Interview: High Unemployment Puts Pressure on Revenue, Says Sheehama

Business and economics expert Josef Kefas Sheehama says the country’s rising unemployment rate is putting mounting pressure on tax collection, public finances, and overall economic stability. In an exclusive interview, Sheehama explained that while the official unemployment rate climbed from 33.4% in 2018 to 36.9% in 2023, the real figure could be much higher. “If we use what we call the standard mean, unemployment could actually stand at 60%,” he said.

He warns that fewer people earning taxable incomes means a shrinking tax base and less money flowing into state coffers. “Unemployment reduces the number of people paying income tax, which results in a smaller tax base and can trigger budget deficits,” Sheehama cautioned. He added that this scenario forces the government to make difficult choices about spending, while also trying to protect social safety nets such as the conditional basic income grant and the food bank programme.

“It’s good that the government tries to help vulnerable households through social grants, but if revenue keeps dropping due to high unemployment, it becomes harder to sustain,” he said. Sheehama stressed that high unemployment creates a dangerous cycle, where low tax revenue limits job creation efforts and rising social spending puts more pressure on limited resources.

He urged policymakers to prioritise meaningful interventions to tackle unemployment, saying, “Addressing joblessness is the only way to boost the tax base, grow the economy, and keep social spending sustainable.”