THE pace of the post-lockdown economic recovery will depend on how soon consumer sentiments improve and household spending is restored. Merchants and small manufacturers who serve the local market are nervous as their fortunes are too closely tied with the fate of households in the country.
The situation that was already tense for families in a sagging economy turned precarious as Pakistan struggles to deal with the pandemic. The readjustments under the lockdown, stress of rising health risks, pay cuts and retrenchments were hard enough to deal with. Rising inflation has served as the straw that broke the camel’s back. The grave situation and growing uncertainty forced families to cancel avoidable expenditure heads and trim their shopping lists to basics.
A general scare and social distancing demotivated the rich. But for the majority, it is a compulsion, not a matter of choice. “The depleting family income and the uncertain future forced households to cut corners for the provision of basic needs. Many of my friends have switched to weekly from monthly grocery to curb wastage. Any indulgence is simply not affordable,” Amina Munir, a homemaker, told Dawn at a departmental store chain.
The change in the consumer behaviour affected market dynamics, disrupting the supply chain. Big players with deep pockets in the market may survive. But for the small and medium businessmen working on credit and off rented premises, the lingering distress exceeds their capacity to endure. According to trade associations, at least 18 per cent of rented shops in Karachi have closed down or are in the process of winding up. Only 48pc traders own their shops while the rest work off rented premises. All five industrial estates in the city are littered with dead or partially operational plants.
‘The government is perceived as an alien entity when it turns a blind eye to people’s compelling problems’
With travel advisories and a ban on Pakistani perishable items in multiple countries, export prospects are compromised. If steps are not initiated to restore local demand, many businesses are doomed, businessmen believe.
The hope for a spike in the pent-up consumer demand has dashed as footfall following the easing of the lockdown in June was not even half of the usual level. Many shopkeepers had to pull shutters down for good to cut on their losses. They took the ultimate step in desperation when no one responded to their cries for help to salvage a business that took years to build.
Before the situation crosses the point of redemption and the growing frustration spills over, the leading lights of society in and outside the government should sit together to chart out a workable national economic revival plan to equitably share the burden and start the return journey towards stability.
Persisting ominous prospects can consume the survival spirit of businesses. “It is the duty of the state to provide a viable, business-friendly framework to keep the private sector from giving up. If the hierarchy fails to dump its silly antics that are pushing the country to the edge, the tipping point is not far. There is no defence for ignoring the visible dangerous signs.
“The falling footfall in markets has baffled us. It doesn’t feel the same when bustling markets go quiet like a graveyard,” said Rafique Jadoon, a leader of multiple retailers’ associations and vice chairman of the Karachi Chamber of Commerce and Industry’s small traders’ committee.
He was critical of the extension in the lockdown in the city’s old market areas until July 15. As for the implementation of standard operating procedures (SOPs) and the policy of social distancing, he said people didn’t pay attention to the government’s advice because it did not enjoy their trust. “When the government turns a blind eye to people’s compelling problems after promising them the moon, it is perceived as an alien entity. You can still find people who doubt the very existence of the deadly virus. Such is the trust deficit.”
He was frustrated with K-Electric for compounding the pain of people. “Long power shutdowns and escalated bills doubling the surcharge for late payment is K-Electric’s response to the government’s call for providing relief under Chota Karobar-o-Sanat Imdadi Package announced on account of the Covid-19 crisis.”
There is a growing grumble over the necessity of consumer confidence–building measures and a significant increase in family income to regain the market vibrancy. But there was confusion among traders about how to articulate their stance over the issue. Their platforms, therefore, are again focused on demanding concessions for small and medium enterprises (SMEs).
Haji Haroon Chand, president of the All Sindh Sarafa Association, expressed his concern about traders joining the ranks of the people defaulting on rents and bills. “I wonder if those responsible for protecting people’s lives and livelihoods even understand the scale of the festering resentment,” he said. “Gold traders feel trapped. Despite the scope for the export of gold ornaments owing to the price differential in favour of locals, Covid-19–related cross-border restrictions on the movement of men and material come in the way.”
“Without a supportive policy framework, the lagging economy may take longer to bounce back,” said Jamil Paracha, another leader of the traders’ community. He said the shops dealing in bridal wear are among the worst hit segment. “People lost millions in their investment and skilled artisans are losing work as inventories pile up. In my careers of over 35 years, I have never felt this helpless,” he said.
The business circles appreciated the State Bank of Pakistan’s policy of monetary easing, but said it would be insufficient without a fiscal stimulus.
Published in Dawn, The Business and Finance Weekly, July 6th, 2020