Pakistan has a debt problem. It owes the world much more than the amount it can afford to pay without hurting its medium- and long-term economic and social prospects. Some of what is owed was not well used. The impressive advance the country has made in developing its political system could also be negatively affected. International action in the form of debt-forgiveness needs to be taken to make it possible for the country to move forward. As is the case with many other developing nations, Pakistan will be seriously hurt by the way the global economy is impacted by the coronavirus pandemic.
The world is clearly moving towards a deep recession — possibly a depression even severer than the one it faced in the 1930s — unless collective action is taken by the global community. This would require leadership of the type the United States provided during the 1930s Depression and again after the end of the Second World War. That is not expected from President Donald Trump’s America. Under Trump, the US is moving to pull down some of the important pillars of the international economic and social system that were built painstakingly over several decades after the end of the Second World War. The US does not feel it needs to or can work with a number of international organisations. Washington is ignoring the World Trade Organization (WTO) created in 1995 after several rounds of international trade negotiations. The WTO required its members to trade on the basis of the rules to which the member states had agreed. However, Trump’s “America First” approach violates the rule-based international commerce the WTO oversees. The World Health Organization (WHO) is another institution against which Trump is moving. Always looking for somebody to take the blame, he holds the Geneva-based organisation for his administration’s poor management of the coronavirus pandemic.
There was some international action on helping the developing world to deal with the economic consequences of the coronavirus pandemic. It was prompted by French President Emmanuel Macron who telephoned Trump to call both G7 and G20 groups of nations to meet to discuss what needed to be done. Trump agreed with some reluctance but asked Macron to organise such meetings. That was done. One of them was on April 15, 2020 when the G20 leaders met “virtually” at which they decided to provide debt relief to the world’s lowest income countries by suspending debt payments until the end of 2020.
This decision was well received by the leaders of the developing world, including Imran Khan and Abiy Ahmed, the Prime Ministers of Pakistan and Ethiopia respectively. The former was the recipient of the Nobel Peace Prize in 2019 and has a voice — as does Imran Khan — in world affairs.
The Ethiopian leader had an article published in The New York Times in which he applauded the decision by G-20 but urged the rich nations to go further. “But if the world is to survive the punishing fallout of the pandemic and ensure that economies of the countries like mine bounce back, this initiative needs to be even more ambitious,” he wrote in the newspaper article. “At the very least the suspension of debt payments should last not just until the end of 2020 but rather until well after the pandemic is truly over. It should involve not just debt suspension but debt cancellation. Global creditors need to waive both official bilateral and commercial debt for low-income countries. These steps need to be taken with a sense of urgency. The resources freed up will save lives and livelihoods in the short-term, bring back hope and dynamism to low income economies in the medium term and enable them to continue as the engines of sustainable global prosperity in the long term.”
The Prime Minister rightly focused on two aspects of the recent African experience. He recalled that in October 2019, the International Monetary Fund (IMF) reported that the five fastest growing countries in the world were in sub-Saharan Africa. But this performance would be short-lived if the international community did not act to save these countries from the ravages of the pandemic. “Most of our countries managed to borrow funds on the back of solid economic performance and evidence-based development programmes and trajectories. No body foresaw this promise being derailed by an event such as the coronavirus pandemic.” In his article, the Ethiopian Prime Minister promised that the returns from debt relief would be used in social sectors.
How poor countries are dealing with the steps they have had to take to deal with the pandemic crisis was well illustrated by the front-page story about Pakistan’s education sector in The Washington Post on May 20. Partial coronavirus lockdowns in Pakistan have put millions of people out of work and have pushed as many as 10 million Pakistanis into poverty. The Post story described what the government in Pakistan is doing to provide some education to the children as it closed schools to deal with the coronavirus pandemic. Pakistan spends little on social sectors with the result that its large and rapidly growing population is underdeveloped. More than 40% of the country’s school-going children don’t attend school, the second highest rate in the world. And even for those who do get to schools, literacy rates suggest that many are not learning. This is in part due to the poorly trained teachers and also because instruction is provided in Urdu, the national language, spoken in fewer than 10% of the households.
By closing schools as a part of the response of the lockdown, the educational system has come under even greater stress. The government is attempting to address the situation by investing in creating a TV channel that is attempting to provide some education to tens of millions students who have lost access to classrooms. Programmed with content for kindergartens through high school, it provides each grade one hour of curriculum per day, so students have to watch in shifts. But the access is limited since about 36% of Pakistani households have broadband internet access but only 15.5% of the population actually uses the Internet.
With President Trump totally contemptuous of any form of international action to deal with the problems that require global solutions, China is likely to step into the void. That will happen only after Beijing has been able to fully explain its initial response to the appearance of coronavirus in the industrial city of Wuhan in central China. In the meantime, some international institutions such as the IMF and the World Bank have announced the actions they plan to take. On May 19, David Malpass, the World Bank President, announced the launch of a $160 billion programme of assistance that would disburse the money over a period of 15 months. Quick disbursements will necessarily include tackling with the debt problem that so many developing countries including Pakistan have to deal with.
Published in The Express Tribune, May 27th, 2020.
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