Economic Stimulus and Support for Businesses is Not Enough: The poor and the vulnerable in Zambia Need Relief During the COVID-19 Pandemic

By Fr. Charlie B. Chilufya, S.J

In the wake of COVID-19, Zambia has taken commendable measures to arrest the pandemic and to stop it from spreading. So far, the measures are paying dividends. Zambia has taken further commendable steps to keep businesses and the economy afloat. Rightly so, this is much more than a health crisis.

However, economic stimulus to keep businesses afloat is not enough! Yes, government has offered some temporary tax relief through targeted reductions or delays in paying taxes in order to help address cashflow shortfalls for affected businesses. Such interventions are commendable but only make sense in countries where many people are wage or salaried workers. Rates of unemployment in Zambia are still very high. So, any measures being introduced meant to support businesses sustain their payrolls will miss the larger section of populations that actually need help. While such programmes are commendable for supporting economies and businesses during a recession, they must be accompanied by social protection programmes robust enough to reach the needy.
“Corona virus is hitting some industries real hard, more especially those affiliated to the Chinese road works, where I belong. We closed sites at the end of January and to date we have not resumed works. Too much poverty and considering our current economic situation, te fintu!“ said Mwamba Mulenga, a construction expert working for a Chinese contractor in Lusaka. As noted, this loss of jobs and loss of incomes has further repercussions. Some now cannot afford basic needs, as basic as housing and food. “Am finally thrown outside the house. I have been praying for this not to happen but it has happened. I don’t have anywhere to go at the moment…my goods and my family have been thrown outside,” said Lucky Chabala another building expert from Luanshya.

If not properly addressed through policy, the social crisis created by the COVID-19 pandemic may also increase poverty, destitution, inequality, exclusion, discrimination and unemployment in the medium and long term and therefore now lead to more poverty related deaths. Comprehensive, universal social protection systems, when in place, play a much durable role in protecting workers and in reducing the prevalence of poverty, since they act as automatic stabilizers.

So why does this matter? The vulnerable need to be protected because they are human beings with value and dignity. Secondly being poor is bad for health and that will in turn increase the burden on the budget as more funds will have to be spent on dealing with poverty related diseases. Thirdly, poverty is not good for the economy through various pretty obvious transmission channels I may not want to go into now.

The Threat is Real

In this blog article I wrote three to four weeks ago for the Jesuit European Social Centre, I discussed how COVID-19 was worsening poverty in sub-Saharan Africa in general . Most of the global poor live in sub-Saharan Africa and that includes Zambia. The threat of people falling into destitution and new ones becoming poor in Zambia and in Africa in general is real. Looking at the data for Zambia see PovcalNet, the percentage of individuals living below the national poverty line of K 214 per adult equivalent per month in general is almost two thirds at 57.5% and more than three quarters in the rural areas at 76.7%. According to the World Bank April 2020 Poverty and Equity Brief for Zambia, the economic impact of COVID-19 in Zambia is expected to constrain GDP growth, and to result in an increase in poverty in the near future. The national poverty rate is expected to rise by around half a percentage point in 2020. Informal workers in general and service sector workers in particular are expected to be the worst effected by job and wage losses, while the effect of rising prices will also have a negative impact on the purchasing power of households.

What Should Zambia do?

Many countries world over are deploying fiscal and monetary tools and social protection programmes in response to the COVID-19 shock. Does Zambia have the facility to deploy any such tools to respond to the threat of increased poverty in the wake of COVID-19, what kind of preparations has Zambia considered so far or is still considering? Does Zambia have fiscal space for social protection programs that can be financed through their its budget?

Ugo Gentilini, a senior economist with the Social Protection and Jobs Global Practice at the World Bank has been devoting his weekly Friday links to country-specific policy responses to COVID-19 globally and this work can be followed here. By April 17, Gentilini and others reported that a little more than 40 out the 54 African countries had introducing or adapting social protection and labour market programs. These were largely driven by fee waivers for utilities, followed by in-kind transfers and cash transfers all in response to COVID-19. According to data presented by Gentilini and others, Zambia has not yet introduced or adapted social protection and labour market programmes in response to COVID-19 specifically meant to protect the poor vulnerable.

Where will the money to do all this come from?

Zambia may not have fiscal space at the moment and understandably so. However, the cost of inaction might be more severe. As such we propose the following road map to raise funds:

Government should immediately review and revise downwards its overall Budget estimates for financial year 19/20 (April-September 2020) to free up some of the unspent cash for social protection. The Finance Ministry to propose to parliament the revision of the equitable shares due to statutory bodies and offices appropriately.

2. Government is seeking moratorium of national debts that are due to development partners and other sovereign nations such as China during the period of the pandemic and a further 6 months to allow the cash that would have gone to debt service to be directed to protecting the local economy and the poor.

3. Bilateral Grants: Most cash transfer programmes in Africa are complemented by those of INGOs, NGOs and development partners. In 2018-19, the UK’s Department for International Development (DFID) supported projects that reached 32.6 million with cash transfers. Zambia can again lobby this kind of support in the hope of weaning itself off once the crisis passes. There are such facilities. Kenya received $2.3 million from Denmark to help it fight COVID-19.

4. Multilateral Grants: Any grants that are available from international bodies such as World Bank, IMF, WHO. There is an opportunity from the IMF: The Short-term Liquidity Line to Help in the Crisis. This is good news for Zambia that missed on last week’s list of the countries to be assisted by the IMF with credit. Again, this support is obtainable. Early this month, World Bank gave Kenya $50 million to help it respond to C-19.

5. Set Up an Independent Emergency Response Fund
The President should direct the National Treasury to set up an independent emergency response fund overseen by a 10 to 12-member board committee to bolster the country’s countermeasures against COVID-19. The board of the fund shall include men and women from various walks of life, consisting of eminent citizens the private sector, civil society and the Church/Religious organisations.

Charlie B. Chilufya, S.J is the director of the Justice and Ecology Office (JEO) – Jesuit Conference of Africa and Madagascar (JCAM)