Basic Income Grant could have supported the economy during lockdown …as government borrowed N$30.6 m daily

Tujoromajo Kasuto

A new report by Simonis Storm Securities (SSS), reveals that a temporary basic income grant would have gone a long way in providing support to those who lost their jobs, businesses or income as a result of the Covid-19 pandemic lockdown.

Once economic indicators demonstrated a meaningful recovery, the basic income grant could have been phased out to avoid dependency and to encourage people to seek employment.

This policy intervention would have increased government debt and widened the budget deficit, but it would have supported the economy given that consumer spending is 70 percent of the Gross Domestic Product (GDP).

‘’It also would have prevented acute poverty, hunger and hopelessness among the very vulnerable in

our society,’’ the report says.

It says the total government debt increased by N$5.6 billion between April 2020 and September

2020 from N$101.2 billion to N$106.8 billion.

The report shares that this implies that the government borrowed N$30.6 million every single day while the country was under lockdown.

‘’However, total debt was on a rising trend before the pandemic outbreak and would likely have reached N$110 billion without the pandemic outbreak, albeit slightly further down the line and not as soon as the end of fourth quarter 2020.’’

The N$4.5 billion and N$1.2 billion received from the IMF and African Development Bank (AFDB)

respectively must still be utilized, the report continues.

‘’Given that the IMF and AFDB loans were received by May 2021 and September 2021 respectively,’’ Simonis and Storm Securities argues that for more timely and effective decision making these funds should be injected in developmental projects, infrastructure investments, upgrading of public healthcare facilities and various welfare programs and loan schemes to kick start economic growth, as opposed to leaving these funds in the foreign currency reserve account to earn interest.

Additional fiscal policy measures that could have been pursued include the fast tracking of VAT return claims and refund timeously to provide businesses with additional cash flow, despite this requiring enhanced public administration and efficiency.

Simonis and Storm also proposes the reduction of corporate tax rates to improve Namibia’s tax competitiveness and provide corporates with some relief.

However, the report notes, that this proposal needs to be accompanied by structural reforms in improving the ease of doing business if Namibia’s tax competitiveness is to attract foreign investors and entrepreneurs.

It also proposes for the adjustment of income tax brackets for inflation to avoid bracket creep as informal sector workers and low skilled workers are now in the unenviable position to pay tax which should not be the case.

Removing tax burdens by adjusting the tax brackets higher for inflation, will keep low-income earners below the tax threshold and this will maintain their spending power and benefit informal businesses, says the report.

By Observer