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Formidable challenge

Coronavirus has severely impacted the human lives and the economies the world over in a profound manner. The trauma of loss of human lives will be followed by loss of jobs, food shortages and depleted health facilities – just to name a few of them.

Effluent nations with ample reserves and political muscles will ride through it and bounce back as had been the outcome of global wars and epidemics in the world. The hardest-hit will be poor nations and many emerging markets. Pakistan, unfortunately, happens to be the most venerable.

The UN Conference on Trade and Development (UNCTAD) last week bracketed Pakistan among the countries which would be the hardest-hit by the global pandemic of coronavirus, demanding a raft of measures for their relief.

UNCTAD said in a report that the developing countries – which according to a UN body’s tally number 170 – would need a $2.5 trillion support package this year to face the economic crisis caused by the coronavirus pandemic.

Their economies will take an “enormous hit” from high capital outflows, lost export earnings due to falling commodity prices and currency depreciations, with an overall impact likely worse than the 2008 crisis, the report said.

The Federal Board of Revenue (FBR) on Tuesday announced a revenue loss of over Rs200 billion for March owing to the coronavirus-led slowdown in economic activity. It has warned of further losses in the coming months in case businesses fail to resume operations.

The issues of Pakistan are compounded by the fact that even before the Coronavirus crisis hit the world the country was struggling to meet its revenue targets and now with loss of production and exports the shortfall will escalate. The nine-month revenue collection gap has widened to Rs 470 billion. Till June this gap is likely to widen exponentially. The government would be fortunate enough to collect Rs 4.5 trillion against the Rs 5.5 trillion revised target set by the IMF.

The hope of salvation of economy lies in early start of businesses and industry in Pakistan. The business chambers around the country are voicing concerns.

The Overseas Investment Chamber of Commerce and Industry (OICCI) last week sought the support of federal and provincial governments for easing restrictions on the movement of persons and raw materials needed for essential items by industries.

Food and pharma are already exempted from the ongoing lockdown and now the trade bodies are urging the government to include more items to that list.

In a meeting with city and provincial authorities last week, trade bodies presented a list of 125 units that should be allowed to restart operations. Traders also reiterated the same demand.

Apart from a serious crisis emerging from Coronavirus, the enabling environment to boost industry and businesses could not be better with lower oil prices, reasonable lending rates and rising local and global demand in a number of essential commodities mainly food, healthcare, sanitation and others.

The crude oil prices have nosedived to an unprecedented level of $ 20, which is likely to decline further as global economy is not likely to revive in the next 6 months.

Refiners in Pakistan are closed and the storage capacity is exhausted. The government is considering renting out floating storage and storing oil while the going is good.

The government will show economic wisdom if it supplies electricity to industrial unites at a reduced tariff to lower its oil inventory and revive its refineries instead of investing in floating storage facilities.

Salvaging already sunk industry by doling out millions of rupees to affectees is a fatally flawed strategy. The government should utilise this scarce cash in supporting the industry through across the board incentives.

The incumbent government earlier did well by doing away with duty drawback incentives and subsidies to exporters which too was largely manipulated by vested interests. The exporters on its withdrawal raised a hue and cry. The textile exports, however, received a boost due to increased global demand and exporters earned well even without duty drawbacks and subsidies.

Human lives have a clear precedence over all other considerations. But the government must seriously start planning how best and fast it can capitalize on the current business enabling environment and revive its industry and businesses in the markets of niche commodities – local and global.

FARHAT ALI, "Formidable challenge," Business Recorder. 2020-04-04.
Keywords: Economics , Economic growth , Health facilities , Effluent nations , Global wars , Emerging markets , Global pandemic , Economic crisis , Revenue loss , Coronavirus crisis , Boost industry , Economic wisdom , Human lives , UNCTAD

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