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How countries are shielding their economies against coronavirus
Deserted. Most shops on Luwum Street in Kampala remained closed since Thursday following a presidential ban on public transport and markets, among others, as some of the measures to combat the spread of coronavirus. PHOTO BY DAVID LUBOWA
What you need to know:
Stranded. The pandemic has put the economies of more than 200 countries and territories on a standstill.
As of yesterday, the cumulative cases of Covid-19 around the globe was approaching 540,000, with more than 24,000 deaths.
The coronavirus, that started spreading from Wuhan City in China in December last year, is rapidly putting the economies of the world to a standstill as cases have been reported in about 200 countries and territories around the world.
Back home, the number of cumulative cases of Covid-19 increased from 14 to 18 following President Museveni’s confirmation of four new cases via his social media platforms on Facebook and Twitter yesterday.
The world was recovering from the global financial crisis that started in 2007, and the effect of coronavirus is clearly sending every economy to a backtracking foot since governments are having challenges on how to stabilise the sinking ship.
Everywhere, governments are charged with ensuring availability of testing kits and also making the health facilities ready to handle the overwhelming number of cases.
The number of people leaving their jobs without any assurance of when they will return is increasing by the day as governments opt for lockdowns or stay home orders as one of the mitigating measures in regard to fast spreading pandemic.
Much as governments in Africa have almost taken one common measure- the closing of borders, it is still not yet clear what they are up to in regard to shielding their economies from a fall if the pandemic surges as higher as it is in Europe, the United States of America, and China.
Countries earmark relief
With the US surpassing China with the number of confirmed cases (85,612 against China’s 81,340), the Trump administration has agreed with the Senate on a $2 trillion package to save the world’s biggest economy from falling as a result of the Covid-19.
This package includes $500 billion to help companies struggling with bank loans, $350 billion to save small business operators from closing shop, and $1,200 (about Shs5m) for lower and middle income earning adults. Each child has been provided with a $500 (about Shs1.9m) package by the government. There are other insurance packages for different categories of people.
As per a report in Quartz, the Federal Reserve pledged an unlimited amount of asset purchases to support markets, including, for the first time, buying corporate bonds and exchange traded funds. The central bank earlier slashed interest rates to near zero.
China
The Chinese government was the first to feel the pinch of the Covid-19, but reports say there is a plan to spend $394b, which will also be backed by local government bonds.
Already, the bank reserve requirements will be freed up to $79b for lending to the companies that have been hard hit by the crisis.
UK
Prime Minister Boris Johnson’s government has already announced waiving of Value Added Tax (VAT) until June and the deal is worth £30b. Other packages include government grants covering 80 per cent cover for the salaries of retained workers up to a total of £2,500 a month.
While the Bank of England cut its target rate to a record low 0.1 per cent, the officials have also revealed that a package of £330b bailout fund was being assembled to support businesses struggling with loans.
EU
Away from the UK, the European Union is planning to ensure that economies of member states do not sink.
The focus is on combating the sovereign debt crisis and the EU Commission is already assessing a €37 billion Coronavirus Response Investment Initiative to be used for healthcare, supporting workers, and small- and medium-size businesses.
Other countries
Japan plans to provide $4 billion focusing on small and mid-size companies and the Bank of Japan will buy more than $100b worth of exchange-traded funds; Germany (€750 billion plan for loans), France will spend €45 billion to help small businesses and employees; Italy (€25 billion of support for companies and workers) and, €340 billion of financing, and more efforts are expected to follow.
India, which is also under lockdown, plans $8.1 billion of loans by the end of March.
Elsewhere, the Canadian government set up a $56.7 billion package to support individuals, companies and households. Australia availed $8.8 billion for lending to small and medium lenders.
The International Monetary Fund is preparing to set aside $1 trillion in lending to 189 member countries, as well as a $10 billion available for low-income countries using facilities that have zero interest rates.
East Africa
In Kenya, where a curfew started yesterday, with the government ensuring no movements between 7pm and 5am, President Uhuru Kenyatta announced a tax relief for workers earning KShs24,000 (about Shs890,000); reduced Pay As You Earn (PAYE) from 30 per cent to 25 per cent; pay cut for president, his peputy and all Cabinet Secretaries; and, KShsh1 billion health coverage kitty.
Rwanda
Rwanda’s central bank this week announced some measures to mitigate the economic impact of Covid-19.
These include introducing the extended lending facility of roughly $52 million, which commercial banks with liquidity challenges can borrow from at the central bank rate, and lowering reserve requirement ratio effective April 1 from five to four per cent to allow banks more liquidity to support affected businesses.
The central bank also allowed banks to restructure outstanding loans of borrowers facing temporary cash flow challenges arising from the pandemic.
Africa
Coronavirus casualities. In Africa, South Africa is the most hit, with 900 confirmed cases ad two deaths by yesterday, followed by Egypt with about 500 cases and 24 deaths, and Algeria with at least 367 and 25 deaths. Other countries with higher cumulative numbers include Morocco with 275 cases and 11 deaths, and Burkina Faso with at least 152 cases and seven deaths.
In East Africa, Rwanda leading with at least 50 with no deaths, followed by Kenya with 31 and one death. Uganda jumped to 18 cases yesterday, while Tanzania’s has 13. Only Burundi and South Sudan had not yet reported a case by press time.
Uganda’s case
Despite President Museveni announcing stringent measures to curb down the spread of the coronavirus, the government is yet to come out clearly on what mitigation approaches it intends to take to save the economy already chocking on debts.
Millions of people are now home after public transport was banned effective Thursday.
Officials from Bank of Uganda this week revealed that the country had lost more than Shs130 billion between February and March because offshore investors, who have been investing in Uganda securities, stopped.
Some of investors have already exited Uganda’s economy, making investments in government securities decline.
There was talk that high level planning was being made for the government to come up with measures to put in place to save the economy from falling.
Finance Minister Matia Kasaija early this month told Parliament that economic growth in FY2019/2020 has been revised downwards from 6 per cent to between 5.2 and 5.7 per cent, depending on the severity of the Covid-19 impact on Uganda.
“The biggest impact will be on the services sector. Travel restrictions are already affecting the tourism sector, including hotels, accommodation and transportation. Supply chain disruptions are hampering trade, and this is expected to continue until the virus is contained at the global level,” the minister said.
Mr Kasaija said the government would seek a loan of $100 million (about Shs389b) in budget support for FY 2019/2020, and another loan of $90m (about Shs350b) in the 2020/20 FY to mitigate economic impact that will caused by coronavirus.
Worried with the slow response of the government, Parliament set up a six-member ad hoc committee chaired by Kasilo County MP Elijjah Okupa with terms of reference majorly on identifying key economic intervention measures to be put to the government next week.
Sources within the ad hoc committee, which has been sitting since last week, told this newspaper that the draft report should be out on Monday.
“We have been looking at the banks not to collect loans and also reducing interests but the committee is somehow stack because government has not clearly given a projection of the magnitude of the impact on the economy. Everyone feels it is going to be high but the government is slow to open up,” the source said.
Among the suggested measures, the committee will recommend to Parliament to urge government to empower the private sector by reducing the cost of doing business and also quickly train people on how to use money in terms of crisis.
Additional reporting by agencies
