The Institute for Policy Reforms (IPR) Monday released a comprehensive factsheet on the effects of UK’s exit from the European Union. It analysed the effects of the move on the world economy and on Pakistan. The factsheet states that the Brexit vote challenges the way economic policy has been run in recent decades.
Pakistan has already felt Brexit’s effect. Soon after the vote, PSX lost about 1,700 points. It is still about a thousand points below its pre-Brexit level. It is unlikely that foreign investment will return soon. The factsheet states that Pakistan’s exports will suffer a twofold blow. Consumer demand in Britain will dampen from lower growth. A cheaper pound will increase the value of foreign goods in UK. Pakistan’s main concern is whether exports to UK will lose the duty concessions under EU’s GSP plus, and if so, when. UK was a strong advocate for Pakistan’s GSP plus case in Brussels. The government of Pakistan must lobby with the UK for its continuation. At over $1.5 billion, UK has a share of over 7% in our total export.
Workers’ remittance could also decline, especially if unemployment grows in the UK. Remittance from UK is about 13% of total. FDI from UK will likely decline. They have fallen since 2007, in line with the overall trend of FDIs in Pakistan. Pakistan is one of the largest recipient of UK’s overseas development assistance. Prolonged loss in economic growth could lead UK to reconsider its ODA level. This would affect assistance to Pakistan.
A spillover to other economies will heighten the effect on Pakistan, as it would for the rest of the world. An analysis of why the UK voters opted out of the EU holds a deeper lesson for everyone. Educated and skilled people voted to stay. Unskilled voted to leave.