Monday, 20 April 2020 00:00
Governments all over the world are dishing out economic rescue packages – on an unprecedented magnitude. On the face of it, this is very encouraging and of course much needed. But, who will actually pay for this – considering the following:
Governments are custodians of people’s wealth – which it gets from all forms of taxes and its returns on government assets.
However, with the unemployment rates significantly increasing, there will be less tax revenue and more unemployment benefits that will need to be provided. There will also be large numbers who will be operating at reduced salaries and self-employed / SMEs operating at much lower levels of income. This means less production, less consumption and critically less direct and indirect tax revenues for the Government.
At the same time, most countries have a Government Budget Deficit, which means they are already spending more than what they earn. Plus, some have large debts they have to pay back.
Also, how far and how long can you camouflage the real pain – by printing more money?
Hence the question, who will really pay for the cost of Corona? We all have to - in one way or the other! Tighten your belts or lose your pants!