Lockdown, cost-cutting measures push up unemployment rate

Monday May 18 2020

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Rwanda on May 4 partially lifted the national lockdown, allowing businesses to operate until May 15 when new measures will be announced. PHOTO | CYRIL NDEGEYA  

IVAN R. MUGISHA
By IVAN R. MUGISHA
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Unemployment in the country is estimated to have increased from 13 per cent to 55.5 per cent within two months due to national lockdown imposed by the government to contain coronavirus pandemic.

As economic activity gets shred to its bare minimum under the lockdown, public and private sectors were forced to lay off workers that they considered to be offering non-essential services.

Estimates by the National Institute of Research and Statistics (NISR) indicate that about three million Rwandans are unemployed – including individuals whose contracts were terminated or suspended.

 “This was because people stopped working since their work was stopped, especially in the service and industry sectors. We know that most jobs in these sectors were stopped in this period of the coronavirus pandemic,” Ivan Murenzi, deputy director-general of NISR said on national television. “

We estimate that the industry sector was hit the hardest with unemployment reaching 90 per cent, and the services sector going up to 66.5 per cent. Agriculture was not heavily affected by the lockdown, with about 15 percent unemployment rate.”

He pointed out that the estimates are based on analysis of the sectors and not based on new figures from research, noting that “many of the unemployed will get back into employment once this pandemic is declared over.” But as the pandemic ravaged on, more Rwandans continued to relay fears they would not be paid their normal salaries during the country lockdown.

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The government planned to tackle this challenge by offering incentives to private businesses to retain their lower-income staff by suspending Pay as you Earn (PAYE) and reducing the bank borrowing rate, among several measures. The Ministry of Finance announced that PAYE will be waived for six months from April to September 2020, for private school teachers earning up to Rwf150, 000 as net salary.

PAYE waiver also applies to employees of companies operating in the tourism and the hotel sector who earn the same salary, but for a period of three months between April and June.

The stimulus package comes at a time when many companies in the service sector are auditing their books, slashing salaries and laying off staff in a bid to avoid shutting down.

But tax incentives in the midst of a pandemic also come at a cost. According to the World Bank, the government’s additional financing needs will rise to 3.6 per cent of GDP amid an expected decline in tax revenues, while the public debt will reach 65 per cent of GDP.

“No one predicted this virus and how it would cause such a global economic crisis. Many businesses in the services sector were performing well because tourism was booming and economic activity was vibrant. That all stopped instantly, and we are now working closely with the government to find the best solutions that will help businesses,” an importer and Chairman of the Private Sector Federation told Rwanda Today. “Waiving PAYE for a period of time was a move that we in the private sector welcomed because it saved jobs of some people who would have suffered a layoff.

We will publish a survey on how businesses were hit. For now, more advocacy and stimulus for the private sector is needed, particularly in the short term.”

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