ADDIS ABABA – The government should implement expansionary fiscal and monetary policy to mitigate the economic crisis of COVID-19, according to a development economist.
Increasing government expenditure while minimizing tax as well as increasing the distribution of finances to financial institutions would play an important role in lessening the impacts of the pandemic, he added.
Zekarias Mhret-Ab, Development Economics Lecturer at Civil Service University, noted that as the fall in industries did not arise from the decrease of aggregate demand but the crisis of the novel coronavirus, the government should increase its expenditure so as to prevent the risks of financial and business crisis.
He suggested that the government should facilitate loan, decrease interest rate and should apply open market operation which includes decreasing reserve requirements of banks and interest rate, and purchasing bonds from institutions.
As to him, launching of COVID-19 economic response program through endorsed stimulus budget or packages would also help during and post economic crisis of the pandemic.
The stimulus budget should allocate from the government, grant, concessional loan and domestic resource mobilization, he noted. “When using domestic resource mobilization, the government should consider assigning public figures who are trustworthy and prominent within the community.”
During the crisis, the package would safeguard the functioning of essential sectors, provide necessary resources to vulnerable people and prevent excessive economic disruption, he added.
According to him, by safeguarding the function of essential sectors, the country would be able to provide food, power, water, telecom service, roads and banking and hotel services to households, trade centers, and financial institutions.
Like many other African countries, the government could also provide the destitute with food and other necessary materials. “Senegal has announced to cover water and electric bills for the societies for about six months. Taking this an example, Ethiopia can do the same. Not only this, but during this crisis, the government should also support business sectors and financial institutions from facing financial liquidity”.
The Ethiopian Herald April15/2020
BY BETELHEM BEDLU
