Arapović: The government must protect lives, but also save the economy

By Adis Arapović

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The impact of the COVID-19 pandemic on the global economy is already drastically negative. Recession is already visible, and economic depression is a possible outcome of the emerging chaos. Large countries will have big problems. Small ones have great chances for a quick reaction.

Such a challenge requires measures that may have never been implemented before in the sphere of economic policies. Responsible governments are already taking measures to save national economies and protect their citizens from a strong economic shock.

Preventing the collapse of companies and mass job losses is the number one economic priority at this moment for all governments, including those in BiH, specifically the Government of the Federation of BiH. The negative effects of a sharp drop in demand and supply, company liquidity, and overall consumption must be amortized in time, otherwise thousands of jobs and tens of thousands of families will be victims of negligence and delayed reaction.

Very few companies and families have enough cash reserves to survive the blows to income and family budgets that this crisis inevitably brings. This threatens unforeseeable negative effects on the survival of companies, and endangers the lives of citizens. The drop in company revenues, the drop in household incomes, the drop in employment and reduced wages, and a significant reduction in consumption, will also negatively affect the collection of public revenues, thus pensions, social benefits, and salaries in the public sector will also be threatened.

- It is necessary to implement measures through the banking system that will save companies from collapse due to fixed costs from credit obligations they have towards banks.

- The state must follow Italy's example and encourage the banking system to bear part of the burden by allowing companies to either freeze or significantly reduce their fixed obligations to creditors during this period.

- It is necessary to enable subsidization and credit lines (from existing generous budget capacities, and even loans if necessary) related to retaining labor and production.

- The government must offer ways to reduce costs for companies and households through tax relief (related to contributions, but also other types of taxes), and tax refunds as a mechanism to alleviate fixed obligations and compensate for a significant drop in revenue.

- Despite all of the above, there will be many who will lose their jobs, so the government must introduce drastic measures such as a minimum income for every endangered family, at least in the short term.
The government should offer mechanisms for reducing household costs in the form of reduced tax obligations and utility bills (at least for the most endangered categories).

- All measures must be systemic and equally cover the entire economy and society, avoiding protectionism of individual industries and a clientelistic approach.

- The government must engage all professional, economic, and academic capacities, including the formation of an economic crisis headquarters, and distribute responsibility and burden to as many actors as possible.

Yes, first and foremost, human lives and health must be protected, but it is equally important to prevent economic collapse, which requires an immediate and feasible reaction, because salvaging a sinking ship afterwards is uncertain and incomparably more expensive.