Economic Researcher roots for Trust Funds to manage pandemic related economic inequalities

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A respected University of Nairobi Professor of Economics has identified the need to establish dedicated Trust Funds to mitigate growth challenges in the wake of a pandemic.

Dedicated Trust Funds in Africa, Prof Germano Mwabu said, would come in handy to finance what he described as “Covid-19 like crises” to reduce economic inequality challenges.

The establishment of trust funds, Prof Mwabu said, would work better as conventional mechanisms that initiate and sustain pro-growth poverty reduction have been proven ineffective in times of the Covid-19 pandemic.

Prof Mwabu was speaking when he delivered a research presentation on Poverty, Growth, Redistribution, and Social Inclusion in Times of COVID-19 Pandemic in Africa at an international Virtual Research Workshop hosted by the African Economic Research Consortium (AERC).

The 55th AERC Plenary Session of the Biannual Research Workshop explored the theme: Poverty, Growth, Redistribution and Social Inclusion in Times of Covid-19 Pandemic in Africa.

Alongside Prof Mwabu, the United Nations University World Institute for Development Economics Research (UNU-WIDER) Research Fellow Dr Simone Schotte, in his presentation titled “The Labour Market Impact of COVID-19 Lockdowns: Evidence from sub-Saharan Africa”, disclosed that the pandemic’s shock had exposed and exacerbated pre-existing vulnerabilities in Ghana.

Dr Schotte noted that lockdowns had slowed down recovery prospects in his study, featuring Kenya, Ghana, and South Africa. The labour market, he said, is still suffering from anxiety; despite signs of recovery.

AERC, the global economic affairs think tank headquartered in Nairobi and led by former Central Bank of Kenya Governor Professor Njuguna Ndung’u, hosted the Biannual Research Workshop Plenary Session. Hundreds of Economic Policy Researchers, Scholars, Public Policymakers, non-state actors and practising Economists participated in the Virtual Research Workshop.

While welcoming views such as those expressed by Prof Mwabu, AERC Executive Director Prof Njuguna Ndung’u said the global think tank would continue supporting such forums to foster economic affairs awareness.

“Such plenary sessions have informed, influenced, and inspired researchers and the wider public on a wide range of issues relevant to policymaking. The 55th AERC Biannual Research Workshop Plenary Session specifically sought to lead and explore a viable path to recovery from COVID-19,” Prof Ndung’u said.

Research indicators, Prof Ndung’u, confirmed indicate that policy responses to combat the pandemic led to significant social and economic disruptions. Evidence suggests that at the height of the lockdown (March, May, June 2020), Africa’s GDP shrunk by 5%. During the entire period, the continent’s GDP declined by 2.5%.

In his presentation, Prof Mwabu noted that further research would be required to identify how Governments in Africa could have implemented anti-Covid-19 measures with minimal economic disruptions.

“In a pandemic such as the Covid-19 period, policies designed to sustain the virtuous spiral of pro-poverty reduction growth should focus more on addressing effort-based inequalities than those due to circumstances. A Trust Fund to finance Covid-19 like crises is needed,” said Prof Mwabu.

He added that “The mechanisms that initiate and sustain pro-growth poverty reduction would not work in times of Covid-19 as the resource transfers that trigger poverty reduction would be directed, as they should, to saving and protecting lives, rather than to poverty reduction.”

Further, resources to sustain pro-growth poverty reduction, he explained, would be constrained as pandemics destroy and disable human capital. Economic research he noted has also established that school closures slow human capital formation.

“In effect, the large social protection programs required to trigger pro-growth poverty reduction in Covid-19 times would be infeasible in Sub Sahara Africa,” Prof Mwabu said.

At the Plenary session, Kenya’s Commission on Revenue Allocation (CRA) Chairperson Dr Jane Kiringai chaired and led a panel discussion session on public/private sector policy featuring distinguished panellists, including distinguished economists, private and public sector leaders from across the continent.

British Economist and Political Scientist, Professor James Robinson, of the University of Chicago delivered a Memorial Lecture on “Africa’s Latent Assets” in honour of the former Governor of the Bank of Tanzania (BoT) and renowned African Economist, the late Prof Benno Ndulu, who passed on earlier this year.

Traditionally, the AERC Biannual Plenary attracts hundreds of researchers, academics, policymakers, non-state actors and economists, providing a forum for participants to interact with a worldwide network of professionals to discuss issues relevant to Africa’s economic development. They also provide an opportunity for monitoring the progress and quality of the various research projects sponsored by AERC, fulfilling one of our major mandates – to strengthen local capacity for conducting independent, rigorous inquiry into problems facing the management of economies in sub-Saharan Africa.

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