive
weeks from March 18 to mid-May and gradually easing of
restrictions during the remaining 6-weeks of Q2.a, to June
30th.
• Shocks are weighted across quarter according to quarterly
GDP data.
a January-March and April-June are the third and fourth quarters of the July-June
Government of Pakistan fiscal year.

Government Policy Response
• The government took numerous policy actions to mitigate the
effects of the economic slowdown of COVID-19, beginning in late
March 2020
Most programs were directed at households, especially poor ones
• The largest program was the Ehsaas program, formerly BISP, which
expanded from 4.5 million female-headed households to 12
million households
• The total government expenditures directed towards different
kinds of households reached PKR 318.6 billion (USD 2.12 billion)
See detailed Government Mitigation Measures in Annex-II at
the end of slide deck

Scenarios
1. Impacts during the lockdown period
• 8 weeks from March 18 to mid-May with full lockdown period
• 6 weeks from mid-May to June 30 with easing of restrictions
2-3. Impacts throughout 2020 by quarter
• We compare a faster (2) vs. slower (3) easing of restrictions
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Q1 Q2 Q3 Q4
Full
lockdown
period
Easing of
restrictions in
Q3
Final easing by
end of Q4
(possibly complete
recovery)
1
3
2
Easing of
restrictions
during rest
of Q2

Economic Impacts During the
Lockdown Period4

Estimates of change in GDP
National GDP losses over four months dropped from 26.4 to
19.5 percent due to emergency response packages
(most economic losses occur in the industry & services sectors)
Change in total GDP from mid-March to end-June (Percentage)
(with and without government emergency response package)
-26.4
-2.1
-6.7
-17.6
-19.5
-0.2
-5.4
-13.9
-30
-25
-20
-15
-10
-5
0
Total Agriculture Industry Services
ChangeinGDP(Percentage)
Without emergency response package With emergency response package

Sources of GDP Losses
Reduced export demand and closing of manufacturing enterprises
activities accounts for over half of GDP losses
Contribution of lockdown restrictions & shocks to
loss in total GDP during lockdown (sums to 100%)
(Closing business activities, hotels and restaurants, and wholesale/retail businesses , while restricting
transport activities created an additional third of GDP losses)
Reduced export demand
Closing non-essential
manufacturing enterprises,
closing wholesale/retail activities
and closing business services
Closing transport and travel
restrictions, closing hotels and
restaurants and limited
construction activities
Reduced other services, limiting
energy and water supply and
restricted domestic workers
Disruption to hospitals and closing
schools
Restrictions to farming and other
services
36.4
19.9
9.5
8.2
5.3
5.0
3.7
2.8
2.1
2.0
2.0
1.8
0.9
0.3
0 5 10 15 20 25 30 35 40
Reduced export demand
Closing non-essential manufacturing…
Closing non-essential wholesale/retail…
Closing non-essential business services
Transport and travel restrictions
Closing hotels and restaurants
Limiting construction activities
Limiting mining operations
Disruptions to hospitals and clinics
Closing schools
Direct restrictions on farming
Other services
Diruptions to energy and water supply
Domestic workers & other services

Impacts on the Agri-Food System
Food supply is exempt from most restrictions, but it is still
indirectly affected by falling intermediate demand from other
sectors
(food services is directly affected by the closing of hotels, restaurants & bars,
but this is a small component of the overall agri-food system)
Change in agri-food GDP during the 14-week period (Percentages)
-26.4
-6.4
-2.1
-0.4
-3.2
-0.7
-20.6
-30 -25 -20 -15 -10 -5 0
Total
Agri-food system
Agriculture
Agro-processing
Food trade and transport
Food services
Outside agri-food system

Unpacking Agricultural GDP Impacts
Change in agri-food GDP during the 14-week period (US$ billion)
Cash crops hurt by falling demand from other
sectors linked to closure of hotels and
restaurants
Cereal crops are affected through
indirect effects of food demand
reduction in the downstream sectors
Decline in investment spending &
construction activities reduces demand
for timber & wood products
Sluggish export demand also hurts
export crops (e.g.: rice)
-0.96
-0.81
-0.02
0.00
0.00
-0.04
-0.10
-0.63
-0.15
-0.16
-0.02
-0.01
0.00
Agriculture
Crops
Cereals
Pulses & Oilseeds
Root crops
Fruits & Vegetables
Sugarcane
Traditional Export crops
Livestock
Meat & Eggs
Dairy
Forestry
Fishing

Unpacking Food Processing GDP Impacts
Some food processing sectors like meat and
other food are affected more from demand
reduction in food service sector.
Demand reduction from restaurant
and other services activities
generate negative spillover effects
on food processing industries.
Change in food processing GDP during the 14-week period
(US$ billion)
-0.19
-0.02
0.00
-0.01
-0.01
-0.08
-0.09
Food Processing
Meat
Dairy
Vegetable & animal oils
Cereals milling
Sugar refining
All other food, beverage,
and tobacco products

Estimates of change in Household Income
Change in household incomes during
lockdown due to ERP transfers
(Percentage)
-3.30
-2.99
-2.27
-2.47
-3.16
-2.70
-3.91
-2.4
-2.1
-1.4
-1.6
-2.3
-1.8
-3.1
-5
-4
-4
-3
-3
-2
-2
-1
-1
0
All
households Quartile 1 Quartile 2 Quartile 3 Quartile 4 Rural Urban
Percentage
Without ERP With ERP
All households experience large income losses
Larger income losses for higher-income households
Households received transfers of USD 2.1 billion to cover their income losses
Smaller losses for rural households because farming/food trade was not shut down
-8.0
-0.6
-1.9
-2.3
-5.5
-3.3
-4.7
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
Changeduringlockdown(USDbillion)
Change in household incomes during
lockdown (USD billion)

Employment Impacts During the Lockdown
The unemployment rate increased to a staggering 20 percent
during April but declined to 7 percent by end-June
5.2 million jobs were saved, mostly in May due to Emergency Response
Programs (ERP)
Change in unemployment during the
lockdown period without ERP
(Percentage)
20%
17%
7%
April May June
Reductions in Unemployment from ERP
(by Sector, millions of workers)
1.6
1.0
2.6
Agriculture Industry Services

Poverty During the Lockdown
Period
5

Households (hhd)
Households (hhd)
HHD-RS1 Rural small farmer (quartile 1)
HHD-RS234 Rural small farmer (quartile 234)
HHD-RM1 Rural medium+ farmer (quartile 1)
HHD-RM234 Rural medium+ farmer (quartile 234)
HHD-RL1 Rural landless farmer (quartile 1)
HHD-RL234 Rural landless farmer (quartile 234)
HHD-RW1 Rural farm worker (quartile 1)
HHD-RW234 Rural farm worker (quartile 234)
HHD-RN1 Rural non-farm (quartile 1)
HHD-U1 Urban (quartile 1)

Distribution of Poor Households
Source: Pakistan’s Household Integrated Economic Survey (HIES), 2018-19
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
Numberofhousehold
Non Poor Poor

Poverty Ballpark
Poverty Line is defined as households with basic needs consumption
expenditures less than PKR 45,312.
Poverty Ballpark was extended from PKR 45,312 to 54,500 to fully account for
the distribution of the PKR 144 billion in the Ehsaas Emergency Program.
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
Households
Non Poor Poor Poverty ballpark

Rural vs Urban Poverty Distribution
Poverty Line is defined as households with consumption expenditures less
than PKR 45,312.
Poverty Ballpark includes the population with incomes between PKR 45,312 to 54,500.
48.1
59.2
24.9
9.3
57.7
8.7
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
Poor Non-Poor Poverty ballpark
Population(million)
Rural Urban

Poverty Impacts During the Lockdown
Poverty rate increased by 43 percent and 38.7 percent during
April & May. The poverty rate stood a little higher than the
base poverty rate of 27 percent by end-June
Poverty rate during the lockdown period (Percentage)
Poverty is defined as the share of the population with consumption spending
below the national poverty line
43.0
53.0
25.927.0
38.7
48.9
21.2
27.3
35.9
12.5
0
10
20
30
40
50
60
Base National Rural Urban
Povertyrate(%)
April May June

Poverty rate with and without ‘Ehsaas’ Cash
Transfer Program
39%
49%
21%
27%
35%
14%
0%
10%
20%
30%
40%
50%
60%
National Rural Urban
Percentages
Without Ehsaas With Ehsaas
The national poverty rate decreased by 11.2 percent due to ‘Ehsaas’ Cash
Transfer Program

6
Economic Impacts Under Fast & Slow
Easing of Restrictions & Recovery

Easing of Restrictions & Recovery
Predicting Pakistan’s “post-lockdown” period is challenging
Consider two stylized scenarios:
Faster easing: Economy rebounds strongly in Q3 & largely returns to normal by Dec 2020
Slower easing: Modest rebound in Q3 with growth in Q4 still below pre-lockdown levels
Quarter Month Recovery until Sep 2020 Recovery until Dec 2020 Global shocks
Q1
Jan
No shocks in pre-COVID-19 period
Feb
Mar
Full lockdown period starts from March 18 to Mid May
Decline in remittances
& export demandQ2
Apr
May
Easing of restrictions during rest of Q2
Jun
Q3
Jul
Slow: Shocks eased by 5%
Fast: Shocks eased by 15%
Fast: Shocks eased by 15%Aug
Sep
Q4
Oct
Nov
Dec

GDP Impacts with Recovery Scenarios
Change in quarterly & annual GDP under two recovery scenarios*1
(changes are relative to a no-COVID growth scenario)
National GDP is lower over 2020 as a result of COVID-19
(given its pre-COVID-19 growth trends, Pakistan may well lose a year or more of growth)
*1 April to June should represent fourth Quarter of Pakistan fiscal year for 2019/2020.
-3.0
-5.0
-0.9
0.1
-3.0
-5.8
-1.6 -1.4
-11.8
-1.2 -1.1
-11.1
-14
-12
-10
-8
-6
-4
-2
0
2
First quarter Second quarter Quarterly values Annual
Change(USDbillion)
-3.0
-5.0
-0.9
0.1
-3.0
-5.8
-1.6 -1.4
-11.8
-1.2 -1.1
-11.1
-14
-12
-10
-8
-6
-4
-2
0
2
First quarter Second quarter Quarterly values Annual
Change(USDbillion)

Poverty Impacts with Recovery Scenarios
Change in national poverty rate with fast or slow easing of restrictions
(changes are relative to a no-COVID growth scenario)
Poverty stabilizes by the end of 2020 as people return to work,
incomes recover & consumer demand resumes
But this hides a sharp spike in mid-year poverty, when many households living close to
the poverty line require government or other support to cope
27.0
43.0
29.5
26.6 28.4 28.2 27.628.1 27.9 27.4
0
10
20
30
40
50
60
Base April May June Q3 Q4 2020
Second quarter Quarterly changes Annual
Povertyrate(%)
Base lockdown slow recovery fast recovery

A-I
Detailed Assumptions About
Production & Demand Shocks

Channels, Shocks & Affected Sectors (1)
Sectors
Sector Shocks and Dates
Q1 Q2 percent due to
domestic
effects
percent due to
export effects
March April May June
Agriculture and Ag Processing
Crop Production
- Wheat
- Important Crops- Kharif
- Other Crops -0.5% -0.5% 100%
- Cotton Ginning -0.8% 100%
Livestock -0.80% -0.80% -3.30% -3.30%
100%
Forestry
Fishing -0.30% -0.30%
100%

Sectors
domestic
effects
percent due to
export effects
Industry (1)
Crude Oil -15% -15% -10% -5% 100%
Natural Gas -15% -15% -10% -5% 100%
Other Mining -15% -15% -10% -5% 50% 50%
Food processing -10% -10% -5% -5% 90% 10%
Textiles and clothing -20% -20% -10% -5% 30% 70%
Wood & paper -5% -5% 100%
Petroleum products -10% -10% -5% 60% 40%
Chemicals -15% -15% -5% 80% 20%

Sectors
domestic
effects
percent due to
export effects
Industry (2)
Fertilizer -5%
-5% 1% 1%
100%
Vehicles and transport equipment -15%
-15% -10% -5%
80% 20%
Metals & machinery -15% -15% -10% -5% 70% 30%
Other manufacturing -15% -15% -10% -5% 60% 40%
Electricity generation and distribution
-5% -5% -5% -5%
100%
Construction -10% -10% -5% 100%

Sectors
domestic
effects
percent due to
export effects
Services
Trade, wholesale and retail -16% -16% -11% -5% 60% 40%
Transportation -32% -32% -16% -5% 70% 30%
Information and communication
technologies -11% -11% -5% -5%
90% 10%
Hotels & food services 5% 5% 100%
Finance & business -11% -11% -5% -5% 100%
Education -16% -16% -11% -5% 100%
Health -21% -21% -11% -5% 100%
Public services
Domestic services -11% -11% -5% -5% 100%
Other services -11% -11% -5% -5% 100%

A-II Government Mitigation Measures

Government Mitigation Measures (1)
Mitigation Measures Beneficiaries Amount
Ehsas Cash Program:
Cash grants of 12,000 per household
distributed among poorest families
12 million households categorized
poorest of the poor
PKR 144 billion
Support Package for Labor:
Cash grants of PKR 12000 per
household
Labor who lost their jobs due to
COVID-19
PKR 75 billion
Subsidy for Utility Store Corporations:
To provide essential food items at
subsidized rates
Support vulnerable families PKR 50 billion
Electricity relief Package for MSMEs:
Provide electricity relief package to
industrial and commercial consumers
3.4 million commercial consumers
and 0.3 industrial consumers
provided electricity relief package
PKR 50.69 billion

Government Mitigation Measures (2)
Mitigation Measures Beneficiaries Amount
Financial support for private
companies:
Providing incentives for construction to
kick start economy
Construction sector PKR 100 billion*
Wheat Procurement:
Providing support to farmers and
sustainable supply of wheat in the
country
Farmers (Wheat cultivators) PKR 0.26 billion**
Agriculture Package:
Providing subsidy to farmers on inputs
such as fertilizers, pesticides, seeds
and tractors to reduce their cost of
production
Farmers PKR 50 billion
* Package announced in Q2 and impact would be over Q3 and beyond.
** Incremental procurement X price differential

Pakistan: Impacts of COVID-19 on Production, Poverty & Food Systems

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Pakistan: Impacts of COVID-19 on Production, Poverty & Food Systems

Similar to Pakistan: Impacts of COVID-19 on Production, Poverty & Food Systems (20)

More from International Food Policy Research Institute (IFPRI)

More from International Food Policy Research Institute (IFPRI) (20)

Recently uploaded

Recently uploaded (20)

Pakistan: Impacts of COVID-19 on Production, Poverty & Food Systems