COVID-19 is a unique and severe health and economic crisis that is changing our lives. Three things make it unique. First, it is a rolling combination of a health pandemic and an economic crisis.
Second, the crisis has turned global in record time. Third, it is both a demand and supply side shock to all the major economies.
Responding to the catastrophic impact of coronavirus requires a coordinated response at both the global and local levels. COVID-19 is one of the most vicious contemporary threat to the human stability, national security and development.
All governments, including our own, are attempting to prioritize and coordinate financial and physical resources to respond to the virus.
Resources are being allocated to cure the sick and much effort to stop the spread of the virus while both Governments and private entities are working together to improve diagnostic tests.
The COVID-19 crash had nothing to do with the military — yet, if not contained, it will easily turn into another Great Depression that will shake the world order to its foundations.
Now we are battling a pandemic that had by Friday killed 193,861 people and 2,768,001 are infected globally and so far, 154 people were tested positive in Rwanda by Thursday April 24, 2020.
In Rwanda, the battle of COVID-19 is spearheaded by the top leaders of the Government of Rwanda led by the Prime Minister’s Office with technical lead of the Ministry of Health and other ministries in line with their mandate.
The list of frontlines include men and women who wake up in their farms for us to get fresh food and those who take the risks to run the shops/markets or to the motorcyclists that deliver us food in the comfort of their home.
The journalists who face the risk of coronavirus to keep us informed. The local leaders and volunteers who are making sure the most vulnerable among us can feed their beloved one.
Also the Rwanda National Police and the Army Corps highly involved in different ways such as ensuring the stay home and social distancing policy; support in contact tracing, securing the country borders - but those contributions, while valuable, will not come close to turning the tide.
The post-COVID recovery process will cost trillions of dollars. But, experts said aggressive investment and well-designed policy could bring the economy back more quickly and with less long-term distress for workers and businesses.
They concluded that countries can afford the investment if financial institutions avail enough liquidity for loans. In the post-COVID world, countries and firms future investment decisions of diversifying risk is something that they will be obsessed with and this will mean a strong push to reduce dependence on suppliers in other countries.
As a matter of fact, the domestic policy to promote local made products "Made in Rwanda” will be the ultimate option to supply the local market with products by creating jobs and reducing the pressure to the demand for foreign currency for import.
The damage caused by the virus and the policy responses it requires are deep and multifaceted. Its effects can be grouped into three categories.
. Human suffering. The rapid loss of life and deterioration of health outcomes, but increasingly also economic suffering through loss of jobs and other incomes. As small and medium enterprises are hammered by the lockdowns, many workers have lost their jobs or are working on reduced work schedules. Cash-strapped individuals and low-income earners are grounded in their home without any income for living. If the economic suffering is prolonged and as deep as expected, this will hurt people especially the poor.
. Severe global economic recession. It is a visible conclusion that the global economy will slip into a recession in 2020. What we don’t know is how deep, long, and widespread the contraction in economic activity is going to be.
. Deep financial and private sector distress. The financial and corporate sectors are likely to suffer large scale deterioration. Markets have taken a big hit, financial systems are under stress, and banks are likely to see huge pressures on their balance sheets. Private firms are being hurt by the collapse in demand.
The world will have to bear the consequences of the coronavirus for years if the policy response is late, weak, or uncoordinated. Pandemics, economic downturns, and financial crises are mutually dependent.
Simultaneous action on all these fronts requires greater resources - medical, fiscal, financial, and monetary. This means that they need to be mitigated at the same time:
. Flattening the pandemic curve is important because it saves lives by avoiding bottlenecks in the health system when larger numbers of sick exceed the health system’s capacity.
. Deep and prolonged recessions must be avoided, for these can cause lasting damage. Long periods of weak supply and demand can lead to elevated structural unemployment, permanently lower capital stock. Flattening the recession curve is therefore important.
. Health and social protection. These are the priority government policies, ranging from testing and treatment, to hiring new medical staff, to expanding social assistance and implementing cash transfers to households.
. Fiscal policy. Measures include efforts on the revenue side (deferring filing and payment, reducing social contributions), spending (low-interest loans to firms, reprioritizing spending), and financing of the larger fiscal deficit.
. Monetary policy. Providing liquidity to solvent banks is very important.
. Financial, industrial, and trade policies. Interventions include bank forbearance on domestic private loans with certain strict preconditions so as not to create financial instability down the road, reductions in collateral requirements, easy and soft the loan repayment.
Right now, governments have to do all they can to limit the health, economic, financial, and corporate distress. But soon they will have to begin to think about the shift to the next phase of economic policies.
The COVID crisis change the world. People will travel less and Zoom more. Some won’t socialize as they once had, others will burst out of isolation to savor the joys of human contact.
The writer is a Rwandan economist