Two of the major burdens on the forthcoming federal budget are likely to be relatively lighter compared to what successive budgets had to bear under these heads over the last many decades. The first is the foreign debt, part of which, thanks to Covid-19, one would hope would be written off and part rescheduled. The second is the oil import bill which because of the collapse of world oil prices is expected to be less than half of what budgets over the last decade or so had to mobilize.
And the kind of economic activity witnessed in the last two months and the continuation of slowdown because of various degrees of lockdowns, the demand part of supply and demand equation is expected to remain largely muted in the remaining months of the year which might get extended to the end of next fiscal year. Incomes of a majority of the population have declined steeply while unemployment has risen equally steeply in the aftermath of the pandemic. Secondly, those with means, for fear of the unknown, are more likely to use these means only for the most essentials, like food, house rent, education and perhaps necessary transport and communication. One manifestation of the decline in demand could be a marked slowdown in the pace of inflation rate to around 4-5% which would perhaps encourage the SBP to further curtail during the next fiscal year the policy rate to about 5-6%. And this would perhaps bring down significantly the burden of domestic debt on the next year's federal budget.
The Covid-19 has already adversely impacted on the overseas labour market with many of our expats returning home including those having lost their jobs. This could mean a sharp decline in the inflows from remittances in the coming months. However, since most of the returning overseas workers would be bringing back their savings, at least for the next year or so, the strength of the rupee against the dollar is likely to hold. But with remittances down and the prospects of export of manufactured goods like textiles and leather apparels not very bright, the country is likely to suffer from dollar shortage which would significantly affect the import sector on which our economy has been critically dependent all these 72 years.
If the developing economic scenario on the domestic front is likely to be underpinned by what has been briefly hazarded above, then the authors of next year's annual balance sheet would perhaps have a lot of leeway to experiment with the expenditure part of the budget irrespective of the amount expected to be collected by way of revenue by the FBR over the recession-afflicted next fiscal year. However, this experiment should be focused on extracting out the most from the limited resources available by prioritizing agriculture, especially food production, health, essential goods and services and at the same time exploring export potential of agro-products, mainly food items.
And with the rate of inflation almost in the pits, the government seems to be in a better position to take the risk of printing currency notes to expand the stimulus package in the budget by initiating some out of the box measures. Also in order to improve our foreign exchange earning capacity over and above FDIs which too are likely to remain shy at least during the Covd-19 reign we need to explore the possibility of exporting surplus food items. Also, the budget would need to be so formulated as to create domestic medical capacity to live with pandemic without having to suffer its consequence in human disaster.
The coronavirus outbreak has impacted the poorest particularly hard because it directly affects their most important, sometimes only, productive asset: labour, especially physical labour. The pandemic will cause disruptions in public sector programmes on food, nutrition, health and poverty that poor people depend on. Other safety nets, too, have been affected. Key health programmes, such as child immunization, have been disrupted as well. And of course, public food relief programmes face the risk of exposing more people to the virus by attracting large crowds at distribution points.
Produce needs to reach the market. Food and related inputs and services need to be defined as essential goods so transport is prioritized to overcome the strictures of lockdowns. Trucks need more than a green light to keep working. They need mechanics and related services to keep delivering food to markets. The same goes for agricultural inputs. The continued flow of seeds, fertilizer and mechanical parts - often across borders - will be crucial in the next six to 12 months. And we need to recognize the myriad of businesses including small and medium enterprises, often informal that supply farmers and handle food from farm to fork, and devise policies to keep them afloat.
Given the urgency of this challenge, country's limited resources, and that a large percentage of the labour force and informal sector are agricultural and food producers as well as net consumers, approximately 80%, it makes greater sense to prioritize agriculture and food sectors in designing assistance programs. This will mean putting money in people's pockets so they don't go hungry, and making sure food keeps moving.
Here, it would not be out of place to remember that except for a few viruses like small pox which have been completely eradicated the human kind has learnt to live with all kinds of fatally dangerous and not so dangerous viruses with vaccines having been developed for a large number of these viruses. In view of the current state of affairs in relation to the Covid-19 so far it seems we would be living with it for all times to come. It is, therefore, necessary that the forthcoming budget should allocate generous funds to expand at accelerated speed our domestic medical infrastructure including hospital beds, doctors, nurses, paramedics, masks, ventilators, PPEs etc. so much so that the expanded capacity ensures that we continue to live the way we have been prior to Covid-19 but without losing as many lives as we are doing today to the pandemic for want of meeting the challenge squarely.
And in the context of boosting food export for earning hard currency an agricultural products' export growth strategy should be developed with necessary steps initiated in the forthcoming budget. This involves a number of issues. On the supply side, concerns regarding quality control, marketing and storage facilities-silos for grain stocks and cold storage for preserving perishable food items--and information needed to be addressed. The past performance, role and adequacy of existing agencies and supporting infrastructure also need to be reviewed to increase their effectiveness. In particular Commodity Marketing Boards should be formed. The experience of commodity/marketing boards in other countries, which also exhibit a mixture of successes and failures, may provide relevant guidance. While the focus should be heavily on supply-side considerations by measuring export-potential only in terms of exportable surpluses, it is also important to recognize the possibility of demand constraints and the complexity of factors influencing demand, particularly in the case of many minor crops for which broad international markets do not exist. Further study is needed to determine-for each agricultural product-the likely market, the nature of demand, and the obstacles to entry. On the basis of such studies, specific proposals to overcome constraints (e.g., through competitive pricing, improved marketing channels and information systems, better quality control) could be developed. In the same context proper attention should be paid to developing fisheries and livestock sectors for export markets.
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