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Fiscal Monitor
Fiscal Monitor April 2021
April 2021
Fiscal Monitor
April 2021
This report overviews countries' fiscal actions in response to COVID-19 and discusses how governments' policies should adapt to get ahead of the pandemic and set the stage for a greener, fairer, and more durable recovery. Global vaccination should be scaled up as it can save lives and will eventually pay for itself with stronger employment and economic activity. Until the pandemic is brought under control globally, fiscal policies must remain flexible and supportive, while keeping debt at a manageable level over the long term. Governments also need to adopt comprehensive policies, embedded in medium-term frameworks, to tackle inequalities—especially in access to basic public services—that were exacerbated by the COVID-19 pandemic and may cause income gaps to persist. Investing in education, healthcare, and early childhood development and strengthening social safety nets financed through improved tax capacity and higher progressivity, can strengthen lifetime opportunities, improve trust, and contribute to more social cohesion.
This chapter overviews countries’ fiscal actions and discusses how governments' policies should adapt to get ahead of the pandemic, protect vulnerable households and viable firms, and set the stage for a greener, fairer, and more durable recovery. Global cooperation on vaccination must be scaled up to produce and distribute vaccines to all countries at affordable costs. Until the pandemic is brought under control globally, fiscal policy must remain flexible and supportive, and increasingly tailored to country circumstances. To balance the risks from growing debt with those from premature withdrawal of policy support, policymakers need to develop credible medium-term fiscal frameworks. This effort could be supported by improving the design of fiscal rules or by “preapproving” future tax reforms. Fiscal policy should also enable a green, digital, and inclusive transformation of the economy in the post–COVID-19 environment.
This chapter discusses fiscal policies to tackle inequalities, especially in access to basic public services. Large preexisting inequalities have worsened the effect of the COVID-19 pandemic, while the crisis, in turn, has escalated these inequalities. A holistic approach, which encompasses both predistributive and redistributive policies, are needed to break the circle of inequality. Investing in education, healthcare, and early childhood development and strengthening social safety nets can have a powerful effect on improving access and hence lifetime opportunities. These policies can be financed by raising progressivity and strengthening overall tax capacity. Given that public support for better access to basic services, financed through higher taxes, has been strong and is likely rising with the pandemic, governments need to announce comprehensive policy packages, embedded in medium-term fiscal frameworks, that gives everyone a fair shot and strengthens trust in governments. Such reforms can support inclusive growth, strengthen trust, and build social cohesion.
