The coronavirus has now spread to over 150 countries around the world. There is panic even in developed countries such as the USA and Europe over the global pandemic.
Along with the loss of thousands of lives so far, the virus has also devastated economies and equity markets. While China may have turned the tide and controlled the virus to a large extent, the situation is a lot different in Pakistan as government efforts are inadequate.
As a developing country, Pakistan has always had a struggling economy. Successive government have taken loans from financial global institutions such as the IMF and harmed the economy. The coronavirus outbreak has now completely destroyed the nation’s economy.
In Sindh, the government has closed wedding halls, public parks, cinemas, shrines, shopping centres, restaurants, amusement centres, malls, and even some non-essential government offices.
Although these measures are necessary, it has affected the daily wage earners in the city including hotel waiters, vendors and street hawkers. The people who belong to the lowest segments of society have been the worst affected due to closure of public places.
Labourers would be idle if factories are closed or working below production, import would halted if trade and global supply chains are disrupted, and the entire economy would be clogged. The actual economic loss cannot be deciphered at this moment it will badly hurt Pakistan’s economy.
The stock market reflects the economic situation of a country as it attracts foreign investment. When the incumbent government came to power, the Pakistan Stock Exchange (PSX) was hovering above 52,000 points and was at around 43,000 points at the beginning of the year.
As global economy has come to a shutdown, the local stock market has plummeted in the past two weeks. The stock market crashed on March 9 dubbed as ‘Black Monday’s witnessed the biggest single-day decline in the past decade.
The stock market has crashed in the past two weeks. The alarm bells have been raised and traded has been suspended five times since then. The stock market is now below the 31,000 points.
Business activities and industries revolve around the prevailing interest rate. Pakistan has one of the highest interest rate in the world which was reduced from 13.25 percent to 12.50 percent.
Although a decline was expected, it was not up to market expectation as businessmen, industrialists are other analyst were expecting at least a two percent decline of even bring the policy rate to single digits. This could spruce business activities but the government has not given due attention leading to a slack economy.
The US Fed has slashed the interest rate to near-zero percent while the government has introduced a $700 billion fund to ease the financial loss against coronavirus. The Bank of England has reduced the interest rates from 0.75 to 0.25 percent, while similar measures are expected from Canadian, Japanese, European and Swiss central banks.
The minuscule decline in interest rate by the State Bank of Pakistan will not bring any stability in equity market or the economy. The government is taking short-term contingency plans rather than strengthening trade and business activities in the country.
Pakistan has to spend vast amounts of foreign currency on oil imports. The price of crude oil has reduced sharply in global markets as an oil war ensured over supplies at OPEC.
This has benefited the government by reducing the oil import bill but the benefit has been passed down to the consumers or the business community. The government should formulate a strategy to capitalize on the declining oil prices and shore up its reserves by buying oil on cheaper rates.
The business community should be taken into confidence and provide relief along with civic facilities to increase activities. The benefit of the reduction in oil prices should trickle down to help the economy.
The main problem is that Pakistan’s economy is heavily burdened due to foreign debts. The dismal state of the economy has led to a lack of business opportunities.
Successive government are compelled to secure loans from friendly countries, such as China, Saudi Arabia and UAE, and then from global financial institutions such as the ABD, IMF, and World Bank.
These come with strings attached and now the global pandemic has even affected developed countries. Pakistan would default on debt payments due to the global economic conditions and might have to seek even more loans which could bankrupt the country.
While many countries are enforcing lockdown and closing down entire cities, Pakistan unfortunately is still politicking over the coronavirus pandemic. The federal government did not respond when the first coronavirus case was reported in Sindh which eventually worsened the situation.
The federal government has neglected Sindh even in the times of a pandemic. The screening facilities and other equipment provided by China were not given to Sindh. This is gross criminal negligence and as a result, the entire nation is fighting against the dreaded virus.
There should be national unity and consensus as it will test our patience, determination and resolve. We need to work together and ensure essential safety precautions to help defeat the pandemic.