The mysterious outbreak of the coronavirus pandemic has global ramifications. It has created an economic and human security crisis for developing and developed states alike. Economic and human security needs are most severely affected due to the great lockdown practice across the globe. However, no significant unified global response is observed in the international community collectively amid the Great Lockdown. Rather, the national response of different countries depends on the vitality of their economic muscles and capacity of healthcare infrastructure. This creates a peculiar dimension of the political economy of coronavirus. Political economy represents economic capacity and availability of national resources of any particular state to maintain its economic lifecycle amid a crisis.
Great powers have the capacity to shape their external environment with the help of national resources at their disposal. USA has announced a 2.2 trillion-dollar economic stimulus package to mitigate the effects of coronavirus. Germany has announced a 1 trillion-euro economic stimulus package while Japan has announced a 1 trillion-USD package. Nationalist and projectionist response from integrated economies is the result of a $5 trillion hit to the world economy. The underlying rationale of these stimulus packages is the regulation of economic growth activity and job stabilization amid coronavirus crisis which has brought large scale economies to a standstill due to imposition of lockdown and social distancing. This is the starting point of a changing international economic order. These economic initiatives are taken by their governments to sustain the effects of social distancing and lockdown. This is the response of capital-intensive economies which are facing huge economic and human capital losses despite having stabilized economies and advanced healthcare systems.
The nature of response coming from low income countries is similar to the response of the developed world but differs in term of economic muscle and healthcare infrastructure magnitude. This article looks at the national response of Pakistan to deal with the economic impact of this crisis. Pakistan has announced 8 billion USD economic stimulus package for its industry and working classes amidst the coronavirus lockdown to keep economic activity alive in the country. This package includes 1.5 billion USD social security program for 12 million needy families to mitigate economic fallout of the great lockdown caused by novel coronavirus. Other segments of this stimulus package deal with providing relief to retail, real estate, construction and textile sectors for economic stabilization. A recent IMF quarterly outlook report has identified negative growth trend for Pakistan’s economy for the fiscal year 2020-2021 which reflects the economic repercussions of this crisis.
The World Bank has announced a special economic assistance package for developing states including $200 million for Pakistan in Corona relief operations and $38 million extra in existing projects. These packages are not sufficient for population-intensive countries like Pakistan, because the real economic challenge of low income and developing countries is external debt payment. External loan payment and debt servicing is the biggest expenditure of Pakistan’s annual budget. Defence expenditure comes second on national spending in term of economic volume. Hence, the settlement of debt services and loan payment rescheduling must be the top priority of the incumbent regime to deal with the economic fallout of the coronavirus crisis, because the steps taken in the crisis situation will determine the post-crisis economic outlook of Pakistan.
There can be two scenarios in this regard. The first is Pakistan’s demand for loan rescheduling and relief in payment timeline of debt services from multilateral and bilateral economic lenders, including IMF, ADB, USA, China and Arab states. The second can be clear declaration of inability to return debts for 2020. Argentina unilaterally declared suspension of debt payments in time of its economic crisis in the past. This can be a harsh economic measure taken by Pakistan in the time of acute financial crisis. In the second scenario, declaring bankruptcy at the early stage of economic crisis will create more economic problems for Pakistan instead of easing financial woes. Pakistan can face severe backlash in term of sanctions from the power steering the current global economic order.
On the external front, Pakistan needs to make collective efforts along with other developing countries to get relief in debt payment and loan rescheduling for the current year from multilateral and bilateral economic lenders. Exercising the first option of loan rescheduling and relief in payment of debt services is the most plausible strategy in the time of the looming economic crisis. Loan rescheduling and debt services payment comprise nearly 60% of Pakistan’s national budget. Their rescheduling will assist the government in fiscal readjustments in the budget for 2020-2021 for dealing with the short to medium term economic fallout of this crisis. Diplomacy is the best forum to exploit this option of carving economic relief for Pakistan in the time of crisis from powerful capital lenders.
Pakistan has taken the lead in this initiative in the developing world. On the behalf of developing countries, Prime Minister Imran Khan has called for a “Global Initiative On Debt Relief”, in a special message, for economic relief amid the coronavirus crisis. The premier needs to take the lead for the third world in this regard. International community and leaders of global economic order need to give a united response to this crisis. However, reliance on external support is not enough. Therefore, Pakistan needs to take smart lockdown measures at the internal level. The government has already taken measures in this regard to operationalize lockdown.
On the internal front, the strategy of a smart and targeted lockdown seeks to balance between need to save people’s lives from the coronavirus pandemic and from the economic starvation caused by a strict lockdown. Federal and provincial governments have taken measures in this regard. The federal government has announced the extension of lockdown for the second time in the country from 15 to 30 April with certain relaxations for different economic sectors in order to generate economic activity whiling keeping implementation of precautionary SOPs intact. Diverting national resources from economic front to capacity building of national healthcare infrastructure is another challenging task for the government.
Pakistan’s response to coronavirus pandemic is based on its learning from the practices of 2005 earthquake and 2009-10 flood rescue and relief operations. Pakistan’s handling of these two crises was a considerable success as compared to the paucity of resources. Pakistan has established a national command under National Coordination Committee of Federal Cabinet to deal with the coronavirus crisis. However, the result of this national response will depend on the nature and magnitude of this crisis which is larger and more complex as compared to previous ones. Therefore, Pakistan needs a novel response to deal with the novel crisis caused by the novel pandemic.