The President of the Republic has announced a package of 20 measures to ease the cost of living. However, some economists contacted by DE this Wednesday, 10 August, argue that the announced measures do not solve the cost of living problem in the short term.
“The measures are good, as they aim to improve the state of the economy. However, these measures do not resolve the situation of the cost of living in the short term,” said Dimas Sinoia, economist and researcher at the Centre for Democracy and Development, stressing that “people expected the announcement by the President of the Republic to come with measures to respond to the situation in which we find ourselves, which is the high cost of living. The measures announced do not solve the problem now”.
Economist Estrela Charles shared the same point of view, saying that “these are measures implemented on the supply side, on the production side. And this is a good thing. But we know that for the measures to have the desired effect, companies must adjust so that they can increase their production. For that to happen, it will take a long time, because these measures are medium and long term and not short term.”
As for the VAT reduction, economists consider the measure to have an impact, but they differ on some points.
For the economist Inocência Mapisse “the issue of reducing VAT by 1% is something very useful because it had been under debate for a long time. VAT makes products more expensive and we know that it is a tax that falls on consumers, so this measure relieves, in some way, the weight of the cost of living that has been increasing for consumers.
“Although it is a small reduction in relation to what was expected, I believe it can have a positive impact,” said Estrela Charles, adding that “what happens is, many times, companies do not reduce the price of products in accordance with the lowering of VAT. In other words, with this reduction, companies will probably not lower the price of their products and this only ends up benefiting the companies themselves. So, as well as this reduction in VAT, the profit margins of companies should be controlled.
For Dimas Sinoia, “reducing VAT by 1% has been discussed for some time, and it has even been proposed that it should be lowered to 16% to allow the tax base to be broadened so that more people pay tax. And he concludes: “the reduction of 1% is not the reduction of the cost of living”.
About the ninth relief measure announced on Tuesday [the creation of the Mutual Guarantee Fund], Dimas considers that “the Government realised that with the high interest rates applied by the central bank, it is almost impossible to access credit”, and in his view, “nobody wants to pay interest above what they will get in return, because the rates are very high, more than 20%. So the fund will allow people to take out loans with subsidised rates”.
In his turn, Estrela Charles said that “we are talking about a measure that aims to guarantee financing for small and medium-sized companies. This fund will give the opportunity to some companies, which do not have access to commercial banking, to obtain financing.”
“The measure on the percentage of revenue that is intended to be channelled to the provinces that exploit natural resources is quite positive, since the issue of transferring the 2.75% of exploration revenue that goes to the communities has been discussed for a long time. It is positive, but it is necessary that afterwards the due metric analyses are carried out to know if, with this increase of 10% for the province, the community continues with its part of the 2.75% intact,” Massipe said.
