ARTICLE: It is peaking in Pakistan. And there has been no full-blown lockdown as such since the Covid-19 curve started taking a steep trajectory at a relatively faster rate some two weeks back. Meanwhile, the economy at large is continuously going south as the current fiscal year races to its closing days and the balance sheet for the next is about to be presented. Exports and remittances are shrinking. Import bill, though relatively smaller, still far ahead of foreign income. Large-scale industry is in doldrums. Locus has gobbled up any promise agriculture sector had held. In view of the dwindling foreign exchange reserves one cannot rule out a debt default situation, but perhaps it would be averted somehow this year. Recession is continuously deepening.
Meanwhile, the Covid-19-triggered death rate has turned into a serious scramble with signs of soon assuming dangerous proportions. In Sindh at least the government hospitals have already reached their saturation point. The Punjab government is putting up a brave face. But the way things are turning out, this province as well is likely to throw in the towel soon. The strike call given by the young doctors in Punjab presumably protesting against the shortage of PPEs and other protective gears for doctors indicate a more hazardous scenario in the offing. Reports of doctors, nurses and paramedics succumbing to the virus in good numbers are coming in from all over the country.
The public at large, it seems, never took the pandemic threat seriously. Many thought it was a passing phenomenon being made to look like a fatal health hazard because of the childish antics being indulged in by both federal and Sindh governments as they chose to misuse it for political point scoring against each other. And the Federal Government's approach in tackling the problem had actually bordered on dithering-to lockdown or not to lockdown. And Prime Minister Imran Khan's bizarre assertion that it was actually the so-called 'Ashrafia' which in its own interest was enforcing the lockdown policy made it appear as if one could live with Covid-19 without the fear of its spreading fast and wide and causing heavy fatalities like those being witnessed in Europe and America.
The upshot of all this was that not only lockdowns when they lasted in their full force were observed with scant respect by the general masses but even the social codes like wearing a facemask when out doing shopping or keeping a safe social distance on the streets from others were violated with a vengeance.
And the general complacency towards the pandemic in countries like Pakistan further exacerbated because just 14 percent of the world's known Covid-19 deaths were reported in the first four months of the year in low-income and middle-income countries having 84 per cent of the world's population. Indeed, for a while, it had appeared that the developing world was being spared the worst of the pandemic.
The answer to why it was so fell victim to heavy speculation adding further to complacency. Some thought it was due to a lack of enough testing facilities in these countries and a failure to attribute many deaths to Covid-19. Also nursing homes, which have accounted for a large share of deaths in wealthy countries, are uncommon in the developing world, so the elderly are not clustered together; heat may have some effect in reducing the spread of the virus and; some medical experts privately speculated that the populations in these countries have stronger immune systems because they have been exposed to many more diseases over their lifetimes.
However, Fareed Zakaria in his Washington Post column (The pandemic's second stage is here - and it's getting ugly - published on May 29, 2020) has warned that if the coronavirus which has moved slowly but steadily across South Asia and Latin America does not start thinning soon the damage would be worse than anything one has seen in the West. The population density and sanitary conditions in these countries make the rapid spread of the coronavirus seem inevitable. In India, a fifth of all known cases come from Mumbai, where one slum, Dharavi, houses about 1 million people and has a population density that is nearly 30 times that of New York City. Hospital facilities in lower-income countries are sparse. In Bangladesh, there are eight hospital beds for every 10,000 people.
"In many of these countries, large segments of the population make just enough each day to feed themselves and their families. So governments face a deadly dilemma: If you shut down the economy, people could starve. If you keep it open, the virus will spread," says Zakaria, bringing forth the inherent paradox in the challenge being faced by these countries.
And then there is phase three of the pandemic - the debt crisis - which is expected to hit the developing world very hard. They have to take out loans in dollars, which they must pay back in their own (rapidly depreciating) currencies. Down the line, they face the real prospect of hyperinflation or default.
Various studies estimate that somewhere between 100 million and 400 million people will be pushed back into extreme poverty as a direct consequence of Covid-19. In this most crucial measure of human progress, the world is said to be moving backwards - and fast.
Brad W. Setser, writing for Foreign Affairs magazine (The Covid-19 Crisis in Emerging Markets Demands a Once-in-a-Century Response; Will the IMF Pass the Pandemic Stress Test? Published on May 27, 2020) contends that the International Monetary Fund-the lender of last resort for financially strapped governments-lacks a framework to handle what may be coming for the developing countries which were already agonizing under a global debt pileup before the pandemic hit them.
The IMF often lends to countries with deep problems, demanding (as the string attached to its loans) promises of fiscal reform. It also has ways to offer smaller-scale help. But in the pandemic, Setser writes, those models don't fit. That is why perhaps, Pakistan is finding it even more difficult to cope with the pandemic despite being in the midst of a three-year IMF Extended Fund Facility (EFF) programme.
In Setser's opinion the IMF "needs to find more creative ways to put more of its $1 trillion balance sheet to work". "This is a once-in-a-century pandemic that calls for a once-in-a-century response. The IMF has yet to deliver."
"To be sure, the IMF has offered some assistance to emerging economies battered by the pandemic. Through its Rapid Financing Instrument, for instance, the IMF is poised to provide a small amount of money to a large number of countries (Pakistan has already received $1.4 billion from the Fund's RFI). But the $100 billion available through this facility pales in comparison to the more than $2 trillion in need that the IMF itself has identified. The pandemic, however, calls for financing in much larger amounts than this line provides, over longer terms, and available to a wider range of countries," maintains the author.
In the opinion of Setser, to meet a portion of this need, the IMF should authorize a one-time increase in the world's foreign exchange reserves. A so-called Special Drawing Rights (SDR) allocation would distribute the IMF's internal currency-the SDR-to all countries in proportion to their existing IMF contributions. (SDR could then be exchanged for hard currency reserves, be they dollars or euros.)
"The IMF authorized a $250 billion SDR allocation in 2009. But now, in the face of what is in many ways a bigger shock, the IMF hasn't pushed to make use of this mechanism, seemingly for fear of offending the administration of U.S. President Donald Trump.
"The IMF shouldn't risk being hamstrung by a US veto of the SDR allocation, however. It needs to find more creative ways to put more of its $1 trillion balance sheet to work. Specifically, the IMF should create a new instrument that would help countries cover the cost of emergency public health measures for the duration of the pandemic. This instrument should be designed to appeal to a broad range of countries that previously had sustained access to private-market financing. And unlike the IMF's Short-Term Liquidity Line, this instrument should be designed so that countries have five or more years to repay the funds. It is in everyone's interest for countries to borrow more so that they can spend more to fight the pandemic. This new special instrument should reflect that reality."
Setser says that many countries need a new long-term source of financing to make up for the private financing that has vanished and so long as the IMF limits the amount of pandemic financing to a portion of countries' 2020 fiscal deficits, the risks associated with a one-time broad increase in lending to emerging-market countries would be manageable.
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