Tough decisions

The SBP in its recent monetary policy announcement offered a peanut stimulus package targeting only new industrial units which amounted to a joke and rejected by the businesses. The government must not disguise or sugar-coat the gravity of the fallout on the economy which is already in the ICU. The government is advised not to pass on the benefit of lower oil prices to the end consumers. Instead, the relief should be channeled towards: 1) industries through lower energy costs, early payment of refunds and extending easy financing; 2) agriculture through lower energy costs, subsidized inputs – fertilizer, seeds, pesticides; 3) assistance to key essential services including railways, PIA, port/airport operations etc; and 4) offset drastic reduction in government revenues as a result of slowdown and steep fall in oil consumption in the country.

Notwithstanding the lockdown, the government must ensure that production centers, factories and plants are not shut and continue to operate uninterrupted so that there is no disruption in supply chain and to take advantage of the opportunity when the global economy starts to rebound in the anticipated three months time. The government must implement tough austerity measures including reduction in emoluments of all government employees, civilian or armed forces, by 5-20 percent. The moot point is whether the prime minister can overrule the powerful SBP governor in the matter of interest rate reduction and override his even stronger adviser on finance to revisit the existing economic strategy that has miserably failed.

Arif Majeed

Karachi