Shaliza Hassanali

The Ministry of Social Development and Family Services and the Social Sector Investment Programme could be placed under immense pressure to provide relief to the unemployed in the next two years.

This view was shared by economist Vaalmikki Arjoon, as he weighed on the country’s rising unemployment and closure of several businesses due to the fallout from the COVID-19 pandemic.

Arjoon said while these two institutions could face constraints to provide food support and public assistance grants “it was urgent that they (Government) take steps to limit the bureaucracy and unnecessary processes involved which can delay vulnerable people from receiving them…sometimes by many months.”

He said this is where the single electronic window can be quite useful.

In addition, Arjoon said a Value Added Tax system should be more progressive for these economically vulnerable individuals by providing rebates and cash transfers to poorer households.

He said, “Remember, the earnings of many were already depressed before COVID-19 and the fall in sales brought on by the lockdown have caused them to either downsize and cut staff or cease their operations altogether. Some business owners have tapped into their own personal savings to pay workers to avoid letting them go.”

“Emergency relief measures from the government have only partly compensated for the loss in income and several households are still awaiting assistance promised, like the salary relief grants. The reality is that poverty and income inequality levels have started to soar even further.”

Given that many are jobless among the low-skilled labour, Arjoon said there was now an excess of these workers seeking employment and this will dampen low skilled wages across the board – if they are able to find work, they might not earn as much as before.

Several may seek employment in the informal sectors and not pay taxes.

“Heightened poverty could also increase COVID infection rates, especially if persons start working in segments of the informal sector that are not abiding by government restrictions. Households may also start renting smaller spaces making it more difficult to abide by social distancing.” (SH)

Arjoon said this comes at a time when the State’s revenues have not been healthy, and they may have no choice but to cut expenditure in several areas. With ten years of fiscal deficits amounting to over $55 billion, he said we clearly have not saved and therefore have little money to fall back on to assist fiscal expenditure.

With little savings, Arjoon said we have no choice but to borrow some eye watering amounts in these next two to three years and tap into the Heritage and Stabilisation Fund.

“This is no longer a recession – we are in an economic depression with five years of consecutive economic decline since 2016.”