Pakistan’s economic response to coronavirus needs better structure
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A lot has already been written about the prime minister’s economic package to mitigate the impact of coronavirus. The Economic Coordination Committee (ECC) has announced a PKR 1.2 trillion amount with allocations for emergency relief fund, Ehsaas program, and assistance for daily wage earners. However, some questions and observations that have emerged in the media merit discussion.
First, there are scanty details of how emergency relief funds will be utilized. This observation also applies to various other initiatives approved by the ECC. For example, cash assistance allowed for daily wage earners has to be ensured by provincial labor departments – many of which we understand do not even have the updated database of such workers. Additionally, there are critical capacity gaps in these departments which will prevent verification of beneficiaries.
Second, this package has overlaps with announcements of fiscal response by provincial governments. This is going to give rise to multiplicity of similar schemes and wastage of scarce resources. It will be best if the prime minister can call an urgent meeting of the National Economic Council, followed by regular weekly meetings of all finance departments to ensure efficiency in public spending. This will also boost the confidence of well-intentioned citizens and local philanthropists contributing to the prime minister’s fund.
Third, the political leadership has perhaps struggled to create a sense of urgency across finance departments. For example, the ECC has asked the Utilities Stores Corporation (USC) to procure essential items without demanding an urgent proposal on how to target the poorest of the poor. In fact, the USC has been allowed another two weeks to liaise with the Benazir Income Support Program (BISP) to obtain necessary data for targeting beneficiaries before coming back to the ECC. The USC will then be given another three weeks to procure! One is also surprised not to see any efforts by the finance departments toward allocating additional spending on testing, prevention, and mitigation of coronavirus.
Fourth, it is important to have a longer term perspective while estimating losses from COVID-19 and the resulting economic recession. We do understand that many Pakistanis working abroad may have to return in the coming days as world economies slow down and GCC countries suffer from abnormally low oil prices. This sluggish global economic outlook is expected to prevail in the medium-term. Therefore, the prime minister's economic package needs to expand its scope and include assistance for returning workers. The ministries of finance and overseas Pakistanis need to coordinate on an immediate basis and estimate the support that has to be allocated for such workers and their families.
Many Pakistanis working abroad may have to return in the coming days as world economies slow down and GCC countries suffer from abnormally low oil prices. Therefore, the prime minister's economic package needs to expand its scope and include assistance for the returning workers.
Dr. Vaqar Ahmed
Fifth, the assumption that only providing a one-off tax relief to businesses will keep them from laying off labor is perhaps not correct. Private enterprises, particularly micro, small, and medium-sized firms, may soon face a complete shut down if there is a prolonged lockdown or sluggish demand patterns continue into the next year. Already many in the export sector have seen cancellation of orders by foreign buyers. The supply chain disruptions and in particular, the lockdown faced by transport and storage sectors is resulting in existing export consignments getting delayed.
In this scenario, the central bank and treasury are expected to coordinate. The Monetary Policy Committee and Monetary and Fiscal Policy Coordination Board should meet frequently. This is also important in the context of the recent fall in the value of currency and upcoming state obligations during the holy month of Ramadan. Additionally, utility rates, including power and gas tariffs, may be locked for the medium-term to lend certainty to already volatile markets. As the next federal budget is around the corner, relevant departments should undertake inclusive public-private dialogue to understand the perspectives of Pakistani entrepreneurs.
Going forward, Pakistan is requesting assistance through the International Monetary Fund’s Rapid Finance Instrument. In addition to this, the Finance Division is hoping to receive some support from the World Bank Group and Asian Development Bank. We are informed that some bilateral donors may also come forward in the coming days. Our suggestion would be not to approach donors in a haphazard manner. The current scenario calls for a comprehensive damage needs assessment which should be completed on a war footing. Such an assessment will better inform the development partners where to support Pakistan during the crisis and post-crisis phase. Besides financial assistance, the country is in dire need of technical advice on coping strategies.
Finally, Pakistan’s call to philanthropists needs to be better structured. In fact, at the time of writing this text, the Prime Minister Secretariat’s web page has no mention of how citizens and diaspora can contribute to the PM’s COVID-19 Pandemic Relief Fund-2020 for which Khan is seen daily campaigning over television!
– Dr. Vaqar Ahmed is an economist and former civil servant. He is author of ‘Pakistan’s Agenda for Economic Reforms’ published by the Oxford University Press.
Twitter: @vaqarahmed
