Consider funding a long-term stimulus package
Freedom Speaks Column: The economy was already declining but the new coronavirus is making it worse – Part 5
An economic disaster is certainly looming in our land – the result of a double whammy – loss of CBI revenue and the impact of the COVID-19 pandemic! A significant worsening in social conditions will result and the already-low quality of life in the nation will drop. A key challenge will be how to prevent the situation from becoming chaotic and how do we ultimately restore the economic health of our country.
In discussing that question, let us again emphasize that the economy of Dominica was already weak and declining prior to the impact of the COVID-19 pandemic. The COVID-19 pandemic is however making the situation worse. To minimize the pain that is to come and to reposition the country to re-invent itself, a number of strategies must be contemplated. In that regards it would be desirable for there to be prepared a meaningful rapid relief package and an economic stimulus package to respectively address the immediate social impact of the COVID-19 pandemic on the people and awaken an economy that was already very weak. But given the lack of fiscal reserves and the poor state of government finances, the current administration will need to borrow to finance a such a package. The Dominica Freedom Party has recommended that the government approaches the International Monetary Fund (IMF), the World Bank and the Caribbean Development Bank (CDB) for such support. Though there may still be fiscal financing shortfalls after inputs from these multilateral institutions, their input could be significant. We truly hope that the government will be prepared to meet loan conditions that will be required by these institutions. These requirements could include those related to good governance. As for that matter, these institutions will be skirting their responsibilities if they don't insist on conditions to strengthen governance given that they are aware of the lack of accountability by the Skerrit-led regime for public funds – including that related to the CBI programme and the PetroCaribe fuel programme.
What then does the government need to finance? First, they need to finance a huge fiscal deficit (expenditure exceeding revenue) that was already confronting the country prior to the impact of the COVID-19 pandemic. This threatened to rattle the country including through difficulty to pay civil servants and cuts in expenditure to include that on social programmes such as the National Employment Programme (NEP) and monetary assistance to the elderly.
Secondly, given the unfolding pandemic, the government would need to consider funding an immediate relief programme as if this is not done, there could be much social hardship and heightened social and citizen security challenges that would in turn make it more difficult to restore our country once the COVID-related risks have abated. Even if the quasi-lockdown is removed in Dominica, lockdowns among our trading partner countries including the USA and the pandemic-induced global recession, will continue to depress economic activity in Dominica, and thus there may still be need for social relief. But we pause here to re-iterate that should financing become available, the government should not use a relief programme as a political tool and the multilateral organizations should be mindful that this is a real possibility and they should prescribe adequate loan conditions to address this issue.
An immediate relief package could include but not necessarily be limited to the following areas.
Income support for low income persons who lost employment or suffered significant reductions in earnings as a result of the pandemic. This could include farmers who habitually sold produce to hucksters. Such relief will assist these persons to pay for food and essential utilities.
Assistance to public transport operators who have been advised to carry less passengers per row. This will support their earnings given that bus fares are controlled. The availability of bus services would facilitate persons accessing essential services, but it would also facilitate a quicker return to normal life once the risk from COVID-19 has passed.
Debt relief should be contemplated for homeowners with mortgages and who experience significant declines in earnings. This could be facilitated by the banking system through loan moratoriums, but consideration would have to be given to the capacity of commercial banks and credit unions to provide the moratorium. There should be a role played by the Eastern Caribbean Central Bank (ECCB) in that regard.
Debt relief for qualifying businesses who have suffered significant loss of income. Here again this could be facilitated through the banking system with the involvement of the ECCB.
Keeping essential utilities turned on for residential and commercial use during an initial period without disconnections but with a proposed bill settlement plan for those who suffer significant loss of income or who otherwise could not settle their bills. A relief package should then include an element that gives consideration to the ability of the utility companies to provide such support.
Thirdly, government needs to consider funding a long-term stimulus package aimed at resetting the economy. Let us discuss that next week.
Kent Vital Political Leader Dominica Freedom Party.