Prime Minister Imran Khan stressed that there was no confusion at all in his government about how to handle the coronavirus threat, despite all the criticism from the opposition and the press, and even claimed that his was the only government in the whole world that was not confused at all about the problem. Yet even as he delivered these comments during the parliamentary budget session the Punjab government was imposing sudden and selective lockdowns which left the people, at least, pretty confused. The only information that people really had about what the provincial government was going to do in Lahore, that too at just a few hours’ notice, was that a few localities were going to be closed down for a few days. Nobody knew just how strict the lockdown was going to be. Once again, like the government’s previous attempts to control the spread of the coronavirus, people panicked because of the government’s policies and rushed to stores to stock up.
Also, because of the sudden announcement, a lot of people are unable to make important decisions about work and handling their homes. This pretty much shows that the prime minister could well be right, and there is no confusion in his government, but how does that look when his polices leave the people pretty bewildered? And while it’s normally a very good thing that a government is not confused about a very important policy, it’s quite another when said policy is dragging the whole country in the wrong direction. The claim about being the only government that always had the correct narrative also flies in the face of simple facts like the World Health Organisation (WHO), among others, warning about the sharply rising number of cases in Pakistan and also that we have now replaced Mexico to become the country with the 13th worst number of cases in the world.
A little also needs to be said about examples of other places, like New York, New Zealand and Singapore, that might have been more than a little off the mark. True, all counties are now in favour of relaxing lockdowns but only after being in favour of implementing them in the initial stages. And almost all countries except Pakistan reopened only when the graph of new cases was flattening, not steepening. Since facts so openly contradict the government’s claims at this point, it would not be going too far to fear that the ruling party might be in denial about how its handling of the most important problem confronting the country is turning out. Regrettably, it does not seem that the government is in any mood to accept that it might need to correct its course of action.
Yet another rate cut
The state bank cut its main interest rate just as suddenly as the government announced shutting down selected localities, and now it is down another 100 basis points to 7pc. This makes it the fifth time that SBP (State Bank of Pakistan) has cut rates since March, when the coronavirus started spreading throughout the country. Before that, even as the economy was already grinding to a trickle – since before the pandemic – and practically everybody who and anything to do with trade, industry or the economy was begging for a cut, to stimulate some sort of activity, the Bank didn’t listen. Now, despite cutting it five times in just around three months, there’s still not much of a reaction from the economy.
SBP has said that this would be the last of the rapid cuts it thought were necessary to offset the downturn from the pandemic. But perhaps this last one was also unnecessary and could be called going a step too far. The economy’s survival at this point hinges more on how soon the government is able to stem the tide of the virus than how much more interest rates can be slashed. For, if they could really breathe any sort of life into the economy in this environment some sort of positive change would have been visible by now. This was, at the sake of repetition, the fifth time that rates were brought down rather quickly. It is also a little irresponsible of the Bank to imply that the monetary policy committee had anything to do with inflation coming down. Prices came down because of the effect of the lockdown and shutting down of the economy.
SBP is clearly worried about the historic contraction in the growth rate. And, to be fair, it has been on the front foot ever since the pandemic came to our shores. It has forwarded some very dynamic proposals to keep businesses from laying off workers even if there is no production. However, it was something of a letdown that commercial banks did not want to play ball until the government provided some sort of sovereign guarantee against defaults and the matter dragged on too long for a lot of businesses to wait any longer. And a number of outlets went bust and workers were sent home. The Bank’s initiatives are welcome, but its policies would be far more rewarding if they make a bigger difference on the ground.
Published in Daily Times, June 26, 2020