Coronavirus, or COVID-19 – a word the world was
unfamiliar with just 5 months ago. In Dec 2019 Coronavirus outbreak was first
identified in Wuhan, China, and since then it has travelled to 210 countries, claiming
lives of more than 180,000 people. On Mar 11, 2020, the World Health
Organization declared Coronavirus as a Pandemic, stating that the only
precaution to prevent the spread of this virus is physical distancing, washing
hands for 20 seconds, and covering one’s mouth while sneezing and coughing. In
Pakistan, the first case of Coronavirus surfaced on Feb 26, 2020. As of third
week of April 2020, over 10,000 cases have been testified. Over 200 lives have
been lost, while more than 2,000 have recuperated.
What is an
Externality?
By definition, an externality is a cost or benefit that
affects a third party who had no control over the creation of that cost or
benefit. Also known as the ‘spillover effect’, an externality can be both
negative and positive, and can stem from both production side and consumption
side. Negative externalities arise when social costs exceed private costs.
Similarly, positive externalities occur when social benefits exceed private
benefits. Externalities –negative or positive –create market inefficiencies.
Negative
Externalities
(1) Macroeconomic
consequences:
According to a research
conducted by Pakistan Institute of Development Economics (PIDE), an affiliate
of Planning Commission, Pakistan is expected to face 12.3m to 18.53m layoffs as the country is experiencing lockdown. As stated by the Labour Force
Survey 2017-18, the informal sector, which caters to 72% of non-agricultural
employment is hit hard. The sectors heavily affected due to the countrywide
lockdown include wholesale & retail trade, transportation, construction,
and social and personal services.
Coronavirus is set to further
damage the already ailing economy. Pakistan’s economy is burdened with an
external debt of more than $100 billion – an all-time high. During the year 2019,
Pakistan paid $11.6 billion as debt repayment. The foreign exchange that comes
through the workers’ remittances play a huge role in repayment of the debts. According
to the data published by the State Bank of Pakistan overseas
Pakistanis remitted $1,824.3 million in February 2020, which is a 15.3%
increase on a year-on-year basis. In February 2019 this figure was $1,581.7
million. 80% of the total remittances are received from four countries - Saudi
Arabia, UAE, US and the UK – all of which are heavily affected by COVID-19. Therefore,
a drop in remittances is expected as the oil prices have plunged, putting the
employment of expatriates in a jeopardy.
As the economy is seen
struggling to fight the pandemic, Prime Minister Imran Khan took the lead and
called for a moratorium on the interest payments. Following his initiative,
several African debt-ridden countries also voiced for the same. But because the
IMF and World Bank cannot restructure the debt plan unilaterally, a response
from the leaders of the wealthy lender countries is still awaited.
(2) Behavioural
Concerns:
The behavioural aspect of
coronavirus pandemic cannot be overlooked. The country-wide lockdown has led to
panic-buying behaviour of consumers. They fear they will be confined in homes
for an indefinite period. Therefore, in an attempt to reduce their outdoor
movement, consumers prefer to stockpile items ranging from kitchen staples to
sport equipment, from art supplies to cleaning equipment. The disrupted supply
chain has added much to the woes of consumers as empty shelves make their
supermarket visit futile. Just last year, Pakistan faced wheat and sugar
crisis. A shortage of these staples compelled the consumers to pay exorbitant
prices. Although Pakistan is an agrarian
country, and Prime Minister Imran Khan has repeatedly stressed on the adequate
supply of wheat and sugar which can fulfil the country’s requirement, yet
people fear shortages and end up hoarding these items, disturbing the markets
and swelling more uncertainty.
Positive
Externalities:
(1) Reduction
in Air Pollution:
Following the coronavirus lockdown
in major cities, the world has witnessed a drastic drop in air pollution. With
the factories shut and fewer cars on the roads, the level of nitrogen dioxide
(NO2) is noticeably lower when compared to the same period of previous year.
Karachi, the industrial hub of Pakistan, has also reported a significant
improvement in Air Quality Index. During this lockdown period, the AQI in the
city is at 73, or in the ‘Moderate’ range, as compared to 196, or in
the ‘Unhealthy’ range, in February 2020; the pre-corona period.
(2) Social
Responsibility:
In Pakistan, where the fear of
unemployment is magnifying as the virus grips the country, the role of social
responsibility is proving pivotal. The Government of Pakistan has created Prime
Minister’s Relief Fund for Covid-19. The
Premier has urged the nation to donate to this fund which will help in
providing relief to people who have been on the breadline due to the lockdown.
Individuals and organizations alike are donating generously towards the fund.
The Central Bank has slashed the discount rate to a single digit in order to
boost investment Unilever Pakistan has pledged Rs. 200 million towards the
fund. Asim Jofa, a leading dress designer, has developed protective gear for
medical staff and aims to distribute these free of cost. These are just a few
of numerous initiatives taken by public and corporations to help the people
affected most by the novel coronavirus.
(3) Improved
Family Relationships
While this pandemic has
restricted families to the boundaries of their homes, it has given a great
opportunity to all to ‘take a break’. Parents have found an opportunity to
strengthen the bond with their children.
From playing indoor games to baking treats, the families have found joy
in being together.
To sum up, the novel
coronavirus is going to alter the way we perceive things. It has just begun and
its grave repercussions are yet to be witnessed. For the time being, it is nature’s
way of giving us a break, to have us reflect and contemplate as to how we have
to lead the rest of our lives, how we should value people around us, and how we
could nurture the nature even more.
