A grim situation

The Planning Commission (PC) made initial assessment that the coronavirus pandemic has so far caused losses of Rs2.5 trillion for few sectors of the national economy. Before these estimates, the Pakistan Teheek-e-Insaf led government provided relief package of Rs1,240 billion in a bid to prove some relief to the public, especially those affected severely by this virus. The government also announced amnesty-like scheme for the construction sector with an aim to kick-start economic activities after April 14, 2020.

Prime Minister Imran Khan, on the eve of launching an incentive package for the construction industry, made all out efforts to convince masses that Pakistan would have to strike a balance between avoiding spread of COVID-19 and providing opportunity to the poor segments.

He emphasised on providing opportunities to the daily wagers to earn their bread, because an indefinite period of lockdown could result in plunging them into a famine-like situation.

International Monetary Fund (IMF) Managing Director Kristalina Georgieva argued that as the world responds to COVID-19, country after country is faced with the need to contain the spread of the virus at the cost of bringing its society and economy to a standstill.

At face value there is a trade-off to make: either save lives or save livelihoods. This is a false dilemma – getting the virus under control is, if anything, a prerequisite to saving livelihoods.

She further stated this is what brings the World Health Organization (WHO) and the IMF so closely together – the WHO is there to protect the health of people and well-placed to advise on health priorities; the IMF exists to protect the health of the world economy – it advises on economic priorities, and also helps provide financing.

“Our joint appeal to policymakers, especially in emerging market and developing economies, is to recognise that protecting public health and putting people back to work go hand-in-hand,” the IMF’s MD stated.

The WHO was on the front line of this crisis by the virtue of its mandate, but so was the IMF. In the short time since COVID-19 started spreading across the world, the demand for IMF financing has skyrocketed.

Never in the 75 years history of the institution have so many countries – 85 so far – found themselves in need of IMF emergency financing. And this financing is being made available in record short time, with the first projects already being approved and money disbursed to provide much needed assistance to shield countries against dramatic increase in financial needs at a time of sudden drop in economic activities and in revenues.

“As financing to support severely constrained public budgets reaches the countries in need, our joint plea is to place health expenditures at the top of the priority list,” the IMF’s MD advised.

Our Planning Commission worked out the impact of losses of the pandemic on some sectors of the national economy, and showed that under moderate restrictions, employment loss could be 12 to 20 percent of the total employed labour force of the country.

The total labour force in the country stood at 60 million and moderate estimates calculated by the Pakistan Institute of Development Economics (PIDE), an affiliate of Planning Commission, showed that the lingering pandemic could result into unemployment ranging from 12 to 20 million.

The PIDE had assessed that the monthly average losses of losing jobs stood at Rs180 billion to Rs260 billion, so in the worst case scenario basis, the estimated losses could go up to Rs780 billion in the next three months. However, the government has decided to provide Rs4,000 monthly stipend to expected job losers.

The Security and Exchange Commission of Pakistan (SECP) estimated that the stock market tumbled and has so far caused losses to the tune of Rs200 to 250 billion.

On the government's tax revenue side, the official said that it was expected that the FBR could see a decrease in revenue/cash outflow of around Rs600 billion alone in the fourth quarter (April-June) period of the current fiscal year. Initially, the FBR had estimated revenue losses of Rs380 billion, but they revised upward their losses in the wake of additional Rs200 billion losses on account of deferment of utility bills, including electricity and gas and then release of stuck-up refunds to the tune of Rs100 billion.

However, it is not yet known that the FBR took revised target of Rs5.2 trillion or Rs4.8 trillion. FBR sources have said that tax collection could go up Rs4.2 trillion maximum, but the possibility of Rs4.4 trillion seemed out of question.

On the trade side, the Planning Commission’s estimates showed that there was an expected sharp slowdown in imports of up to 60 percent, exports could potentially go down by up to 10 percent “Impact of trade contraction only on GDP could be up to 4.6 percent in the last quarter if combined imports and exports go down by 20 percent,” the official estimates showed.

This figure of 4.6 percent losses in GDP during the last quarter could be roughly quantified at around Rs700 to Rs800 billion losses in the April-June period of FY2020 if exchange rate in terms of dollar versus rupee is estimated at Rs165 against dollar.

he researchers of PIDE argued that they had not yet calculated the exact figures because there was no estimation of quarterly growth figures in Pakistan. However, the Planning Commission and the PIDE are working jointly to come up with exact estimates on trade losses on accounts assessed for the last quarter of the current fiscal year.

Now, the daunting task lying ahead before the policy makers was how to translate just announcements into action. As these actions could save the population from this deadly virus and also kick-start economic activities in ways that could help avoid millions from famine and an unstable law and order situation in the country. It is not easy to strike a balance in this situation, which no one has ever experienced in their life time.

The writer is a staff member