- The economic consequences are not because of the lockdown, but the virus
By: Sidra Shafaqat
No outdoor activities, No flights, no trains, six feet distance from others that we have to maintain. But why? Because it is time to fight with an invisible enemy ‘COVID-19’. All over the world, the deadly virus is affecting lives of people irrespective of any discrimination between rich or poor economies. The World Health Organization has officially declared the outbreak a pandemic. Countries are imposing strict measures to control the spread of coronavirus.
In Pakistan, a total 2118 cases are reported on April 2 with 27 confirmed deaths. The risk assessment of this disease is also high. In this scenario, government forced a lockdown in all regions of the country for up to approximately two weeks. Public transport, markets, parks, offices and other public spots will remain closed. Health professionals are doing their best to combat the COVID-19 outbreak in Pakistan. All the available resources are being utilized by the government. Hence in a country with one of the lowest public health expenditures as a percentage of GDP in the world, it is of utmost importance to limit the number of infections as much as possible.
However, this is just one side of the situation. On the other hand, the economy is also battling against COVID-19. A controversial question is that whether the country should be under lockdown or not. Most countries have closed down their borders and implemented nationwide lockdowns. India has announced a 21-day nationwide lockdown with 1.3 billion people confined to their homes, likewise a 21-day lockdown has been in South Africa, while Italy with the highest death toll in world had imposed lockdown on March 10 restricting 60 million citizens to their homes, France, Spain, Norway and New Zealand are also following the same strategy, while on March 23, the UK went into full lockdown.
The government has to manage the situation efficiently and competently by implementing new economic priorities; precise planning to protect jobs companies and employers, compensation on payable interest amount to energy service providers, relief on income tax to companies producing products related to life necessities and health protection and to announce some back support for exporters. Along with all this, it is a major responsibility of citizens to self-quarantine and provide government a free hand to gear up some economic activities in a proper manner under the war of COVID-19
Here, the need is to evaluate whether an economy like Pakistan can afford the nationwide lockdown or it’s a path towards another bout of troublesome economic downfall. Is the financial situation of our economy able to feed the population without any economic activity? Prime Minister Imran Khan also stated that a complete lockdown in country is not a feasible solution as 25 percent of the population lives below the poverty line. It would make their lives miserable.
Economic activities are crippled. The virus has killed off the stock market gains. The Federal Commerce Secretary commerce said that exports orders had got cancelled and due to this export loss can be in the range of $2 billion to $4 billion. The FBR is already facing a massive revenue shortfall. The estimated collection of revenue till June 2020 is just Rs 4.4 trillion as compared to the FBR’s annual target of 5.555 trillion. Former Finance Minister Dr Hafiz Pasha indicated that unemployment rate of 5.8 percent reported by the Labour Force Survey 2017-18 may surge to 8.1 percent in fiscal year 2020-21. Not only this, inflation and poverty level will also rise after the industrial shutdown. A drop in international tourism and a reduction in remittances are other pieces of bad news. The Asian Development Bank reported that Pakistan economy may face losses of $5 billion or may even more than that.
Currently, in order to tackle the situation, an economic relief package of Rs 900 billion ($5.6 billion) was approved by the Prime Minister on March 24. Out of this, Rs 200 billion ($1.25 billion) are assigned for low income groups, particularly for laborers, along with Rs 280 billion ($1.76 billion) for wheat procurement. Whereas, a package of Rs 100 billion is to support the agriculture sector and small industries. Furthermore, the PM stated said that over five million people will be provided a monthly stipend of Rs 3,000 ($20) for next four months.
Now there is serious requirement to do a cost-benefit analysis. The cost includes the aforementioned economic downfall through the nationwide lockdown whereas the benefit will be in terms of reduction in COVID-19 positive cases and a lower number of fatalities. Another unintended benefit is the reduction in the pollution level in the cities due to the closure of factories, public transport and reduced human activity. Environmental experts have identified the improvement in the Air Quality Index (AQI) of Karachi under the lockdown in Sindh due to coronavirus. The AQI in Khyber-Pakhtunkhwa has also dropped, showing healthy air quality. This improvement is also expected in other major air polluting cities, specifically, Lahore.
The government has to manage the situation efficiently and competently by implementing new economic priorities; precise planning to protect jobs companies and employers, compensation on payable interest amount to energy service providers, relief on income tax to companies producing products related to life necessities and health protection and to announce some back support for exporters. Along with all this, it is a major responsibility of citizens to self-quarantine and provide government a free hand to gear up some economic activities in a proper manner under the war of COVID-19.