Governments should protect people from the economic impact of the novel Coronavirus (Covid-19) outbreak, the International Monetary Fund (IMF) said on Friday. IMF added that those who are hit the hardest should not go bankrupt nor lose their livelihood for something out of their control.
A family-operated restaurant in a tourism-reliant country or the employees of a factory that has shut down due to a local quarantine will need government support to survive the crisis, the IMF said. The fund also noted that a key role of governments is to protect the well-being of its people, most crucially and visibly during emergencies such as the recent outbreak of Covid-19.
The IMF has $50bn available in rapid-disbursing emergency financing to help countries suffering from the novel Coronavirus. The priority for governments and the global community is to prevent people from contracting the Covid-19 virus and to treat those that have.
Low-income countries urgently need grants or zero-interest loans to help finance health spending costs. Experience with past epidemics, such as Ebola, shows that a speedy deployment of concessional loans is essential to containing the spread of the disease.
Governments can help people and firms by spending money to prevent, detect, control, treat, and contain the virus, and to provide basic services to people that are quarantined. Part of spending should also be directed towards affected businesses to make sure that national economies aren’t hit hard.
For example, national governments can allocate money for local governments to spend in these areas or mobilise clinics and medical personnel to affected regions, as China and South Korea have done.
Moreover, the IMF said Governments should provide timely, targeted, and temporary cash flow relief to the people and firms that are most affected, until the emergency abates. France, Japan, and South Korea are providing subsidies to firms and individuals that must stay home to care for their children as schools continue to close.
Similarly, China is accelerating payments of unemployment insurance benefits and expanding social safety nets. Besides, China is easing tax burdens on firms in the most vulnerable regions and sectors, including transportation, tourism, and hotels.
While South Korea is providing income and value-added tax extensions to businesses in affected industries. China, Italy, and Vietnam are also offering tax extensions to cash-strapped businesses. Iran is simplifying taxation for corporations and businesses while China is allowing for a temporary suspension of social security contributions for firms.
It is also important to communicate to the public how emergency action and changes to original budgets are compatible with stability and sustainability. The IMF noted that the next IMF Fiscal Monitor in April 2020 will provide further details on policies undertaken by governments to contain the Covid-19 outbreak.
