Subsidy removal inevitable, says Saasa

REMOVING subsidies to cut the US$1 billion that Government spends is inevitable and has to be taken into account and on board, says Professor Oliver Saasa. Professor Saasa has, however, called on Government to put in place compensatory mechanisms for those who would be most affected. In an interview, Professor Saasa said that removing subsidies was not a bad thing when a country was unable to finance them. “You cannot meaningfully talk about subsidies in a situation where you cannot subsidise. We have reached a stage where even if they remained there, the Government will not be able to raise its resources to continue subsidising. So really, the removal of subsidies has to be taken into account and taken on board,” he said. He said it was time for the public to stop spending beyond their capacity to generate resources while tightening their belts to survive. “What the minister means is that we will have to cut our dress according to our cloth and that you cannot spend beyond your capacity to generate resources. So really for me, it is inevitable and it has to be taken,” he said. Professor Saasa said it was important to channel the resources from subsidies to the productive sectors. Professor Saasa, however, said Government needed to put in place compensatory mechanisms which would caution the pain caused by removing the subsidies. He explained that the effect on the people was going to be significant especially among the poor and the manufacturing industry. “It is not that we cannot go for it and that we should not go for it. We have to go for it. It is bitter medicine but we have to find sweeteners,” he said. Professor Saasa also warned that there were a number of austerity measures which were part of the International Monetary Fund (IMF) supported programme which would equally have an effect on consumption in the short term. “It is also important to realise that it is not only subsidy removal which will come in. There will be a number of austerity measures which are part of the IMF supported programme and these too will have an effect on consumption in the short term,” he said.

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