Governments across the world are taking measures to fight the fallout of COVID-19. There appears to be a consensus that public health should be a priority over economic considerations. Every measure that can contribute to the fight against this virus should thus be taken first. Once the governments are done with the virus, there shell be time to focus on economic recovery.
Given the limited resources, Pakistan has to make some tough choices. There was a view early on that a lockdown will adversely affect economic stability for which the government had been trying hard. Others argued that stopping the endemic in its tracks was more important.
Like other countries, Pakistan has to face and accept the trade-off. It is time to control the spread of Covid-19 and save lives. Leaving the virus uncontrolled may jeopardize the health system, which might impose even higher social and economic costs.
Currently, the provincial governments are in a lockdown. However, the confusion remains. Policy makers seem to be doing too little, too late. Policy uncertainty on responding to covid-19 remains. The federal government is seen shedding its responsibility in the name of allowing provinces to make decisions about a lockdown. It is also seen to be of the view that lockdowns are not doable. This has resulted in a debate and added to the uncertainty. This uncertainty at the top level is causing several problems.
First, other than Sindh, the provincial governments are confused about the way ahead. Is it going to be a voluntary social distancing or a lockdown? Is the lockdown going to be partial, where people can go to jobs for their livelihoods, or a forced lockdown? How is a forced lockdown different from a curfew?
These are important questions as they shape the execution of the lockdown and related social protection and other strategies. Any confusion on this front may leave lockdowns executed poorly. And, this will be the first failure. A partial lockdown is no lockdown. The virus may find ways to continue to spread. The odds of a post-lockdown emergency –- the second or third wave of infections— are high. A complete lockdown can curtail the impact.
Second, the costs of the policy uncertainty are already visible. Except for Sindh, the governments, federal as well as provincial, have no plans in place to protect people from socio-economic fallout of the lockdown. The first announcement with regard to a relief package came three days after a lockdown was announced.
The costs of the policy uncertainty are already visible. Except for Sindh, federal and provincial governments have no plans in place to protect people from socio-economic fallout of the lockdown. The first announcement with regard to a relief package came three days after a lockdown was announced.
The relief plan may not be useful at this stage. The time required to devise strategies and action plans may overlap. This may increase the sufferings of the people as they will be unable to get the help required during the lockdown. The masses, if not taken care of in the first phase, may resist an extension of the lockdown, if any.
Third, while other factors, such as the impact of a cut in the interest rate on foreign reserves and value of rupee must have weighed in, policy uncertainty on Covid-19 also reflected in late response on the part of macro-economic policy. Recent developments on the monetary policy front will make the point clear. When the world was cutting the rates to ensure provision of liquidity required to fight Covid-19, the State Bank of Pakistan was reluctant to cut the rate because of the policy uncertainty on the part of the federal government.
The debate and position before March 17 showed that Pakistan might not be hit hard by the virus. Most probably, the SBP had decided sticking to economic stabilisation and a ceremonial cut of 75bps. This caused panic. The SBP has to convene an urgent meeting of Monetary Policy Committee (MPC) to cut another 150bps. A clear message before March 17 of a possible lockdown and its implications would have avoided this situation and the associated panic in the market.
Similarly, closing other transport but allowing trains to operate may prove costly as it caused railway stations to be packed with people travelling from Karachi to other parts of the country to avoid a stiffer lockdown in Sindh. This may have caused the infections to spread to other parts of the country.
Such policy uncertainty needs to be avoided if we have to have an effective lockdown. Policy uncertainty and the associated impact on the decision-making will leave any efforts, including economic packages, futile.
There are certain lessons one can learn from the success of lockdowns elsewhere.
First and foremost, better coordination is needed between federal government and provinces. It is the first line of defence against uncertainty and bad response. The Inter-provincial Coordination Committee must be engaged to align the decision-making process regarding Covid-19 crisis.
While provinces may have different economic packages, decisions regarding containment and the degree of lockdown, quarantine and testing should be taken jointly and implemented simultaneously. Sequential decision-making may deprive us of the desired gains.
A piecemeal approach may not work. As Henrik Müller, in his piece COVID-19: Governments Must Avoid Creating Additional Uncertainty says, “We are confronted with a complex global crisis that is rooted in falling demand and supply as well as in high levels of uncertainty”. The cost of hesitation can be too high. Make the mind that it is people over economy and then take decisions.
Third, policy makers have a very critical role to play. “Not knowing what to expect from the authorities has the potential to render economic agents virtually paralysed”. Federal government, as the main driver of macro-economic policy in Pakistan, therefore, needs to come out with greater clarity. Top level federal and provincial governments and other related authorities must take steps to reduce uncertainty in decision-making, action plans and the tools employed to fight against Covid-19.
The situation demands momentous decisions. The fear of error must not stop policy makers from making tough choices. Otherwise, lockdowns will not work. Policy uncertainty on economic and lockdown fronts may also inflate the economic and psychological anxieties of the people further. Tough and difficult decisions on public health measures—quarantine, forced lockdown—must be taken with utmost clarity and then implanted.
The writer is a research fellow and heads Policy Solutions Lab at Sustainable Development Policy Institute (SDPI). The opinion does not reflect SDPI’s position.
This article was originally published at: https://www.thenews.com.pk/tns/detail/635427-policy-uncertainty-and-covid-19
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.