MOST countries that have been hit by Coronavirus, referred to as Covid-19, have availed substantial fiscal and monetary stimulus and relief packages geared at addressing the negative effects arising from lockdown periods.
Editor’s Memo, Faith Zaba
China, the United States, the United Kingdom, Japan, Germany, Nigeria, South Africa, Rwanda, Namibia, among several other countries, have offered huge stimulus packages. The United States has put together a US$2 trillion stimulus that will expand unemployment insurance, provide US$1 200 stimulus in emergency financial relief to most American adults and provide life preservers to distressed businesses impacted by the Covid-19 pandemic.
Namibia has allocated about US$450 million to a stimulus and relief package to deal with the negative impact of Covid-19. Its Finance Minister Ipumbu Shiimhi said the package was directed at formal and informal businesses in sectors which are directly affected by lockdown measures, as well as households. “To avoid further retrenchments in the hardest-hit sectors, government will provide a wage subsidy to aid businesses in keeping employees on board in the tourism, travel and aviation and construction sectors.”
In South Africa, the government has said it will assist companies facing distress through the Unemployment Insurance Fund and special programmes from the Industrial Development Corporation. It has also announced that it will cushion workers with an income below a certain threshold, who will receive a small monthly payment during the next four months. There will also be funds available to assist small and medium-scale enterprises (SMEs) under stress, mainly in the tourism and hospitality sectors.
However, the Black Management Forum (BMF) says government should avail a R1 trillion (US$53 billion) stimulus package to cushion the economic aftermath of the three-week national lockdown.
In Zimbabwe, Finance minister Mthuli Ncube announced a package which just focusses on containing the virus, through importation of ventilators, face masks, test kits, infrastructure, among other personal protection equipment. He also announced that government is set to provide financial assistance to at least one million households. The households will be identified by the Ministry of Public Service and Social Welfare.
Other measures implemented to try and limit the spread of the virus include the institution of a 21-day lockdown. The Covid-19 pandemic has hit at a time when the country is still reeling from two shocks — erratic rains in the 2019/20 that affected the agricultural season and Cyclone Idai, which ravaged the eastern parts of the country. Confirmed Covid-19 cases stand at eight, with one death recorded.
According to the International Monetary Fund, Zimbabwe requires more than US$26,4 million as at March 24, targeting prevention and control of the disease, including awareness campaigns. This does not include what the country will need to recover after the epidemic is contained.
With over 95% of the country’s employment in the informal sector, which has been brought to a halt during the 21-day lockdown, it means there are much more than the one million households being targeted, in desperate need of financial aid.
According to analysis by the Food and Agricultural Organisation conducted before the World Health Organisation (WHO) declared Covid-19 a pandemic on March 11, over 4,3 million people were in urgent need of food assistance. Overall, about 7,7 million are in need of food assistance in the country, according to World Food Programme. This means the one million being targeted is an insignificant percentage of Zimbabweans who will require assistance from government to survive the 21 days. Government needs to craft a substantial stimulus package that will not only take care of vulnerable households, but also save jobs by providing financial assistance to companies in distress.
The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending. The theory behind the effectiveness of a stimulus package is rooted in Keynesian economics, which argues that the impact of a recession can been lessened with increased government spending.
The goal, based on the principles outlined by Keynesian economics, is to increase aggregate demand through increased employment, consumer spending and investment. The question for Zimbabwe is what it intends to do for critical industries and SMEs post the coronavirus pandemic. What are its plans to limit the number of job losses in a country which is already haemorrhaging from underlying socio-economic problems?
While the country works towards flattening the coronavirus curve by staying at home during the lockdown and adhering to the WHO guidelines of social distancing and self-isolation, government needs a post-Covid-19 plan.