WITH over two million people infected, Covid-19 has gone exponentially viral across the globe. No one really knows how the impact of the pandemic will play out on the economic, social and power dynamics.

In addition to the ongoing human tragedy, there lies a long recessionary phase leading to bankruptcies, massive job losses, rising poverty and continued uncertainties for quite some time.

Serious questions are already being raised on the current practices of capital controllers, effectiveness of democracies and vulnerabilities of healthcare systems. One thing is certain that there will be a huge pressure on resource mobilisation for rebuilding states, revival of businesses, job creation and building social safety nets.

This rather grim and testing time, unprecedented in recent history, poses a huge challenge to the old school leadership that has facilitated elite capture of resources for populist interventions, leaving very little space for human development.

The potential impact of this global outbreak is expected to be particularly severe on fragile states and conflict zones. The United Nations secretary general has rightly appealed to warring nations for an immediate ceasefire to focus on humanitarian efforts and to open precious windows of diplomacy.

The unparalleled devastation wrought by the pandemic is a rude reminder to all those countries which have neglected social sector investments, particularly in health and education, and have disproportionately diverted fiscal resources towards unproductive infrastructure, defence contracts and other crony capital deals.

Pakistan’s ranking on the UNDP’s Human Development Index (HDI) stood last year at 152 out of 189 countries — 13 per cent below the average HDI of South Asia, including Bangladesh and India. India is ranked 129.

It is time for the nation to start confronting their rulers about the negligible allocations for health. The country spends only 1.12pc of GDP on health — way below the minimum required average of 4pc.

With a large youth population, it is high time to reflect upon scenarios of national security and economic sustainability with such a meagre resource allocation for healthcare. It will be prudent to start reprioritisation of public policies to deal with vulnerabilities of human security.

The key challenge is how to influence thinking in historically rigid public policy structures protected by patronage, populism and elite capture.

Looking at the development spending patterns through the Public Sector Development Programme (PSDP) of the federal government and the Annual Development Plans (ADP) of provinces, it is obvious that majority of the funding goes to infrastructure projects without any serious analysis or coordination.

Social sector spending remains almost invisible in the overall fiscal pie. This year’s development budget of Rs1.6 trillion is already lower than those of recent years and utilisation capacity is likely to further erode due to diversion of attention towards Covid-19 response.

While wastage of public sector expenditures is colossal, we have never tried to explore innovative ways of financing health and education. The current crisis provides an opportunity to develop a consensus about spending priorities and stop pouring more into a leaky bucket.

Biggest asset

It is crucial at the moment for nations to take a firm stance on the need to prioritise human development and focus on quality of life. Pakistan’s biggest asset could be a healthy and skilled workforce to get us out of a prolonged recession.

The coronavirus pandemic will turn global economic growth “sharply negative” this year, the head of the International Monetary Fund (IMF) has warned. The world is faced with the worst economic crisis since the 1930s Great Depression.

So how will developing countries raise financing for tackling poverty, revival of jobs and for strengthening human security in the coming years when tax revenues and global trade are expected to plunge. The answer is complex and only out of the box solutions, coupled with visionary policy shifts, may lead us towards accomplishing this goal.

Our leadership is currently focused on debt relief, charitable contributions for cash transfers to the poor and some monetary incentives for selective economic sectors like the construction industry. Given the looming economic crisis over the next two years, Pakistan needs to look for new ways of financing its policy options to revive the economy and to preserve jobs. Getting immediate debt relief will be cumbersome, but debt rescheduling is very much on the cards.

Our domestic debt is three times higher and expensive than the international debt and economic managers should strike a deal with banks for slashing down interest rate as well as the option for delayed repayments.

China has emerged as a winner by defeating this pandemic through its unparalleled commitment, resources and discipline. As part of the strategic and economic objectives of Belt and Road Initiative, China must extend substantial long-term financial support to Pakistan to strengthen its health and labour force infrastructure.

The two governments should urgently start a dialogue on human capital development under the CPEC framework. At the same time, size of the federal government needs to be cut down, privatisation of assets should be prioritised and money for infrastructure should be raised through domestic financial markets rather than overburdening the shrinking tax base.

All this could happen only if the state invites top professionals to volunteer in this difficult time.

At the diplomatic level, both India and Pakistan should seriously think about bringing down the heat of conflict so as to create more fiscal space. A responsible public policy and diplomatic response from India and Pakistan will be welcomed by the people of South Asia and the world at large.

With expected pressures on fiscal space due to both demand and supply side compression, loss of lives and livelihood, it is time for opinion makers in South Asia to reshape the discourse of dialogue towards human security and reduction of conflict.

Such a response will only be possible if consistent evidence-based messages go out from think tanks, international financial institutions, media and private sector leaders.

The writer is a senior economic policy thought leader. He has served as a minister of state and chairman of the Board of Investment

Published in Dawn, April 17th, 2020