Pandemic’s economic impact

Published April 15, 2020
The writer is an author and journalist.
The writer is an author and journalist.

IT is still too early to fully evaluate the economic, social and political impact of the pandemic that has already exacted thousands of lives across the globe and paralysed the world economy. As one commentator put it, the “coronavirus has turned the global market into the global hospital”. It threatens every single human being beyond national boundaries.

Notwithstanding some early warnings even the most developed countries were caught unprepared to deal with an epidemic of biblical proportions. These countries have become the hub of the pandemic and there are already signs of them falling into economic recession thus affecting the existing world order.

Yet it will be the developing countries that will be the most affected by the catastrophe. Constituting one-fourth of the total world population, South Asia is most vulnerable to the outcome of the pandemic. Although the number of cases in the region is still relatively low compared to other parts of the world, the spread of the deadly virus could be much more devastating given the extremely poor health infrastructure and fragile economy.

A new World Bank report presents an alarming economic outlook for the region in the midst of a crisis that could result in the worst economic performance of the last 40 years. According to the report, regional growth could fall to anywhere between 1.8pc and 2.8pc in 2020, down from 6.3pc projected six months ago. In the worst-case scenario, the whole region can experience a contraction in its GDP.

With large numbers of the population living in poverty, the crisis will have serious social and political consequences for South Asia. What makes the situation more dangerous is that the region remains at risk for increasing violence and there seems to be no sign of tensions easing despite the spread of the epidemic. The escalation in clashes between Indian and Pakistani forces along the LoC and the continuing killings in Afghanistan despite a peace agreement between the US and the Afghan Taliban are not likely to subside soon.

The mixed messages from the leadership often fail the efforts that have so far been made to fight the virus.

With its economy already struggling, Pakistan is likely to be hardest hit as it struggles to simultaneously save lives and livelihoods. Along with Afghanistan and Sri Lanka, Pakistan is in danger of experiencing a negative economic growth rate. With the population growing at 1.8pc a year, the prospects are dismal. The population explosion that has never been on the radars of our policymakers has also been a major reason for our deteriorating health situation. The current crisis has exposed all these fault lines.

Another serious problem adding to the country’s woes are the shrinking job opportunities in the oil-producing Arab and Gulf countries that are the biggest source of employment for Pakistani expatriate workers. This will not only add to the rising unemployment problem but will also affect remittances. The development will have serious social and economic implications.

For a country facing a massive debt burden — both domestic and external — it is an extremely serious situation as the Pakistani government is now compelled to divert its resources to fighting the pandemic. It is certainly the right approach to provide monetary help to the poorest sections of the population worst hit by the economic shutdown. But given Pakistan’s limited financial resources the effort will not be enough to meet the enormous challenges.

As the World Bank report has pointed out, sharp economic recession along with skyrocketing fiscal deficit will have serious implications. Pakistan`s total debt and liabilities stand at about Rs41 trillion, which is almost 94pc of the country’s GDP. The external debt situation is particularly problematic.

Prime Minister Imran Khan has called upon the world’s richer countries to write off the debts of Pakistan and other poor countries, which are most vulnerable to the effects of the pandemic. Surely, debt write-offs or even debt rescheduling would help the underdeveloped countries cope with the crisis.

The prime minister is not the only leader urging the richer countries to share the burden of the economically most vulnerable nations, particularly those burdened by heavy debt. The UN secretary general in a statement has called for creating the conditions and mobilising the resources necessary to ensuring that developing countries have equal opportunities in their response to this crisis. António Guterres has said that trillions of dollars would be necessary to not only strengthen economies but also ensure basic food supplies for developing countries. But there is no indication as yet of the richer countries — themselves struggling to cope with the spreading pandemic and its fallout on their economies — responding to the appeal.

One has to wait to see whether we get the debt relief, but at the moment, the country needs to focus fully on its efforts to contain the spread of the deadly infection that also has disastrous implications for the people’s livelihoods. It requires a strong national narrative and a clear strategy to meet the multiple challenges the country is facing. The mixed messages from the leadership often fail the efforts that have so far been made to fight the virus.

The government has now decided to relax the lockdown by allowing some industries and businesses to reopen. The prime minister says the decision has been taken in view of the lower number of cases than had been projected earlier. It may be true, but there is still no sign of the crisis having been contained.

The decision taken to save the economy and livelihoods is indeed a risky one. There may be some differences in the approach, but there seems to be an agreement on the phased lifting of the restrictions. Pakistan is probably the first country in the region to do so. One can only hope that the revival of the economy will not undermine the efforts to save lives.

More importantly, the battle against the coronavirus pandemic needs a global response. As the UN secretary general said: “We are only as strong as the weakest health system in our interconnected world.”

The writer is an author and journalist.

zhussain100@yahoo.com

Twitter: @hidhussain

Published in Dawn, April 15th, 2020

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