Another nail in the coffin

LAHORE: Coronavirus deems to be another nail in the coffin of unfulfilled commitments piled up by the authorities in almost two years and that include unrealistic ambition of providing 2 million jobs and 1 million houses in a year.

During the last 18 months, the people of Pakistan have seen their expectations frustrated by the incompetent government. The GDP growth declined sharply in its first year from 5.5 percent to 3.3 percent.

Most economic experts and multilateral institutions were estimating the growth to further decline to 2.4 percent of the GDP in the current fiscal year. Adviser to the prime minister on finance insisted that the growth would be 3.6 percent. Now, the Finance Ministry has revised the growth estimates to 2.6 percent that would be less than half the growth achieved by the PML-N government in its last year.

Pakistan would be very lucky if it managed to achieve even 2.6 percent GDP growth target this fiscal year after the devastation caused by the coronavirus globally, as well as in Pakistan. We should also keep in mind the track record of this regime in achieving the stated targets, which is not good. A few months ago, our productivity was declining, exports were stagnant (even today they are 3.5 percent higher in the first eight months of this fiscal year). The interest rate was very high that stifled investment. Inflation was going up. But the stock market was booming, rupee was stable and foreign exchange reserves were rising.

Today, the manufacturing growth is still in red. The exporters have warned of 25 to 50 percent decline in exports. The stock market has nosedived and small investors have been completely wiped out. The rupee has become unstable. The foreign exchange reserves are holding, but with the hot money moving out of stability is suspecious.

Inflation is likely to come down to a single-digit this month or in the next after expected decline in petroleum rates. The interest rates are as high as ever, as the central bank has decreased its policy rate by only 0.75 percent. If we analyse the economic prospects in the coming months, the picture looks bleak. There are no chances of new investment. We are expecting large scale closure of exporting industries that would be accompanied with huge job losses, as well. When the economists talked about job losses exceeding one million, the Ministry of Finance called it without statistical evidence. Now the government itself is expecting that job losses after coronavirus might touch 2.6 million. The economic meltdown has accelerated at a time when the poor families have exhausted all or most of their assets during the last 18 months of high inflation and huge job losses.

Coronavirus is not only a life threat, but its economic threat is much higher. With mortality rate of 3 percent it will leave 97 percent survivors to cope with the worse economic conditions ever, particularly in countries such as Pakistan where the population was already reeling from high inflation, engineered shortages and declining manufacturing base.

We do not have resources to compensate the affected population. We also do not have the capability to deal with this emergency even if we get resources from somewhere. Everything in Pakistan is going as usual and most of the ruling elite is not bothered by the crisis. Nature has been kind on us because its spread is not as rapid as in other economies. This virus does not distinguish between the rich and poor, ruler and subject. The Canadian prime minister and his wife have tasted its impact.

On the economic front, the virus would leave thousands of small enterprises devastated. Numerous large industries operating on obsolete technologies on the strength of government provided crutches would go into oblivion with no chances of revival. This government lacks resources to compensate the losses of industries. In fact the government would face an uphill task of managing its day-to-day affairs, as the revenues would take a big hit. The privatisation process would also go on the backburner. The IMF would understand the genuine pressure on the economy and may grant waivers on many targets, but the ruling elite would have to revise its strategy of seeking cooperation of all instead of solo flight on the economic affairs. It will have to go for fair accountability instead of targeting its opposition and sparing the supporters.