Shouldn’t we start with questions about what has happened to the economy — and what is likely to happen to it — in a structural sense, and what that might require of policy, rather than starting with well-worn answers and working backwards?
The COVID-19 pandemic has now spread to over 180 countries, including several countries in sub-Saharan Africa. Ethiopia reported its first COVID-19 case on 14 March 2020. A month after the detection of first case, the economic impact of the pandemic is already being felt. Recently the international monetary fund/IMF/ lowered its 2020 growth forecast to around 6 per cent. Among the key sectors most strongly affected are aviation, hospitality, tourism, and horticulture. Generally, the export sector, is likely to be adversely affected.
In fact the government has been rightly praised for its quick economic response to the economic slump triggered by the virus, the actual economic effect is still playing out in many sectors of the economy.
Ethiopian Businesses are still battling through the processes of working out what support they are entitled to, negotiating with staff and banks, trying to establish just what is a viable path through for the next few months and year.
We are still only just getting a picture of how the virus has affected different states, industries and workforces. The government should underscored the need to support the private sector and protect many thousands/million jobs at risk, particularly in the manufacturing and service sectors across the nation.
Some interest and principal payments on corporate debt, leases, extended credit facilities, refinancing schemes and guarantee facilities should to think to partially at least to waive, restructure and provide additional liquidity in the near future for some critical sectors including agro industries, tourism, hotel and travel, imports and exports, pharmaceuticals.
A liquidity line should also be made available to the private sector to ensure the continuity of essential purchases and all SMEs that are dependent on trade can continue to function.
Various fiscal and monetary policy response measures should be taken to protect incomes and cushion the economy. COVID-19 is now understood as a major challenge across Africa, given resource constraints, limited facilities, and fragile health systems. Both short- and long-term measures are needed to address the serious impacts of the pandemic in Ethiopia.
In the short-run, budgetary reallocations towards critical sectors and the provision of safety nets to the most vulnerable are most needed. In the long term, Ethiopia ought to think of strategies for re-engineering the economy and minimizing the impact of future shocks on poor and vulnerable groups.
It is time to provide more incentives to supply local needs through local production and innovation. There is already an on-going initiative to produce masks and personal protective equipment locally. This idea can be expanded for other essential products and will boost supply chains and local industries to sustain jobs.