As the impact of the COVID-19 is multidimensional and as it is affecting economic activities, households, and the financial sector, it requires a holistic and integrated approach to assess the economy-wide impacts of the pandemic, according to the study inquired by Ethiopia Economics Association in collaboration with Ethiopian Economic Policy Research Institute.
As to the study paper, COVID-19 inflicts a number of shocks in a single package, namely health, supply, demand and financial shocks.
The supply side impact of the pandemic on the economy is through loss of labor inputs due to social distancing, movement restriction, stay-at-home, sickness and disruption to production.
The supply side impacts are also reflected in delays in business inputs being imported because of disrupted transport networks and border closures. There are also demand side impacts such as falling global trade including services, reduced tourism, and loss of income.These impacts can be rapid and very damaging.
The study assesses the potential impact of the pandemic on economic growth and welfare under different scenarios and pandemic duration. So, the pandemic will slowdown economic growth and exacerbate poverty.
The results show that, depending on containment efforts and duration, the pandemic could reduce gross domestic product by 2.2-9.9 percent. In a very conservative scenario with three months pandemic duration, economic growth will be reduced by over two percentage points from the base due to labor reduction either temporarily or permanently.
Even under the mild scenario, delays in the containment of the virus will lead to a large reduction in economic growth which could multiply the economic cost of the disease.
As to the paper, the poverty impact of the pandemic is considerable due to slowdown in economic activity.
Incidence of poverty is expected to worsen, especially in the severe scenario, as nearly half of the population would fall into extreme poverty under acute and protracted economic downturn and prolonged pandemic duration. Poverty will increase significantly in both rural and urban areas.
For now, what is unmistakable is that Ethiopia starts with poor economic, health and social baseline of the society and the government. Although it may be useful to look into other countries actions, Ethiopia’s responses must be realistic, reflecting its own capacities.
On the inquiry paper, it is not just the health of the population that is at stake, in equal measure, it is also the economic, social and physical securities of the population that must be addressed from the get go. There is very little savings, for the vast majority of Ethiopians, financial and other resources that can be deployed during the pandemic.
The government’s capacity is also the reflection of the population; one must mitigate unrealistic welfare expectations.
“Key priority for the Federal and Regional governments, the population, business communities and other civic organizations is to adequately balance health responses with a realistic and on the ground economic and social conditions of the population. Ethiopians cannot, and should not, be forced to choose between the suffering and even deaths from the virus and hunger. The paper pointed out.
According to the study paper, given that the economic and welfare costs of the pandemic are significant, a large enough response is required to reduce the effects of the pandemic once it emerges.
Quick-win interventions together with recovery plan need to be designed and implemented before a temporary health shock turns into an economic and social crisis.
The paper illustrated that priority needs to be given to delaying the spread of the virus, flatten the bell-curve and minimize the economic and social cost of the pandemic.
Early and proactive measures need to be implemented to contain the spread of the virus, including testing, targeted lockdown, tracing and so on. Social distancing and appropriate personal protection equipment strategy must be sought in all types of markets throughout the country including farm gate exchanges; local sellers, neighborhood shops, street vendors.
These distribution mechanisms are both the flash point of the contagion and the lifelines for the entire population throughout Ethiopia. Effective awareness campaign is underway since early March and this has to continue. Special attention must be given to rural and remote areas where information penetration is limited or none at all.
The paper noted that Ethiopia has a well-functioning rural and urban safety net organizational arrangement, programs, delivery methods such as cash and voucher. These must now be tested and made to work using existing stocks as well activating strategic grain reserves.
Under severe scenario, the safety net programs will be overwhelmed in a short span of time, especially in urban areas. For this reason, alternative arrangements must be considered including preparing and equipping cooperatives, local/ kebele distribution channels, and local/neighborhood shops as a place of voucher-based distribution.
“A system for cash and voucher must be worked on right now spearheaded by the National Disaster Risk Management Commission in partnerships with multilateral and bilateral institutions.
There is a need to mobilize social self-help institutions such as Iddir and link them with the formal structure to provide a coordinated support to the most vulnerable population during the pandemic. The paper indicated.
In Maintaining an uninterrupted supply chain for critical commodities, the study paper mentioned that continuous movement of cereals and other essential commodities such as vegetable oil, hygiene supplies, condiments must be made to flow as normal as possible throughout the country.
Closure of regional boarders must ensure commodity movements. These are not only essential for survival of the population, but also critical for national security arrangements.
“Ensuring uninterrupted agricultural commodity exchanges farmers-to-farmers exchange, and primary, secondary and tertiary agricultural commodity aggregation and distribution system should be considered as well.
Imported food commodities fill a significant gap in the national food balance sheet. International commodities might be disrupted as a result of the pandemic, the effects of which will be felt delayed. To the extent possible, advanced contract may be arranged within an international commodity trade regime. The paper stipulated.
In supporting domestic economic activities, the study indicated that putting in place alternative mechanism to fill a potential import deficit is as well inevitable.
These may include planting short-season and early-maturing crop varieties, and prioritizing irrigation schemes for selected foods crops like, potato, maize. With immediate effect, put in place measures that will ensure uninterrupted supplies of chemical fertilizers, improved seeds, pesticides and herbicides as well as livestock medicine.
These will minimize the adverse effects of the pandemic in the agricultural sector. According to the study, initiating discussions with commercial banks on rescheduling bank loan repayments and writing off interest payments for severely affected sectors until the shock is abated, is as well paramount.
The National Bank of Ethiopia needs to consider reserve rate relaxation to enhance banking liquidity. The National Bank of Ethiopia shall initiate discussions to reduce interest rates to stimulate the economy.
Initiate discussions with financial institutions to support exporters by increasing foreign trade credits, deferring loan payments and extending debt rollovers should be considerate.
Regarding Provision of basic services and facilities, the study paper pointed out that maintain consistent and sustainable water supply schedule at household level, especially in urban areas, for ensuring water supply for drinking and sanitation, is inevitable.
Establishing reliable system for disseminating information related to the pandemic nationally, regionally, and locally using selected and reliable media suitable to different social groups, including rural-urban, persons with disability, illiterate people will also help to avoid misinformation.
Strengthening security services for protection of property and people arising from expected social disruptions, is also significant.
The Ethiopian Herald April 26/2020
BY MEHARI BEYENE
