Economic lessons taught by Covid-19 pandemic

The post-pandemic world is filled with uncertainties. Who knows when a new variant of the novel coronavirus would hit and where?

And who can predict precisely how a new wave of Covid-19 would affect national, regional and international economies? It seems a new world is emerging. Economic development patterns are changing. Economic growth models are changing. And, consequently economic policy priorities are also changing. Some nations are more adventurous by nature.

Others are not. The first lesson the world has learnt during the pandemic is that it has to respond collectively to every challenge, which can potentially affect all nations. This means no nation – big or small – can now afford to go solo in braving a global challenge like the Covid-19 pandemic. So, the first thing Pakistan’s policymakers must do – and it is good to see they are already doing – is that they must benefit from the world experience in containing the spread of the pandemic and in containing the economic fallout of the pandemic.

There is no need, as they say, to reinvent the wheel. Most nations affected by the pandemic have resorted to fiscal expansion and easing of monetary policy to overcome the challenges of Covid-19. And, Pakistan has also done that. This policy must continue till the time the challenge of the pandemic is over – or subsides substantially. Most of the developing nations are now trying their best to earn – or borrow from external sources – to meet pandemic-induced imports and social safety net expenses.

As they spend more on imports and on social sectors, they also try to push up exports and revenues to avoid unmanageably large trade and fiscal deficits and sovereign loan defaults. Pakistan is doing the same. It is focusing on sustainable growth of exports as well as remittances and, at the same time, pursuing policies of both tax and non-tax revenues. In the post-pandemic world, countries with a narrow tax base are struggling more in boosting economic growth than the ones with a relatively large tax base.

Pakistan is not doing enough on this account, though its higher tax collection in the last fiscal year has followed some expansion in the tax base. There is an urgent need to expand the overall tax base through increase in the collection of direct taxes. Indirect taxes are already too many and, technically speaking, the entire nation pays indirect taxes in one form or the other – at one stage or another.

Digitalisation

In the post-pandemic world, different sectors and subsectors of the economy are being reprioritised and each sector and sub-sector is undergoing tremendous change. Gone are the days when developing countries could afford a slow-paced digitalisation. Now, because of the pandemic-triggered lockdowns and social distancing, e-learning and e-commerce are gaining momentum. This momentum needs to be maintained.

Pakistan lags far behind both in e-learning and in e-commerce. The country must accelerate all efforts to maintain a system of online education parallel to the education through inperson interaction. And, it must also exploit all the opportunities emerging in e-commerce like trading through Amazon or via Facebook Marketplace. All local portals of online trading have already achieved a new milestone in their outreach during the pandemic days.

With the enlisting of Pakistani businesses on Amazon and on Facebook Marketplace, the country’s own online markets (like daraz.pk and foodpanda) as well as individual entrepreneurs and small and medium enterprises (SMEs) and even large industries can boost their domestic and foreign sales. The government only needs to come up with more supportive policies.

Wealth sharing

Economic growth and development remodelling has emerged as a big challenge in the post-pandemic world. Resource redistribution, which is taking place to contain the economic fallout of the pandemic, needs to be maintained and even pushed forward. Over the past two decades of this century, the global wealth has become more concentrated in fewer hands, and income disparity has been on the rise.

The pandemic has exposed this global economic fault line and forced wealthier nations to share their wealth more equitably with other nations – and within their own segments of the population. This is true in developing nations’ context too. Policymakers must realise this and work hard to ensure a more inclusive growth model and introduce more resilient economic development models. That is not possible without quickly closing the gender gaps, skill gaps and poverty gaps.

The sooner Pakistan and similar countries empower their youth, particularly young women, and equip them with new sets of skills and technologies needed for a new growth and development model the better. Sadly, this objective is not being pursued in many developing nations, including our own country, and global social development goals have almost been forgotten. (We haven’t even identified fully the sources of investment in the now-needed sets of skills and technologies).

Going forward, such countries will have to pay the price for it as their ability to respond to future uncertainties would become weaker day by day, and their social agility required to steer the post-pandemic economy in the right direction would also be hit hard. These are serious issues but no serious discussion is taking place around them.

Building specific capabilities to respond to the future global economic challenges and ensuring social agility to augment these capabilities is not possible without amending the political systems accordingly. Fragile democracies like that of ours need to strengthen the democratic institutions in light of the post-pandemic ground realities at home and abroad. In the post-pandemic world, managing the economy has become far more important.

We need an entirely new, practical approach in everything related to the economy. That is not possible unless we first determine what economic lessons the pandemic is offering and then learn them well.

THE WRITER IS A MECHANICAL ENGINEER AND IS DOING MASTERS