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Dawn Editorial 19 March 2020

State Bank’s rate cut

THERE has been a strong reaction to the cut of 75 basis points in the policy rate announced by the State Bank of Pakistan on Tuesday, with industry leaders decrying the move as ‘too little too late’. As demand and cash flows at businesses plummet, people deserve to know why the State Bank is continuing to approach the question of the interest rate as if it is business as usual. Even without the coronavirus-related challenge and the sharp slowdown in business activity that has resulted from the fight against this menace, the market was expecting a rate cut somewhere between 50bps and 100bps. As it turns out, the bank has met the market midway within the expected band. But industry leaders say that times are now extraordinary and they need further support to keep the economy afloat. They point to central bank actions in the US and other jurisdictions where rates have been cut sharply to argue that a large-scale stimulus now needs to be worked out to prevent economic collapse and the resultant unemployment.
These are indeed extraordinary times and the challenges of the day do call for the commitment of more resources. But the State Bank should resist the pressure from the business community that these resources be spent on them in the hope that they will keep jobs intact with the assistance. Instead of lavishing scarce fiscal and monetary resources of the state on the business and industrial elites of the country, the government and the central bank should target this assistance to the poor and the health authorities; this is where help is needed more than anywhere else. The State Bank’s decision to provide financing support for the procurement of ventilators is one example. The Benazir Income Support Programme can also be used to ramp up targeted assistance to the poor, for awareness-raising as well as material support in the coming days. But providing the rich with a ‘stimulus’ in the hope that this will result in job creation or income support for the working poor should not be the strategy.
With that in mind, the State Bank did the right thing to implement a meagre cut in interest rates at this time. The other countries that are using the monetary lever to stimulate their economies are not in the midst of a massive adjustment and can afford their respective stimulus programmes. But a stimulus of that sort in Pakistan, especially in today’s context, will do little to support the working class and the poor, and, in fact, could inflict significant damage on the economy through greater exchange rate stress, widening fiscal deficit and depleting reserves. If we are to commit our resources so painfully accumulated since the adjustment began, it would be better to target them directly to the poor.


Message of unity

IN a recent media interview, Prime Minister Imran Khan underlined the need for global unity in the fight against the coronavirus pandemic, which has caused a huge humanitarian crisis across the world. He was spot on when he said that the virus would wreck developing economies, asking the richer nations to write off the debts owed by poorer countries. In the same vein, he urged the international community to lift the crippling sanctions against Iran, which has emerged as the epicentre of the coronavirus outbreak in the region and is struggling to control the disease’s spread as its efforts are hampered by the sanctions imposed by the US. There is little room for disagreement with the prime minister when he declares Iran as a “classic example” of a country where the need to curb the virus is greater than politics.
The truth is that Mr Khan’s message of more cooperation internationally could have been backed by a better example of unity at home. Sadly, his televised speech to the nation on Tuesday reflected the divisions within, both in its content and in the reactions it generated. There have been concerns that the prime minister was selective in his praise when it came to the handling of the crisis, and chose to omit from his list those who appeared to so many others to have worked valiantly in the face of great odds. A more generous review could have served the cause of national cohesion well in this hour of trial. The rest of his speech was focused on what actions his government had taken to contain the outbreak of COVID-19 and its plans to help businesses affected by the spread of the virus, as he tried to reassure the people and allay public fears over the rising number of confirmed cases across the country. He ruled out the possibility of locking down the cities, saying that with such a large population and a huge number of poor, the country could not afford this extreme measure because thousands would starve. Mr Khan urged the people to support his government in the war against coronavirus. There’s no denying the fact that ‘we have to win this war as a nation’ as he said. With his government coming under criticism over its slow response to the global pandemic, Pakistanis will need much more than words from its leaders as they brace for one of the biggest health crises the world has seen.


PSL postponement

THE hugely successful and entertaining Pakistan Super League extravaganza has come to an abrupt halt amid the growing threat of coronavirus, leaving millions of fans disappointed. Though there is talk by the PCB of rescheduling the two semi-finals and final soon, the feverish tempo that had gripped the nation has been lost. The reason why the event was halted may be understandable, but it is still a pity that the fifth season of the cash-rich PSL could not have had a more befitting climax. For the first time since its inception in 2016, the league had shunned UAE shores to fully relocate to Pakistan, a sign that the environment was secure for international players, especially with matches planned in four cities, and that the country was ready to shake off years of being a pariah in the cricketing world. That the league emerged handsomely from it all is a credit to the PCB and security personnel. It broke attendance records with nearly all the matches played to packed houses. Besides, the month-long carnival remained incident-free and saw foreign players and officials praise the competition and hospitality. Viewership skyrocketed to over 120m across the globe, delighting broadcasters and sponsors.
More importantly, it provided a golden opportunity for Pakistan’s cricketers to showcase their talent in front of their home crowd and on their own turf. With the World Twenty20 scheduled for October this year in Australia and hawk-eyed selectors looking to shortlist potential match-winners, the players have fought hard to prove their supremacy while competing alongside three dozen international superstars. It must be said that by virtue of being commercially successful, the PSL has lent extraordinary credibility to the T20 format. The league has been a hit not so much because of the format of the game as the format of the tournament where no one team emerges as a clear favourite until the play-offs to keep the suspense going. Hopefully, PSL’s brand of cricket will achieve more landmarks in the years to come.


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