Would it be stating the obvious to say the fear of economic losses is hand-wrestling with the fear of losing lives? The see-saw of living and making a living is leaving us paralysed? As Ezra Klien quipped, it is hard to decide which is scarier: conversations with the epidemiologists or the conversations with the economists!
'If the coronavirus doesn't get you econovirus will' is perhaps putting it too baldly, but the trade-off gets more stark and brutal as you go down the economic ladder, of countries and people.
The rich, everywhere, think they will ride the tide and live to fight another day; recoup their losses and more. Another year and 2020 will be a destruction that created new opportunities. Who knows, but they do seem to have the first call on Titanic's lifeboats. As Zadie Smith put it, best chance of delay goes to the highest bidder!
The rich countries have at least the ammunition to make a go of it. Petrified of the 'greater depression' - that will make the 1929 depression look like a Montessori playbook - they are willing to throw into it everything they have got. The astronomical fiscal stimulus and quantitative easing numbers leaves one struggling with zeros.
It is hard to tell how resilient these 'shock absorbers' will be but it is a reasonable bet that citizens of the developed countries will manage better in terms of social protection. It is the less endowed countries, where a great majority of people are already nutrition-stressed and wanting in adequate health care, that have the problem of striking a balance between life and livelihood.
Pakistan, with its poor human development and productivity indices, and an informal sector as large as the formal, has even fewer response options.
It also has the IMF dilemma. There are costs to staying or exiting. You stay and your policy space shrinks further. IMF may give you a largish leeway for social protection but will look askance upon a lax fiscal regime, especially subventions, tax breaks, and low interest rates needed to rescue the reeling economy.
If you exit your external sector gets mauled. With uncertain export and remittances outlook, and multilateral funding drying up if the IMF umbrella get folded, you could be back to where you were a year ago: facing default.
The Prime Minister is spearheading the global debt relief initiative. Will it buy us enough time, even if the lenders are willing to relent? Both have weak chances. There are already 90 countries that have invoked the IMF emergency-funding window. There is not so much to go around. Even if we do get rescheduling - and it will help - it will merely give us a time-bound cash-flow relief, not alter the fundamentals.
So if you don't have enough in the kitty, and the IMF dragnet won't allow any 'helicopter drops' or large scale Keynesianism - dig a hole and fill it to keep people employed, a variant of the billion tree scheme - where do you go from here?
You do exactly what a level-headed, unemployed, cash-strapped family does: reset needs and redirect assets. Food and healthcare first - and look for work, for things to get better before indulging in other basics and beyond.
And you scrounge. Not easy when your money-lender sees a growing clientele. So you 'create' savings by redirecting your assets.
Government, too, has to reimagine its assets. There are savings, no matter how infinitesimal, that can be eked out, without having to resort to the kind of austerity that puts people on the street. The idea is to realign expenditures while avoiding job losses.
The first natural candidate is the Policy (interest) rate. Pakistan's domestic (Rupee) debt is north of 23 trillion. A four percent cut in policy rate will lead to several hundred billion rupee 'savings' that can be diverted to social safety, 'socialisation of losses', even paying export refunds. It will also have a salutary effect on investment climate that needs all the stimulation that it can get.
There could be inflationary and exchange rate pressures as a consequence. But demand-push inflation appears unlikely; and to check the pressure on food, utilities, and transport, we would need to be smarter with administered prices and targeted subsidies.
Exchange rate will be a worry, but its determinants are too varied to be controlled through monetary tightening alone. It is a risk we will have to take, and hope there will be sufficient emergency-related inflows to soften the blow.
When we think State Enterprises - PIA, Pakistan Steel, Railways - we think 'bloated workforce'. Have we thought of all the flab in the government? It doesn't show up because government doesn't have a profit and loss statement!
Take our missions abroad, many more than much richer countries. Yes, our foreign policy imperatives are uniquely demanding, but are we getting a bang for the buck? Can we put our embassies to a cost-benefit test?
What about our 57 trade offices? Do we seriously think they contribute to export growth?
We like to think we can do with fewer and smaller missions and save a few hundred million dollars. There will be no loss of jobs - they are all civil servants. Some can be sent off for training, others on a year's leave with full pay.
Then there are departments whose utility is not known to even those who work there. The task force on austerity identified scores of departments for closure. Actually, these were already non-functional. Large departments that exist without contributing much need to be identified and their mandate refined. They should be retooled and put to more productive uses.
Trade Development Authority (TDAP) is a case in point. It consists of fairly competent people who we are not getting the best out of because TDAP has an ill-defined role. That probably explains Secretary TDAP having two full time jobs, reporting to two different bosses!
Like many other departments TDAP's role needs reorientation. It should become a lobbyist for exporters with the various government departments. It needs to become a 'think tank' for the Ministry. It ought to help exporters with product adaptation, greater productivity, and business alliances.
Fear is not one of the deadly sins. But indecisiveness is. Time for government to lead, and not be afraid of the consequences of its decisions!
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