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ECONOMICS OF COVID-19

07/04/2021 07:24:00 Sanele Sibiya

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As I placed pen on paper and pondered on content for the maiden issue of Economics for Humans, I saw it befitting to disentangle the economics of COVID-19.

The COVID-19 pandemic has had direct impact on people’s livelihoods. The kingdom has been in and out of lockdowns and that has had marked effects on our ability to generate income and wealth. The multiplier effect on those who depend on our ability to generate wealth has been profound. Magnitudes have lost jobs due to the promulgated lockdowns and supply chain disruptions. Resulting in dwindled ability on government to mobilise resources and thereby finance the foreseen development and provide some quantitative easing to those who need support to minimise the impacts of the pandemic.

The youth continues to bear the brunt on the impacts of the pandemic as the numbers into the employment pool increase due to graduations against the backdrop of a shrinking economy. The question that begs an answer is how can we ensure we provide adequate social support amidst a weak fiscal position. This can be attained by utilising borrowing through the world facility that has been availed to the country and provide the much required relief to households and firms. It is imperative that adequate social safety nets are provided and the multiplier effect from spending through direct transfer payments to households might set the economy on a positive growth trajectory.

Transfer payments direct to households will ensure that the purchasing power is not completely eroded due to the COVID-19 impacts on the economy. If households still have money to spend, main streets will continue being sustained and that way jobs emanating from main streets will be saved. The payment of transfers to households will also have positive effects on the vaccine drive which also needs to be strengthened. Households that have money will also be able to overcome finance barriers to access vaccines. They will be able to get to vaccine centres to take their jab.

Insulated

If we time all this correctly, the economy might well be insulated from the looming impacts of the third wave. As the country takes up more debt, it is imperative that this debt be directed to adequate social provisioning which will have multiplier effects on business. The economics of quantitative easing show that it works more efficiently and achieves the desired multiplier effect if it is directly paid to households who are going to spend the money on main streets that are the middle class and the lower class. Relief aid has to be funnelled through those who are going to spend the money within the economy, not the upper middle class or the super-rich who have foreign tastes.

In my view, the World Bank and IMF COVID-19 lines of credit should not be utilised for normal infrastructure development and arrears of reduction or general wage payments. This should be given as support to those who need it the most. The economy shall then be expected to grow through the multiplier effect since the basic premise behind all this is government should pump in money to the economy and that money needs to be spent within the economy and that way the economy might likely grow albeit the pandemic. Statistics coming out in quarter four show that there continues to be an upward pressure on food inflation due to the marked impacts of the COVID-19 pandemic on supply chains. This is observed while the agricultural sector in the country also posited positive growth within the quarter.

Backbone

This shows that it is imperative for the input subsidy programme and the tractor hire programmes to start working early this time around and allocations to this must be increased. The agriculture sector remains the backbone of every economy and it is also one of the sectors that have the ability to create jobs faster than any sector. Food production remains vital to the survival of the economy and the people who inhabit it. Surging food production in the domestic economy will lessen the impacts of the pandemic on the economy and might make the lockdowns a bit bearable for us all. As I conclude this session, I implore government to stand ready with direct income support to households. This is something that the authorities need to ponder as we brace for the third wave and an impending and eminent lockdown looms. It is critical that the households be supported as everyone gets on the brace position.

Middle income and low income households have a high marginal propensity to spend for every lilangeni value given to them. This will ensure that the economy gets to reap a huge multiplier effect. It is also imperative to ensure that we have households ready to get to full economic activity after the vaccination drives, hence the buffer income support will play a vital role in ensuring that the economy resuscitates immediately after the vaccines become effective. Therefore, let us direct the resources to the people.