As the Covid-19 spreads, a people already groaning under the unfair burden of the hardest austerity regime ever imposed by an IMF programme, was expecting kindness, if not justice. Two much awaited speeches, one by the elected Prime Minister and the other by the selected Governor of the State Bank, signalled that the masses struggling to eke out a living are the children of another god. This at a time when a power-drunk Trump starts looking like Sanders by waiving off interest payments on student loans and free testing for all, including the uninsured. The head of the Fed, whom he had threatened to demote, has declared the United States an interest-free economy. There are proposals to handout a $1,000 to every American. Other countries are deferring utility payments and supporting the health infrastructure of the lower tiers of government.
At home, the response before the two speeches was a laudable activism of a financially disempowered Adviser, the most underdeveloped province left alone to handle the Taftan transmission and the jeers at the first ever indication of a functioning Sindh government. In the PTI-ruled provinces, the pandemic was reduced to a health issue. The speech of the top man counselled social distancing but stopped short of dealing with its consequences, citing a slowly healing economy. Like all predecessors, he asked the world to help, including a call for debt relief, something that his own central bank Governor is unwilling to do for domestic debt. Social distancing will soon lead to de facto lockout that he has ruled out. Warning hoarders and blackmarketeers does not make sense as demand, already deficient, is likely to decline rapidly into a recession. Hoards of unsold goods will need stimulation of demand, not raids. The bottom 25% that he wants to protect by not locking down will soon have no money in their pocket. They will be joined by workers from closing factories and a winding down of the services. What is required is a massive Benazir Income Support Programme (BISP) funded, if necessary, by printing currency. This is no time for being more loyal than the king who is wanting to raise a trillion dollars to help fight the virus-infected economies. Rather than wasting time on the three-year strategic budgetary framework, based on the pre-Covid-19 numbers, his team should be renegotiating or suspending the deal with the IMF.
Of the other speech, the less said, the better. In the first place, it wasn’t even a speech, delivered as it was from a glass house. After declaring the outbreak of the Coronavirus as the dominant development since the last monetary policy statement, the new statement anti-climaxed into the 75 basis points of a joke. With uncertainty looming large for utilising the existing capacity, who in his right mind will invest in a new venture by accessing the Rs100 billion fund at 7%. A non-start has been guaranteed by limiting the facility to one year. It should have been reserved, interest-free, for the existing industries to keep paying workers until things improve. Experience elsewhere shows that the virus quickly impacts the low-paid workers. That still leaves an even greater number of outsourced workers, informal workers and home-based women. “Langars (free meals)” are no help here. The best the Governor could have done was to provide debt relief to the government for direct transfers to the most vulnerable and emergency funding of the care facilities. The Rs5 billion concessional window for equipment buying is a pittance.
Taking Covid-19 lightly can have great costs, economic and political.
Published in The Express Tribune, March 20th, 2020.
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