If the year 2020 was anything to go by, the states investing in public healthcare infrastructure, social protection and food security will have a comparative advantage in mitigating the pain of Covid-19.
Governments across the world seem to be aware of this. Most of them have doled out — and are still doling out — trillions of dollars to their citizens to reduce the suffering caused by Covid-19.
Pakistan, too, has done that within its constraints. The list of what has been lacking or missing in Pakistan’s response to Covid-19 can be endless but one must acknowledge that it has done rather well — albeit with borrowed money — to avert a triple crisis of healthcare system collapse, economic meltdown and food scarcity.
As in 2020, the focus of Pakistan’s policy response to Covid-19 in 2021 should continue to be on mitigating the socio-economic damage done by the pandemic. The policymakers should not be too concerned about growth in gross domestic production (GDP), current and/or fiscal deficit and the debt burden — provided that all the resources available to them are invested in people.
Seeking an improvement in these macro-economic indicators at the cost of micro-economic stability for the masses in the second year of the pandemic runs the risk of eroding the resilience that people might have developed. Any improvement in macro-economic indicators in this situation should be seen as the icing on the cake. The cake itself should be the ability to plod through the pandemic without serious harm to the social, economic and political fabric of the state and the society.
Having said that, it is important to highlight the fact that the financial incentives that the government gave to various industrial sectors in 2020 mostly remained confined to the formal sector. Being undocumented, most of the small and medium entrepreneurs (SMEs) were not eligible for reduced interest rates or deferred loan repayments. This gap has hurt millions of small business owners, shopkeepers, restauranteurs and a myriad vendors, including motor mechanics, tailors and barbers.
In 2021, the State Bank and the government should come up with an out-of-the-box solution to bring the SMEs and the informal sector under the umbrella of the financial stimulus. Keeping the SMEs running in the face of the pandemic’s second phase — and until a Covid-19 vaccine is administered across Pakistan — is vital for stopping Pakistan’s economy from sliding into a recession.
Some studies estimate that the SMEs contribute as much as 40 percent to the GDP, 40 percent to exports, 80 percent to non-agricultural employment and 35 percent to the total value addition. The cost of not protecting them, therefore, can easily surpass the cost of helping them.
Switching from non-targeted subsides to the targeted ones is another move that may improve the government’s economic and financial response to Covid-19. A big chunk of the subsidies currently lands in the lap of those who, going by their incomes, should pay the full cost of the commodities/services. The use of technology and data — that can be collected both from the National Database and Registration Authority (NADRA) and the telecom service providers — can help the government trace and reach the most deserving beneficiaries of these subsidies. This will help the authorities avoid an elite capture of the subsidies.
A minimum universal social protection (MUSP) — at least in terms of healthcare, education and employment — can also be introduced in 2021 to recognise social protection as a right. This can be initiated in districts selected on the basis of high incidence of multi-dimensional poverty. Expanding the Benazir Income Support Programme/Ehsaas programme and learning from peer economies where different models of MUSP are being tried, Pakistan should role out this initiative to strengthen and enlarge its human capital.
The cost of not having an MUSP is way higher than the cost of having it. Let me explain this through the World Bank’s latest Human Capital Index (HCI) released in October 2020 (though it is based on pre-Covid data). According to this index, a child born in Pakistan before the advent of coronavirus could expect to achieve just 41 percent of his or her potential productivity as a future worker because of a lack of healthcare and education facilities.
The other alarming fact is that Pakistan’s score on HCI is lower than the average score for both South Asia region and lower middle-income countries. In Pakistan, the index states, seven out of 100 newborns are expected to die before reaching the age of five and 38 percent of all newborns will experience a stunted growth. Pakistani children will, on average, complete 9.3 years of school (which translates to 5.1 years when adjusted for the quality of learning) and, even more alarmingly, only 85 percent of today’s 15-year-olds will live till the age of 60.
If this was the situation before Covid-19, one can imagine how much worse it might have got with millions of poor families having become poorer as a result of job and income losses caused by the pandemic. The state, therefore, should invest in an MUSP urgently and thereby secure the future of its people. Otherwise, we can easily earn the dubious distinction of being the least productive society in the world.
The readers of this piece must be wondering as to wherefrom the above-mentioned initiatives can be funded. The answer for the short term is that the policymakers should use Covid-19 as an opportunity to bring back social sector development on the public policy radar. All of the financial relief that Pakistan has received from its lenders in the form of loans, grants, rescheduled debts and special assistance packages should be utilised to avert the crises unfolding in healthcare and education sectors. I would not mind a raise in the debt to GDP ratio in 2021 as long as the debt gets spent on building the economic and social resilience of the people.
Rationalisation of the government’s own non-developmental expenditure and bringing the untaxed/tax-evading elite into the tax net is another quick-fix solution for the resource mobilisation needed for investment in the social sector.
In the medium to long term, additional resources can be arranged by tapping the opportunities offered by an online ‘Covidized world’. We now know that we do not always need buildings and other physical infrastructure to teach and dispense medical advice. It is only by bridging the digital divide that we can make healthcare and education accessible to many million people across Pakistan. This will also prepare the country for the fourth industrial revolution driven by the advancements in digital, information and communication technologies.
While discussing all these possibilities one should always be aware of the many non-financial constraints that hinder the development of the human capital in Pakistan — the biggest of them being our persisting policy failures in agriculture pricing and marketing. Whatever political gains the government might have made in 2020 by keeping the economy on track, avoiding the collapse of healthcare system and averting food shortages seem to have been dwarfed by the specter of rising food inflation. Without a transformation of the food supply chain such inflation will be difficult to bring under control.
To transform its food supply chain, Pakistan needs to do a host of things. These include: updating its agro-ecological zoning, adapting climate smart agricultural practices, investing in research to develop climate adaptable crops and livestock varieties, reducing the cost of inputs, using data and digital technology to accurately measure crop yields and to track the food supply chains, making evidence-based decisions to curb hoarding and smuggling and maintaining a constant balance between the supply and demand of various food items.
Two other major hurdles in this regard are a shoddy inter-provincial coordination and a top-heavy bureaucracy increasingly out of touch with realities on the ground. The need for better coordination and collaboration among the federating units cannot be over-emphasised given that the provinces are responsible for most of the development — or lack thereof — in the social sector after the 18th Constitutional Amendment. Making them all follow the same policy parameters is certainly difficult but it is also an imperative that Pakistan can ignore only at its own socio-economic peril.
It is high time to make the best use of the existing institutional arrangements, such as the Ministry of Inter-provincial Coordination, and Council of Common Interests, for a coordinated effort to mitigate the pain of Covid-19.
The civil service reforms, including protection of tenure, assessment against a well-defined job description, and merit-based postings/transfers, however, are even more urgent. Without a comprehensive — but also speedy — change in this regard, no stimulus package will ever achieve its desired objectives.
Let us hope that 2021 is the year in which we achieve our full human potential, based on global best practices to cope with Covid-19; we may redefine the social contract not only between the state and its citizens, but also among the citizens. Happy New Year.
This article was originally published at: https://www.thenews.com.pk/tns/detail/768104-another-year-another-opportunity
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.