Evaluating the Costs of Government Credit Support Programs during COVID-19: International Evidence
IMF Working Papers, January 27, 2023
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- Evaluating the Costs of Government Credit Support Programs during COVID-19: International Evidence
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Bibliographic details
- Authors: Gee Hee Hong, Deborah Lucas
- Published: January 27, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400231971.001
Summary and scope
- Advanced economies made available more than 5 trillion USD through government-supported credit guarantee and direct loan programs during the COVID-19 pandemic.
- The paper estimates subsidies provided by the largest credit guarantee programs introduced in 2020 in seven advanced economies.
- Subsidies are estimated on a fair value basis to provide a consistent and comprehensive upfront measure of cost.
- Authors: Gee Hee Hong, Deborah Lucas.
- Date: January 27, 2023.
- Series: IMF Working Paper No. 2023/016; Pages: 62; Volume: 2023; Issue: 016; DOI: https://doi.org/10.5089/9798400231971.001; ISBN: 9798400231971; ISSN: 1018-5941.
Methodology: fair value framework and alternatives
- Estimates use a fair value approach to quantify the subsidy element (cash-equivalent subsidy) of credit support programs.
- The paper explains the logic for applying a fair value framework in a government context and compares it to alternative approaches.
Key quantitative findings
- For the programs examined, total credit extended totaled 1.7 trillion USD.
- The subsidy element (cash-equivalent subsidy) is estimated to be 67 percent of loan principal on average (37 percent, excluding the US PPP).
- Subsidy shares vary widely across programs, ranging from 12 to 100 percent.
Drivers of variation across programs
- Variation in subsidy magnitudes is explained by differences in:
- Eligibility criteria.
- Loan terms.
- Compensation to lenders.
- Other program design choices.
Policy-relevant implications
- The fair value estimates provide a consistent, upfront measure of fiscal cost that improves transparency of fiscal consequences from large-scale credit support.
- Recognizing subsidy costs on a fair value basis can inform fiscal accounting and policy debates over the design and cost of government credit support programs.
International Monetary Fund — Evaluating the Costs of Government Credit Support Programs during COVID-19: International Evidence; Gee Hee Hong and Deborah Lucas; IMF Working Papers 2023, 016 (2023).
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