Impact of COVID-19 pandemic on MSMEs in Pakistan

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Nabeel Rana

The outbreak of coronavirus disease-20191 (COVID-19) has severely affected national and global economies. Various enterprises are facing different issues with a certain degree of losses. Particularly, enterprises are facing a variety of problems such as a decrease in demand, supply chain disruptions, cancelation of export orders, raw material shortage, and transportation disruptions, among others. Nevertheless, it is quite clear that enterprises around the globe are experiencing the significant impact of COVID-19 outbreak on their businesses. We argue that major victims of COVID-19 outbreak are the micro, small & medium-sized enterprises (MSMEs) because MSMEs, in comparison to large enterprises, usually do not possess sufficient resources, especially financial and managerial, and are not prepared for such disruptions likely to go longer than expected .Additionally, these firms are highly dependent on their routine business transactions and a small number of customers .Hence, many MSMEs are running out of stock, some hardly continue to operate, and some will be running out of stock soon MSMEs are the backbone of many economies worldwide that provide income and employment generation to many people around the globe. Similarly, in the case of Pakistan, MSMEs2 are crucial for the economy as they constitute over 90% of the estimated 3.2 million business enterprises and contribute 40% to the GDP with over 40% to export earnings These businesses are spread all over Pakistan in rural and urban areas and represent a significant portion of agriculture, manufacturing, retail, wholesale, trade, and service sectors. Due to the COVID-19 outbreak and lockdowns, Pakistani firms are facing unprecedented adverse effects on their businesses.According to a recent report of the United Nations Conference on Trade and Development (UNCTAD). Pakistan would be hardest-hit by the global pandemic of COVID-19. Therefore, this justifies the need to examine the impact of the COVID-19 outbreak on MSMEs operating in Pakistan. Additionally, the ongoing pandemic crisis will severely hamper the operations of these businesses because MSMEs are highly dependent on the cash economy, which has been adversely affected by the pandemic .Besides, the unavailability of labors, slowdown of productions, shortage of raw materials, and transportation restrictions will have major results on these businesses. This, in turn, will have a significant impact on the national economy. Hence, a robust policy response is also essential to offset the negative effects of the current outbreak. policymakers and practitioners in identifying strategies required to respond to the impact of the ongoing pandemic on MSMEs. Mainly, this study emphasizes to pay more attention to the huge risks brought by external environmental uncertainty to MSMEs and help these enterprises in predicting risks in the early stage of business decision-making and planning and specify countermeasures.In a similar vein, Pakistan has also experienced such a devastating crisis caused by external environmental disasters. For instance, floods in 2010 affected not only public and private property but also crops with a loss of $4.5 billion. Pakistan has also witnessed several similar crises in past such as climate change, 2005 and 2008 earthquakes, droughts in 1998 and 2004, etc. Moreover, recently in 2015, nearly all main types of natural disasters such as earthquake, drought, flood, heatwave, and cyclone, were faced by Pakistan that severely affected many businesses. Further, several businesses, due to their small size and resources constraints do not reach to the post-disaster stage. Moreover, due to the lack of enough governmental support, most MSMEs face financial decline and even go bankrupt. MSMEs have limited capability and resources to recover from such crisis, especially those operating in developing countries like Pakistan with high poverty rate, economic and political instability

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