Addressing the Economic Impact of COVID-19

On two separate continents, T-birds Soraya Hakuziyaremye ’05 and Christopher Campbell ’06 are directly shaping their governments’ economic responses to the COVID-19 pandemic.

As Minister of Trade & Industry in Rwanda, Hakuziyaremye is on the front lines of efforts to halt the spread of coronavirus and mitigate its economic damage. Campbell, who is former Assistant Secretary of the U.S. Treasury and current Chief Strategist for Duff & Phelps, helped craft the United States’ $2.1 trillion economic stimulus package known as the CARES Act.

On March 31, Thunderbird Dean and Director-General Sanjeev Khagram moderated a discussion with Hakuziyaremye and Campbell as part of the Thunderbird Global Dialogues Webinar Series. (Watch it here.)

Balancing Health and Economic Impacts in Rwanda 

The concern in Rwanda, as in most places, is ensuring that COVID-19 doesn’t spread so fast that it overwhelms the health care system. While Africa was the last continent to be hit by the virus, and Rwanda had relatively few cases as of March 31, the government there took an early aggressive stance to mitigate the risks of unchecked spread. 

“It’s really about being on top of things from the beginning but also adjusting measures daily to prevent completely shutting down the economy while refraining from taking risks in terms of health,” Hakuziyaremye explained.

“We had our first case on March 14,” she said. A week later, the government imposed a “total lockdown” which included stopping air travel and closing the border except for the movement of goods. 

Of course, such health protection measures carry economic costs. Hakuziyaremye explained, “One of our key sectors is tourism, and also meetings and international conferences, which had seen double-digit growth over the past four years until coronavirus hit.”

The government is working on policy interventions for companies in hard-hit industries, but “Rwanda is not a country that can provide stimulus packages to the private sector,” Hakuziyaremye said. They support businesses in other ways, such as working with the tax authority to defer corporate income tax payments, which are normally due in March.

They’re also working with the central bank to provide liquidity to local banks and to be more flexible on debt defaults, including halting property auctions for companies and individuals. For individuals, Hakuziyaremye said, “we’ve worked hard to come up with a social protection scheme. The President has ordered distribution of food for vulnerable families during the lockdown.” 

“It’s really about being on top of things from the beginning but also adjusting measures daily to prevent completely shutting down the economy while refraining from taking risks in terms of health.” – Click to tweet 

Providing a Bridge for Individuals and Businesses in the U.S.

In the U.S., Campbell explained, “It’s the goal of the government to get as much money out to markets as humanly possible, as fast as possible. So individuals and companies – certainly small businesses – are able to recover and maintain a bridge during the most difficult time of the economic shutdown. So they emerge stronger on the other side.”

Campbell talked about the key components of the CARES Act, which provides a total of about $2.1 trillion in funding for payments to individuals, increased unemployment insurance benefits, loans and grants for small businesses and larger enterprises that are distressed, as well as funding for healthcare-related programs.

The payments to individuals are automatic for those who qualify, and will be disbursed in two rounds, Campbell said. Eligibility is based on income reported for the 2019 tax year (or 2018, for those who haven’t yet filed their 2019 returns). 

Assistance for small businesses includes the Paycheck Protection Program, which is designed to enable employers to continue paying their employees during the worst of the economic shutdown. It starts as a low-interest loan but “if the small business meets certain criteria when the crisis abates – they haven’t fired employees or changed their labor allocation – the loan would be transferred to a grant,” Campbell explained. 

The package also includes assistance for larger enterprises that are distressed, including airlines and air cargo carriers, businesses important to national security (primarily Boeing, Campbell said), and “other afflicted large companies that will need a cash infusion as a bridge loan to get past this challenge.”

Those are only a few examples of the assistance programs provided under the CARES Act, all of which are fully delineated in the legislation. And, Campbell said there is already significant “talk of a fourth stimulus package” that could be passed by Congress depending on the depth and length of the crisis. 

Campbell recognizes that the U.S. is likely now in the first phase of a recession, but he takes solace in the fact that “the U.S. government and economy were very strong, showing no signs of systemic challenges coming into this health crisis.” He is “very hopeful that with a very large shot of stimulus from the Federal Reserve Bank and the Treasury and Congress, we’ll be able to bridge the gap so when the economy reopens, we can reopen as vibrantly and quickly as possible.”

Could that “large shot of stimulus” create an inflation problem? “Inflation is always a challenge,” Campbell said. “But right now we’re effectively in economic triage where we’re deploying every tool in our arsenal and then some. We need to mitigate the challenges first then deal with the ramifications of those mitigation efforts when the economy is open and vibrant again.” 

“I’m very hopeful that with a very large shot of stimulus, we’ll be able to bridge the gap so when the economy reopens we can reopen as vibrantly and quickly as possible.” – Click to tweet

International Cooperation? Not a Rosy Picture

“Multilateralism has been shaken,” Hakuziyaremye said. At least multilateralism on a global scale. “I’m optimistic about the cooperation we’re seeing regionally, but also pessimistic when I look, for example, at how the EU is tackling this health crisis.”

Regionally in Africa, Hakuziyaremye explained the push for a “unified position in terms of measures that are being taken.” She said, “countries have taken different approaches. For example, Rwanda was the first African country to impose a total lockdown, but we’ve also reached out to our partners in the East African community where it’s crucial to align on measures taken for travelers and measures taken for the movement of goods.” Where there were at first questions around whether truck drivers and their crews would have to be isolated for 14 days at the border – untenable for the supply chain – countries in the East African region agreed to more expeditious screenings of truck drivers and their crews to facilitate goods continuing to move country-to-country.

“It’s essential to keep that regional cooperation,” Hakuziyaremye said. “But international cooperation? For now, it’s not a rosy picture from what I see.”

“Global multilateralism has been shaken.” – Click to tweet

A Unique Opportunity

Despite the very real challenges associated with crafting economic responses to what will likely end up as the worst global health crisis in a century, both Hakuziyaremye and Campbell see opportunities in the mire.

“When we’re faced with such a crisis, the bureaucracy is pushed aside,” explained Hakuziyaremye of the experience in Rwanda. “The government is pushed to be innovative and creative – to almost mirror the private sector, which to me is a good thing. It’s good for governments to be more agile.”

Campbell said, “We have a very unique opportunity now to come together as human beings in a way we’ve never experienced, ever. We have ways of connecting we haven’t had in the past. We have time for quiet self-reflection about what we as a collective human people want to be and how we want to interact post-crisis.”

“We have a very unique opportunity now to come together as human beings in a way we’ve never experienced, ever.” – Click to tweet

Echoing Hakuziyaremye’s comments about Rwanda, Campbell said, “In the U.S., when things are toughest, we really dig in, and that creates the best opportunities for innovation. We’ll see amazingly disruptive technologies coming out of this and new and different ways of approaching problems. We’ll tackle problems in ways we’ve never even thought of prior to this crisis.”

T-birds will be leading the way.