While we can't quite decide if we are too worried about coronavirus or not worried enough, the Government knows which way Exports are heading. Adviser Commerce, who last month was celebrating that month's growth numbers, is now projecting negative growth. Exporters share the outlook - buyers are advising them to withhold shipments until the situation becomes less fluid. One can't rule out large-scale cancellations if the prevailing circumstances persist.
Every Black Swan event enriches our lexicon. Coronavirus, unmatched in its fearsomeness since the Spanish Flu a hundred years ago, has added such choice expressions to our vocabulary as social distancing, self-isolation, lockdowns, epidemiological neoliberalism - and Covidiot. It may not have given a new twist to 'hybrid warfare' but the fear of a lasting global recession, accompanied with supply-chain ruptures and questions about the kind of outsourcing to China that Jack Welch (died March 1) pioneered, has sired another new word: Econovirus.
The developed world has the ammunition to fight econovirus. It doesn't have much monetary firepower - how much below zero can interest rates go - but is determined to stave off the threats of unemployment and loss of wages with everything it has got. It is too early to speculate if it is going to be enough but the doors to the arsenal are being opened like there is no tomorrow. Quantitative easing is back with a bang and fiscal stimulus has become the nuclear war-head against recession.
Pakistan's options, unsurprisingly, are woefully limited. This was underscored in no uncertain terms by the Prime Minister when he said a national lockdown was not a viable proposition. Economic compulsions prevailed over national health concerns. There wasn't enough in the kitty to provide sustenance to the daily wage-earners. Nor did we have the fiscal space to stimulate the economy. So we take our chances? Depend on others - swap COVID-19 risks for our own brand of Dutch Disease?
The world has problems enough of its own to come to our rescue. Even that 'lender of last resort' - despising us for our geostrategic El Dorado but often helpless- has become more inward looking. China has sent us Doctors but in all probability they will insist on what worked in China: a national lockdown as the first step towards containment.
It is time for macroeconomic fundamentals to take a walk. It is time to start practicing what we preach: what good is all the wealth when you are six feet down? What good a healthy fiscal balance will be if the CV spins out of control? The PM has already asked us to be prepared for it to evolve into an epidemic.
National health has to be centre-stage. No matter what it takes!
It is time to have a candid conversation with the IMF. If they don't already know it they need to be told Macroeconomic stabilization is for normal times, not when a natural disaster stares you in the face. This is not the time to fix economic fundamentals; it is time to fix public well being; to restore confidence in the government. In times such as these you can't rely on the invisible hand of the market. You need a very visible hand of the State.
These extraordinary times clearly demand a moratorium on the IMF programme.
Both the fiscal and monetary spigots need to be turned on - as far as they can go. Despite the recent rate cut of 150 bps we still have considerable head room on the monetary side. State Bank of Pakistan should worry less about inflation than speeding up the demise of an already faltering economy. Of course, cheaper cost of capital will not, by itself, trigger investments but it will at least reduce government's debt servicing costs - savings that can be diverted to more test kits and ventilators. It will also shore up hope - God knows we desperately need it, and in industrial quantities.
The power of fiscal stimulus can come only if the government borrows directly from the State Bank - in the process debunking the charade of government borrowing from the banks, who borrow from the State Bank to lend to the government! Orthodoxy will of course holler 'runaway inflation', except that new research now finds only a tenuous connection between monetary expansion and inflation, as evidenced by the experience of the US and others where trillions were spent but deflation refused to budge.
Lower interest rates and fiscal stimuli pose a threat only to the external sector. That is where exports assume primacy.
For starters, there is the bogey of '72 hours'. Exporters were promised refunds within 72 hours, on the magic of the FASTER system. Adviser Finance kept telling us the government did not wish to sit on exporters' money for even a day. Now, slowly but grudgingly, government is beginning to divulge what we have known all along: the government was using exporters' money to dress up its fiscal numbers.
Now 72 hours has given way to 'end of the month'. Now we know why the government never wanted to set up a dedicated fund for refunds that was repeatedly asked for by the exporters - so they at least know refunds were not fungible and used for other government expenditure. Now we know why the government never wished to have an independent audit carried out of the refunds due -it would make the fiscal deficit numbers look less pretty.
Finally, the PM has spoken. With a refreshing candour he has acknowledged refunds were deliberately delayed!
But will the promised 100 billion be enough? Will the promise be kept? Answer to the first is a resounding no. To the second, it will be triumph of hope over experience.
Coronavirus has definitely added to our exporting woes. The silver lining is government waking up to the urgency of exports. It won't happen quickly but we do have strengths that we can leverage - if exporters have the liquidity to keep the machines running and people employed.
We can do it - if the government really wants it. As a trust-building measure, stop taxing exports. Do away with export development surcharge and withholding tax. Refund exporters' money. Give exporters a level playing field.
If the government is serious it should stop dithering about zero-rating. Time for it is now. Will RD put his job on the line for what we know he truly believes in?
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