Editorial | Dealing With The Economic Challenge Requires Decisive Leadership
The economic losses caused by the Coronavirus pandemic are an unforseeable and unfortunate blow to many countries. And without a doubt, they are losses that Pakistan could ill afford at a time when it was already struggling to keep some semblance of financial viability and economic stability.
Where the country was looking at modest GDP growth of 3 percent this year, it now faces losses of anywhere from 4.6 to 9.5 percent – the two figures representing the lower and upper limits of an estimate from former finance minister Dr Abdul Hafiz Pasha and former State Bank governor Shahid Kardar.
It is impossible to hold the current government responsible for the fact that we are facing a massive economic challenge due to the pandemic. But whether those in power like it or not, they will be judged in the court of public opinion for the direction that Pakistan takes in its response to this crisis. No power centre, elected or unelected, can wish away the fact that its legitimacy is rightly at stake here. Pakistan’s people have nowhere else to turn to for relief than the state.
The dramatic decline in economic output is a global phenomenon right now. It is an inevitable result of millions of citizens in each country being strictly limited to their homes, unable to produce or consume. In Pakistan, the Finance Ministry estimates losses in output ranging from Rs 891 billion to Rs 1.6 trillion in the fourth fiscal quarter of this financial year.
While there is no way to avoid losses, there are certainly steps that can be taken to mitigate the fallout and to direct the bill towards those who can better afford it rather than the country’s poor who are stalked by malnutrition and basic deprivation even in “normal” times. It is for their performance on this count that those currently wielding power in Pakistan will be judged by the people and by history.
No strategy to counter these losses can succeed if the state authorities behave timidly when it comes to business lobbies in various sectors. Markets may or may not have effective self-correction mechanisms, but that is a debate for other times. It is clear that in the extraordinary economic strain imposed on us by the global pandemic, state intervention has to be extensive, decisive and swift – and above all, driven by a clear understanding of what measures are necessary to provide economic stimulus to businesses and protect working people.
From the point of view of keeping the economy going, two considerations will be vital.
First, the need to keep the cost of doing business as low as possible. A number of monetary and fiscal tools are available to governments which understand the magnitude of the problem that they are facing right now. Such measures – including further lowering interest rates – have been proposed in Pakistan too.
Second, the need to ensure that while keeping the cost of doing business low, we avoid a situation where business owners leave poor, struggling employees to cover the costs of the economic slowdown. Nothing could be more catastrophic for the economy or the social stability of an already troubled Pakistan than a situation of mass unemployment, food insecurity and the resulting lawlessness. Simply put: there will be no economic recovery from the costs imposed on us by the Coronavirus pandemic if aggregate demand plummets and law and order comes under severe strain.
Relief packages and employment protection for struggling citizens are no longer questions of “social justice” alone. They are now necessary for Pakistan’s continued economic survival. But this is not always apparent to various business lobbies clamouring for their own understandable concerns in such a time.
At all costs, what this boils down to is this: those currently at the helm of affairs in Pakistan must resist the lure of that which is expedient. A crisis of this nature and scale demands a very different kind of leadership from what we have become accustomed to.