By Kwame Venner, Economist
Worldwide, the Covid-19 pandemic has left a trail of destruction in its path, including but not limited to plummeting business and government revenues and significant layoffs and/or salary cuts for a multitude of workers. Some notable adverse effects of the pandemic in the OECS sub-region include:
- A dramatic decline in government revenues, of approximately 50%.
- Redundancy of thousands of tourism sector workers.
- The temporary closure of non-essential businesses and concomitant effects.
To cushion the adverse impact of the pandemic on the socioeconomic landscape, many of the affected countries have devised income support packages which are being funded and implemented by their social security schemes. These packages are meant to provide temporary income relief and cost tens of millions of dollars to implement. In addition, the governments of the affected territories have provided a wide variety of economic concessions to alleviate the plight of households and businesses. The provision of these concessions will undoubtedly result in tremendous government revenue losses.
Neither the social security schemes nor the governments can sustain these worthy initiatives because the scale of financial and human resources required to do so will become overwhelming over time, bearing in mind that these initiatives are not the primary mandates of these entities.
Given the transitory nature of the income support measures instituted and the need to continue the discussion on suitable country-specific socioeconomic reforms to move forward on a sustainable path, the countries could consider, in the interim, conscientiously and expeditiously resuming economic activity whilst simultaneously adopting a disciplined approach to adhering to the relevant health protocols designed to control the spread of Covid-19.
Adhering to health protocols is very important to:
- Contain the transmission of the coronavirus which causes the Covid-19 disease.
- Gain citizens’ trust and confidence that it will be safe to resume daily activities, which in turn ensures, critically, that the economic recovery is sustained.
The conscientious resumption of economic activity would reverse the trend of social and economic suffering and minimise the need for income support programmes funded by social security schemes or loans and/or grants from internal or external sources. It would also negate the need for governments to maintain the excessive levels of economic concessions which, given the resultant high revenue losses incurred, would handicap governments’ ability to satisfactorily fund administrative operations and development agendas.
Citizens of the Organisation of Eastern Caribbean States (OECS) can be assured that its regional bodies, i.e. the Eastern Caribbean Central Bank (ECCB) and the OECS Commission, will be committed to steadfastly and diligently providing the necessary technical guidance to the member states on medium-to-long-term strategies for responding to the adverse effects of the pandemic.
In the circumstances, a joint fiscal support initiative for the governments could be considered by the independent members of the OECS. This could be treated as a first phase of intervention given these members’ unhindered ability to negotiate with foreign countries and entities. Such negotiating authority is not available to the non-independent territories in the OECS.
Key representatives from the countries’ respective Ministries of Finance could meet to discuss the make-up of this joint fiscal support initiative, which ultimately would be duly deliberated upon and approved by our political leadership. Our Ministries of Finance have developed the requisite experience and expertise in public sector financial management through continual training, counsel and application of prudent fiscal policy over many years. The programme would be constructed bearing in mind a lifespan of at least six months that would satisfy the immediate requirements/priorities of government expenditure, including but not limited to:
- Employee wages and salaries.
- Utility payments.
- Public infrastructure repairs and maintenance.
- Procurement of goods and services.
- Rental payments for properties housing government offices.
- Social sector subventions.
The group approach to the design and management of the initiative would give the prospective donor countries/agencies great confidence in the quality of the programme and in the ability of the group to efficiently administer it, given the pooling of the various countries’ relevant human resources.
The funding sources that could be explored include:
- Regional and international agencies, e.g. Caribbean Development Bank, World Bank and International Monetary Fund which, given their ‘AAA’ investment ratings, can generate funding at low interest rates.
- Friendly countries which have enjoyed decades of economic success and with whom our countries have strong international political and economic relations, e.g. Canada.
- A combination of funding from the options described in (1) and (2).
A country is not meant to stop working, and must continue to interact with the rest of the world. Our countries need to arrive at the point where health protocols are adhered to and operations can resume. Although this may have to be phased in, time is of the essence, because our citizens and our public and private sector operations are in distress. Notwithstanding the adverse developments forced upon our countries, all stakeholders must be very mindful that the successful resumption of economic activity is contingent upon the establishment of a harmonious relationship between our governments and citizenry. In this relationship, the stakeholders must be resolutely committed to containing and controlling the transmission of the coronavirus.