Staff Discussion Notes

The State as Financier of Last Resort

By Bryn Battersby, Raphael A Espinoza, Jason Harris, Gee Hee Hong, Sandra V Lizarazo Ruiz, Paolo Mauro, Amanda Sayegh

October 13, 2022

Download PDF Order a Print Copy
Order a Print Copy

Preview Citation

Format: Chicago

Bryn Battersby, Raphael A Espinoza, Jason Harris, Gee Hee Hong, Sandra V Lizarazo Ruiz, Paolo Mauro, and Amanda Sayegh. The State as Financier of Last Resort, (USA: International Monetary Fund, 2022) accessed November 8, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

During the COVID-19 pandemic and global financial crisis, governments swiftly served as financiers of last resort through large financial support measures (FSMs) such as loan and guarantee programs and equity injections in firms. This Staff Discussion Note argues that such FSMs prevented bankruptcies and attenuated the recession by increasing firms’ liquidity, reducing risk premiums, and boosting confidence. But FSMs also carry large and long-lasting fiscal costs and risks. The note presents recommendations for managing the legacies of the COVID-19 programs and preparing for future crises. Ideally, FSMs should be assessed and included in budget plans, though a balance needs to be struck between speed and scrutiny.

Subject: Economic sectors, Financial crises, Financial institutions, Financial sector policy and analysis, Health, Money, Public financial management (PFM)

Keywords: Bailout, Below the line, COVID-19, Credit, Credit guarantees program, Equity injection, Equity injections, Equity purchase, Fiscal policy, Fiscal risks, Global, Government guarantees, Government loan, Government loans, Loans, Pre-existing FSM framework, Public sector balance sheet, Solvency

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Staff Discussion Notes No. 2022/003

  • Stock No:

    SDNEA2022003

  • ISBN:

    9798400220692

  • ISSN:

    2617-6750

You May Also Be Interested In...

Colombia: Technical Assistance Report-Report of the Diagnostic Mission on Macro-relevant Climate Change Statistics (July 17–21, 2023)

November 8, 2024

Republic of Tajikistan: Technical Assistance Report-Public Investment Management Assessment with the Climate Module

November 8, 2024

South Africa: Technical Assistance Report-Report on the Compilation of Energy and Air Emissions Accounts Mission (June 10-14, 2024)

November 8, 2024

Colombia: Technical Assistance Report-Report on the Mineral Asset Accounts and Carbon Footprints Mission (May 20–24, 2024)

November 8, 2024