Govt urged to prioritise public life over all else
Experts say UN wants to promote regional cooperation on global health fund
PHOTO: REUTERS/FILE
As the novel coronavirus (Covid-19) cases soar past 2,000 and the government extended a partial lockdown of the country by another 15 days, experts on Wednesday urged the government to prioritise transparent spending on health and social protection during the pandemic irrespective of other fiscal pressures.
This was the crux of an online dialogue on ‘Macroeconomic Policy Responses to COVID-19’. The dialogue was organized by the Sustainable Development Policy Institute (SDPI) on Wednesday.
The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) Macroeconomic Policy and Financing for Development Division Director Dr Hamza Malik said irrespective of their fiscal positions, all countries, including Pakistan, should spend their money on health and social protection.
“We all understand there is a confluence of multiple shocks from both the demand and supply side, however it is expected that demand-side shocks will dominate the supply-side considerations,” he explained.
Dr Malik, however, conceded that contractions in the economy will be of much greater concern than inflation in the coming weeks. For this purpose, he said that fiscal policy will have to take the lead. There will be monetary measures but they will essentially be complementing the lead taken by the fiscal authorities, he said.
Regarding the cut in the interest rate, he said, it has been lowered to boost businessmen confidence or acquire fiscal space.
Further, it is a consequence of the measures that the global system has enforced such as massive and substantial liquidity injections all over the world. In Pakistan, however, it is a natural consequence of how the balance sheets work, he said.
“Central banks have to step in and make sure that their actions are consistent in terms of prevailing market interest rates and they have to lower interest rates,” the UNESCAP official said, adding that the decision will be primarily driven by how much liquidity and credit support is needed to run the system.
Dr Malik noted that international lenders such as the International Monetary Fund (IMF) will be very receptive on lowering of targets. In this regard, he suggested that an emergency meeting of the Monetary and Fiscal Coordination Board (MFCB) should have been called. The board presents a mechanism for consultations to advise the National Economic Council (NEC).
At the global level, Dr Malik said that the UN is trying to promote regional cooperation towards the creation of a global emergency health fund.
Debt relief or debt deferral mechanisms need to be negotiated with global lenders, in particular, he said, adding that the UN wants to engage all countries so that governments commit that they will have tangible improvements beyond purely economic considerations.
One evident side effect of the enforced global lockdown has been the fall in pollution.
“It is evident that there is less pollution due to a decline in economic activity, this should be taken as an opportunity to support and prioritise low-carbon-footprint industries and businesses, to make economies more sustainable over time,” he said.
Another key area which needs to be addressed is the digital divide which has become apparent.
“The internet should be accessible to all as education and other activities now depend on it,” he maintained.
SDPI Joint Executive Director Dr Vaqar Ahmed said that central banks across the world have been quick to respond, but treasuries have been sluggish. He called for treasuries to change the way they operate in times of extreme distress apart from developing fiscal policy responses which should be clear, quick and transparent.
“We need to revive our trust in rule-based fiscal policy, as the confidence of the treasury to act will also be boosted by this,” he said, adding, “A rule-based fiscal policy will not only help in managing the crisis phase but also the post-crisis phase.”
Moreover, he said, greater participatory democracy in decision-making is needed, as the stimulus package which was announced without participation and consultation from the business community created great resentment amongst them.
Dr Ahmed said it was time to integrate databases of the Federal Board of Revenue (FBR), the ministries of commerce and finance along with the 13 tax departments across the country. “Cursory analysis reveals the policies adopted by each of the provinces has overlaps because systems and data were never integrated,” he explained, adding that this compromises the efficiency of public spending, especially when donors start supporting Pakistan in the post-crisis phase.
Published in The Express Tribune, April 2nd, 2020.
This was the crux of an online dialogue on ‘Macroeconomic Policy Responses to COVID-19’. The dialogue was organized by the Sustainable Development Policy Institute (SDPI) on Wednesday.
The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) Macroeconomic Policy and Financing for Development Division Director Dr Hamza Malik said irrespective of their fiscal positions, all countries, including Pakistan, should spend their money on health and social protection.
“We all understand there is a confluence of multiple shocks from both the demand and supply side, however it is expected that demand-side shocks will dominate the supply-side considerations,” he explained.
Dr Malik, however, conceded that contractions in the economy will be of much greater concern than inflation in the coming weeks. For this purpose, he said that fiscal policy will have to take the lead. There will be monetary measures but they will essentially be complementing the lead taken by the fiscal authorities, he said.
Regarding the cut in the interest rate, he said, it has been lowered to boost businessmen confidence or acquire fiscal space.
Further, it is a consequence of the measures that the global system has enforced such as massive and substantial liquidity injections all over the world. In Pakistan, however, it is a natural consequence of how the balance sheets work, he said.
“Central banks have to step in and make sure that their actions are consistent in terms of prevailing market interest rates and they have to lower interest rates,” the UNESCAP official said, adding that the decision will be primarily driven by how much liquidity and credit support is needed to run the system.
Dr Malik noted that international lenders such as the International Monetary Fund (IMF) will be very receptive on lowering of targets. In this regard, he suggested that an emergency meeting of the Monetary and Fiscal Coordination Board (MFCB) should have been called. The board presents a mechanism for consultations to advise the National Economic Council (NEC).
At the global level, Dr Malik said that the UN is trying to promote regional cooperation towards the creation of a global emergency health fund.
Debt relief or debt deferral mechanisms need to be negotiated with global lenders, in particular, he said, adding that the UN wants to engage all countries so that governments commit that they will have tangible improvements beyond purely economic considerations.
One evident side effect of the enforced global lockdown has been the fall in pollution.
“It is evident that there is less pollution due to a decline in economic activity, this should be taken as an opportunity to support and prioritise low-carbon-footprint industries and businesses, to make economies more sustainable over time,” he said.
Another key area which needs to be addressed is the digital divide which has become apparent.
“The internet should be accessible to all as education and other activities now depend on it,” he maintained.
SDPI Joint Executive Director Dr Vaqar Ahmed said that central banks across the world have been quick to respond, but treasuries have been sluggish. He called for treasuries to change the way they operate in times of extreme distress apart from developing fiscal policy responses which should be clear, quick and transparent.
“We need to revive our trust in rule-based fiscal policy, as the confidence of the treasury to act will also be boosted by this,” he said, adding, “A rule-based fiscal policy will not only help in managing the crisis phase but also the post-crisis phase.”
Moreover, he said, greater participatory democracy in decision-making is needed, as the stimulus package which was announced without participation and consultation from the business community created great resentment amongst them.
Dr Ahmed said it was time to integrate databases of the Federal Board of Revenue (FBR), the ministries of commerce and finance along with the 13 tax departments across the country. “Cursory analysis reveals the policies adopted by each of the provinces has overlaps because systems and data were never integrated,” he explained, adding that this compromises the efficiency of public spending, especially when donors start supporting Pakistan in the post-crisis phase.
Published in The Express Tribune, April 2nd, 2020.