There is growing concern among health experts that Covid-19, being a respiratory-borne disease, will find a suitable home in the winter months. Virus surges have forced European countries to impose new restrictions on businesses and other activities. From Spain, Italy and France to England, Germany and Poland, countries are shutting down again—some nationally, some partially. As infections continue to rise in the United States and other parts of the world, the optimism that the pandemic is coming under control is showing cracks. In recent months, global growth was beginning to pick up speed after a collapse in the early months of this year. Yet, resurging Covid-19 worries are clouding the outlook, again.

Nepal’s first confirmed case was recorded on January 23. A national lockdown began on March 24 and lasted through July 21. When the lockdown ended, there were 17,994 confirmed cases, which have now crossed over 200,000. Amid a rapid rise in infections came a Cabinet decision on October 5 not to bear the expenses of all virus-infected people. The government said it would only foot the test and treatment bill for those in economic hardship, disabled people, single women, the elderly, frontline workers in security and healthcare, and cleaning staff. Soon, fewer people were willing to share information. Contact tracing became difficult. On November 1, the KP Oli administration reversed its decision.

Quick adjustment

While the policy reversal deserves a ‘better late than never’ welcome, the vacillation itself reflects poorly on the decision-making process. Rather curiously, the October 5 decision came just a few days after the Supreme Court ordered the government to conduct free-of-charge PCR (polymerase chain reaction) tests of all people who want them. Health experts routinely point out the importance of PCR tests and contact tracing as effective tools to contain the spread of the virus. Yet, the Ministry of Health waited until November 1 to form three high-level teams—one each for contact tracing, case management and logistic support. This was done more than nine months after the first case was diagnosed. The death toll now stands at over 1,100.

Months of virus-spurred disruptions have taken a toll on the economy. The growth momentum witnessed in the first half of the fiscal 2019-20, which ended mid-July this year, was derailed in the second half. The pandemic has straggled two fiscal years. The International Monetary Fund forecasts the economy to have grown by 0 percent in the last fiscal year, and will grow by 2.5 percent in the current fiscal 2020-21. If anything, risks are to the downside. In late May, the federal government presented a budget of Rs1,475 billion for the current fiscal, setting a target of 7 percent growth in the economy! Growth will fall short, and it will be a challenge to raise the targeted Rs950 billion in revenue, which can lead the government to penny-pinch.

This can also lead to a larger-than-planned budget deficit and increased borrowing—both internally and externally. Nepal lacks a developed fixed income market. Multilaterals like the World Bank account for nearly 90 percent of external borrowing. These institutions act differently than private foreign investors who head for the exits at the slightest signs of uncertainty. In Sri Lanka, also a tourism-dependent nation, dollar bonds performed extremely well early this year as foreign investors piled in looking for higher returns. The virus then turned things upside down. In October, these bonds collapsed 20 percent—the worst in Asia—preceded by a 15.5 percent drop in September. Policymakers in Nepal are spared from this headache.

Their focus lies elsewhere. Like other lower-income countries, Nepal is having to grapple with whether to stay open, risk more infections and more deaths or impose restrictions and save lives but cause economic hardship. A significant portion of the working population works in the informal sector. They tend to be un- or semi-skilled labour and will bear the brunt of a prolonged shutdown. Right here and now, there are two issues at hand, one short-term in nature and the other long-term. Both will have repercussions for the economy. According to the World Health Organisation, 80 percent of Covid-19 infections are mild or asymptomatic, 15 percent are severe, needing oxygen, and 5 percent are critical—requiring ventilators.

The next several months, therefore, are crucial. In October, the number of confirmed cases in Nepal grew at a daily average of 2,998, versus 1,279 in September and 635 in August. The curve is steepening, and we are approaching the winter months. Even if we assume the curve flattens out from here on, there could be an additional 300,000 cases in the next four months, which translates to 15,000 patients that will require ventilators. There are currently an estimated 2,600 ICU beds and 900 ventilators in the country, not all of which are in working order. The math doesn’t add up. If this trend, even in the best case, continues, the government will have its hands full. We already hear of Covid-19 patients waiting for days to get a hospital bed.

Hope for the best

Longer term, even when a vaccine is available, it will be a while before the likes of Nepal lay their hands on it. Until then, policies designed to deal with the worst possible outcome can surprise on the upside. Once the vaccine is ready, tourism will likely pick up faster as tourists from countries that get vaccinated first begin to descend. Manufacturing should continue to take a back seat until the vaccine arrives here. There may come a time when exporters will be unable to meet demand—not because of a lack of orders but because of insufficient production. On remittances, in the first two months of the current fiscal Nepali workers sent home Rs165.7 billion (up 8.1 percent from last year). This was better than expected, but the momentum may or may not continue.

Immediately ahead, the authorities have other worries, including a lack of public trust. Effective risk communication played a vital role in containing the virus in Singapore, Taiwan and Pakistan. For the most part, Europe was unable to contain it, where a shortage of doctors and nurses looms. In the Czech Republic, US military medical personnel are extending help. Poland is establishing temporary hospitals at stadiums. Belgium patients got flown to Germany for treatment. Spain enlisted medical students to prop up its overwhelmed healthcare system. Policymakers here can learn a thing or two from these instances. Failure to adjust to the new realities can prove costly. Peru experienced many Covid-19 deaths as medical oxygen ran out.