Fiscal actions of $11.7trn expended for COVID-19 pandemic, associated lockdowns – IMF
By Kayode Tokede
The Fiscal Monitor 2020 report released by the International Monetary Fund (IMF) shows that the sum of $11.7 trillion, or close to 12 per cent of global GDP, was expended in fiscal actions and interventions relating to the COVID-19 pandemic and associated lockdowns.
According to the report, half of the fiscal actions consisted of additional spending or forgone revenue, including temporary tax cuts, while the other half is in form of liquidity support, including loans, guarantees, and capital injections by the public sector.
This forceful response by governments has saved lives, supported vulnerable people and firms, and mitigated the fallout on economic activity. However, the consequences of the crisis for public finances, combined with the revenue loss from the output contraction, have been massive.
In 2020, government deficits are set to surge by an average of 9 percent of GDP and global public debt is projected to approach 100 percent of GDP, a record high.
The COVID-19 pandemic has prompted an unprecedented fiscal response worldwide to support health systems and provide lifelines to vulnerable households and firms. Fiscal measures announced as of September 11, 2020, are estimated at $11.7 trillion globally, or close to 12 percent of global GDP.
The size and composition of fiscal support has varied vastly by country reflecting in part countries’ available fiscal space. Advanced economies and large emerging markets account for the bulk of the global fiscal response.
The advanced and large emerging markets had a large chunk of the global fiscal response, as they were the first to be hit by the health crisis.
The fiscal response in low-income developing countries, which were later hit by the pandemic, was largely based on the available budget which was smaller because of the subsisting tighter financing constraints.
The debt build-ups in several countries added to global debt vulnerabilities that existed before the pandemic.
According to the report, 54 per cent of low-income countries were deemed to be in debt distress or at high risk of debt distress as of September 2020, up from 51 per cent at the end of 2019.
The massive fiscal support undertaken since the start of the COVID-19 crisis has saved lives, livelihoods and impacted positively on the economy.
No amount is too huge to be expended to save lives and several economies from imminent collapse or crisis by way of fiscal interventions. Several central banks implemented palliative measures aimed at ensuring the financial stability of their economies in light of the ongoing COVID-19 pandemic and lockdown effects on businesses.
