What lies ahead

There is an overload of talk about the pandemic but not too many answers or even the right questions being asked. The lifting of the lockdown was imminent even as cases are on the rise.

In Pakistan, we still have little idea about how many people have the virus or why fatality is low. Worldwide there is a rush to find a vaccine that would make these questions irrelevant. Science will eventually prevail over the virus. A bigger question is if policy will catch up. The virus brings with it profound effect for politics and economy, which governments must grasp and respond to.

Most people alive today cannot recall a crisis as complete and all-embracing as this one. Already, in the few weeks since its onset, there have been more deaths globally from Covid-19 than from any single event since WWII. It is also hard to find precedence for the scale at which people have lost jobs. Nor has the world economy been at a higher risk of implosion because of sudden growth in public debt. Except for measles, Covid-19 is the fastest spreading virus ever.

On its surface, the pandemic is a health problem. In reality, it is about the quality of governance and institutions. It is about adaptability and making tough choices as a society as well as revisiting our governance model. The pandemic is not just a test for the scientists. Inability to control its spread and to offer welfare makes it a test for leadership.

Knowing as we do the serious crossroads at which the world stands today, it is surprising that there is not a national debate on what may be in store for us. As a country, it is critical that we take strategic stock of where we stand on many indicators of a dynamic society. We must then articulate a response. Below I share some ideas on the effect of the pandemic on Pakistan’s politics and the economy.

First, the new norm in the coming months will be moving between lockdown and opening up. Lockdowns would ease only to be imposed again and then eased once more, as we optimize between lives and livelihood. This is in the nature of policymaking as governments must deal with competing demands. With the economy operating at about half its capacity, demand for opening up would build up. So, it is necessary to maintain a balance between risk to life and economic collapse. To do so successfully, requires us to generate local data and create special protocols for areas of high economic activity. Key measures must be instituted in such places and in supply corridors. These areas need more intense testing and monitoring of cases along with well thought of distancing measures.

I make this recommendation knowing full well that a strict lockdown is the best solution. In my view, health and economy are not mutually exclusive. A strict lockdown is the fastest route for an economy to get back to work quickly. Yet as we see the health argument lose out, we must do the next best thing, which is to open with safeguards. It calls upon us to devise a new kind of management that takes stock of local conditions. It will need data and a dynamic and flexible tuning of protocols at the local level. It will need also the ability to work with industry and civil society to ensure effective implementation.

Second, the crisis has brought into ever more sharp relief the vast chasm in Pakistan’s social deficit. Clearly, this is a political choice made by the country. That is why each year’s UN HDI report does not even cause a ripple in the policy space. In 2019, our rank fell a further 5 places to 152nd of 189 countries. We stand 17 steps below Bangladesh and 33 below the Palestinian Authority.

Behind the abstraction of numbers lie some hard truths. They are the many vulnerabilities in personal growth that hound our people. I will spare the reader its egregious details because it makes for sad reading. Suffice it to say that it is harmful from an economic consideration alone, but it has grave consequences in the present context. Because this dysfunctional system of social services now has been called upon to deliver on the added burden of dealing with the health crisis. There is no way that such a broken system can do the job.

Yet, failure to keep our citizens safe or prevent major loss of lives would harm the state. What most people consider to be a moral question now will transform into something very major. It will reinforce the perception of state ineffectiveness, lack of state writ, and the irrelevance of political institutions. Any unrest that might happen would deepen the social fault-lines that exist already. If this happens, we cannot rule out threats to our security and sovereignty.

Third, we must not allow the economy to collapse. It is well known that the current fiscal would see a fall in GDP with a very shallow recovery in FY 21. Covid-19 has reinforced trends in our economy that were already in place. Even before the pandemic, GDP growth rates were low, debt had grown exponentially, and price hike was rife. FDI had fallen and portfolio capital was going out in large sums. Essential goods were in short supply.

We must do all that it takes to limit the acceleration of these trends. Firms must get liberal low-cost debt to stay in business and to not cut jobs. Essential supplies must continue, and help must go in large amounts to those who lose jobs. We must especially reach out to micro businesses that are not in the formal mainstream. The new budget should be the focus of these efforts. The additional debt that we receive must go to helping those affected by the slowdown and for reviving industry.

The WTO says that world trade will fall by 13 to 32 percent in 2020. Even with our low dependence on international trade, Pakistan could lose exports further. We must revisit the policy to separate our economy from the region. A downward economic spiral, which is likely, is dangerous for the country.

Lastly, I draw attention to world trends. Clearly, the shift to what Fareed Zakariya refers to as the post-American world will gather steam. As no one region can or would step in that role, the world will be without an anchor. This has vast risks for medium powers such as Pakistan. The last thing we want is to take sides in major power rivalry.

Our focus must be to come out of the pandemic’s huge challenge by building unity in the country and trust in government. Because not doing so is fraught with danger.

The writer is chair and CEO

Institute for Policy Reforms, and a former commerce minister.