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Battle of survival – the world after coronavirus

Battle of survival - the world after coronavirus

The New World Order implemented after the events of 9/11/2001 has changed after the COVID-19 pandemic outbreak. The details of what the world might actually look like is still being determined, however, it is safe to assume that if there was a Before Covid (BC) world, then we are actually living in an After Covid (AC) world. The following will give the readers a glimpse as to how the AC times would look like:

In the wake of outbreak of coronavirus, Pakistan’s initial economic losses in different sectors of the country’s economy have been estimated at Rs1.3 trillion. These losses are going to be incurred on account of drop in the GDP growth because of reduction in services sector, including airline business and others, FBR’s revenue loss, massive decline in imports, exports, reduction in remittances, disruption in food supplies and other fronts. The Planning Commission estimates that the size of the country’s GDP stood at Rs44 trillion and one/fourth stood at Rs11 trillion, so the disruption caused by coronavirus was expected to cause at least 10 percent losses in the last quarter (April-June) that would stand at Rs1.1 trillion at least.

The tax machinery initially estimates that the lockdown of Karachi was going to cause major revenue losses and they were assessing that if it persisted till June 2020, then the tax losses would go up to Rs380 billion. The FBR has already been facing massive revenue shortfall before the virus despite slashing down the FBR’s annual target from Rs5.555 trillion to Rs5.238 trillion. Earlier, the FBR had also requested the IMF for allowing further reduction in its envisaged target from Rs5.238 trillion to Rs4.8 trillion. Now the FBR is assessing further reduction in achieving the target by Rs380 billion, so it is estimating collection of just Rs4.4 trillion till June 2020.

The exports might face loss in the range of $2 to $4 billion as export orders had got canceled. The imports would be reduced in the shape of declined POL prices as well as in quantity. Pakistan imports 80 billion barrels of POL products and keeping in view the lowest-ever prices in international market in the last two decades, the import bill would shrink having negative impact for the FBR’s collection and petroleum levy might also be reduced if the consumption decreased because of possible lockdown in different parts of the country. While we cannot assume oil will remain in the mid $30s, the Pakistan economy, as a net oil importer, should benefit from lower oil prices.

The worst effects are to be borne by the daily wagers as 47 percent workforce in service sector such as marriage halls, hotel industry and others belongs to this sector. The government should increase the allocation of Ehsaas program from Rs. 12,000/- per family to at least the minimum wage rate of Rs. 17,000/- per family and ensure utilization of allocated funds. The utilization of Public Sector Development Program (PSDP) might slow down, so it could be diverted into small schemes through SDGs Accelerated Program.

Due to the closure of major port operations and retailers globally, reduced global demand is likely to lead to a reduced global economic growth. The Planning Commission resolves to make all efforts to combat and will actively coordinate for necessary emergency funding from both the local and international sources to ward off any negative impacts of coronavirus on livelihoods, jobs, especially the industry. Pakistan will not face any food shortages as the country has sufficient stocks of essential items to meet the immediate needs.

There will undoubtedly be a significant and tragic human cost if COVID-19 takes hold in the Pakistan population. The impact on the economy will largely be dictated by government action and any impact on Pakistan’s export sectors. Thus far the government has not declared COVID-19 an epidemic and few measures have been taken that will hinder economic activity. Given the domestic focus of the economy it should be less impacted by travel bans and slowing international trade than other more externally-facing developing economies. Pakistan’s textile export sector relies on China for the bulk of its capital goods inputs, so there will be an impact if there is a protracted closedown of the Chinese economy.

One thing which needs to be watched closely is any sign that the Chinese authorities are forced to slow down their rollout plans for the China-Pakistan Economic Corridor and the development of the Gwadar international deep water port and its associated infrastructure due to the COVID-19 outbreak and the associated measures taken by the respective governments.

[box type=”note” align=”” class=”” width=””]The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan[/box]

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