Pakistan exports, investment, foreign remittances have taken a major hit due to global meltdown
The gravity of coronavirus pandemic keeps increasing. The world is still grappling with the first wave of the pandemic and the vaccine is a year and a half away. The projections of economic fallout are still being firmed up.
As per the UK’s University of Cambridge Risk Center, the consensus figure for losses to the global GDP is $26.5 trillion over the next five years. European Union (EU) has announced a $2 trillion plan to fight the impact of coronavirus over the next seven years. This is in addition to Euro540 billion already committed by the EU. US budget deficit has ballooned to $4 trillion due to stimulus packages of nearly $3 trillion. Over 40 million have applied for the unemployment benefits in the US and its GDP will shrink by around 6% in 2020. The Bank of England has warned that the UK will enter its worst recession in 300 years and the country’s unemployment rate will be over 9% even in 2021.
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Pakistani exports, investment and foreign remittances have taken a major hit due to the global meltdown. The locust issue has added to the economic challenges. As a result, we are looking at a budget deficit of over 9% and the government will have to borrow heavily to meet the deficit. Already our borrowing is approaching 100% of GDP. It is very evident that pre-corona politics and economic handling will not work in Pakistan like the rest of the world. PTI is in power for almost two years in the Centre and two provinces and had a five-year stint in KP. PML-N and PPP are in power in different capacities for over 30 years. The three parties have the lion’s share of the votes polled in 2018 elections with PTI having around 32% of the votes.
The biggest challenge to the success of EU’s new $2 trillion package is to overcome infighting among the member states. European Commission President Ursula von der Leyen said, “This is Europe’s moment, our willingness to act must live up to the challenges we are all facing.” Unfortunately, Pakistani leadership has failed to overcome its political differences so far to converge on fighting health and economic challenges posed by the pandemic. Very precious time is lost and the number of coronavirus suspected patients as per Ministry of National Health Services is around 500,000. This is in addition to the nearly 75,000 cases which have tested positive. Whereas Indian testing is nearing 200,000 per day, we have not been able to reach 20,000 tests in a day. China and the US lead with near 1.5 million tests per day. Lack of required testing capacity is the reason for a large number of suspected cases in Pakistan and the spread of the virus is much higher than reported officially. In the last one week or so, the COVID-19 infection rate is over 20%, which is double the global average.
Read also: CM Punjab warned 670,000 may be infected with COVID-19 in Lahore alone
PTI is now reasonably well settled despite the thin majority and has received very strong support from within the state. Members of the cabinet and parliamentarians have gained good exposure and experience with Prime Minister Imran Khan leading from the front. The opposition, for the most part, has been on the defensive and mature at the same time to let PTI roll out its agenda and perform. The PTI government came in against odds and followed an aggressive agenda to eradicate the influence of previous governments and the two main opposition parties which led to severe polarisation.
The need of the hour is to suspend political differences for at least a year and immediately convene discussions to achieve consensus on a corona control and management program and an economic response programme. PM Imran should convene an All Parties Conference to lead this process. The government will be very well advised to close fronts with judiciary and media as well. The discussions over NAB law should be concluded at the earliest to limit their arbitrary powers. Genuine cases of corruption should be processed and executed with additional vigour. Politicised arrests and those on behalf of vested interests should stop which vitiate the political and business climate in the country. Members of political parties, political commentators and analysts should promote national harmony and help out measures to fight the pandemic and economic survival.
On the business and economic front, the greatest challenge is to maintain the consumption-led local economy. State Bank recent report on coronavirus points out to heavy challenges for local consumption with falling income and sales levels. This is besides the external challenges as discussed above. Andrew Bailey, the Bank of England Governor in his recent remarks urged banks to keep lending as reduction will lead to bankruptcies of different business which will come back to hurt the banks. World over the central banks have lowered interest rates to galvanise the local economy. Pakistan interest rates were already one of the highest in the world and despite a 5% drop, the interest rates are way beyond the capacity of big business or SMEs and the ordinary consumers under present circumstances. With a reduction in cashflows, business or individuals all need to borrow. The reduction of interest rates can be one of the consensus points of a government and opposition corona response committee besides many other points.
As Prime Minister Imran Khan repeatedly reminds that one in every four Pakistanis lives in some form of poverty, its an obligation on all politicians who are or have been in power to rise above political considerations and join hands to save the ultra-poor from extinction.