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May 16, 2020

The tasks ahead


May 16, 2020

The PTI government led by Prime Minister Imran Khan is facing the dual task of curbing the coronavirus and reviving the economy. The first task for the PTI government is to implement SOPs for the reopened markets, industries and businesses.

Desperate to minimise further damage to an economy already in recession and a working people reeling from a loss of livelihood, the decision of PM Imran Khan to ease restrictions is not surprising.

The question is: who will monitor the thousands of large, medium-sized and small production units in Punjab and Sindh? Who will ensure the implementation of SOPs in crowded markets?

The first few days of easing the restrictions have shown that hardly a few people are following the SOPs. No social distancing is being maintained at crowded markets. People are going to the markets in big numbers without taking precautionary measures.

There is a danger that the number of patients might increase as a result of the careless attitude of people. A dramatic rise in infections and the death toll cannot be ruled out, particularly if social distancing and other SOPs like wearing face masks and use of hand sanitisers is not strictly observed.

The public healthcare system is already stretched to the limits. Nearly 700 doctors, nurses and health workers have been infected by the novel coronavirus. The situation is likely to get worse if the number of infections continues to grow.

The prime minister has played a big gamble with this decision. If he succeeds in reopening the economy without an exponential growth of infections and deaths, he will be credited for taking such a bold decision. If the decision to ease restrictions backfires and he is forced to re-impose the lockdown then he will be blamed for the disaster. The prime minister and his government are facing a tough situation. The failure of the government to save lives and curb the virus will have serious political consequences.

The second task is to reboot the economy, which was almost halted due to the restrictions imposed to control the coronavirus spread. Pakistan is now facing the real prospect of a deep recession. The government should prepare itself to deal with the most serious economic crisis of our lifetimes.

For the first time in nearly seven decades, Pakistan’s economy is expected to post a negative growth rate of around 1.6 percent this fiscal year. In a statement, the finance ministry has confirmed the recession forecasts by leading global financial institutions like the IMF and the World Bank.

Pakistan experienced recession last in 1951-52, according to official stats. The country posted some sort of growth even during the 1965 and 1971 wars. And it achieved 1.23 percent growth even when East Pakistan had broken away. After 68 years, Pakistani economy is experiencing negative growth.

Pakistan’s pre-corona economy was facing a mild recession, which was the result of the stabilisation measures adopted by the government and the State Bank of Pakistan (SBP). Then the Covid-19 pandemic forced the government to impose lockdowns across Pakistan. These lockdowns have triggered deep recession and Pakistan’s economy will likely come out of the lockdown facing a serious economic crisis.

We are facing a serious economic crisis and the government needs to come up with a clear plan and strategy to rescue the economy.

The closure of schools, offices, factories and markets will hit the small and medium businesses. There is a possibility of mass bankruptcies. As the middle and lower income groups struggle to earn enough income to pay for basic necessities, it can result in hyper-inflation, joblessness and complete collapse of the economy.

Small traders, businesses with few employees and self-employed people have been hit hard and will find it difficult to run their businesses without cheap credit from banks. Small investors and businessmen in transport, travel, hotel, aviation, tourism, entertainment, sports and other sectors badly need help to avoid bankruptcies. The government needs to announce a rescue plan for these sectors. Some sectors are still facing closures and take more time to reopen. These sectors need help from the government.

The government has already announced some relief measures for some industries and businesses, including the construction sector. The government has reduced import duties on construction and building material. Taxes on sale /purchase of property have been reduced.

The SBP has announced financial incentives for industries affected by the lockdown. Around $290 million in cash subsidies has been given to export sectors to compensate for lost revenue. More than 237 export units have been allowed resumption of production under preventive SOPs imposed by the government.

A three-month waiver on electricity bills for SMEs when they open up has been granted by the government. Under a financial support programme for skilled labour losing their jobs due to the lockdown, the government will pay cash assistance. Prices of various types of imported fuels have been reduced.

But these incentives are not enough to reboot the economy. Small businesses will need more incentives to kick start their businesses. These incentives need to be extended to other sectors like transport, aviation, travel, tourism, agriculture, sports etc.

The economy needs new thinking to ward off the brewing crisis. This extraordinary situation demands an extraordinary response. The current government has the responsibility to steer the ship through rough waters.

The writer is a freelance journalist.