The corona virus poses huge challenges to the government and people of Pakistan in terms of human and economic costs. It has already claimed at least 10 lives and the national economy may lose 1.67pc of its gross domestic product. However, it also provides an opportunity to the government of Prime Minister Imran Khan to concentrate on governance issues as the opposition is in disarray and conditions are not suitable for it to launch a movement against him in the near future.
A sharp dip in oil prices could help Pakistan save around $4-$5 billion in oil imports. As global oil prices are down due to the virus and geopolitical circumstances, the government can pass on the benefit to the public and reduce prices. It will also reduce the high rate of inflation in the country. However, the pandemic has exposed Pakistan’s fragile health system. It ranks 105th amongst 195 countries on the Economist’s Global Health Security Index, reflecting the country’s poor capacity for rapid response and mitigation of the spread of an epidemic, for treating the sick and protecting the health workers.
All public and private hospitals put together have a total of 1,700 ventilators, and the government is finding it hard to even ensure the availability of safety kits for health workers or facemasks and hand sanitiser for citizens. Poorly-equipped government hospitals lack the capacity to screen the large number of suspected cases. Another challenge is quarantining and isolating the patients. Doctors are reluctant to treat patients over lack of personal protection equipment. In Balochistan, disciplinary action was taken against 13 doctors for staying away from a quarantine centre in Mastung. A doctor treating the patients has already died from the disease in Gilgit-Baltistan.
Besides it, the virus poses a serious threat to the economy, which the government believes is recovering fast. However, Moody’s Investor Service has lowered its forecast for Pakistan growth rate at 2.5pc for the current fiscal year owing to Covid-19 even though it said risks for the entire Asia-Pacific (APAC) region were generally on the downside. In December 2019, the New York-based rating agency had projected Pakistan’s growth rate at 2.9pc for the current year. It coincides with the State Bank of Pakistan (SBP) estimating the GDP growth rate for the current year at 3pc, down from its earlier projection of 3.5pc. In its latest “Regional Credit Outlook Update on Evolving Coronavirus Impact” report, Moody’s forecast 4.8pc growth rate for China, down from 5pc earlier, on assumptions of slow resumption of economic activity and weak export demand. At the same time, Moody’s noted significant economic fallout from more rapid and wider spread of the corona virus as dampening domestic consumption demand in affected countries exacerbates disruptions to supply chains and cross-border trade of goods and services.
The International Monetary Fund (IMF) has agreed to relax budget deficit ceiling aimed at allowing Pakistan to meet emergency fiscal needs to fight the corona virus contagion that has started spreading rapidly. The Ministry of Finance has so far sanctioned over Rs5.4 billion including Rs5 billion for the National Disaster Management Authority (NDMA) for emergency response purposes. The IMF decision to relax the deficit condition will ease restrictions on Pakistan that under the $6 billion deal is bound to keep the primary budget deficit limited to only Rs264 billion in the current fiscal year. The IMF has also announced a $50 billion emergency financing facility to fight the corona virus across the globe. The IMF says efforts to contain the spread of the disease have resulted in severe shocks to both supply and demand around the world, rippling through to the financial sector. Commodity prices, especially the sharp drop in oil prices, posed a further challenge for many countries, while aiding those countries that imported commodities.
J.P Morgan economists’ views on the economic consequences of the virus shock have evolved dramatically in recent weeks with respect to the severity and duration of the outbreak. J.P. Morgan Global Economics Research now expects the global economy to experience an unprecedented contraction during the first half of the year as containment measures are driving deep collapses in monthly economic activity. According to World Economic Forum, success in containing the virus comes at the price of slowing economic activity, no matter whether social distancing and reduced mobility are voluntary or enforced. In China’s case, policymakers implemented strict mobility constraints, both at the national and local level—for example, at the height of the outbreak, many cities enforced strict curfews on their citizens. But the tradeoff was nowhere as devastating as in Hubei province, which, despite much help from the rest of China, suffered heavily while helping to slow down the spread of the disease across the nation.
Pakistan’s textile export sector relies on China for the bulk of its capital goods inputs, so there will be an impact if there is a protracted closedown of the Chinese economy. In the wake of the Covid-19 outbreak and the associated measures taken by the respective governments, the Chinese authorities are forced to slow down their rollout plans for the China-Pakistan Economic Corridor and the development of the Gwadar international deep water port and its associated infrastructure.
The tough times have thrown up both challenges and opportunities for Pakistan. The pandemic has exposed weaknesses in its economy and healthcare system. Though health and education have become provincial subjects after the passage of the 18th Amendment, yet the Centre can help the provinces improve the sectors by providing huge funds to them. Prime Minister Imran Khan’s ambition to alleviate poverty in the country is also not possible without better earnings of the country. It is time he learnt his lessons and moved prudently to pave the way for a new Pakistan, which is self-reliant and able to meet all requirements of its people independently.