The second obstacle is obvious: funding. Given the temporary nature of the challenge, funding TBI by additional taxation could be politically difficult. Other ways of covering the costs are instead worth exploring.
For example, funds could be raised by repurposing nonessential spending, including wasteful expenditures and energy subsidies (which usually tend to benefit the better off). Alternatively, debt repayments could be paused for a period. Developing countries are expected to make debt payments of US$3.1 trillion this year. A comprehensive repayment freeze for 12 months, if possible, would fund 16 months of TBI under the top-up option, 12 months under option two and up to six months under option three. Also, as emergency cash transfers are often steered towards immediate essential consumption, part of the money will be recaptured by indirect taxation such as VAT and sales taxes, thus providing a degree of self-funding.
The third obstacle is trust. Governments will need to be trusted not to redirect whatever they raise towards other purposes, nor to allow temporary measures to last any longer than agreed. They will need broad (possibly cross-party) support to launch these schemes, and they will need to make sure that those that don’t benefit from them still see the schemes as credible. These are all political challenges that need to be addressed on a country-by-country basis.
TBI schemes are not expected to reverse country-wide economic downturns, nor substitute for comprehensive social protection systems. They can, however, mitigate the worst immediate effects of a crisis that has been magnified by deep-rooted structural inequalities and injustices that haven’t been decisively addressed in the past.
This article was originally feature in The Conversation, you can read it here.
The pandemic has disrupted informal work worldwide, leaving many without any form of income. EPA-EFE
People line up to apply for unemployment insurance in Hanoi, Vietnam. Even countries that have controlled the virus well are now feeling the economic hardship of the pandemic. EPA-EFE
In South Africa, unemployment has risen to more than 30%. Many of the country’s estimated ten million unemployed work in the informal sector. EPA-EFE