NEALS BUDGET FAILED TO EFFECT DISTRIBUTIVE EXPENDITURE IN ORDER TO ERADICATE INEQUALITY MADE WORSE BY COVID-19.

 

Budget failed to effect distributive expenditure and instead continued the trickle down dream.

By Fundizwi Sikhondze

 

Inequality (Source: Online)

The budget speech read by Finance Minister Neal Rijkernberg on 26^th February 2021 demonstrated once more what many have always feared around the country, that the government, made up of mainly business operatives continues not doing much to balance the economic imbalances that afflict the Eswatini society. The Minister of Finance instead chose to continue down the beaten path of trickle-down economics.

The trickle-down economics doctrine basically entrusts the private sector with correcting societal challenges that include poverty reduction and unemployment reduction. In reality however the markets are never perfect and thus may not give the expected result as any given moment. For instance, where companies are supposed to hire more people to undertake certain services, they can delay and not do the same, continue to use the current workforce if when their profit margins improve.

This is primarily why trickle-down economics has been synonymous with gross inequality globally because often the government has very little power to intervene in order to resolve imbalances in the economic system.

Poverty and Inequality, particularly brought by the COVID-19, has rendered urgent the need for intervention in order to improve the conditions of the poor and those who are suffering as a result of not having livelihoods because of COVID-19. The number of those adversely affected by the economy keep growing by the day. Sunday newspapers (28/02/21) have reported that the Happy Valley Hotel, in Ezulwini was retrenching around 76 employees. These are the people going back to communities and who shall have not have any income going forward.

 

 

 

 

 

Finance Minister Neal Rikjinberg (Source:www.observer.co.sz)

Unfortunately, Neal and his almost E24 Billion budget again failed to rise to the occasion. While they seem to have responded to calls to increase the existing grants by increasing the budget for the Old Age Grant and the Disability Gran. The budget, however, did not provide for the addition of all possible beneficiaries namely those who are living in poverty and have been driven to poverty by the COVID-19 economy

One distribution mechanism that would have been momentous to employ would have been the Basic Income Grant (BIG).

In one of its policy proposals in 2020 the United Nations Development Programme (UNDP) had advised countries to consider implementing BIG in order to assist vulnerable people to cope with effects of COVID-19. The UNDP had suggested to governments that even if these measure were put up temporarily it would be helpful to citizens in need. The IMF and World Bank had been studying the effects of distributive expenditure on inequality and found that there was correlation between distributive government expenditure and reduction of inequality. The countries with the most equality in their socio economic systems including Nordic countries such as Norway and Sweden have a high distributive expenditure of more than 25% and above.

Given this reality, it is expected that inequality shall deepen in the country.