For all the government's alleged oversights in the war against the coronavirus, neither fiscal nor monetary authorities can be questioned for not doing enough to keep the economy solvent and protect jobs even when the whole system was shut down. And yet again, realising the need to do more, the State Bank of Pakistan (SBP) has expanded the scope of the Rozgar Scheme to finance 100 percent of payrolls of businesses with a total three-month wage bill of up to Rs500 million and for wage bill beyond this amount and up to 1 billion rupees to the extent of 75 percent. This arrangement can be used for payment of salaries for the months of April, May and June. Earlier, when the scheme was launched on April 10, 100 percent financing was offered for wage bills up to Rs200 million, with 75 percent financing for a maximum of Rs375 million, and 50 percent for as much as Rs500 million. SBP must be commended for its proactive steps to provide cushion to employers and protect the job market because if unemployment spikes before the economy is able to function again, there will be a sharp increase in the poverty rate, outright panic and the likelihood of large-scale social disturbance.
Yet for all its novelty, the Rozgar Scheme is in danger of getting bogged down under procedural delays. It turns out that requests have been received from over 1,440 businesses for financing over Rs103 billion so far, meant to support around a million employees, yet no disbursements have been made at all. That is because banks have had little time to prepare Standard Operating Procedures (SOPs) that match their risk profiles. And even if the government acts as a guarantor, it is on the condition that banks take all necessary steps to cover associated risk; hence all the confusion about necessary documentation. Hopefully, all the bottlenecks will be overcome sooner rather than later because even brilliant initiatives that cannot be implemented in time for achieving necessary objectives only amount to waste of time and resources at the end of the day. SBP has no doubt come up with a rather ingenious way of marshalling its resources to keep the economy from collapsing. And all that looks just fine on paper. But now it must also hammer out a workable arrangement with banks, one which protects them from downside risks of default, so disbursements can begin without any further loss of time. Already, a number of businesses counting on this facility have had to keep workers waiting for their salaries despite the increased spending requirements that almost always come with Ramazan and Eid.
Everybody realises, of course, that there are only so many answers the State Bank can pull out of its hat. The economy was barely above water even before the pandemic. And if banks spend too much time fine-tuning risk matrices now they could well miss the bus to consolidation and recovery, and throw all the workers awaiting compensation under it. Being the effective guardian of the banking sector, SBP should step in and help remove all the roadblocks. And it must move with exemplary speed because now that the lockdown is being relaxed the risk of the virus spreading faster is increasing. Already there has been some disturbing news from Germany, South Korea and even neighbouring China indicating a pronounced uptick in confirmed cases as economies reopen and people are forced to interact. Therefore, it is crucial to quickly find whatever arrangement works for getting funds, which have been made available, to people who need them urgently.
Pakistan is truly standing at a historic crossroads. It is nothing short of a miracle that not only did we not suffer the high number of Covid-19 confirmed cases and deaths that some other countries did, but authorities were also able to keep a floor under the economy. But if things get worse, and the outbreak worsens or the economy crumbles, we have neither the healthcare infrastructure nor the financial reserves to survive for too long. Therefore, how we exploit this brief window when things are more or less in control will dictate much about our future. And perhaps the scenario that can tip the scales against us faster than anything else is a wave of joblessness that pushes a sea of poor people out onto the streets to look for food and work, agitate, and spread the virus all along the way. SBP has done the right thing by identifying the most pressing problems. It must now make sure its plans are implemented in the right manner and before it is too late.
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