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Saturday, April 13, 2024

How to kickstart the economy whilst keeping people safe?

We should not think about the health and economic responses separately. A comprehensive approach toward resuming economic activities while containing the spread is the need of the hour. Dr. Kamal Monnoo provides some suggestions with a global perspective.

Imran Khan’s government seems to have adopted a prudent approach by gradually starting the process of re-opening the economy, while side by side trying its best to ensure people’s safety. Safety is essential as industries and businesses will re-open and employees will return to work.

Pakistanis in the meanwhile are playing their part well by remaining patient, keeping essential national services running at great personal risk, and opening up their purses in helping the government take care of poor families. Others are contributing by just staying at home, away from friends and relatives, and more importantly, by agreeing to not become apart of mass gatherings. Adjusting to this has not been easy for anyone by any stretch of the imagination.

Kickstarting the Economy

In return for its support, the public remains curious about the government’s plan to economically take Pakistan forward post-Covid-19? On a positive note, this has somewhat been answered. Things finally seem to be falling into place and perhaps for the first time in two years, this government appears to be making the right policy choices. Employment generation activities are being resumed, albeit after partnering with the private sector to keep working environments safe.

Read more: Covid-19: Pakistani economy can thrive if managed well

Prime Minister Khan has acted proactively by securing a debt moratorium for at least 12 months (cushion of $12 billion in returnable + accruable interim interest) and a supporting loan of $1.40 billion on easy terms; Pak Rupee has started to stabilize again (if last week’s Friday closing is anything to go by); the stock market has resumed an upward trend; interest rate finally moves down into single-digit with expectations that it will drop further; inflation is declining, and last but not the least, despite a global lull the economic mood (perception) within the country is beginning to lift.

Safe economic activity amid the virus 

So what next? First and foremost, the focus should remain on controlling the disease, so that not only the number of Covid-19 cases come down significantly, but also that the trend starts to show a negative trajectory. The efforts should be directed at: Making testing widespread, developing a homegrown vaccine against Covid-19, and establishing a contact & tracking strategy in coordination with the telecom service providers nationwide.

The aforementioned steps should be taken to keep on boosting the capacity of our hospitals and healthcare services and to ensure social distancing, all have to continue on a war footing – no letting down of the guard! This is of paramount importance since our success rate in achieving all these measures is going to ultimately determine our real readiness to tackle any flare-ups of the disease that may occur when economic activity resumes because re-opening by itself – even if it is in the right way – will still not be completely safe.

Read more: COVID-19: Depreciating Economy & the way forward

The provincial administrations will need to conduct effective surveillance. They will help by working closely with employers and businesses in ensuring all the safety protocols against Covid-19 are being met.

Make no mistake, only an effective plan to beat the virus is the ultimate answer to how we get our economy back on track. Meaning, we should stop thinking of the health and economic responses as separate. They are not. As we go along and feel more confident, we should begin to open more businesses and put more and more people back to work.

Things will not go back to normal right away and we should expect activity to return gradually. Offices and stores will reopen before cinemas, shopping malls, sports arenas and restaurants are declared safe. This is why the government now needs to think ahead and determine the precise conditions going forward under which the Pakistani economy will function. Financial support to the poor families and the SMEs (small and medium-sized enterprises) should remain intact.

By now it should be evident that as long as there is a significant risk from the virus can, we will have to do things differently. The Federal Government should spearhead the campaign by consulting experts from the private sector to come up with doable ideas on how to operate more safely vis-a-vis re-organizing space, re-designing factory floor layouts, seating and dining arrangements, etc. All businesses, including the smaller ones and not just the large companies, should be trained.

Finally, the most important aspect from an economic sustainability perspective, we will have to go back to the drawing board to work out a strategy on how to effectively mitigate the risks arising for the Pak economy in the days to come owing to imminent global supply chain disruptions in the days ahead. Global trade growth had already slowed down last year to its lowest level since the financial crisis, bogged down by a trade war between the United States and China and slowing economies in Europe and Asia.

WTO’s warning: Should Pakistan increasing domestic industrial activity?

Now the WTO has issued a rather stark warning that global trade in effect could shrink further by as much as 32% (nearly one third). Ironically, Pakistan has an economy dominated by imports where even the most robust of our sectors, for example in the FMCG (fast-moving consumer goods) sector, some of its leading companies tend to operate at an average imported input level of as high as 40% or more. Other key sectors like pharmaceuticals, automobiles, communications, electronics, footwear and edible oils come across as being even higher in terms of percentage of overall imported content.

Now some would argue that this presents a perfect opportunity to start looking inwards and to rely more on homegrown solutions – and they would be right – but the thing is that realigning the direction of domestic manufacturing takes time and is not always possible in the short-term, since manufacturing invariably requires a certain minimum lead time to change. So, for now, our immediate problem is likely to be the inability of our companies, on a wide scale, to be able to source input requirements and thereby as a result having to close down operations; in-turn leading to possible nationwide shortages and resurfacing of inflation.

Mutually beneficial agreements: Kickstarting economies

With the WTO’s myth of high moral ground on free and fair trade now almost shattered, more and more countries are taking matters into their own hands to counter such risks by forming their own bilateral and multilateral arrangements. Their initiatives, amongst many others, primarily include signing product-specific agreements on medicines, health equipment, fuel(s), food essentials, and key spare parts. The purpose being, to keep domestic industries operational and on a wider-level cooperation in the areas of travel and tourism to facilitate the people in being able to undertake relatively risk-free vacations and business trips.

Read more: After successfully containing COVID-19, Pakistan goes for smart lockdown

Some European countries are proactively endeavouring to form groups that will tie them in mutually beneficial arrangements, based on essentially the commonality of having similar threshold on COVID-19 cases or having a similar level of risk from the disease, while avoiding the ones where the incidence of the disease is higher.

The Czech Republic, Croatia, Hungary and Austria are working jointly in combining to open tourism, business trips and movement of some essential food supplies, initially only between themselves. As the world increasingly turns protectionist and gets fragmented, Pakistan will also have to think of such out of the box endeavours that safeguard its interests and protects its people from looming supply chain disruptions by forming new prudent partnerships in its proximity. 

Post-COVID-19, some countries have begun to limit food exports. Vietnam has already barred exports of rice, Thailand has blocked eggs and Russia has restricted the outward movement of grain, while Kazakhstan has prevented grain, potatoes and other agriculture products from leaving the country. As we move into the post-COVID-19 era, it will be important to remember what this crisis has taught us and what we have to do.

Dispensing innovative economic management is a skill that requires the right tools, expertise and some hard-won experience. It can often be quite different from the typical winning strategies in a sports field – in fact, the very opposite in many ways. The quicker we realize this and assemble a dedicated team with the sole purpose of innovatively guiding the economy through some very troubled times ahead, the better it will be for our chances to survive what is by now being billed as the mother of all global recessions, the worst since the 1850s. The Prime Minister has to ensure that this time he gets it right!

Dr Kamal Monnoo is a political analyst. He is honorary consul general of the Czech Republic in Punjab, Pakistan, and a member Board of Governors of Islamabad Policy Research Institute. He is the author of two books ‘A Study of WTO’, and ‘Economic Management in Pakistan.’ He can be reached at: kamal.monnoo@gmail.com. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.