Tuesday, July 14, 2020

Coronavirus Economy: To cushion or not…?

Its already clear that the global pandemic – COVID 19 otherwise known as Coronavirus impact, though too early to fully measure, will be significant on both the global and domestic economy.   

As it spreads and the global patient count and death toll keep growing, economists across the globe are slashing their once-rosy expectations for global growth in 2020. As data keeps coming in day-in and day-out, the interest now shifts to the impacts of the deadly virus on the growth of the economy with interest on private business profits. Some countries across the globe have already availed cushions against the impact to their citizens and business communities. 

For countries like Botswana, the first and perhaps the easiest start of point is to measure the public purse. From economic perspective of policy makers here, the key issue now is not just about the number of cases of COVID -19 that could be registered, but the level of disruption to the domestic economy. Can the government afford to cushion the now ailing tourism and hospitality sectors as well as the SMEs? 

In its first indirect step, the government of Botswana has since mobilized resources to finance the national health programmes to control the spread of the virus and protect human lives. 

In the meantime, the Permanent Secretary in the Finance Ministry – Dr Wilfred Mandlebe says a comprehensive assessment of the macroeconomic impact of COVID-19 is being undertaken as the situation unfolds. 

The focus of the assessment is on the impact on the economy and the government budget which will later inform the national response required. 

Each passing day, it is however becoming clear that the economy is fast being held at ransom by the Coronavirus. This therefore raises questions such as whether Botswana can display the same resilience demonstrated after the 2008/09 financial crisis. 

While no one can answer the question now, Dr Mandlebe says the outbreak buttresses the importance of diversifying the economy through export led growth beyond the traditional sources of revenue. 

Apart from plans to speed up plans to diversify the economy post the coronavirus outbreak, the Botswana government is in talks with the private business sector through the relevant sector Ministries to assess the impact of the COVID-19 with a view to considering policy response and others. In addition, the Government, through Bank of Botswana, is also engaging with commercial banks to find ways of cushioning the impact of the COVID-19 on the cashflows of the affected businesses. 

“Similarly, we are engaging with the Botswana Unified Revenue Service (BURS) to consider negotiating affordable tax payment schedules and penalties for affected taxpayers on a case by case basis. So, the affected businesses will be considered and assisted in that manner”, says Dr Mandlebe. 

Following the 2008 economic crisis, the Economic Stimulus Programme (ESP) was formulated out of the realization that the economy needs a boost to sustain growth and development, by so doing facilitating job creation and diversification. However, the job losses emanating from the mining sector negated attempts to create jobs through the ESP.

Meanwhile in the meantime, the government has been banned travelers from countries classified as high risk. The move, however, does not signal a change in the country’s foreign policy. 

Dr Mandlebe says what is being implemented are measures to control the spread of the deadly virus into the country from across the globe with no discrimination of the source. 

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Sunday Standard July 12 – 18

Digital copy of Sunday Standard issue of July 12 - 18, 2020.