Fear and panic have gripped human consciousness as corona unfolds itself in Pakistan and abroad. Fear is understandable; but panic surely not, for in the bigger picture it serves no one.
By now there is credible evidence that social distancing can help flatten the curve while medical scientists search for the anti-corona. Which may or may not take a long while; it’s difficult to forecast such inventions with certainty.
What is certain, however, is that corona will put individual character to test, since social distancing demands self-discipline, while the management of household economics presents a great moral dilemma: the battle between thinking about others, and primal human instincts of survival, which is driving people to stockpile their food and medical supplies.
Trust a pandemic to disrupt the market as shipping, production and distribution fall. Which means more demand will not create more supply; it will only lead to higher prices. In this country, there are those who can afford to pile up their household food inventory for six months, and there are also the poor, who have more mouths to feed (poor have more children) but less disposal income, which means they do not have enough saving to buy and store for weeks and months.
Effectively, therefore, those who are emptying out shelves at retail stores are further impoverishing the poor. Think about it! Because if things get worse, the savage of hungry can strike in the heart of comfortable villas.
It is already an unfortunate reality that Pakistan’s local government system isn’t effective, whereas provincial and federal governments aren’t an emblem of efficient management either. Let’s not make matters worse and risk destabilisation of the social order with panic buying and panicky statements. At the risk of reiteration, the corona curve can be flattened, and food supplies better rationed. It does not require everyone to be an Einstein; all it requires is a sense of collective thinking, and action.
There is no denying the fear of corona. Pakistan is an over-crowded country, which at the risk of simplification can be defined as more than three persons per room. It is also a country where the use of soap for handwashing isn’t very high. These facts combined with the level of preparedness displayed by the state thus far, and its capacity to deliver public health is something to be concerned about. But panic won’t solve the problem; solutions will, which is why federal and provincial government would do well to set up an online solutions-lab to crowd source ideas from the citizens.
The state of macroeconomics may also emerge as fragile as the state of public health. These are those who are pinning hopes to the halving of international oil prices, which is obviously a boon for Pakistan as far import bill is concerned. But think again. Pakistan may not be the poster child of GVCs, it isn’t living under a stone either.
From skimmed milk for UHT milk production, or edible oil or pulses to inputs for textile – all these are imported in great proportions. With empty containers stuck in China, increase in missed port calls for shipping lines, an array of precautionary measures taken by port authorities at home and abroad are causing various sorts of disruptions in global shipping. And shipping accounts for 90 percent of world trade for supply of food, fuel and medicines to global consumers.
Meanwhile, Europe has become the epicentre of corona, leading to lower export orders for domestic textile players. Even if it weren’t, there is no guarantee that Pakistan can supply those orders. If corona scales up in Pakistan, industrial production would naturally take a hit.
When white-collar workers are being asked to work from home, then pretty soon industrial workers will have to be asked the same as well. The lives of industrial workers are as important as the white-collar class; and factories are equally at risk of spreading the virus as are wedding halls, Masjid al-Haram, schools and other assemblies of large number of people. Since industrial workers cannot work from home, industrial production will take a hit in Pakistan if corona is not contained; whereas corona’s containment itself requires taking a hit on production.
The positive impact of low oil prices, therefore, is limited given the growing scale of the crisis. For instance, even if the government maximises its petroleum levy at Rs30 per litre, the overall tax revenue from POL products may still take a hit on account of lesser sales volume. So might revenue from other tax heads such as falling income (in the case of POL refineries), or lower sales volume of other commodities.
At the time of writing this, businesses were demanding tax relief, and a substantial reduction in interest rates, as if these measures can resuscitate production hit by corona. It will be good optics and may even provide some relief to businesses. But at what cost. Further fiscal constraints? Unchecked inflation?
What is instead needed is close collaboration of joint working groups - not only between various arms of the state across monetary, fiscal, industrial, shipping and agriculture – but also among business clusters across the value chain of at least critical goods and services, especially in light of the fact that Ramadan begins in next 40 days.
If tomorrow brings a new dawn, and humans find the anti-corona, then nothing like it. If not, then these coordination platforms, together with a much-needed strong managerial arm of the state will prove critical to deal with the crisis.
And oh, by the way, the stock market was down just 2376 (6.6%) points yesterday. The thing about stock movement is that it rests on collective memory and collective wisdom of the players. Only that, no one has seen any a pandemic of this magnitude in their lives, ever. And to quote WHO’s Director-General Tedros Adhanom, no one has ever seen a pandemic that can be controlled. Beware of the rate-cut rebound, if any. (See also BR Research’s ‘KSE-100: all eyes on the crowned monster’, Mar 16, 2020)