ECONOMIC GOVERNANCE HANDRAIL FOR RECOVERY

As a society, our standard of living depends on our ability to produce goods and services.

The ability to produce these goods and services depends on several factors including physical capital, human capital, natural resources, technology and prudent monetary policies, as seen in the recent monetary policy statement released by the Central Bank of Eswatini. Government plays an important role in an economy’s growth rate. It achieves influence on the growth rate through the implementation of several policies. These policies not only influence the economy’s growth rate, but also play a significant role in day-to-day life.

Due to COVID-19, governments around the globe have responded with lockdown measures and stimulus plans, but the extent of these actions has been unequal across countries. Within countries, the most vulnerable populations have been disproportionately affected, both in regard to job loss and the spread of the virus. The implications of the crisis going forward are vast. Notwithstanding the recent announcement of vaccines, much is unknown about how the pandemic will spread in the short and long- term with stories of a third wave, as well as what will be its lasting effects. What is clear, however, is that the time is ripe for change and policy reforms.

The hope is that decision-makers can rise to the challenge in the medium-term to tackle the virus and related challenges that the pandemic has exacerbated, be it tax usage, rising inequality, job insecurity or international cooperation. This global pandemic has produced a human and economic crisis unlike any in recent memory. In this regard if policy and decision-makers increase national budget allocation from taxes to education and training, this will play an important part in influencing a country’s economic growth. A country’s investment in education is equal to its investment in physical capital for long-term economic success. With a more educated population, a country’s productivity can significantly increase. This increase can be a result of increased technology and more efficient ideas on productivity.

Interests

The economic policies need to be supportive of a country’s best interests especially in times of uncertainty where decision-making becomes difficult and forecasting becomes a nightmare. It may be argued that the main objective of a government is to promote sustained economic growth to improve and increase the nation’s prosperity through prudent management of taxes and other ventures. This can only be achieved with structural policies used to enhance the long-term economic performance and the creation of a stable macroeconomic environment that will encourage stable growth to take place. This requires management of both monetary and fiscal policies, which can be examined in terms of having aims of creating a stable economic environment which will facilitate growth and the way that the policies manage, and are seen to manage all economic activities in the best interest of  citizens.

Implementing an economic policy mix involving macroeconomic and microeconomic policy in order to achieve development objectives is another way of energising the economy.
The fiscal instrument is the budget, an annual statement from policy framers, decision-making machinery and dealing with income and expenditure plans for the next financial year. Fiscal policy is an effective tool which can target specific sectors of the economy such as individual industries, unlike monetary policy which affects the economy as a whole; this is why there is need to have and implement a policy mix.

Challenge

While the economy may recover in the near future, policy fix has to ensure we also include other sectors including agriculture, services and mining. The challenge is three-fold; design data-dependent policies that boost productivity and long-term growth, cut debt and reduce vulnerability shocks to economic downturns. In general as Africans we must avoid overreliance on external debts as well as donations rather adopt a model of self-reliance that guarantee sustainability and use of diversified economy as the source of livelihood.

Countries like Uganda and Kenya have created job opportunities in sectors like road construction, trade activities, telecommunication and transportation industries. The situation shows various job opportunities that can be created outside the traditional ones. In order to avoid uncertainties that came with COVID-19, we should utilise our rivers and lakes to create irrigation schemes. This can be done by learning irrigation technology from countries such as Israel that is a desert yet it produces more food than it can consume. In the short run it would also help to resist the worst protectionist ideas arising from economic policies that encourage thirst for imports.

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