Miljević: The most vulnerable are the unemployed - they have lost any chance of finding a job next year!

(Patria) - Damir Miljević from Banja Luka, known to the public as an economic analyst, stated in an interview for the Novinska agencija Patria that at this moment no one can predict the consequences of the coronavirus on the global economy, because it primarily depends on how the duration of the pandemic is assessed, and estimates range from three months to a year and a half. 

“What we know is that it will be devastating for tourism, service industries, and production largely dependent on imports or exports, as well as for almost the entire population, and consequently, it will threaten the financial sector and the system. 

Governments around the world are now trying to prevent a catastrophe with standard measures of pumping money into the financial sector, but it is already clear that this will not yield the desired result. Therefore, an increasing number of governments are opting for direct measures to help the population and the economy through tax relief and tax exemptions, as well as deferral of other obligations, and some countries are preparing to directly inject money into the economy and the vulnerable population. Certainly, all of this will have, and already has, a huge impact on Bosnia and Herzegovina, its economy, and its population, primarily because we are a small and poor country dependent on imports of almost everything and reliant on the export of goods and services that are not of vital importance.

In addition, a weak economy, a huge number of people dependent on the budget, the lack of a surplus and serious commodity and monetary reserves, and high indebtedness relative to GDP, along with the inability to use monetary policy measures, significantly narrows the possible space for a quick and effective intervention as done by countries such as Sweden, Ireland, or Great Britain. This only means that the authorities in Bosnia and Herzegovina should immediately and very seriously approach defining a set of measures to help the economy and the population, if there is a desire and the necessary knowledge to avoid a complete economic and social catastrophe. There is no time to wait, and copying recipes from other countries that are not in the same situation will not yield results”, says Miljević.

Patria: In what way could and should Bosnia and Herzegovina be most adequately helped?

The greatest help for Bosnia and Herzegovina will be for the authorities, the economy, and the population to realize as soon as possible that in this situation, where everyone is closing off and first taking care of themselves and their own interests, no one will seriously deal with Bosnia and Herzegovina and its needs, so it is not worth waiting, but rather we need to react and take a proactive approach both within the country and towards those from whom we expect help, primarily international financial organizations, the EU, and our neighbors. 

The resolution of the blockade of freight traffic with Croatia is to be welcomed, and now the same needs to be ensured with other neighbors and protocols for the flow of goods need to be regulated.

Now the most important thing is to devise as soon as possible a concept of short-term and medium-term targeted measures that will adequately help the economy and the population to overcome the pandemic, quarantine, and the suspension of most activities.
 
Patria: What are those adequate measures?

Which measures are adequate depends on how the duration of the pandemic is assessed. In my opinion, the pandemic will last at least until September this year, and measures should be created in that context. In doing so, we should start from those who are realistically the most economically vulnerable.

Unlike most of my colleagues, I do not consider the economy to be the most vulnerable, but rather the unemployed, who have lost any chance of finding a job and a source of income in the next 12 months due to this pandemic, because due to limited movement and the slowdown of all activities, they are no longer able to earn even an under-the-table wage.

In that context, first of all, they should be provided with a monthly unemployment benefit of at least 300 KM for the next 6 months so that they can survive, and this would also be significant financial assistance if they live in a common household. For these needs, a total of about 800 million KM should be allocated. 

This money can be secured from existing budgets if all planned investments that are not vital for functioning and are foreseen by the budgets of the state, entities, and cantons are suspended. The amount that the unemployed would receive could be returned through voluntary work on cleanups, landscaping, and other public works when the necessary conditions are met. 

Given that this money would go into the hands of the unemployed, who would certainly spend it, it would have a multiplying effect on the economy by boosting demand for goods and services. 

In this way, we would help the most vulnerable, indirectly help the economy, and 17% of that money would return to the budgets through VAT collection.

What is absolutely necessary is to urgently negotiate with international creditors and obtain a moratorium on the repayment of foreign debts for the next 3 years and secure additional funds to support budgets. In this way, additional funds would be freed up in the budgets, enabling significant concessions to the economy and the population, such as a moratorium on the payment of corporate and income tax for a period of 12 months, along with a simultaneous moratorium on the payment of profits and dividends, a moratorium or at least a 50% reduction in the obligation to pay contributions for health and pension insurance. 

Certainly, precise calculations should be made regarding this, but it is the only correct way to help the economy and the population.

In addition to the above, it would also be significant for the population and the economy to receive an additional period of no less than 6 months for the payment of obligations under existing loans, because in my opinion, given that banks are full of liquid assets, this would not threaten their position, provided that they have not been “playing” with the surplus liquid assets on foreign financial markets.

Of course, all of this will not be enough if Bosnia and Herzegovina does not start relying on its own resources in food production, on which we are currently import-dependent. Therefore, it is necessary to harness all forces and resources to increase agricultural production this year, as much and as soon as possible, so that we do not find ourselves in a situation of having a shortage of food for our own population because other countries, taking care of their own interests and their own population, will ban the export of agricultural and food products, as they have already done with medical supplies.
Certainly, this is not a detailed and consistent set of measures adequate for everything that awaits us, but it can represent a good basis to start reacting as soon as possible, because every day lost will be difficult to make up for, as inaction will be much more expensive than even wrong action.
 
Patria: You said that nothing will be the same after this, can you be more precise and concretize this stance?
 
Well, this pandemic has finally shown that globalization, the rule of large corporations and financial institutions driven only by their own interests, has no answer to any significant problem facing the world and its population, from food shortages and increasing poverty, through climate change, to the emergence of viruses. 

Many people, and many countries, will become aware after this pandemic and turn to themselves and others. New political and economic alliances will be formed, based primarily on experiences and lessons learned from their own and others' behavior during the pandemic.

Many will finally become clear that in the 21st century, the most significant resources are drinking water, unpolluted agricultural land, clean energy, a good healthcare system, and an efficient state. The pandemic has shown that no matter how much money you have, it becomes irrelevant if you do not have all of the above, and if you have it only for yourself, it means nothing to you in quarantine (isolation).