Policy Tracker

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This policy tracker summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic. The tracker includes 193 economies. Last updated May 29, 2020.

NOTE: The tracker focuses on discretionary actions and might not fully reflect the policies taken by countries in response to COVID-19, such as automatic insurance mechanisms and existing social safety nets which differ across countries in their breadth and scope. The information included is not meant for comparison across members as responses vary depending on the nature of the shock and country-specific circumstances. Adding up the different measures—tax and spending, loans and guarantees, monetary instruments, and foreign exchange operations—might not provide an accurate estimate of the aggregate policy support. The tracker includes information that is publicly available or provided by the authorities to country teams and does not represent views of the IMF on the measures listed.


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Afghanistan, Islamic Republic of

Background. As of May 21, Afghanistan had reported 8,676 COVID-19 cases with 193 deaths and 938 recoveries. Since the first case was confirmed on February 24, the number of Afghan migrants returning daily from neighboring countries has been in the thousands, well in excess of the COVID-19 testing capacity. The actual infection rate is therefore likely higher than reported. On March 18, the government tightened containment measures, including screening at ports of entry, quarantine for infected people, and closure of public places for gathering. On March 28, it introduced in most of the country strict lockdown measures, which were subsequently extended twice and will now be in place until May 24. Daily movements have been restricted to those deemed essential. The government also released over 5,300 prisoners to reduce the risk of mass infections in penitentiaries.

The pandemic has hit hard the economy as trade and transportation have been disrupted and domestic activity slowed sharply, upending the livelihood of thousands of Afghan families. Border closures and panic-buying led to a temporary spike in prices of some foodstuffs, which abated after private wholesalers boosted supply at the government’s request. On May 17, Pakistan re-opened its Torkham and Chaman borders points with Afghanistan.


Key Policy Responses as of May 21, 2020 

Fiscal
  • The Government’s Emergency Committee for COVID-19 Prevention meets every two days to assess the situation and initiate relevant actions. The government initially allocated Af 8 billion (0.5 percent of GDP) for emergency pandemic response, of which Af 1.9 billion (0.1 percent of GDP) for urgent health needs, such as i) establishing testing labs, including at border crossings; ii) setting up special wards to boost hospitalization and care capacity; and iii) procuring the most critical medical supplies.

    Since then, the government has developed two macroeconomic scenarios with distinct assumptions regarding the depth and duration of the pandemic. It has identified non-essential spending that can be curtailed to create space for pandemic-related spending, including social relief package for the affected households and measures to prevent permanent damage to the Afghan economy.

    Draft budget amendments recently submitted to parliament would allocate about Af 21 billion (1.4 percent of GDP) for a short-term employment program, processing and storage facilities for agriculture commodities that producers have been unable to export, building industrial parks, purchases of additional hospital beds, and bread distribution to the vulnerable households. Overall, the authorities plan to spend about 2 percent of GDP for critical pandemic-related spending during the year, with about one third directed to health. With the support of the World Bank, other development partners, and humanitarian agencies, the authorities are developing a social relief package—through cash transfers and, if impractical, in kind—to support food security among socially vulnerable households. On April 29, the government started providing free bread to about 2.5 million needy and poor people in Kabul, and plan to extend to other cities.

    To ease tax compliance, the government extended filing deadlines on March 20 for individual and business taxpayers.

Monetary and Macro-financial
  • The authorities increased the frequency of Financial Stability Committee meetings, enhanced the monitoring of early signs of liquidity stress, and reviewed banks’ business continuity plans. Da Afghanistan Bank (DAB) has suspended administrative penalties and fees, postponed the IFRS-9 implementation to June 2021, and froze loan classifications at the pre-pandemic cutoff of end-February.

Exchange rate and balance of payments
  • DAB remains focused on price stability and is committed to exchange rate flexibility, limiting its foreign interventions to preventing excessive volatility. DAB has engaged money-service providers, who play a systemic role in financial intermediation, including in foreign currency, to ensure uninterrupted services.


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Albania

Background. As of May 21, Albania has 969 confirmed cases (of which only 167 are active cases), and 31 deaths. As new cases continue to drop, the country is preparing to open its borders by the end of May, after virtually shutting them since mid-March, bar for trade and repatriation flights. Preparation for the forthcoming tourist season have started, with government preparing safety and hygiene protocols. Albania is still under the state of natural catastrophe until June 23rd, which enables the government to use extended powers. Since detecting its first case on March 8th, due to its proximity and close links to Italy, Albania adopted some of the toughest restrictive measures in Europe. The parliament adopted on April 18th amendments to the penal code, legislating harsh punishments for those breeching the lockdown or quarantine.

In a sign of solidarity with its neighbor and main trading partner, Albania has sent teams of doctors and nurses to help fight against the COVID-19 pandemic in north Italy, one of the worst hit areas in the world. Small businesses, individuals affected by the pandemic measures and students will be able to hold off on rent payments for April and May according to a normative act.

Reopening of the economy. On May 18th, Albania opened almost all businesses, including bars and restaurants for outside sitting alone. Large gatherings and sporting activities are still banned, but training in open areas has started. Gradual reopening measures have started since mid-April based on the reopening strategy prepared by the Ministry of Health, which factor in new number of cases, hospitalization and patients needing intensive care. Most of the country is now a low risk “green area” where no restrictions apply, Movement between green and red areas is restricted. Schools resumed on May 18th only for graduating high school students that sit university admission exams, while some universities will resume staggered classes in the summer to ensure fewer students per class. Courts have resumed work as April 27th. Public transport remains closed, but taxis have resumed.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has adopted two support packages for people and businesses affected by the COVID-19 pandemic of a combined size of Lek 45 billion (2.8 percent of GDP) consisting of budget spending, sovereign guarantees and tax deferrals. The first package adopted on March 19th through a normative act had support measures of Lek 23bn (1.4 percent of GDP) through a combination of spending reallocations, spending increases and sovereign guarantees to support affected businesses. The key measures are: (i) additional funding for health sector in the amount of Lek 3.5 billion (ii) Lek 6.5bn for the support of small businesses/self-employed that are forced to close activities due to the COVID-19 pandemic by paying them minimum salaries (up to two in the case of family businesses with unpaid family members), doubling of the unemployment benefits and social assistance layouts. (iii) Lek 2bn of defense spending reallocated toward humanitarian relief for the most vulnerable, (iv) Lek 11bn (0.6 percent of GDP) sovereign guarantee fund for companies to access overdrafts in the banking system to pay wages for their employees for up to 3 months with an interest rate capped at 2.85 percent for a maturity of up to 2 years. The government will bear the interest costs. Starting in April, cabinet ministers and lawmakers will receive half of their salaries for the next three months with the savings going to the Anti-Covid 19 social support fund. The second package adopted on April 15th includes (i) Lek 7bn (0.4 percent of GDP) fund to pay for a one-off transfer of Lk40,000 to employees of small businesses affected by the pandemic not covered in the first package, employees of large businesses laid off due to the pandemic, and employees in the tourism sector; (ii) a sovereign guarantee of Lek 15 billion (0.9 percent of GDP) to provide loans for working capital for all private companies that were tax-compliant and solvent before the pandemic. The government will guarantee 60% of the loans, and interest are capped at 5%. The government has also adopted tax deferral measures allowing all companies (except banks, telecommunication, public enterprises and companies in the chain of supply of essential goods) to defer payment of profit tax until after September. Tourism, active processing and call centers – as well as small businesses with turnover of Lk14m or less – can defer payments of profit tax to next year.

Monetary and macro-financial
  • To address the liquidity bottlenecks of companies and individuals, the Bank of Albania announced a temporary change on the provisioning requirements , effective from March 12th to May 31st, enabling clients to ask banks and other financial institutions to defer loan installments without penalties. On March 25th, the Bank of Albania cut its key policy rate -the weekly repo, by 50 basis points to a new historic minimum of 0.5 percent. The Governor announced that the banking sector is liquid and well capitalized, and the central bank stands ready to provide unlimited liquidity for as long as needed.

    The Bank of Albania suspended dividend distribution for 2019 and 2020 for banks until the end of June in order to boost capital and support lending during this period. The central bank also halved the salaries of its supervisory board and top management for the duration of the pandemic.

    To urge the use of internet banking and reduce the number of people requiring services in bank premises, the central bank also waived the commissions for transfers in local currency.

Exchange rate and balance of payments
  • Albania has a floating exchange rate. The Bank of Albania intervenes only in pre-announced purchases to boost reserves or to smooth excessive and disruptive short-term volatility. No measures regarding the exchange rate market have been announced.


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Algeria

Background. Algeria is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both shocks. As of May 21, Algeria had 7,728 confirmed COVID-19 cases, and 575 deaths. The authorities have been implementing containment measures since early February (e.g., cancelling flights, and imposing quarantines to repatriated Algerians). Confinement measures include closure of schools, universities, restaurants, and shops; cancellation of public and private events; shut down of transportation services (internal and external); putting on mandatory leave half of civil servants and private workers with full compensation. Demonstrations and religious activities have been cancelled, a lockdown of affected areas has been ordered and a curfew has been put in place in several cities including Algiers.

Reopening of the economy. The full lockdown of certain cities has ended, while the curfews, notably in Algiers, have been relaxed. Some stores were allowed to reopen before closing again due to the lack of observance of social distancing guidelines. A restrictive lockdown is being imposed during the 2-day Eid celebrations on May 23-24, including stringent curfew and severe limits to traffic.


Key Policy Responses as of May 21, 2020

Fiscal
  • · The government has prepared a supplementary finance law (SFL), which is being considered by the economic commission of the Assembly as of May 18 and will be debated at the end of May. It includes provisions amounting to 70bn dinars to mitigate the health and economic impacts of the COVID-19 crisis. For the health sector, this includes 3.7bn for medical supplies, 16.5bn for bonus payments to health workers, and 8.9bn for the health sector’s development. For the economic impact, the law includes 20bn for allowances to the unemployed because of COVID, and 11.5bn for transfers to poor households. Overall, in order to adjust to the new low oil price environment, the SFL plans for a reduction in current and capital spending by 5.7 percent (representing 2.2 percent of 2019 GDP) compared to the initial 2020 budget law. In response to the economic impact on household and enterprises of the lockdown measures, the authorities also announced that: (i) the declaration and payments of income taxes for individuals and enterprises have been postponed , except for large enterprises; and (ii) contractual deadlines would be relaxed and penalties for companies that experience delays in completing public contracts would be suspended.

Monetary and macro-financial 
  • On March 15, the Bank of Algeria lowered the reserve requirement ratio from 10 percent to 8 percent, and its main policy rate by 25 basis points to 3.25 percent.
  • On April 6, the Bank of Algeria announced that it was easing solvency, liquidity and NPLs ratios for banks. Banks are also allowed to extend payments of some loans without a need to provision against them.
  • On April 30, the Bank of Algeria announced that it was cutting its main policy rate from 3.25 to 3.00 percent, that it was lowering its reserve requirement ratio from 8 percent to 6 percent, and that it was lowering haircuts on government securities used in refinancing operations.
Exchange rate and balance of payments
  • he authorities announced several measures to cut the import bill by at least USD 10 bn (6 percent of GDP). Authorities banned exports of several products, including food, medical and hygiene items.


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Angola

Background. As of May 19, 2020, Angola has 50 confirmed cases of COVID-19, with 3 deaths, and 17 recoveries. The first community transmission was registered on April 27. On April 24, the President requested a second extension of the State of Emergency for an additional 15 days, although with less strict rules, allowingnon-essential commercial and industry activities to operate and partial resumption of all public services. The sanitary restrictions have been lifted in 17 out 18 provinces, but only for interprovincial movements related to commerce and business activities, excluding to and from Luanda, which has two areas under cordon sanitaire due to increasing community infections. A field hospital for Covid-19 patients is being installed in Luanda to double the number of beds available operational. The authorities have also purchased about 380 tons of biosecurity material from China, including 50 thousand tests. The World Bank is working with the authorities to provide financing for medical supplies equipment. The UN is also providing technical and financial support ( US$12.5 million grant). On April 16, a caravan of public health specialists left the Luanda for the regions as the country ramps up its COVID-19 emergency response.


Key Policy Responses as of May 21, 2020

Fiscal
  • The National Assembly approved a package of revenue and expenditure measures to fight the COVID-19 outbreak in the country and minimize its negative economic impact. Additional health care spending, estimated at US$40 million, was announced. Tax exemptions on humanitarian aid and donations and some delays on filing taxes for selected imports were granted.

Monetary and macro-financial
  • On March 27, 2020, the central bank (BNA) reduced the rate on its 7-day permanent liquidity absorption facility from 10 percent to 7 percent and expanded its credit-stimulus program that allows banks to deduct from reserve requirement obligations the amount of credit extended to selected sectors. Financial institutions that provide credit are requested to grant their clients a moratorium of 60 days for servicing the debt. On April 3, the BNA increased the minimum allocation of credit to promote the production of priority products to 2.5 percent of the commercial banks’ net assets. On April 18, the BNA instructed banks to provide credit in local currency to assist importers of essential goods; and on May 7, it reinstated its Permanent Overnight Liquidity Provision facility to provide liquidity support to banks (Kz 100 billion, or about US$185 million), and extended access to large non-financial corporations on the previously announced discount line (US$185 million) created for the purchasing of government securities from non-financial corporations.

Exchange rate and balance of payments
  • On April 1, the central bank introduced an electronic platform for foreign exchange transactions, which will be progressively extended for all such transactions.


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Argentina

Background. The outbreak of COVID-19 in Argentina has been relatively limited so far, with 13933 confirmed cases and 500 mortalities (as of May 28), and the majority of the cases centered in the Province and City of Buenos Aires. The authorities have adopted sweeping measures to prevent a rapid growth in infections, involving a full closure of borders and a nation-wide quarantine, beginning on March 20 and lasting until at least June 7. The pandemic and the containment measures have had a significant economic impact, with a GDP loss of between 0.75 and 1 percent of GDP in Q1-2020. Capital Flow Management Measures (CFMs) that were already in place since August 2019 have largely protected Argentina so far from the impact of capital outflows.

Reopening of the economy. The government’s policy of moving from strict lockdown to a gradual reopening of the economy is contingent on the speed of contagion, defined as the length of time it takes for the number of reported cases to double. On May 8, with the doubling of contagions rising above 25 days, the government announced a gradual reopening aimed at raising regional mobilization from 50 to 75 percent in all districts, except for the Buenos Aires metropolitan area. On May 23, restrictions in the Buenos Aires metropolitan area were tightened in response to an acceleration in infections. The government will reassess the situation on June 7.


Key Policy Responses as of May 28, 2020

Fiscal
  • Announced measures (totaling about 4 percent of GDP, 2.3 percent in the budget and 1.8 percent off-budget, based on authorities’ estimates) have focused on providing: (i) increased health spending, including for improvements in virus diagnostics, purchases of hospital equipment and construction of clinics and hospitals; (ii) support for workers and vulnerable groups, including through increased transfers to poor families, social security benefits (especially to low-income beneficiaries), unemployment insurance benefits, and payments to minimum-wage workers; (iii) support for hard-hit sectors, including an exemption from social security contributions, grants to cover payroll costs; and subsidized loans for construction-related activities; (iv) demand support, including spending on public works; (v) forbearance, including continued provision of utility services for households in arrears; and (vi) credit guarantees for bank lending to micro, small and medium enterprises (SMEs) for the production of foods and basic supplies. In addition, the authorities have adopted anti-price gouging policies, including price controls for food and medical supplies and ringfencing of essential supplies, including certain export restrictions on medical supplies and equipment and centralization of the sale of essential medical supplies.

Monetary and macro-financial
  • Measures have been aimed at encouraging bank lending through (i) lower reserve requirements on bank lending to households and SMEs; (ii) regulations that limit banks’ holdings of central bank paper to provide space for SME lending; (iii) temporary easing of bank provisioning needs and of bank loan classification rules (i.e. extra 60 days to be classified as non-performing); and (iv) a stay on both bank account closures due to bounced checks and credit denial to companies with payroll tax arrears.

Exchange rate and balance of payments
  • A broad set of CFMs have been in place since August 2019, aimed at restricting financial account transactions (limits on purchase of dollars, transfers abroad and debt service in foreign currency), and some current account transactions (surrender requirements on export proceeds, restrictions on imports of services, dividend payments abroad, and interest payments on foreign currency debt). CFMs have helped limit outflows and allowed for a (modest) net purchase of FX in March and early April by the central bank. The exchange rate has depreciated by over 9 percent vis-à-vis the US dollar since early March, in line with most regional peers.


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Armenia

Background. Armenia has reported 5041 cases of COVID-19 and 64 deaths as of May 21, 2020. The government declared a national state of emergency on March 16, and imposed strict containment measures, including school closures, travel bans on foreign citizens from high risk countries, and imposed fines to those who violate isolation orders during the state of emergency. The state of emergency was extended until June 14. The government announced an assistance package with a headline amount of $300 million (2 percent of GDP) to mitigate the socio-economic issues related to the pandemic, although this includes a variety of direct spending, state-sponsored loans and increased investment.

Reopening of the economy. Effective May 4, the movement restrictions were removed and almost all business activities are allowed to operate. Starting May 18, containment measures were eased, resuming operations of public transport, retail businesses, and restaurants. Stricter restrictions may be implemented again depending on the spread of the virus.


Key Policy Responses as of May 21, 2020

Fiscal
  • The measures fall into three broad categories: (i) subsidized 2-3 year loans to provide short-term support to affected businesses and SMEs; (ii) direct subsidies to SMEs and busineses to help maintain their employees; (iii) lump-sum transfers to the vulnerable including individuals who were unemployed after the COVID-19 outbreak, families with or expecting children, micro-businesses, general population who needed help with utility bills, and temporary part-time employment. So far, the authorities have adopted 18 support packages and allocated over 73billion AMD ($137.9m) to those.

Monetary and macro-financial
  • The Central Bank of Armenia (CBA) reduced the policy rate by another 25 bps to 5 percent on April 28. The interbank market has been active, and the central bank has easily met liquidity needs so far and provided a few FX swap operations to assure sufficient liquidity in dram and in FX. The CBA undertook few foreign exchange sales to limit excessive dram volatility around the beginning of April, although since then the dram has strengthened, and the CBA has been able buy some FX. The CBA has not used macroprudential policies actively yet. The CBA’s authorities are supervising banks’ liquidity positions and will act swiftly if required to safeguard financial stability.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly and has appreciated to pre-pandemic level against the US$. No balance of payment or capital control measures have been adopted.


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Aruba

Background. Aruba has reported 101 positive cases (with 3 deaths) as of May 21, 2020. The Coronavirus outbreak is affecting Aruba through two key channels— disruption to domestic activity from voluntary and mandatory social distancing and a sharp declin in tourism. The authorities have adopted containment measures, including a shelter-in place, a compulsory dusk-to-dawn curfew, travel restrictions, suspension of non-vital government work, closures of schools and non-essential business activities, and limits on social gatherings.

Reopening of the economy. The authorities announced a four-phase plan to gradually relax restriction measures starting May 4 through mid-June, when the existing shelter-in-place and curfew orders are expected to be lifted. In phase 1 (May 4-17) some non-essential businesses, such as selected retail stores, food trucks, museums and art centers, and construction activities were permitted to operate with a maximum of 15 people allowed. Other non-essential businesses and activities will be considered for reopening in subsequent phases every two weeks while the number of people allowed in working spaces and stores is gradually increased. Schools reopened on May 18 under precautionary certain restrictions while the country’s border will be closed until May 31st.


Key Policy Responses as of May 21, 2020

Fiscal
  • On March 26, the parliament approved the amended 2020 budget, containing a higher spending related to the healthcare sector and three supporting programs: a relief package for employees who lose their jobs due to the virus outbreak; a package to support social security; and a package to support small and medium-sized enterprises. The authorities announced that the planned fiscal consolidation reforms for 2020 have been postponed. Moreover, on April 23, the authorities announced their plan to reduce government expenditures including the wage bill to contain the anticipated large deficit in the budget.

Monetary and macro-financial
  • On March 17, the central bank of Aruba (CBA) lowered: the reserve requirement on commercial bank deposits from 12 to 11 percent; the minimum capital adequacy ratio from 16 to 14 percent; and the prudential liquidity ratio from 18 to 15 percent. Furthermore, the maximum allowed loan-to-deposit ratio was increased from 80 to 85 percent (see https://www.cbaruba.org/cba/readBlob.do?id=6307). Moreover, on May 5, the CBA further lowered reserve requirement to 7 percent.

Exchange rate and balance of payments
  • On March 17, the CBA announced that it would not grant any new foreign exchange licenses related to outgoing capital transactions, and that it stands ready to take further measures to preserve the peg.


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Australia

Background. Australia has reported 7,150 confirmed cases of COVID-19, of which 103 have died, as of May 28, 2020 (compared to 7,081 confirmed cases as of May 21). More than 1.4 million COVID-19 tests have been conducted across Australia. The COVIDSafe app is available for voluntary download to speed up contacting people exposed to coronavirus. Overseas travels are banned, and any arrivals in Australia are quarantined for 14 days.

Reopening of the economy. After the National Cabinet on May 8 announced a three-step plan to relax COVID-19 restrictions, States and Territories have begun easing regional restrictions to varying degrees. Social distancing measures are still in place across Australia, while some states are revising restrictions on public gatherings.


Key Policy Responses as of May 28, 2020

Fiscal
  • Three economic stimulus packages are put in place at the Commonwealth level, with total expenditure and revenue measures of A$134 billion (6¾ percent of GDP) through FY2023-24, the majority of which to be executed in FY2019-20 and FY2020-21. Measures include sizable wage subsidies (3½ percent of GDP), income support to households, cash flow support to businesses, investment incentives, and targeted measures for affected regions and industries. In addition, parliament approved an advance authorization of A$40 billion for unforeseen events. The Commonwealth government has committed to provide free childcare to around one million families and announced targeted support to the education system. Other measures include loan guarantees between the Commonwealth government and participating banks to cover the immediate cash flow needs of SMEs (up to A$20 billion), and the government is allocating up to A$15 billion to invest in residential mortgage backed securities and asset backed securities to help funding for small banks and non-bank financial institutions.

    Separately, the Commonwealth government has committed to spend an additional amount of almost A$5 billion (0.3 percent of GDP) to strengthen the health system and protect vulnerable people, including those in aged care, from the outbreak of COVID-19. The Commonwealth government has also agreed with the States and the Territories to share the public health costs incurred by the States and Territories in treating the COVID-19.

    State and Territory governments also announced fiscal stimulus packages, together amounting to A$23 billion (1.2 percent of GDP), including payroll tax relief for businesses and relief for households, such as discount utility bills, cash payments to vulnerable households, and support for health spending.

Monetary and macro-financial
  • The policy rate was cut by 25 basis points twice on March 3 and 19, to 0.25 percent. The Reserve Bank of Australia (RBA) has announced yield targeting on 3-year government bonds at around 0.25 percent through purchases of government bonds in the secondary market. To support liquidity, RBA will conduct one-month and three-month repo operations daily until further notice. Repo operations of longer-term maturities (six months or longer) will be held at least weekly, as long as market conditions warrant. To assist with the smooth functioning of Australian capital markets, the RBA has broadened the range of eligible collateral for open market operations to include securities issued by non-bank corporations with an investment grade. The RBA has established a swap line with U.S. Fed for the provision of US dollar liquidity in amounts up to US$60 billion. To allow banks to lend more to SMEs during the period of disruption caused by COVID-19, RBA has established a term funding facility of at least A$90 billion for access to three-year funding at 25 basis points.

    The Australian Prudential Regulation Authority (APRA) has provided temporary relief from its capital requirement, allowing banks to utilize some of their current large buffers to facilitate ongoing lending to the economy as long as minimum capital requirements are met. APRA also announced on March 30 that it is deferring its scheduled implementation of the Basel III reforms in Australia by one year to January 2023. Based on guidance issued on April 7, APRA expects banks and insurers to consider deferring decisions on the level of dividends or approve a dividend at a materially reduced level. APRA is also temporarily suspending the issuing of new licenses for at least six months in response to the economic uncertainty created by COVID-19.

    In addition, the Australian Banking Association has announced that Australian banks will defer loan repayments for small businesses affected by COVID-19 for six months. APRA clarified that loans that have been granted repayment deferrals as part of a COVID-19 support package need not be regarded as restructured for borrowers who have been meeting their repayment obligations.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly to absorb economic shocks.


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Austria

Background. As of May 20, only 37 persons remain in intensive care and no new infections were registered in the past two weeks. The authorities have progressively tightened containment measures between mid-March and mid-April. Initially targeted to travel to and from Italy and self-quarantine for people with symptoms, the measures progressed to bans on large gathering in public spaces, replacing schools, and university classes with home learnings, and isolation of several ski resorts. By March 16, leaving home was banned by law with limited exceptions, restaurants and shops not delivering daily products were closed, and enforced by administrative and police measures, and a number of communities and regions were declared risk areas and put under quarantine. For all judicial and administrative procedures, the clock was put on hold to avoid hardship due to missed deadlines.

Reopening of the economy. A gradual re-opening of the economy has started after April 13, from small shops, construction and garden centers, while other stores and hairdressers were allowed to open at the beginning of May. By mid-May when religious services, outdoor sports, museums, libraries, and archives reopened and the Bundesliga was allowed to restart. Following strict guidelines on distancing and other precautions remain mandatory. The re-opening process will last through June and may be accelerated if infection rates remain low. Borders with Germany, Switzerland, Czech Republic, Slovakia, and Hungary will fully reopen from June 15, with intermittent partial openings and restrictions by that date.


Key Policy Responses as of May 20, 2020

Fiscal
  • The total fiscal package announced on March 15 amounts to 38 billion euros (about 9 percent of GDP). Financing includes: 4 billion euros for the health care system, long-term care, short-time work, and to compensate self-employed, family- and micro-business for the loss of earnings related to the sickness; 9 billion euros in guarantees to companies, including exporters and the tourism industry; 10 billion euros for the deferral of personal and corporate income taxes (for 2020), social security contributions (3 months), and VAT payments (until end-September 2020). The General Civil Code was enacted on March 15 declaring COVID-19 a force majeure enabling companies to force workers to take up to two weeks of leave accumulated in previous years. On March 22, €22 million were earmarked for research and short-term work was extended to 3 months (until May) with the possibility to extend it by another three months (to August). Under this provision working hours may be reduced to up to 10 percent, at 80 to 90 percent of regular pay. Employers only pay the hours worked, while the rest is paid from the budget. From April 2, households could delay rent payments to their landlords until end-2020. Households and SMEs may also delay their debt servicing by 3 months. Funding for short-term work was increased from € 3 to € 5 billion on April 13, to € 10 billion on April 30, and again to € 12 billion on May 19 while the time frame for the submission of applications extended. The authorities are rolling out new fiscal measures including tax relief measures for the hospitality sector of € 500 million and support to non-profit organizations of € 700 million open for 6 months.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    The Oesterreichische Nationalbank (OeNB) has declared readiness to supply sufficient cash to banks, ATM operators, and the economy in response to increased withdrawals. Working hours were extended to meet the increased demand. On March 18, the Financial Market Authority prohibited short sales for one month following the massive drop in prices on the Vienna Stock Exchange due to betting on covered share price losses and extended it on April 16 to May 18.

Exchange rate and balance of payments
  • No measures.


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Azerbaijan

Background. Azerbaijan has been adversely affected by COVID-19 and a collapse of oil prices. The authorities have reported 3,749 confirmed cases, with 2,340 recoveries and 44 deaths as of May 21. Some cases have resulted from local transmission. To contain the spread of COVID-19, the authorities have introduced a special quarantine regime (until May 31, 2020). It includes border closures, required quarantine of returning citizens, prohibition of mass gatherings, restriction on domestic movements; closure of retail outlets, airports, and transportation hubs; social distancing, and disinfection of public spaces.

The Central Bank of Azerbaijan (CBA) and commercial banks have shifted to a seven-day work week, including to allow individuals and businesses to convert their manat holdings into foreign currency. The COVID-19 Operational Headquarters has been created under the Cabinet of Ministers, and working groups within various ministries and at the CBA have been tasked with developing specific measures.

Reopening of the economy. On May 4, the authorities have started a staged relaxation in these restrictions.


Key Policy Responses as of May 21, 2020

Fiscal
  • The authorities have increased spending on public health (AzN 8.3 million) and created a CV Response Fund, to which it has transferred AzN 20 million manat, with additional contributions from the public and private sectors. They have also announced support to the affected businesses in the amount of AzN 3.0 billion (3.5 percent of GDP). Azerbaijan's government has provided $5 million to the COVID-19 Fund as part of the WHO’s Strategic Preparedness and Response Plan.

Monetary and macro-financial
  • On March 19, the CBA left the refinancing rate unchanged at 7¼ percent, but raised the floor of the interest rate corridor (within a de facto floor system) by 125 bps to 6¾ percent. On May 1, the CBA lowered the ceiling of the interest rate corridor by 100 bps to 8 percent. The authorities have extended the blanket deposit guarantee until December 4, 2020. The guarantee covers all manat (foreign currency) deposits within a 10 (2½) percent interest rate cap.

    On April 23, the CBA undertook several measures to assist the financial sector. This included: (I) a relation of capital requirements (system wide and the countercyclical capital buffer) and risk weights on mortgage loans; (ii) a moratorium on late fees and interest rate penalties; (iii) guarantees on insurance premiums; and (iv) suspension of inspections of credit institutions.

    On April 27, the CBA appointed temporary administrators in four banks. Two of the banks were closed on April 28, with the other two closed on May 12.

    On May 19, the CBA signed a $200 million swap agreement with the EBRD.

Exchange rate and balance of payments
  • The CBA, with the participation of the State Oil Fund, has conducted scheduled and extraordinary foreign exchange auctions, and has satisfied all demands for foreign currency at the announced 1.7 AzN/US$ rate.


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The Bahamas

Background. The COVID-19 pandemic comes on the heels of the devastation caused by Hurricane Dorian in September 2019. The Bahamas has so far reported 96 confirmed cases of COVID-19 with 11 deaths (as of May 20). While weekday curfews and weekend lockdown measures remain in place , the authorities are preparing for the phased and gradual reopening of various islands and some sectors of the economy.After closing all airports and ports to incoming flights and vessels (including domestic inter-island travel) as part of the containment strategy, The Bahamas is now looking at a possible opening date for commercial travel on or before July 1, depending on the COVID-19 infection trends. Although the collapse in international tourist arrivals has been an unprecedented shock to the country’s tourism-dependent economy, the reduction in commodity prices has acted as a buffer against the shock.

Reopening of the economy. The government published a re-opening plan on April 27. The plan consists of five phases: Phase 1 (Opening essential services, hurricane preparation, delivery services, and construction), P2 (expanding operations in the Family Islands and existing services), P3 (open some non-essential operations), P4 (re-opening of restaurants, theaters, and cultural events), and P5 (restarting tourism and reopening the borders). The transition from one phase to the next is guided by specific criteria, such as the number of new cases and capacity of the health system. Accordingly, commercial activity has resumed in some islands of the archipelago, where the outbreak has been contained, while one island (Bimini) has been put under a two-week lockdown due to new COVID-19 cases.


Key Policy Responses as of May 20, 2020

Fiscal
  • The government announced various support measures totaling B$65.7 million (0.6 percent of GDP) have been announced, including (i) B$4 million for the health sector and ((ii) B$4 million for food programs and B$5.9 million as income support for the self-employed, (iii) B$ 20 million to support business loans to SMEs and B$30 million to provide tax deferrals (or tax credits) to companies retaining at least 80 percent of staff, and (iv) B$1.8 million to support to Family Island administrators (local public officers).

Monetary and macro-financial
  • The Central Bank of The Bahamas (CBOB) has arranged with domestic banks and credit unions to provide a 3-month deferral against repayments on credit facilities for businesses and households that were negatively impacted by the pandemic. Forbearance will be provided for borrowers who maintained their accounts in good standing before the onset of the pandemic.

Exchange rate and balance of payments
  • The CBOB has suspended all exchange control approvals for domestic bank dividends. This position will be periodically reviewed, with a view to determining a medium-term position by September 2020.

    For commercial banks, the ceiling on the Bahamian open position on foreign exchange transactions has been relaxed to the maximum of 5 percent of Tier11 capital, removing the more binding limit of B$5 million on net long exposures that constrained most institutions.

    The CBOB suspended approval of applications to purchase foreign currency for transactions via the Investment Currency Market (ICM) and the Bahamas Depositary/Depository Receipt (BDR) program. Both programs fund external portfolio investments.

    The CBOB has requested the National Insurance Board to repatriate some of its external assets, excluding any exposures to Bahamas and Caribbean domestic issuers.


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Bahrain

Background. Bahrain has been hit by the spread of COVID-19 and by the recent sharp decline in oil prices. As of May 20, 7843 confirmed cases have been reported in Bahrain, of which 3334 have recovered and 12 have died. To contain the rapid spread of COVID-19, the authorities have expanded social distancing and stay-at-home measures: closing educational institutions, retail shops, restaurants and cinemas; suspending flights to infected areas; suspending prayers in mosques; rescheduling major events; restricting gathering to 5 people; introducing mandatory use of masks while in public; and switching to remote working at public entities. Recently introduced measures include a reduction of private schools’ tuitions by 5-10 percent and a provision to accommodate expatriates in temporary housing where social distancing practices can be maintained. The authorities are also expanding intensive care units (ICU) facilities should the existing stock of ICU beds become insufficient.

Reopening measures. In a series of steps over April 9-23, the authorities have permitted reopening of retail stores subject to some strict operational conditions. Stores that reopen should require every customer to wear a mask, operate with a reduced number of employees, and prevent overcrowding at their premises, ensuring continuous sterilization of premises setting up queues to enter to enforce social distancing.


Key Policy Responses as of May 20, 2020

Fiscal
  • A BD 560 million ($1.5 billion or 4.2 percent of GDP) stimulus package to respond to the economic distress due to the COVID-19 pandemic was announced on March 17. The package, effective for a period of three months from April, comprises seven initiatives: (i) payment of salaries for Bahrainis working in the private sector to be financed from the unemployment fund; (ii) payment of electricity and water bills for Bahraini individuals and companies; (iii) exemption of commercial entities from municipalities' fees; (iv) exemption of tourist facilities from tourism fees; (v) exemption of industrial and commercial entities from paying rent to the government; (vi) doubling of the size of the liquidity fund to support SMEs; (vii) and redirection of Tamkeen (a semi-autonomous government agency that provides loans and assistance to businesses) programs to support adversely affected companies, as well as restructuring of all debts issued by Tamkeen. In addition, to respond to urgent health needs created by COVID-19, the Cabinet has authorized the Minister of Finance and National Economy to withdraw from the general account up to BD 177 million or 1.3 percent of GDP. On April 8, 2020 a further BD 5.5 million enhancement to social benefits for lower income families was announced. On April 20 the authorities announced their objective to reduce non-priority government agencies expenditure by up to 30 percent and delay some capital expenditure to accommodate lower oil revenues due to the decline in oil prices. Other measures announced include the extension of the existing package to drivers, driving instructors and nurseries, as well as a proposal to delay the collection of some claims on nationals.

Monetary and macro-financial
  • On March 17, the Central Bank of Bahrain (CBB) expanded its lending facilities to banks by up to BHD 3.7 billion ($10 billion or 28 percent of GDP) to facilitate deferred debt payments and extension of additional credit. The CBB has also followed the Fed’s interest rate cuts in response to the COVID-19 pandemic: the one-week deposit facility rate was cut (in two steps) from 2.25% to 1.0%, the overnight deposit rate from 2.0% to 0.75%, and the overnight lending rate (in one step) from 4.0% to 2.45%. Other key measures to support banks and their clients include: (i) reducing the cash reserve ratio for retail banks from 5% to 3%; (ii) relaxing loan-to-value ratios for new residential mortgages; (iii) capping fees on debit cards; and (iv) requesting banks to offer a six-month deferral of repayments without interest or penalty and to refrain from blocking customers' accounts if a customer has lost his or her employment. The CBB is also following up with banks on suitability of banks' contingency plans.

Exchange rate and balance of payments
  • No measures.


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Bangladesh

Background. Bangladesh has reported 40,321 confirmed cases and 559 deaths following the identification of the first imported case on March 8. On March 23, the government declared a general holiday from March 26 to May 30, leading to the closure of government offices, private offices, and courts, and shorter operating hours for commercial banks. Individuals have been requested not to leave their homes except to collect daily necessities and emergency supplies, and to wear masks when outside. A lockdown has been imposed on 75 hotspots in Dhaka where cases have been identified, and a curfew is in operation from 6pm to 6am. On April 8, the government restricted operations in Rohingya refugee camps to critical services and assistance only, citing the need to minimize risk within the camp setting. With the first cases in the camps confirmed last week, aid agencies are concerned about the consequences of an outbreak with poor medical facilities for the refugees.

Reopening of the economy. On May 28, the authorities announced that closures and movement restrictions would be gradually lifted starting May 31. Beyond the domestic impact of the health crisis, the two main channels through which the Bangladesh economy will be impacted are remittances and exports of ready-made garments (RMG). Remittances represent over 5 percent of GDP ($16.4 billion in FY 19), and a majority of migrant workers are based in Gulf countries that are affected by the abrupt decline in oil prices. The RMG sector accounts for more than eighty percent of the country’s exports. The industry has been hit by the cancellation or postponement of several billion US dollars in orders from major retailers in importing countries, although top global apparel brands announced on April 1st that they would receive shipments of goods already produced.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government has introduced a series of fiscal measures to contain and mitigate the impact of the COVID-19 outbreak. At end-March, the Ministry of Finance issued a revised budget for FY20 including additional resources to fund the Ministry of Health’s COVID-19 Preparedness and Response Plan and expanding existing transfer programs that benefit the poor. Increased allocation has been made to the Open Market Sale (OMS) program to facilitate the purchase of rice at one-third of the market price, and the Ministry of Disaster Management and Relief is distributing food supplies at the district level. On March 31, the Ministry of Finance announced a Tk. 50 billion (about USD 588 million) stimulus package for exporting industries to be channeled through a refinance scheme operated by Bangladesh Bank. Loan proceeds will be used to pay worker salaries, primarily through mobile financial services, and the scheme is expected to benefit close to 4 million workers for a three-month period. Exporting firms that have laid off workers will not qualify for the loans. The Ministry of Finance will also subsidize interest payments on up to Tk. 500 billion in working capital loans by scheduled banks to businesses. On April 15th, the Prime Minister announced the allocation of Tk. 21.3 billion under a housing scheme for the homeless, Tk. 7.6 billion for poor people having lost their jobs as a result of the pandemic, Tk. 7.5 billion to provide health insurance for government employees most at risk, and a Tk. 1 billion bonus payment for government doctors and health workers treating COVID-19 patients. The National Board of Revenue has suspended duties and taxes on imports of medical supplies, including protective equipment and test kits. The government has approached international financial institutions seeking budget support, and similar requests have been addressed to bilateral development partners.

Monetary and macro-financial
  • • The focus of Bangladesh Bank (BB) is to ensure that there is adequate liquidity in the financial system to support the operations of financial institutions, and it has announced that it will buy treasury bonds and bills from banks. The repo rate was lowered from 6 percent to 5.75 percent effective March 24th and was further reduced to 5.25 percent effective April 12. The CRR was initially reduced from 5 percent to 4.5 percent (daily-basis) and from 5.5 percent to 5 percent (bi-weekly basis), with a further reduction to 3.5 percent and 4 percent, respectively, from April 15. BB has also raised the advance-deposit ratio (ADR) and investment-deposit ratio (IDR) by 2 percent to facilitate credit to the private sector and improve liquidity in the banking system. The Export Development Fund was raised to $5 billion, with the interest rate now fixed at 2 percent and the refinancing limit increased. BB has created several refinancing schemes amounting to a total of Tk 380 billion and a 360-day tenor special repo facility to support exporters, farmers and to facilitate the implementation of the government stimulus packages. To further support farmers, BB also announced an agriculture subsidy program that will take effect for 15 months until mid-2021. In addition, BB has taken measures to delay non-performing loan classification, waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services.

Exchange rate and balance of payments
  • Foreign exchange rules were eased by Bangladesh Bank to provide foreign currency to the Bangladeshi nationals who are visiting abroad and facing problem in returning home due to travel disruptions, and to allow foreign owned/controlled companies operating in Bangladesh to access short term working capital loans from their parent companies/shareholders abroad to meet actual needs for payments of 3-month wages and salary. It also resumed sales of the US dollar to offset extra pressure on the market caused by lower remittance inflows following the COVID-19 outbreak.


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Barbados

Background. Barbados has confirmed 92 COVID-19 cases (7 deaths and 76 recoveries) as of May 28, 2020. The government has taken swift actions to contain the spread of the virus. Within days of the first confirmed case (March 16), measures were taken to activate isolation and treatment centers, impose limits on public gatherings, and establish supplementary medical facilities. On April 3, a 24-hour curfew became effective restricting non-essential personnel to their residences and closing non-essential businesses. Enhanced screening measures are in place at all ports of entry and a 14-day quarantine at a government-run facility is mandatory for all travelers arriving in Barbados. Spillovers from the global pandemic to the critical tourism sector has been significant in terms of a reduction in commercial airlift capacity and forward bookings, which has culminated in labor furloughs and temporary hotel closures. The virtual collapse in tourism—which accounts for 40 percent of economic activity—will significantly depress economic activity in 2020.

Reopening of the economy. The authorities have adopted a four-phase plan to reopen the economy. The shift to phase 2 occurred on May 4 with a modest relaxation of social and economic restrictions. Specifically, the 24hr curfew was replaced with a nightly curfew (8pm-5am) and the resumption of construction and manufacturing activities, as well and food production/distribution and trade services. Phase 3 commenced on May 18 and involves the phased re-opening of most businesses but with restrictions, such as social distancing requirements, temperature testing protocols, and limited admittance according to the Alphabet system. Phase 4 is characterized as the resumption of life as normal once a vaccine is developed and procured.


Key Policy Responses as of May 28, 2020

Fiscal
  • The Government of Barbados (GoB) has identified upfront emergency health and capital expenditures needed to manage and mitigate the spread of infection. This includes resources to refurbish the hospital and clinics, build isolation centers, and provision critical medications and supplies. In addition, the GoB intends to boost priority capital spending and introduce social programs for displaced workers to mitigate the effects of COVID-19 on the economy. This includes infrastructure investment to renovate schools, government buildings, and a key industrial complex and the introduction of a Household Survival Program. The latter involves a minimum income for households made unemployed by COVID-19 and supplemental unemployment benefits though the National Insurance Scheme. In addition, roughly 1 percent of GDP in outstanding income tax and VAT arrears will be cleared to provide an infusion of liquidity to households and businesses, and a Tourism Loan facility is to be established to provide urgent working capital and investment loans to hotels. On balance, the authorities are targeting a 1 percent of GDP primary surplus in 2020 as compared to the 3 percent target announced during the March budget presentation.

Monetary and macro-financial
  • The Central Bank of Barbados (CBB) announced a series of measures (effective April 1, 2020) to help support commercial banks and other deposit-taking institution manage the economic fallout from the coronavirus shock. Specifically: i) the Bank’s discount rate at which it provides overnight lending to banks and deposit-taking non-banks licensed under the Financial Institutions Act was reduced from 7 percent to 2 percent; ii) the securities ratio for banks was lowered from 17.5 percent to 5 percent; iii) the 1.5 percent securities ratio for non-bank deposit taking licensees was eliminated; and, iv) the Bank indicated it stands ready to make collateralized loans for up to six months as liquidity support for licensees. These measures follow an agreement brokered by the GoB for commercial banks to provide forbearance in the form a 6-month debt-payment moratorium for individuals and business directly impacted by COVID-19.

Exchange rate and balance of payments
  • No measures.


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Belarus

Background. Coronavirus has been spreading across Belarus with 39,858 confirmed cases and 219 deaths as of May 28, 2020. The government has been implementing a range of measures to delay the spread of the disease and to support individuals and businesses. Containment measures currently in place—limited relative to other countries—include travel restrictions (e.g., cancelations of international flights and ground transportation) and social distancing (e.g., self-isolation rules, a ban on gatherings/events with international participation and a travel-related self-isolation. In some regions such as Minsk, there has also been a cancelation of public events and recommendations for remote work and remote tertiary education activities, and for extra sanitary and social distancing precautions in schools and businesses, including hotels and restaurants). Policy measures are elaborated below. In addition, Belarus faces adverse consequences from the gradual loss of oil price subsidies from Russia, the current oil-price shock and its negative impact on the price of Belarus’ exports of refined products, and more difficult access to market.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government has announced a package of fiscal measures, which include additional resources for the healthcare sector (including salary allowances for essential personnel) and tax relief and tax deferral measures to support businesses. Some of these measures are being implemented on the local government level (e.g. in Minsk). The possible total fiscal impact of these measures has not been published.

Monetary and macro-financial
  • Key measures include: (i) credit holidays, i.e., guidance to banks to postpone principal repayments and interest on loans in a targeted manner; (ii) mitigation of a number of prudential requirements: softening of assets classification requirements; including looser requirements on FX loans; increasing the maximum risk standard for one debtor; suspending indexation of regulatory capital of banks or other financial corporations; lowering the liquidity coverage ratio; and softening credit risk requirements for systemically important borrowers when calculating the normative capital adequacy ratio (iii) guidance on suspension of dividend distributions; (iv) softening of recommendations on interest rate ceilings on deposits and credits, and the associated risk assessment; (v) recommendations to banks on restraining from increasing interest rates on restructured debt; (vi) partially releasing the capital conservation buffer; (vii) extending the maturity of the central bank’s refinancing loans for banks. The central bank also reduced the policy rate by 75 basis points (as of May 20). See also: https://www.nbrb.by/press/10042; https://www.nbrb.by/press/10060; http://www.nbrb.by/press/10167 (Russian only)

Exchange rate and balance of payments
  • Key measures include: (i) central bank foreign exchange interventions to smooth sharp fluctuations in the exchange rate (within the floating exchange rate regime); (ii) discouraging banks to: (a) keep large margin between FX sales and purchases or overstating the exchange rate for currency withdrawals; (b) provide additional restrictions or charge extra fees for banking operations. See also: https://www.nbrb.by/news/10048 and https://www.nbrb.by/news/10051 (Russian only)


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Belgium

Background.

The coronavirus has been spreading rapidly across Belgium with 57,849 confirmed cases and claiming 9,388 lives as of May 27.  The minority government—which has been granted enhanced executive powers—has implemented a range of measures to reduce the spread of the coronavirus, including closures of schools and all non-essential activities, a ban on all gatherings, limiting movement to essential needs, ban of non-essential travel abroad. The economy is estimated to have contracted by 3.9 percent (q/q) in the first quarter of 2020.

Reopening of the economy.The government has announced a phased reopening plan conditional on health outcomes. On this basis, manufacturing and business services sectors were reopened on May 4, followed by shops on May 11 and May 18. Schools also started to gradually reopen as of May 18. The reopening of other sectors and overseas travel will be assessed by June 8, while sporting events remain banned until July 31.


Key Policy Responses as of May 28, 2020

Fiscal
Monetary and macro-financial
Exchange rate and balance of payments
  • No measures.


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Belize

Background. The first case of COVID-19 was reported on March 23. In response, the authorities closed the borders and the international airport to passenger transit, closed schools, and implemented mandatory quarantines. They also declared a national state of emergency and nighttime curfew during April, under which people were not allowed to leave their homes except for buying essential goods, attending medical appointments, or to work in essential services. As of May 22, Belize had reported 18 cases of COVID-19 and 2 deaths, with no new cases since April 13.

The COVID-19 pandemic came when the economy was already in recession due to drought and a slowdown in tourism in the second half of 2019. The impact of the pandemic on the economy is projected to be severe due to the collapse in tourism activity, lower remittances, and the indirect effects of the necessary containment and mitigation measures. As a result, Belize is projected to experience a deep recession in 2020 and experience a gradual recovery as the pandemic wanes.

Reopening of the economy. The national state of emergency was recently extended until June, although with milder restrictions. More businesses are now allowed to open, and public transportation has resumed.


Key Policy Responses as of May 22, 2020

Fiscal
  • Belize has announced fiscal stimulus amounting to BZ$25 million (about 1 percent of GDP) in 2020 to provide short term relief to employees affected by the crisis, especially those in the tourism sector. So far, more than 40,000 applications for unemployment relief have been approved. The government has also introduced a bill to parliament that seeks to increase the maturity of treasury notes by an additional ten years and freeze the annual salary increment of public sector employees in 2020.

Monetary and macro-financial
  • The Central Bank of Belize has adopted prudential measures to maintain the flow of credit in the economy: (i) reducing the statutory cash reserve requirements; (ii) extending the time period to classify targeted non-performing loans in sectors such as restaurants, transportation and distribution companies, and other affected areas, from 3 months to 6 months; (iii) encouraging domestic banks and credit unions to provide grace periods for servicing interest and/or principal of commercial and ancillary loans, as needed and where commercially viable; (iv) reducing risk-weights for banks on loans in the tourism sector from 100 percent to 50 percent; and (v) reviewing financial institutions’ business continuity and cybersecurity plans to ensure that an adequate level of financial services will be available to the public.

Exchange rate and balance of payments
  • No measures.


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Benin

Background. Benin reported its first COVID-19 case on March 16, 2020. As of May 21, the total number of confirmed cases was at 135 with 71 currently being treated, 61 cured and 3 fatalities. The authorities have implemented strong containment and social distancing measures since March 31, including the partial lockdown (cordon sanitaire) around ten cities most exposed to the pandemic to isolate the contaminated population and contain the spread of the virus. They have also (i) significantly limited the transit of people across land borders; (ii) restricted the issuance of entry visas to the country; (iii) introduced a systematic and compulsory quarantine of all people coming to Benin by air; (iv) suspended all public gatherings; (v) introduced a ban on the movement of public transportation; and (vi) made wearing face mask in public compulsory. The economic impact of the pandemic has already begun to materialize through higher Eurobond spreads and lower cotton prices, while a more widespread domestic outbreak could significantly impair exports, further reduce confidence and capital inflows, and cause a significant disruption to economic activity. In addition to Covid-19, Benin is also being impacted by the closure of border with Nigeria since end-August 2019. Government policy is responding to both developments.

Reopening of the economy. The authorities have announced measures to gradually start Reopening of the economy, while maintaining most of the existing social distancing measures in place. Middle schools, high schools and universities are expected to resume their activities on May 11, 2020, while the kindergartens and day-care centers will remain closed until the start of the forthcoming school year. In addition, plans were announced to gradually lift the cordon sanitaire, once the government’s mass screening plans are put in place. For this purpose, on April 23, 2020, the authorities announced the installation of laboratories in each of Benin’s 12 departments and started a nationwide screening program. The authorities are also, with the support of the WHO and the World Bank, preparing a broader prevention and mitigation plan to buy the necessary equipment; build capacity for case confirmation and follow-up; and organize quarantine and self-isolation protocols. Preliminary cost estimate of the plan is at least US$ 100 million or CFAF 60 billion (equivalent to 0.7 percent of GDP).


Key Policy Responses as of May 21, 2020

Fiscal
  • The mitigation and prevention measures taken so far by the authorities amount to CFAF 10 billion (about $17 million or 0.1 percent of GDP). They are also considering more ambitious measures provided that they can garner financing from donors, including the IMF. As indicated above, the preliminary cost of the health component of this plan is estimated US$ 100 million or CFAF 60 billion (equivalent to 0.7 percent of GDP).

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid-19 related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non-performing; and iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Benin amounted to 1.5 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Bhutan

Background. As of May 21, Bhutan has reported twenty one positive coronavirus cases in total, of which 6 have recovered. All cases are imported (the most recent reported on May 15), no reported case of local transmission and no death so far. Bhutan confirmed its first imported case of COVID-19 on March 6, 2020, a tourist who traveled to Bhutan from India. Bhutan started imposing containment measures immediately after the first case, with restriction of entry of foreign tourists initially for two weeks but extended afterwards and closure of schools in three cities. On March 22, Bhutan sealed off its land borders as a precautionary measure to prevent the spread of COVID-19. For non-Bhutanese, exits are allowed. Incoming non-Bhutanese are scrutinized and quarantined where applicable. On March 27, more containment measures were imposed on public gatherings, travel (within and outside Bhutan), business and entertainment, games and sports and civil service, corporate, private, and other agencies. The government is now working on an Economic Stimulus Plan aimed at helping different sectors, a package of fiscal and monetary measures to protect the vulnerable and minimize the adverse impact on employment, growth, and financial stability and announced a National Resilience Fund for mitigating COVID-19 linked job losses and salary cuts. Effective April 14, a new set of monetary relief measures were introduced by the Royal Monetary Authority (RMA).


Key Policy Responses as of May 21, 2020

Fiscal
  • The government will formulate plans to fast-track the implementation of 12th Five Year Plan activities and wherever possible frontload the investments, particularly, in the tourism, agriculture and infrastructure sectors. An additional resource of Nu. 2 billion will be provided to the Ministry of Health to meet health-related spending. Business Income tax (BIT) and Corporate Income tax (CIT) filing and tax payment for the income year 2019 will be deferred until June 30, 2020. Additional measures include interest waiver (50 percent of cost), deferred payment of sales tax and customs duty on essential items (March to June 2020), and waiver of payment of rent and other charges (April-June 2020) by tourism-related business entities leasing government properties. As of April 27, the government and the World Bank signed a fast-track $5 million COVID-19 project to help Bhutan prevent, detect, and respond to the pandemic and strengthen its public health preparedness. A budget of Nu.1.3 billion has been re-appropriated for health, essential food and fuel, quarantine and related initiatives.

Monetary and macro-financial
  • Provision of working capital at 5 percent interest for wholesale distributors authorized by the Ministry of Economic Affairs (MoEA) for a period of 3 months, extendable by 3 months to enable them to procure adequate stocks and ensure uninterrupted supply of essential items at a reasonable price. Office of Consumer Protection has published market price information of essential commodities as of March 11, 2020, to monitor and keep track of price movement in the market and provide information to consumers for informed purchase decision. The RMA has announced several measures, including the waiver of interest on loans (only performing loans as of February 29, 2020) for three months and deferred monthly loan instalment repayment by three months, working capital for tourism-related companies at 5 percent to assist with payroll expenses to help retain employees and loans to cottage and small industries through the CSI Development Bank (microloans at 2 percent interest for agriculture and rural activities and working capital loans at 4 percent interest rate). To facilitate the implementation of the recent monetary policy measures, the RMA further reduced the Cash Reserve Ratio (CRR) by 200 basis point, to 7 percent, with effect from April 27, 2020. Effective May 1, to ensure that relief measures are adequate and inclusive, the RMA announced that the interest waiver facility would also be extended to non-performing loan accounts for a period of three months (April–June 2020).

Exchange rate and balance of payments
  • No measures. On March 24, ban on select food product (e.g., betel leaf, betel nut) import from India has been imposed to curb the spread of COVID-19.


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Bolivia

Background. The first two cases of COVID-19 were confirmed in Bolivia on March 10, 2020. As of May 20, there are 4481 confirmed cases, and 189 deaths have been reported so far. The government has taken a series of measures to prevent the spread of the virus, including a generalized lockdown, entailing the temporary closure of many businesses, border closure and suspension of school, and postponed the general elections originally scheduled on May 3. On March 25, the authorities announced the state of health emergency until April 15 and further tightened the quarantine orders, completely closing the borders, restricting the movement of people to once a week, and prohibiting movements of vehicles except for security and health reasons. On April 14th the national quarantine was extended to April 30th. On April 29, the national quarantine was extended until May 11.

Reopening of the economy. From May 11, Bolivia will implement a “dynamic quarantine”. The departments and cities will be classified in three categories: High, Medium, Low Risk, with evaluations every 7 days. Those at high risk will be kept to rigid rules, and the others will have more flexibility. The following restrictions remain until May 31 at all risk levels: border closure, suspension of national and international flights, suspension of school activities, suspension of public events, social distance of one and a half meters, use of masks in public places. For medium risk locations: 6 hours work per day, use of motorcycles and bikes for work purposes, business hours from 06:00 to 15:00, circulation until 17:00. For low risk: 8 hours work per day, business hours from 06:00 to 16:00, from 19:00 to 05:00 confinement for those under 18, those over 60 can leave home from 06:00 to 12:00. For the whole country food delivery service is allowed from 09:00 to 22:00. The bank system will work from Monday to Friday from 07:00 to 15:00.

On April 17, the IMF approved Bolivia’s request for emergency financial assistance of about US$327 million under the Rapid Financing Instrument.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities have proposed direct relief payments of about $US 73 per child to be paid to households with children in public schools, a measure calculated to provide most of its benefits to poorer households. This payment will be extended to students in private schools from May 18. In addition, the government plans to deliver food to 1.5 million of families ($US 58 per family), pay the electric energy bills of for three months for the consumers with lower consumption, and pay 50 percent of the potable water and gas for all households. From April 30th, the government will also provide $US 73 to citizens who do not receive any other benefits or draw a salary from the public or the private sector. The authorities also postponed the payment of some taxes (corporate income tax, VAT and transaction tax) with the possibility to pay them in tranches. Payment of corporate income tax is deferred till May and independent workers will be allowed to claim tax deductions against their expenses on health, schooling, food and related expenditures. The government is creating a fund of approx. $US 219 million to support the operations of micro, small and medium businesses. This fund will provide soft loans to companies so that they may pay wage bills without layoffs for two months (companies can withdraw $US 1230 per employee, repayable in 18 months). Imports of respiratory equipment in the amount of $200 million is planned, while ICU capacity is being doubled.

Monetary and macro-financial
  • The Central Bank of Bolivia (BCB) injected 3.5 billion Bolivianos (more than $500 million) by purchasing bonds from the pension funds, which, in turn, are expected to deposit the money at banks, increasing the banking system liquidity by about 50 percent. The authorities have also announced a 2-month moratorium on loan repayment (principal) in the financial system for natural persons and small companies. Most commercial banks announced that they are suspending borrowers’ loan repayments for 2-4 months, with the delayed installments to be paid at the end of the loan closure date.

Exchange rate and balance of payments
  • No measures.


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Bosnia and Herzegovina

Background. Bosnia and Herzegovina (BiH) has reported 2337 positive cases, claiming 133 lives as of May 21, 2020. The governmentdeclared a state of emergency throughout the country, closed schools and universities, shuttered restaurants and shops, suspended public transportation, banned public gatherings, and imposed severe restrictions on the movement of people. Border are closed to non-BiH citizens. Incoming BiH citizens are quarantined for 14 days.

Reopening of the economy. Starting from May 15th, most curfews and movement restrictions have been removed throughout BiH, including for specific age groups; and many consumer businesses are reopening, including gyms and cinemas. There are currently no curfews or movement restrictions in the Federation, including for individuals under 18 or over 65. The RS still has a curfew in effect from 2200-0500 every night, but no longer has movement restrictions for those over 65. All BiH airports, including Sarajevo International Airport, remain closed to passenger traffic. Airports are still open for cargo and humanitarian assistance flights. Restaurants and cafes throughout BiH are now open for outdoor seating only, provided everyone respects restrictive/distancing measures. In both the Federation and RS, public transit is also restarting. In addition, the Federation has allowed all retails stores, salons, and other shops outside of shopping malls to reopen, including gyms and cinemas. Stores inside of shopping malls remain closed, except for supermarkets and pharmacies. In the RS, shopping malls, shops, salons, and other stores are open, although on slightly reduced hours due to the curfew. Both the Federation and RS require all individuals on the street or in public areas to wear some form of mask or scarf across their mouth. Sarajevo Canton has also announced that all schools will remain closed until further notice. Individuals standing or walking together outside must remain 1.5 meters apart. Land borders: Borders between BiH and its neighboring countries will slowly start to open in the coming weeks.


Key Policy Responses as of May 21, 2020

Fiscal
  • • The entity governments have allocated around KM 50 million (0.15 percent of GDP) for dealing with COVID-19, including purchasing medical equipment and supplies. The Federation of BiH (FBIH) will transfer KM 30 million (0.1 percent of GDP) to hospitals. The Republika Srpska (RS) announced the health fund will cover health care costs for all patients and has postponed payments for business tax from end-March to end-June, while speeding up tax and SSC refunds. The RS decided to cover PIT and SSC for about 40,000 workers in the sectors that are closed by the government decision from March to May (KM 50 million, 0.15 percent of GDP). The RS also announced that the government will pay minimum salaries for all employees in these sectors in April (KM 53 million, 0.16 percent of GDP) and is planning to increase the transfers to unemployment funds (KM 25 million, 0.08 percent of GDP). The FBiH plans to subsidize contributions and taxes and pay minimum wages for all employees of the companies impacted by Covid-19. The FBIH announced that total amount about KM 1 billion (3% of GDP) will be secured to support the economy, through: (1) setting up a special fund to stabilize the economy(KM 500 million, 1.5 percent of GDP); and (2) establishing a guarantee fund at the Development Bank (up to KM 500 million, 1.5 percent of GDP) which will be serve to maintain and improve the liquidity of companies. The RS is also developing a credit guarantee scheme.

Monetary and macro-financial
  • Banking Agencies have announced a six-month loan repayment moratorium for restructuring credit arrangements for individuals and legal entities which are found to have aggravated circumstances for loans repayments due to COVID-19. Banking Agencies have instructed banks to track clients and exposure portfolios affected by COVID-19. Banks are also instructed to consider additional customer relief, including reviewing current fees for services and avoiding charging fees to handle exposure modifications. All banks were ordered not to pay dividends or bonuses.

Exchange rate and balance of payments
  • No measures.


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Botswana

Background. Botswana has 25 confirmed cases as of May 20, 2020. The government has declared a state of emergency, effective April 2, 2020, and has adopted a list of containment measures, including social distancing and travel bans. The government has extended the lockdown on May 7 and announced May 22 as a tentative for the lifting of all restrictions. On the economic front, diamond sales, and tourism and travel activities have fallen sharply, and lockdowns in neighboring countries will disrupt activity.

 

Key Policy Responses as of May 20, 2020

Fiscal
  • The government established a Covid-19 Relief Fund with a 2 billion Pula (about 1,1 percent of GDP) contribution from the government that will: i) finance a wage subsidy amounting to 50% of salaries of affected businesses (1000-2500 pula per month for a period of 3 months; ii) finance a waiver on training levy for a period of 6 months (150 million pula). The MoF also decided a tax deferral of 75% of any quarterly payment between March and September 2020 to be paid by March 2021.; iii) Build-up of fuel and grain reserves, as well as acquisition of relevant medical equipment and improvement of water supply (475 million Pula); iv) Fund a government loan guarantee scheme of 1 billion Pula (20% financed by commercial banks) for businesses that are tax compliant (including those who are not eligible to pay taxes/). Guarantee covers a period of 24 months with a max of 25 billion pula per borrower. Reduce the VAT refund period (from 60 days to 21 days).

Monetary and macro-financial
  • At the meeting held on April 30, 2020, the Monetary Policy Committee (MPC) of the Bank of Botswana decided to reduce the Bank Rate by 50 basis points from 4.75 percent to 4.25 percent to support the domestic economy, and reduced the primary reserve requirement (PRR) from 5 percent to 2.5 percent to inject liquidity.

  • Banks and nonbanks have agreed to offer loan restructuring (including for mortgages and vehicles) and payment holidays for affected sectors. Life insurance payment premiums and retirement fund contributions have been rescheduled for at least three months. The Bank of Botswana relaxed rules to meet capital requirements and introduced measures to improve liquidity. Capital adequacy ratio for banks has been reduced from 15 to 12.5 percent, and regulatory forbearance for non-performing loans. Overnight funding costs were reduced, access to repo facilities broadened, and collateral constraints for bank borrowing from the BoB extended to include corporate bonds and traded stocks.

Exchange rate and balance of payments
  • The Bank of Botswana will implement a new annual downward rate of crawl of 2.87 percent with effect from May 1, 2020, representing a change from the current 1.51 percent. This is complementary to the reduction in the Bank Rate and contributes to further easing of real monetary conditions in the economy.


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Brazil

Background. According to the Ministry of Health, Brazil surpassed the mark of 438 thousand confirmed cases on May 28th, with over 28 thousand related deaths. The number of new cases is growing, as are hospital occupancy rates, reaching 90 percent in some state capitals. Most regional governments keep mitigation measures active, including school closures, restrictions to public gatherings and to non-essential services. However, social distancing indexes have declined from their peak in late March. Foreigners’ entry through airports is restricted and borders are closed except for freight, Brazilians and foreign residents, and professionals from international organizations.


Key Policy Responses as of May 28, 2020

Fiscal
  • To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures adding up to nearly 8 percent of GDP, of which the direct impact in the 2020 primary deficit is estimated at 4.8 percent of GDP. Congress declared a state of “public calamity” on March 20, lifting the government’s obligation to comply with the primary balance target in 2020. The government has also invoked the escape clause of the constitutional expenditure ceiling to accommodate exceptional spending needs. Emergency measures are to be included in a separate (so called ‘war’) 2020 budget, not bound by the provisions of Brazil’s Fiscal Responsibility Law and the constitutional golden rule. The fiscal measures include temporary income support to vulnerable households (bringing forward the 13th pension payment to retirees, expanding the Bolsa Familia program with the inclusion of over 1 million more beneficiaries, cash transfers to informal and unemployed workers, and advance payments of salary bonuses to low income workers), employment support (partial compensation to workers which are temporarily suspended or have a cut in working hours, as well as temporary tax breaks and credit lines for firms that preserve employment), lower taxes and import levies on essential medical supplies, and new transfers from the federal to state governments to support higher health spending and as cushion against the expected fall in revenues. Financial assistance states and municipalities – with a temporary stay of debt payments, debt renegotiation, and support for credit operations through government guarantees – was also announced. Public banks are expanding credit lines for businesses and households, with a focus on supporting working capital (credit lines add up to over 3 percent of GDP), and the government will back a ½ percent of GDP credit line to cover payroll costs. The National Treasury responded to pressures in the interest rate futures market by announcing a program for the simultaneous auctions (buying and selling) of government securities.

Monetary and macro-financial
  • The central bank lowered the policy rate (SELIC) by 125bps since mid-February, to the historical low of 3 percent. Measures to increase liquidity in the financial system (reduction of reserve requirements and capital conservation buffers, and a temporary relaxation of provisioning rules, among others) have been implemented. The reserve requirement has been reduced from 25 to 17, on top of a reduction of 6 bps in early March. The central bank also opened a facility to provide loans to financial institutions backed by private corporate bonds as collateral. In addition, the Fed has arranged to provide up to US$60 billion to the central bank through a swap facility that will remain in place for the next six months. The five largest banks in the country agreed to consider requests by individuals and SMEs for a 60-day extension of their maturing debt liabilities.

Exchange rate and balance of payments
  • The exchange rate has depreciated by 17 percent since mid-February and by 24 percent since end-2019. The central bank has intervened various times in the foreign exchange market since mid-February (both with spot and derivative contracts sales), by a total of 45 USD billion (over 10 percent of gross reserves). The central bank is resuming repo operations of Brazilian sovereign bonds denominated in US dollars, having released US$9 billion into the money market thus far.



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Brunei Darussalam

Background. Brunei Darussalam reported its first confirmed case of COVID-19 on March 9, 2020. As of May 21, Brunei had 141 confirmed cases, 134 recoveries, six active cases still being treated and one fatality. Since the pandemic was declared, the government has implemented strict travel restrictions and a ban on all mass gatherings. Schools/universities have been closed since end of March and is being extended. Brunei MOH has stepped up efforts to track close contacts of positive cases, with a total of 16,523 laboratory tests for COVID-19 being conducted since January. On March 22, the Sultan of Brunei announced that the MOH will be expanding its testing capacity, while a new virology laboratory is being built with the hope to increase the country's testing capacity by 10-fold to meet the testing need.

Reopening of the economy. Brunei will be easing some restrictions in public and commercial areas starting May 16, in phases and under certain conditions. In the first phase, the plan is to gradually lift physical and social distancing measures for premises such as sports facilities, food courts and markets, but entries to most of these places will be limited and monitored using a contact tracing app (“BruHealth”). The ministry has been actively rolling out BruHealth, that requires all residents to download before they are given the green light to visit public places. Business owners will be required to apply for the re-opening of business premises before they are issued a customized QR code that will be used for the app. This may also be extended to schools. Mosques are scheduled to reopen on May 29 for Friday prayers, but safety measures will continue to be enforced, such as physical distancing and limiting the number of people gathering.


Key Policy Responses as of May 21, 2020

Fiscal
  • On March 21, the Ministry of Finance and Economy (MOFE) announced targeted measures centered mainly around tax, utility and social security deductions/deferments to assist hardest-hit households and firms affected by the COVID-19 pandemic, while supporting demand. An interim fiscal package (for six months effective April 1) has been deployed to support SMEs and self-employed groups in sectors such as tourism, hospitality, transport and restaurants. The fiscal measures include amongst others, the deferment of payments on Employees Trust Fund (TAP) and Supplementary Contributory Pension (SCP) contributions, discounts on corporate income taxes, rents and utilities.

Monetary and macro-financial
  • On March 19, the Autoriti Monetari Brunei Darussalam (AMBD), working closely with MOFE as well as the financial industry, announced interim measures (for six months effective April 1) to alleviate the financial burden on sectors hit hard by the COVID-19 pandemic. Effective April 1, (i) businesses in the tourism, hospitality/event management, restaurants/cafes, and air transport sectors (“Affected Sectors”) will be given a six-month deferment of their principal repayments of financing/loans; (ii) the deferment is also extended to importers of food and medical supplies; and (iii) all bank fees and charges (except third party charges) that are related to trade and for payments of transactions in those Affected Sectors will be waived for a period of six months. To encourage social distancing and promote the usage of digital banking, online local interbank transfer fees and charges will be waived for a period of six months for all customers. Banks are also encouraged to review their lending rates in this current environment.

    •On March 30, the MOFE announced additional financial support measures amounting to an estimated total of BND250 million, effective April 1. This Economic Relief Package (i) extends the deferment on principal payments of financing or loan to all sectors, (ii) provides for the restructuring or deferment on principal repayment of personal loans and hire purchase such as car financing, for a period not exceeding 10 years, (iii) provides for the deferment on principal repayments of property financing, (iv) provides for the conversion of any outstanding credit card balances into term loans not exceeding 3 years for affected individuals in the private sector only (including the self-employed), and (v) waiver of all bank fees/charges related to these facilities (except third party charges). Coupled with the earlier fiscal assistance, these measures will increase the value of Brunei’s Economic Stimulus Package to a total of BND450 million (or 3.2 percent of GDP).

Exchange rate and balance of payments
  • No measures.

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Bulgaria

Background. Compared to the state of contagion in western Europe, COVID-19 is relatively less spread in Bulgaria with 2477 confirmed cases and 134 deaths as of May 28, where the number of active cases has been declining in the past 10 days. The state of emergency has been replaced with an extraordinary epidemic situation until June 14. The main anti-epidemic, social and economic measures will largely remain in place. The government is implementing a range of measures, which are mainly focused on containing the spread of coronavirus, including social distancing and travel restrictions. Economic policies to mitigate the negative impact of the COVID-19 include increased liquidity supply, loan moratorium, employment support, VAT differentiation and reduction, and deferral of various tax and utility payment deadlines.

Reopening of the economy. Relaxation measures include the lifting of travel restrictions, relaxed requirements for mask wearing, increased accessibility to open spaces and sport and recreation activities, and reopening of open-air restaurants while securing minimum distance between tables, reopening of kindergartens and nurseries, and shopping malls, etc.

The coronavirus will have a significant adverse impact on Bulgaria’s economy. Flash GDP growth in Q12020 slowed to 0.3 percent q/q (2.4 percent y/y) from 0.8 percent in the previous quarter. Registered unemployment exceeded 131,000 since the start of the emergency situation (i.e. over March 13 – May 13, 2020). Meanwhile, the impact on the state budget in the first four months has not been significant. During the first four months of 2020, the budget surplus declined by BGN 1.1billion compared to the same period last year, mainly due to deferred deadlines for corporate taxes payment and, to a lesser extent, to lower proceeds from VAT and other taxes and non-tax revenues.

Key Policy Responses as of May 28, 2020

Fiscal
  • Key tax and spending measures have been implemented under the revised 2020 budget, allowing for a budget deficit of BGN 3.5 billion and increased ceiling on newly incurred public debt of BGN 10 billion for 2020. They include i) coverage of 60% of the wages of the employees in affected sectors that would have been otherwise laid off, including the social security contributions due by the employers (over 1.2 percent of 2019 GDP); ii) deferment of the payment of corporate taxes until June 30 (about 0.5 percent of 2019 GDP); iii) additional remunerations in the ministries of health, interior and defense (0.4 percent of 2019 GDP); iv) possibility for registered unemployed to sign labor contracts with agriculture producers without losing their unemployment benefits; v) bonus payments to medical and social services staff and expansion of social patronage services; and vi) support for various vulnerable groups, such as freelancers in the area of culture, one-off transfers to parents forced to be on unpaid leave during the state of emergency; and vii) VAT reduction for restaurant services (until end-2021) and books (permanently) to 9 percent (from 20 percent), leading to estimated annual revenue shortfalls amounting to BGN 150 million and 15 million, respectively.

Monetary and macro-financial
  • The Bulgaria National Bank has implemented the following measures. i) capitalization of the 2019 profit in the banking system (about 1.4 percent of 2019 GDP); ii) increase in liquidity of the banking system by BGN 7 billion (6 percent of 2019 GDP) by reducing foreign exposures of commercial banks; iii) cancellation of the increase of the countercyclical capital buffer planned for 2020 and 2021 with effect amounting to BGN 0.7 billion, or about 0.6 percent of 2019 GDP; iv) agreement on a moratorium on bank loan payments for up to 6 months (but not later than end-2020); and vi) establishment of EUR 2 billion swap line with the ECB until end-2020 or as long as necessary, with the maximum maturity of 3 months for each drawing. In addition, the government also uses national and EU resources to inject liquidity into the financial system. The measures include i) capital increase of the state-owned Bulgarian Development Bank (BDB) by BGN 700 million (0.6 percent of 2019 GDP), of which BGN 500 million to be used for the issuance of portfolio guarantees to commercial banks for the extension of corporate loans and the remaining BGN 200 million to provide interest-free loans to employees on unpaid leave (up to BGN 4500); ii) allocation of BGN 1,024 million to the state-owned company “The Fund of Funds” to provide subsidies to micro enterprises, self-employed, entrepreneurs from vulnerable groups, and eligible SMEs and companies; iii) allocation of BGN 800 million to a joint-initiative organization between the European Investment Fund and the European Commission to provide guarantee/credit to SMEs; and iv) allocation of BGN 418 million to the Urban Development Funds, managed by the Fund of Funds, for long-term investment and working capital, targeting municipalities, PPPs and businesses, hit by the crisis, including tourism and transport.

Exchange rate and balance of payments
  • None.


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Burkina Faso

Background. Burkina Faso has reported 812 positive cases and 52 deaths of COVID-19 as of May 19, 2020. The government has adopted several containment measures, including social distancing, a nationwide curfew, closure of schools and universities, cancelation of major public events, closure of terrestrial borders, suspension of commercial flights, quarantine of the affected cities and the mandatory nationwide use of masks. To support the health emergency operations, top government officials (President, Prime Minister, Ministers) committed to donate part of their salaries as a solidarity action. The number of reported new daily positive cases of COVID-19 has broadly declined in May compared to April.

Reopening of the economy. As the number of new daily cases declined in late April and early May, the authorities began to ease some social and economic restrictions. Some urban markets and venues of religious worship were allowed to reopen on April 20 and May 2, respectively. The quarantine of cities not exceeding one positive case of COVID-19 was suspended on May 4. This gradual reopening is subject to continued social distancing guidelines, mandatory use of masks, and regular disinfection and body temperature control (mosques and churches), among other measures.


Key Policy Responses as of May 22, 2020

Fiscal
  • The authorities on April 2, 2020 announced plans to revise the 2020 budget to address the socio-economic impacts of the outbreak. Several measures are under consideration, including, among others: (i) lowering import duties and VAT for hygiene and healthcare goods and services critical to tackle COVID-19, and for tourism businesses; (ii) lowering other selected tax rates; (iii) delaying tax payments, and waiving late payment fines and penalties; (iv) suspending government fees charged on informal sector operators for rent, security and parking in urban markets; (v) lowering the licensing fee for companies in the transportation and tourism sectors; (vi) suspending on-site tax inspection operations; (vii) Donating food and providing assistance to households and local small businesses; (viii) supporting the water and electricity bills, including through cancelation, of the most vulnerable social groups; and (ix) securing adequate stocks of consumer products and strengthening surveillance of prices. An emergency response plan for the health sector has been prepared. The plan focuses on strengthening human and technical capacities of public hospitals, increasing available hospital beds, expanding testing capacities and purchasing medical supplies to facilitate the implementation of hygiene measures. The plan will be regularly updated to reflect local and global developments.

    On April 27, Heads of states of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU growth and stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of the Covid-19 pandemic. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the Covid-19 crisis. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-bills issued by Burkina Faso amounted to 0.8 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Burundi

Background. Forty-two (42) cases of COVID-19 have been officially reported as of May 17, 2020, of which eleven (20) have been cured and one died on April 12, 2020. The fifteen new Covid-19 cases were reported on May 17, 2020. They are in good health and are persons who were in contact with at least one of the previous cases. The authorities are now tracking all those who have been in contact with the new cases.

Measures taken to minimize the risk of the pandemic breaking out in Burundi have been very limited: The population has been instructed to follow some basic rules of limited social distancing and frequent handwashing. Hand sanitizers and water for handwashing have been installed in public places. Travelers from high-risk countries are required to undergo quarantine, and commercial flights are still banned (cargo flights still operate). Borders remain closed, except for merchandise. The ban will be reviewed depending on how the pandemic evolves.

Burundi’s health care system is extremely weak. The authorities have asked hospitals to make beds available for potential cases (20 for each national hospital and 5 for each local one). Only one lab in the nation can do Covid-19 tests with minimal capacity. The authorities are currently working with the WHO and World Bank to strengthen capacity in the health sector.


Key Policy Responses as of May 17, 2020

Fiscal
  • The authorities have prepared a national contingency plan to address the pandemic. It was last updated on March 27, 2020 with actions covering the following six-month period. Its cost is US$ 27.8 million (0.9 percent of GDP). Identified financing so far comes from the World Bank and only covers about 18 percent of the plan’s cost.

    In addition, the authorities have taken measures to lessen the socio-economic impact of the pandemic. They comprise: (i) the rehabilitation of roads to limit transportation bottlenecks (US$ 15.8 million or 0.5 percent of GDP); (ii) the boosting of strategic oil reserves (US$ 6.3 million or 0.2 percent of GDP); (iii) the increase of the strategic stock of food supplies (US$ 3.7 million or 0.1 percent of GDP), and (iv) subsidies and transfers to support the most vulnerable (US$ 26.3 million or 0.9 percent of GDP). Financing of these measures has not yet been identified.

    Other measures have been taken to support specific hotels and industries. Taxes owed will be forgiven for hotels and industries that will not be able to pay. Subsidies are planned to help pay salaries in these sectors and avoid massive layoffs. Salaries for suspended services such as those provided at the Melchior Ndadaye International Airport will continue to be paid with government support.

Monetary and macro-financial
  • No measures have been officially announced.

Exchange rate and balance of payments
  • No measure has been officially announced. Burundi has been engaged in multiple currency practices, with a parallel market exchange rate that is substantially more depreciated than the official exchange rate.


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Cabo Verde

Background. Cabo Verde has reported 349 confirmed COVID-19 cases and 3 deaths as of May 20, 2020. The cases are located in the islands of Boa Vista (56), Santiago (290) and São Vicente (3). Prevention measures taken by the authorities include: installation of body temperature scans in airports, suspension of official travel and flights to China and other heavily affected countries, preparation of quarantine areas in hospitals, suspension of flights from European countries affected by COVID-19, the United States, Brazil, Senegal and Nigeria, as well as maritime traffic (with few exceptions), and quarantine of the island of Boa Vista where the community spread started inside a resort hotel . The authorities have also prepared a contingency plan and put in place a rapid response team. In late March, they declared the state of emergency, put in place social distancing measures, restricted travel between the nine inhabited islands, and put the country in lockdown for non-essential activities.

Reopening of the economy. On May 14, the government extended the State of Emergency for the island of Santiago until the end of May and removed the state of emergency for Boa Vista. The state of emergency was removed for all other islands on April 26 and São Vicente on May 2. However, inter-island air and maritime passenger travel remain prohibited.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities stand ready to reprioritize spending, notably through a revised budget to be tabled in parliament by June. However, the likely fall in revenue from the expected economic contraction in 2020 will further constrain fiscal space. In the meantime, they have taken measures to support the private sector, including loan guarantees and tax obligations facilities as follows: loan guarantees of up to 50 percent for large companies in all sectors (CVE 1 billion, about €9 million); up to 80 percent for companies in the tourism and transport sectors (CVE 1 billion); up to 100 percent for small-and medium-sized enterprises in all sectors (CVE 300 million, €2.7 million) and for micro-enterprises in all sectors (CVE 700 million CVE, about €6.7 million). Other measures include faster settlement of invoices and VAT refunds, extension of the tax payment period, payment in installments for VAT and other withholding taxes, cancellation of contributions to the Pension Fund for three months, and funding of an emergency plan with CVE 76 million through the reallocation of budgetary appropriations, to cover additional expenses for personnel, training and medical equipment.

    For the most vulnerable, mitigating measures are estimated at CVE 2.2 billion (1.2 percent of GDP). They comprise: (i) income compensation to provide financial support to individuals operating in the informal sector; (ii) social inclusion emergency measures for vulnerable people without income; (iii) social inclusion income, with support from the World Bank ; (iv) support to microfinance institutions to support interest-free loans to vulnerable households and; (v) care for the elderly with food assistance and other financial support.

Monetary and macro-financial
  • In late March, the central bank decided to loosen the monetary policy stance and to increase liquidity in the banking system. Key measures included a reduction in rates as follows: the policy rate by 125 basis points to 0.25 percent, the minimum reserve requirements from 13 to 10 percent, and the overnight deposit rate by 5 basis points to 0.05 percent; and the setting up at the central bank of a long-term lending instrument for banks. The central bank (BCV) also called on banks to grant a moratorium on loans obligations to borrowers in good standing with their payment record as of end-March 2020.

    On April 1, the authorities introduced a moratorium on insurance payments and loans repayment during April-September 2020 for household, companies, and non-profit associations, as well as the SMEs.

    The BCV also implemented prudential measures, including the reduction in capital adequacy ratio and provision for banks depending on requests by borrowers to place a moratorium or forbearance on loan repayment for three months.

Exchange rate and balance of payments
  • No measures.


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Cambodia

Background. The number of confirmed COVID-19 cases in Cambodia has stabilized at 122 as of May 21. There have been no deaths so far. The authorities have lifted the entry ban on citizens from Iran, Italy, Germany, Spain, France and the US. All arrivals into Cambodia need to obtain a visa at a Cambodian diplomatic mission abroad, a health certificate before departure to Cambodia, and sufficient travel insurance. Returning migrant workers returning are to self-isolate for 14 days, as will those workers who travelled during the Khmer New Year in April. Schools, casinos, and entertainment venues are closed and the government has banned public events with more than 50 participants. New Year celebrations were cancelled. Domestic travel restrictions were lifted on 16 April. The crisis has hit the Cambodian economy very hard during the first quarter of 2020, through exports of garments and textiles and tourism. The authorities are gradually lifting restrictions on movement.


Key Policy Responses as of May 21, 2020

Fiscal
  • Additional fiscal resources to the health sector of around USD 60 mil USD (around 0.2 percent of 2019 GDP) are expected. The government has announced a package of tax and tariff concessions, expenditure support, and credit support. Social assistance is being strengthened, including grants to households and subsidies for wages and health and employment insurance. Other spending will be rationalized, including capital spending. The government will disburse special low-interest loans to specialized banks, in addition to packages issued to SMEs and rice producers. Temporarily laid-off garment workers are to receive income support.

Monetary and macro-financial
  • The National Bank of Cambodia has implemented four measures to improve liquidity in the banking system: (i) delaying additional increases in the Capital Conservation Buffer; (ii) cutting the interest rate in its Liquidity Providing Collateralized Operations, decreasing banks’ funding costs in domestic currency; (iii) cutting the interest rate on Negotiable Certificates of Deposit (the collateral for LPCOs), to encourage banks to disburse loans; and (iv) lowering required reserves that banking and financial institutions must maintain at the National Bank of Cambodia both for local (riel) and foreign currencies. The Central Bank has also issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics).

Exchange rate and balance of payments
  • Cambodia continues to maintain managed floating system. Previous suspension of white rice exports has been lifted.


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Cameroon

Background. The number of positive COVID-19 cases in Cameroon reached 3,529 (1,822 active cases, 140 fatalities) as of May 19, 2020, of which no new cases were reported in the past 24 hours. A total of 1567 infected persons have fully recovered and have been released from hospital. The government announced a package of 13 containment measures on March 17, 2020 including closure of land, air and sea borders, quarantine for travelers returning from a country with a high level of infection, closure of schools and universities, prohibition of gatherings of more than 50 persons, closure of bars, restaurants and entertainment spots after 6 pm, suspension of missions of civil servants and parastatals abroad, cancellation of school and university games, and a ban on overloading taxis and public transportation.

Social distancing and sanitation measures include the use of electronic communications and digital tools for meetings of more than 10 persons, compliance with hygiene measures recommended by the WHO such as systematic hand washing with soap and/or use of disinfectant hand gel in public offices, avoiding close contact such as shaking hands or hugging, and covering the nose when sneezing in public places. On April 10, 2020, the government took seven additional measures to stop the spread of COVID-19. These measures took effect from April 13, 2020 and include wearing a mask in all areas open to the public, local production of drugs and screening tests, establishment of specialized COVID-19 treatment centers in all regional capitals, intensification of screening and the awareness campaign, among others.

Reopening of the economy. On April 30, 2020 the government announced a set of reopening measures. The restriction prohibiting bars, restaurants and leisure facilities from operating after 6 p.m. was lifted, provided customers and users respect social distancing and wear protective masks. The limit on the number of passengers in public transportation vehicles (buses and taxi.) was also relaxed but masks remain compulsory and overloading is prohibited.Schools will reopen on June 1, 2020.


Key Policy Responses as of May 19, 2020

Fiscal
  • On April 30, 2020, the president announced fiscal measures aimed at alleviating the adverse socio-economic impact of the crisis. A set of measures provide temporary tax accommodation to businesses directly affected by the crisis through tax moratoria and deferred payments, notably (i) exemptions from the tourist tax in the hotel and catering sectors for the rest of the 2020 financial year; (ii) exemption from the withholding tax for taxis and motorbikes and petty traders for the second quarter; (iii) the allocation of a special envelope of CFAF 25 billion for the expedited clearance of VAT credits awaiting reimbursement, and (iv) the postponement of the deadline to pay land taxes for the 2020 financial year, to 30 September 2020.

    Other measures aim to alleviate the impact on households, in particular (i) an increase in the family allowance from CFAF 2,800 to CFAF 4,500; (ii) a raise of 20 percent for pensions that did not benefit from the 2016 reform; (iii) continued payment of family allowances from May to July to staff of companies which are unable to pay social security contributions or which have placed their staff on technical leave due to the crisis; (iv) spreading the payment of the social security contributions for the second quarter over three instalments and canceling late fees.

    Specific measures support the fight against the pandemic, notably (i) full income tax deductibility of donations and gifts made by companies for the fight against Covid-19, (ii) three-month suspension of the payment of parking and demurrage charges in the Douala and Kribi ports for essential goods; and (iii) the establishment of a MINFI-MINEPAT consultation framework aimed at mitigating the crisis and promoting a rapid resumption of activity.

    In early April 2020, the authorities scaled up their preparedness and response plan to tackle the coronavirus crisis (with health spending estimated at CFAF 58.3 billion). They are working on a comprehensive global response plan with additional measures to alleviate the socio-economic impact on affected firms and households.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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Canada

Background. Coronavirus has been spreading across Canada, with more than 80,000 cases and more than 6000 deaths as of May 28. Canada is also being hit by the sharp decline in global oil prices. Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus, including travel restrictions, social distancing, and declarations of states of emergency and closures of non-essential businesses in some provinces.

Reopening of the economy. On April 28, Prime Minister Trudeau released a joint statement with premiers across Canada on their shared public health approach to support restarting the economy; all provinces have begun to implement plans to reopen.


Key Policy Responses as of May 28, 2020

Fiscal
  • Key tax and spending measures (9.8 percent of GDP, $205 billion CAD) include: i) $4 billion (0.2 percent of GDP) to the health system to support increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities; ii) around $116 billion (5.5 percent of GDP) in direct aid to households and firms, including wage subsidies, payments to workers without sick leave and access to employment insurance, an increase in existing GST tax credits and child care benefits, and a new distinctions-based Indigenous Community Support Fund; and iii) around $85 billion (4.1 percent of GDP) in liquidity support through tax deferrals. More information here.

Monetary and macro-financial
  • Key measures adopted by the Bank of Canada include: i) reducing the overnight policy rate by 150 bps in March (to 0.25 percent); ii) an extension of the bond buyback program across all maturities; iii) launching the Bankers' Acceptance Purchase Facility; iv) expanding the list of eligible collateral for Term Repo operations to the full range of eligible collateral for the Standing Liquidity Facility (SLF), except the Non-Mortgage Loan Portfolio (NMLP); v) supporting the Canada Mortgage Bond (CMB) market by purchasing CMBs in the secondary market; vii) announcing a temporary increase the amount of NMLP a participant can pledge for the SLF and for those participants that do not use NMLP; vii) announcing an increase in the target for settlement balances to $1,000 million from $250 million; viii) together with central banks from Japan, Euro Area, U.K., U.S., and Switzerland, announcing further enhancing the provision of liquidity via the standing US dollar liquidity swap line arrangements; ix) announcing the launch of the Standing Term Liquidity Facility, under which loans could be provided to eligible financial institutions in need of temporary liquidity support; and x) announcing the Provincial Money Market Purchase (PMMP) program, the Provincial Bond Purchase Program (PBPP), the Commercial Paper Purchase Program (CPPP), the Corporate Bond Purchase Program (CBPP), and the purchase of Government of Canada securities in the secondary market. More details here.

    Other measures in the financial sector include: i) OSFI, the bank regulator, lowered the Domestic Stability Buffer for D-SIBs to 1 percent of risk weighted assets (previously 2.25 percent); ii) under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC); iii) the federal government announced $65 billion in credit facilities to lend to firms under stress; and iv) Farm Credit Canada will receive support from the federal government that will allow for an additional $5 billion in lending capacity to producers, agribusinesses, and food processors.

Exchange rate and balance of payments
  • No measures.


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Central African Republic

Background. The impact of the COVID-19 pandemic has so far been relatively limited in the Central African Republic (C.A.R.), with 411 confirmed cases (no deaths), as of May 19, 2020. Aware that, if not contained, the pandemic could, however, have a considerable economic and social impact, the authorities have adopted a response plan for the health sector and enacted social distancing measures, including the closing of borders, schools, and most public establishments, a ban on meetings of more than 15 people, and restrictions on the movement of people from Bangui.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government of C.A.R. intends to implement an announced response plan for the health sector that was prepared in strong collaboration with the WHO, with an estimated cost of 27 billion of FCFA (1.9 percent of GDP). This plan goes beyond an immediate response plan and contains measures to strengthen the ability of the healthcare system to deal with such pandemics in the future. It notably aims at: (i) providing medical care of confirmed cases, (ii) improving the monitoring of the country’s points of entry; and (iii) strengthening the capacities of the medical staff, laboratories and hospitals. The government has requested the help of its development partners to finance this plan, through grants and loans. In addition to the health sector plan, the authorities are envisaging some specific fiscal measures targeting the private sector, such as tax relief or suspension and easing of public procurement procedures.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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Chad

Background. As of May 21, Chad has reported 588 cases (188 cured, 141 females and 58 deaths) of COVID-19Chadian authorities have adopted containment measures, including passenger flight suspension ( initially set to take place between March 19 and May 15, and extended to May 31), closure of borders with CAR and Sudan, quarantine for nationals returning from high risk countries, closure of shops and stores (excluding basic goods), shortened banking working hours, cancellation of events and gatherings of more than 50 people, closure of worship places as well as schools and universities. A hospital in N’Djamena was designated to receive infected cases. Treatment for infected cases is based on the protocol of Dr. Didier Raoult (hydroxychloroquine and azithromycin) and also recently COVID-Organics from Madagascar. An inter-ministerial management committee meets daily to monitor developments. This comes in addition to the establishment of hygiene regulations in all public places and the introduction of a curfew from 07 PM to 06 AM in the main provinces (Logone Oriental, Logone Occidental, Mayo-kebbi East and West plus the city of N'Djamena, as of April 2). The curfew period was reduced to 08PM-05AM, as of April 15, and extended by two weeks from April 29. Starting April 25, a state of medical emergency has been announced for 21 days, , and recently extended for two months (from May 16 to July 16), giving more execution power to anti COVID-19 measures, to mobilize human capital and other resources in support of the efforts against the virus. After the surge of infection and death cases during early May in N’Djamena and the countryside, the authorities have also limited travel from and into N’Djamena, starting from May 8 up until the end of the month. Additionally, wearing a face mask became mandatory in public places starting May 7. This comes after free masks were being distributed to the most vulnerable and at subsidized rates for the rest of the population as of May 2.

Reopening of the economy. On May 18, the health crisis management committee decided to relax some of the measures that had been taken to prevent the spread of the virus: (i) restaurants and grills would reopen for carry out; (ii) stores, shops and markets would reopen; and (iii) urban public transportation would resume subject to a maximum number of passengers (4 for taxis and 10 for minibuses).


Key Policy Responses as of May 20, 2020

Fiscal
  • Financing for COVID-19 health-related expenditures are going to exceed the estimated CFAF 15 billion (0.3 percent of non-oil GDP) to CFAF 31 billion (0.6 percent of non-oil GDP), which are being implemented under a national contingency plan. This reflects higher donor commitment (amounting to CFAF 49.5 billion but disbursements are still low at CFAF 15.6 billion). Key measures include: (i) training of medical and technical staff, (ii) purchase of necessary medical equipment, (iii) construction of seven health centers in remote areas, (iv) construction of three mobile hospitals, and (v) securely managing entry points. Additionally, the capacity of Farcha Hospital in N'Djamena is going to be expanded with the number of beds increasing from 160 to 300. Deployments are also envisaged to the hospital at the university of Toukra (1200 potential beds). The authorities have also decided on a package of fiscal measures to help households and businesses weather the shock. For small and medium-sized enterprises, the authorities will, among other things, reduce by 50 percent the business license fees and the presumptive tax for 2020. Tax breaks such as carryforward losses and delays in tax payments will also be examined on a case-by-case basis. Additionally, domestic arears of about CFAF 110 billion owed to suppliers will be repaid. Measures were also taken to alleviate the hardship on households, including temporary suspension of payments of electricity and water bills for the lifeline consumption, as well as a food distribution program (0.5 percent of non-oil GDP), which started already with the help of UN agencies. In addition, the National Assembly adopted a new law on May 11 that establishes a Youth Entrepreneurship Fund (0.6 percent of non-oil GDP). The authorities will pay all death benefits due to deceased civil and military agents, indemnities and ancillary wages owed to retirees and payment of medical expenses for civilian agents and defense and security forces (0.1 percent of non-oil GDP). Measures also include the simplification of the import process for food and necessity items, including health equipment, and tax exemptions for these items. Additionally, the authorities are in the process of hiring additional health workers (1600+, 1000 health workers have already been hired) and will set up a solidarity fund for the vulnerable population amounting to CFAF 100 billion.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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Chile

Chile has reported 61,857 confirmed COVID-19 cases and 630deaths as of May 21, 2020. In response to COVID-19, the authorities have implemented a range of measures, including declaration of state of catastrophe, travel restrictions, closure of schools, curfews and bans on public gatherings, and a Law on teleworking. The authorities have also unveiled measures to support employment and incomes, and provide liquidity, elaborated below. The COVID-19 outbreak comes only a few months after the social unrest that started in mid-October 2019.


Key Policy Responses as of May 21, 2020

Fiscal
  • On March 19, the authorities presented a package of fiscal measures of up to US$11.75 billion (about 4.7 percent of GDP) focused on supporting employment and firms’ liquidity. The set of measures includes: (i) higher healthcare spending; (ii) enhanced subsidies and unemployment benefits; (iii) a set of tax deferrals; (iv) liquidity provision to SMEs, including through the state-owned Banco del Estado; and (v) accelerated disbursements for public procurement contracts. On April 8, the authorities announced: (i) additional support for the most vulnerable and independent workers of about US$2 billion; and (ii) a credit-guarantee scheme (of US$3 billion) that could apply to credits of up to US$24 billion for facilitate firms’ financing.

Monetary and macro-financial
  • The key measures undertaken by the Central Bank of Chile include: (i) two policy rate cuts by cumulative 125 basis points to 0.5 percent; (ii) introduction of a new funding facility for banks conditional on them increasing credit; (iii) inclusion of corporate securities as collateral for the Central Bank’s liquidity operations and inclusion of high-rated commercial loans as collateral for the funding facility operations; (iv) initiation of a program for purchase of bank bonds (up to US$8 billion); (v) expansion of eligible currencies for meeting reserve requirements in foreign currencies; (vi) flexibilization of Central Bank regulations for bank liquidity; and (vii) expansion of the program for providing liquidity in pesos and US$ through repo operations and swaps;and (viii) relaxing the liquidity coverage ratio (the ratio remains unchanged, but temporary deviations could be tolerated on a case-by-case basis). The Financial Market Commission unveiled a package of measures to facilitate the flow of credit to businesses and households, which includes: (i) special treatment in the establishment of provisions for deferred loans; (ii) use of mortgage guarantees to safeguard SME loans; (iii) adjustments in the treatment of assets received as payment and margins in derivative transactions; and (iv) revision of the timetable for the implementation of Basel III standards.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly. The Central Bank of Chile has extended until January 9, 2021 the window for possible resumption of FX sales and NDF operations that was opened in November 2019 (during the social unrest).


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The Kingdom of the Netherlands—Curaçao

Background. As of May 21, Curaçao reported 16 positive cases and 1 death. Following the first COVID-19 case on March 13, Prime Minister Rhuggenaath declared the state of emergency and announced travel restrictions, quickly followed by a border closure. As the number of cases increased, the government introduced a curfew on March 28 followed by a full lockdown on March 30.

Reopening of the economy.The government is implementing a gradual easing of measures. Some services such as laundries, car wash services, and auto repair shops were allowed to restart on May 4 and the lockdown was lifted on May 8. The Government of Curaçao has decided to keep the airport closed for all inbound passengers, while adding an exception for returning residents, medical specialists and other persons approved by the Government of Curaçao. Repatriation flights for stranded travelers began on May 10. Ministry of Education announced a phased relaxation, starting at the preschool level, so the 2019/20 school year can continue. The next phase of relaxation began on May 18 for classes with official exams.


Key Policy Responses as of May 21, 2020

Fiscal
  • The first package (Alivio 1) was introduced in March. It included tax measures of NAf 33 (0.7 percent of GDP) and some first-response spending. The second, more comprehensive package (Alivio 2) elaborated the following assistance programs: (i) payroll subsidies to support employment in the private sector up to 80 percent of pre-crisis wages conditional on the revenue loss; (ii) support for the self-employed (NAf 1,335 per person per month); (iii) job loss benefits (NAf 1,000 per person per month) for workers laid off since mid-March 2020; (iv) additional benefits for welfare recipients; (v) credit facilities for SMEs, and (vi) compensation of premium losses for the Social Security Bank. Spending on Alivio 2 fiscal measures in April amounted to NAf 45 million (0.9 percent of GDP). The total spending under Alivio 2 in 2020 will be determined by available financing.

Monetary and macro-financial
  • On March 20, 2020, the Centrale Bank van Curaçao en Sint Maarten (CBCS) reduced the pledging rate--at which the commercial banks can borrow from the CBCS--by 150 basis points to 1 percent and suspended the 200 basis points surcharge on the pledging rate on loans exceeding NAf 20 million. Furthermore, the CBCS reintroduced the overdraft facility for commercial banks. The CBCS also announced that it would lower the interest rates on Certificates of Deposit (CDs) to ease the money market by absorbing less liquidity.

    On March 20, 2020, the CBCS (i) allowed commercial banks and credit institutions to provide a 3 to 6-month payment moratorium on interest and principal of all outstanding loans, without having to make an adequate provision, (ii) announced that commercial banks might exceed the debt service ratio (37 percent), to a maximum of 50 percent, and (iii) allowed life insurance companies and pension funds to provide clients a 3 to 6-month payment moratorium on policy premiums without having to make an adequate provision.

Exchange rate and balance of payments
  • On March 20, 2020, the CBCS suspended the extension of foreign exchange licenses for transfers abroad. This also applied to submitted applications that have not yet been granted a license.


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China, People's Republic of

Background. China has been hit hard by the outbreak with over 82,995 confirmed COVID-19 cases and 4,634 deaths as of May 28, 2020 (mainland). The government imposed strict containment measures, including the extension of the national Lunar New Year holiday, the lockdown of Hubei province, large-scale mobility restrictions at the national level, social distancing, and a 14-day quarantine period for returning migrant workers. Reflecting these containment measures, the economy contracted by 6.8 percent (yoy) in Q1.

Reopening of the economy. Starting in mid-February, the government has gradually removed mobility and activity restrictions, prioritizing essential sectors, specific industries, regions, and population groups based on ongoing risk assessments. Most businesses and schools have reopened nationwide, but social distancing rules remain in place at the micro level and foreign entry remains restricted to contain imported cases. Localized movement restrictions were re-imposed in two cities in Jinlin province following reports of new infections. Testing and individualized health QR codes are used to gauge the path of the virus and contain outbreaks.


Key Policy Responses as of May 28, 2020

Fiscal
  • An estimated RMB 3.6 trillion (or 3.5 percent of GDP) of discretionary fiscal measures have been announced. Key measures include: (i) increased spending on epidemic prevention and control, (ii) production of medical equipment, (iii) accelerated disbursement of unemployment insurance and extension to migrant workers, (iv) tax relief and waived social security contributions. The overall public sector expansion is expected to be significantly higher, reflecting the effect of improvements of the national public health emergency management system, additional support through state-owned enterprises, and automatic stabilizers.

Monetary and macro-financial
  • The PBC provided monetary policy support and acted to safeguard financial market stability. Key measures include: (i) liquidity injection of RMB 3.8 trillion (gross) into the banking system via open market operations (reverse repos and medium-term lending facilities), (ii) expansion of re-lending and re-discounting facilities by RMB 1.8 trillion to support manufacturers of medical supplies and daily necessities micro-, small- and medium-sized firms and the agricultural sector at low interest rates, (iii) reduction of the 7-day and 14-day reverse repo rates by 30 and 10 bps, respectively, as well as the 1-year medium-term lending facility (MLF) rate and targeted MLF rate by 30 and 20 bps, respectively, (iv) targeted RRR cuts by 50-100 bps for large- and medium-sized banks that meet inclusive financing criteria which benefit smaller firms, an additional 100 bps for eligible joint-stock banks, and 100 bps for small- and medium-sized banks in April and May to support SMEs, (v) reduction of the interest on excess reserves from 72 to 35 bps, and (vi) expansion of policy banks’ credit line to private and micro- and small enterprises (RMB 350 billion).

    The government has also taken multiple steps to limit tightening in financial conditions, including measured forbearance to provide financial relief to affected households, corporates, and regions facing repayment difficulties. Key measures include (I) encouraging lending to SMEs, including uncollateralized SME loans from local banks and raising the target for large banks’ lending growth to micro- and small enterprises from 30 percent to 40 percent. (ii) delay of loan payments, with the deadline extended to the end of March 2021, and eased loan size restrictions for online loans, and other credit support measures for eligible SMEs and households, (iii) tolerance for higher NPLs and reduced NPL provision coverage requirements, (iv) support bond issuance by financial institutions to finance SME lending, (v) additional financing support for corporates via increased bond issuance by corporates, including relaxing rules on insurers for bond investments, (vi) increased fiscal support for credit guarantees, (vii) flexibility in the implementation of the asset management reform, and (vii) easing of housing policies by local governments.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly. A ceiling on cross-border financing under the macroprudential assessment framework was raised by 25 percent for banks, non-banks and enterprises. Restrictions on the investment quota of foreign institutional investors (QFII and RQFII) were removed.


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Hong Kong Special Administrative Region

Background. Hong Kong SAR has reported 1,064 confirmed COVID-19 cases and 4 deaths as of May 21, 2020. The government imposed strict containment measures, including (i) closure of schools, (ii) ban on gatherings of more than eight people in a public place, (iii) 14-day compulsory quarantine for travelers from overseas countries and areas and Mainland China, (v) temporary entry ban on Hong Kong SAR non-resident from overseas countries from March 25, (iv) reduction and partial suspension of cross-border transport and border control point services, including suspension of transit services at Hong Kong International Airport, and (v) closure of selected social gathering establishments and businesses. Reflecting these containment measures, the economy contracted by 8.9 percent (yoy) in Q1.

Reopening of the economy. Remote work arrangement for civil servants was lifted on May 4th and the first phase of school reopening is slated for May 27th. Social distancing rules are extended to June 4, while cultural and leisure facilities including libraries, swimming pools and beaches are reopened on May 21, and religious gathering of up to 50 percent of venue capacity is being allowed starting the week of May 18.


Key Policy Responses as of May 21, 2020

Fiscal
  • An estimated HK$287.5 billion (or 10 percent of GDP) of fiscal measures have been announced and are being implemented. Key measures include (i) establishment of a new Anti-Epidemic Fund (HK$30 billion or 1.0 percent of GDP) to enhance anti-epidemic facilities and services, (ii) tax and fee reliefs and other one-off relief measures (HK$79.5 billion or 2.8 percent of GDP), (iii) cash payout to Hong Kong SAR permanent residents aged 18 or above (HK$71 billion or 2.5 percent of GDP), (iv) employment subsidy scheme (HK$80 billion or 2.8 percent of GDP), (v) sector-specific relief measures (HK$21 billion or 0.7 percent of GDP), and (vi) temporary job creation (HK$6 billion or 0.2 percent of GDP).

Monetary and macro-financial
  • Under the currency board arrangement, the Base Rate was adjusted downward to 1.50 and 0.86 percent on March 4 and March 16, respectively, according to a pre-set formula, following the downward shifts in the target range for the US federal funds rate. The jurisdictional countercyclical capital buffer for Hong Kong SAR was reduced further from 2.0 to 1.0 percent on March 16 and the level of regulatory reserves will be cut by half to increase banks' lending capacity. The HKMA also introduced measures to increase banking sector’s liquidity, including a temporary US Dollar Liquidity Facility (US$10 billion) which uses funds obtained through the US Fed's FIMA Repo Facility, encouraging banks to deploy their liquidity buffers more flexibly, and easing interbank funding conditions by reducing the issuance size of Exchange Fund Bills. The implementation of the various requirements under the Basel III framework will also be deferred.

    Key measures to provide financial reliefs include (i) the introduction of low-interest loans for SMEs with 100 percent government guarantee (HK$ 50 billion), (ii) pre-approved principal payment holiday for corporates, and (iii) other measures by banks to the extent permitted by their risk management principles, including delay of loan payment, extension of loan tenors, and principal moratoriums for affected SMEs, sectors, and households as appropriate.

Exchange rate and balance of payments
  • No measures.


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Macao Special Administrative Region

Background. Macao SAR has reported 45 confirmed COVID-19 cases and no deaths as of May 13, 2020. The government imposed strict containment measures soon after the first case was registered on January 21, including (i) closure of schools (ii) temporary closure of casinos and other types of entertainment premises (including cinemas, restaurants, and gyms), (iii) rationed distribution of masks to all residents, (iv) temporary mandatory remote work arrangement for civil servants, and (v) cancelation of large-scale events. Starting on March 18, travel restrictions have included a temporary entry ban on foreign visitors and foreign non-resident workers, and from March 25, entry restrictions to visitors from Mainland China, Hong Kong SAR and Taiwan, China who have traveled overseas in the previous 14 days.

Reopening of the economy. (i) Eased border restrictions: on May 8, the shuttle bus service in Hong Kong-Zhuhai-Macao Bridge (HZMB) connecting Hong Kong SAR and Macao SAR restarted after over a month of suspension; operating hours of HZMB and Zhuhai Gate returned to normal on May 3; starting on May 11, non-resident workers from Zhuhai are eligible for an exemption from the 14-day medical observation period with certain requirements. (ii) Schools: senior and junior secondary schools resumed classes on May 4 and 11, respectively; primary school classes are planned to resume on May 25 (for year levels four to six) and on June 1st (for year levels one to three). (iii) Businesses: casinos reopened on February 20.


Key Policy Responses as of May 13, 2020

Fiscal
  • Key fiscal measures include (i) additional health spending handouts to all permanent residents (600 patacas per resident) amounting to 400 million patacas or 0.09 percent of GDP, (ii) handouts to all residents amounting to 5.8 billion patacas or 1.3 percent of GDP (electronic vouchers with 3,000 patacas per resident valid from May to July; electronic vouchers with 5,000 patacas per resident valid from August to December), (iii) transfers to eligible employees amounting to 3.8 billion patacas or 0.9 percent of GDP (5,000 patacas monthly for 3 months), (iv) transfers to self-employed professionals and eligible firms (ranging from 15,000 to 200,000 patacas) under the condition of not laying off employees, amounting to 2.4 billion patacas or 0.6 percent of GDP, and (v) transfers to taxi drivers leasing a taxi, lessees of wet market stalls, holders of hawker licenses or holders of tricycle rickshaw licenses (10,000 patacas). In addition, other measures include free utility fees for residents (for 3 months), subsidized utility fees for firms other than gaming operators and high-end hotels (for 3 months), interest-free loans and interest subsidy for SMEs (2.6 billion patacas or 0.6 percent of GDP), interest subsidy schemes for self-employed individuals (110 million patacas or 0.03 percent of GDP), training for unemployed workers (317 million patacas or 0.07 percent of GDP), and tax exemption/deductions for residents and local enterprises. Fiscal measures amount to an estimated 52.6 billion patacas or 12.1 percent of GDP.

Monetary and macro-financial
  • Under the exchange rate peg in place, the Base Rate of the discount window was adjusted downward on March 4 and 16, by 50 and 64 basis points respectively, reaching 0.86 percent on March 16. With the pataca pegged to the Hong Kong dollar, changes to the Base Rate follow those in Hong Kong SAR’s Base Rate that in turn follow the downward shifts in the target range for the US federal funds rate according to a pre-set formula.

Exchange rate and balance of payments
  • No measures.


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Colombia

Background. Colombia has 17,687 confirmed COVID-19 cases and 630 deaths as of May 21, 2020. The government declared a state of emergency on March 17, and a quarantine has been in place since March 25. This is currently scheduled to last until at least May 25.

Reopening of the economy. The construction and manufacturing sectors were allowed to restart operations on April 27, and an expanded list of industrial and commercial services sectors restarted on May 11. The next wave of reopening is scheduled for May 31 with an expanded sector list that includes retail commerce. Other measures to contain virus transmission have included travel bans, border closures, and a suspension of classes.


Key Policy Responses as of May 21, 2020

Fiscal
  • A state of emergency decree created a National Emergency Mitigation Fund, which will be partially funded from regional and stabilization funds (around 1.5 percent of GDP) and will be complemented by 1.3 percent of GDP from domestic bond issuance and other budgetary resources. The Fiscal Rule Consultative Committee also allowed a 2020 fiscal deficit of 6.1 percent given the expected economic impact. Additional budgetary support for health has been announced, along with faster direct contracting for services associated with the emergency response, new credit lines providing liquidity support to the coffee sector, the education sector, health providers and all tourism-related companies, new credit lines for payroll and loan payments for SMES trough the National Guarantee Fund, a two-month suspension of pension contributions by both employees and employers, delayed tax collection, an exemption of tariffs and VAT for strategic health imports and selected food industries and services, delayed utility payments for poor and middle income households, additional taxes for public sector workers (to help fund the response), and expanded transfers for vulnerable groups. In addition, the government announced a payroll subsidy equivalent to 40 percent of the minimum wage per worker for businesses with a fall of over 20 percent in revenues for a period of three months.

Monetary and macro-financial
  • The Central Bank has cut the policy rate by 100 bp and has implemented several measures to boost liquidity in both the financial market and foreign exchange rate markets. These include: (i) an expansion of their liquidity overnight and term facilities in terms of amounts, applicable securities and eligible counterparts, (ii) a COP 10 trillion program to purchase securities issued by credit institutions, and (iii) TES purchases in the secondary market. The Central Bank also lowered the reserve requirement applicable to savings and checking accounts from 11 to 8 percent and the one applicable to fixed-term savings accounts (less than 18 months) from 4.5 to 3.5 percent.

    Superfinanciera has allowed supervised entities to reprofile all loans that were less than 30 days over-due on Feb 29. These new provisions can include grace periods or extended deadlines. Banks cannot increase interest rates on loans, charge interest on interest, or report entities to credit registries for availing themselves of any forbearance measures. Countercyclical provisions have been released, and Superfinanciera has authorized certain related-party transactions for fund managers, including the purchase of Certificados de Deposito a Termino (term deposit certificates) issued by an associated entity. Fund managers can also invest, directly or indirectly up to 15 per cent of the value of each fund, in other investment funds managed by them.

Exchange rate and balance of payments
  • To provide liquidity in FX markets, the central bank has auctioned FX swaps (in US dollars).In addition, a new mechanism of exchange-rate hedging was introduced through auctions of Non-Deliverable Forwards with a 30-day maturity. Colombia also obtained access to the FIMA Repo facility and the Flexible Credit Line agreement with the IMF has been renewed for two more years.


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Comoros

Background. Comoros’ cases continue increasing. The COVID-19 shock comes less than a year after Cyclone Kenneth, which necessitated emergency Fund financial support. Comoros is already feeling a severe impact from the Coronavirus pandemic as remittances receipts have slowed and visitor arrivals have stopped, weighing on activity in the services sector.

The government declared a travel ban, which added to measures such as closing schools, prohibitions of gatherings of more than 20 people, and suspension of traditional ceremonies. A curfew from 8:00 p.m. to 5:00 a.m. is currently in place. A full lockdown has not been implemented owing to the dimension of the informal economy. The authorities have prepared a public-health related plan that describes the measures to be taken to minimize risks from pandemics. Implementation of the plan appears to be proceeding slowly, however, reflecting the authorities’ severe financial and capacity constraints. The WHO ranks the health system’s preparedness at the lowest level in international comparison.


Key Policy Responses as of May 28, 2020

Fiscal
  • The authorities intend to fully implement their pandemic preparedness plan. Their top priority will be to substantially expand spending on health care in line with pandemic-related needs, trying to overcome to the greatest extent possible the health care system’s capacity constraints. If financing is available after raising spending on health care, the authorities intend to raise transfers to vulnerable households. Import taxes on food, medicines, and items related to hygiene were reduced by 30 percent. The government announced a fund to support employees associated with airport operations.

Monetary and macro-financial
  • The authorities intend to monitor the impact of the COVID-19 shock on banks’ asset quality. The central bank reduced reserve requirements to 10 percent. The authorities also announced a restructuring of commercial loans and freezing of interest rates in some commercial loans.

Exchange rate and balance of payments
  • The authorities intend to monitor inflation developments and continue preserving the peg against the euro.


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Congo, Democratic Republic of

Background. The Democratic Republic of Congo has reported 1835 positive cases (61 deaths) as of May 21, 2020 of COVID-19. On March 24th, the government declared a state of emergency and imposed the confinement of the capital, Kinshasa, which includes restrictions to travel between Kinshasa and the rest of the country and the prohibition of all gatherings of people in public spaces. Passenger flights from abroad are not allowed and border posts are closed to non-cargo shipments. These measures add to previous restrictions, such as closure of all education centers, suspension of all religious and sporting events, and closure of bars and restaurants. In 2020, the effects of the COVID-19 pandemic are projected to reduce real GDP growth (including through lower mining activity), increase consumer prices (particularly of imported products), reduce fiscal revenue (both mining and non-mining), and increase fiscal spending through the implementation of a COVID-19 response plan.


Key Policy Responses as of May 21, 2020

Fiscal
  • A preparedness and response national plan to deal with the pandemic has been designed with support from development partners, and it is coordinated by Dr. Jean-Jacques Muyembe. The plan mainly focuses on actions to (i) strengthen early detection and surveillance and foster technical and operational coordination within the government; (ii) improve the quality of medical care to infected patients; and (iii) develop effective preventive communication strategies and enhance medical logistic platforms. The plan’s budget is estimated at US$135 million (0.3 percent of GDP).

    The following measures were approved the week of April 12th by the Prime Minister:i) a three-month VAT exemption on pharmaceutical products and basic goods, ii) suspension of tax audits for companies, iii) a grace period for businesses on tax arrears, iv) full tax deductibility of any donations made to the COVID relief fund. The week of April 19, an additional set of measures were adopted, namely: i) provision of water and electricity for a period of two months, free of charge, ii) prohibition to evict renters in case of no payment of financial obligations from March to June 2020, iii) suspension of VAT collection on the production and on the sales of basic goods.

Monetary and macro-financial
  • On March 24, the central bank (BCC) announced several measures to ease liquidity conditions by: (i) reducing the policy rate by 150 bps to 7.5 percent; (ii) eliminating mandatory reserve requirements on demand deposits in local currency; and (iii) creating a new collateralized long-term funding facility for commercial banks of up to 24 months to support the provision of new credit for the import and production of food and other basic goods. The BCC has also postponed the adoption of new minimum capital requirements and encouraged the restructuring of non-performing loans. In addition, the BCC announced measures to reduce contamination risks in bank notes and promote the use of e-payments.

Exchange rate and balance of payments
  • No specific policy responses have been set to date.


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Congo, Republic of

Background. Congo, as most of oil producers, is being hit by two shocks—the potential spread of COVID-19 and the sharp decline in oil prices. The country has reported 420 positive cases (15 deaths and 132 recoveries)  as of May 19, 2020. The authorities’ s policy is towards responding to these developments. The Ministry of Health has prepared a national contingency plan in collaboration with WHO and other international partners. In the meantime, the authorities started to adopt containment measures, including social distancing, travel bans on visitors from high-risk countries and quarantine for nationals/expatriates returning from those countries, screening at ports of entry, and school closures. A lock-down has been established in the country from April 1 to mid-May.

Reopening of the economy. On May 18, the lockdown was eased with opening up of public transportation, primary schools final year class and graduation class. Restaurants, hotels, and most private services remain closed in the two main cities, but the rest of the country has opened up completely.


Key Policy Responses as of May 20, 2020

Fiscal
  • The overall cost of the response plan to the COVID 19 epidemic has been estimated at US$170 million (100 billion XAF), equivalent to 1.6 percent of 2020 GDP, to date the government has made available to the Ministry of Health the amount of US$1.4 million. The EU, WFP, France are getting together to provide support for the poorest segments of the population with combined support amounting to about 3 billion XAF as of now.

    The government has adopted some measures to ease tax and duty payments for private enterprises. In particular, more time has been given to companies to pay their taxes and tax assessments on site have been abandoned. The import duty directorate is also strongly encouraging electronic payment of dues and allowing more electronic documents to be accepted at the port. Corporate income tax has been reduced to 28 percent from 30 percent and the turnover tax has been reduced to 5 percent from 7 percent for small businesses with turnover below 100 million XAF.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5% to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution. Discussions are taking place at the country level on whether private companies can have access to the 100 billion XAF fund set up by the President and on simplifying access to refinancing instruments. A guarantee scheme has been set up to help private companies service their banking debts, but no details have been provided on the amounts or conditions.

Exchange rate and balance of payments
  • No new measures.


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Costa Rica

Background. Costa Rica reported its first confirmed case of COVID-19 on Mar 6, and as of May 20, the country has registered 897 confirmed cases and 10 deaths. In response, the government has implemented a range of measures to contain the spread of coronavirus, including declaration of a state of yellow alert and a national emergency, restrictions and bans on non-essential private and public vehicle circulation, international travel restrictions, mandatory quarantines for close contacts and those who enter the country, closures of schools, churches, beaches, national parks, bars, clubs and casinos, entry restrictions for foreign truck drivers, increased testing, and the conversion of a rehabilitation center into a hospital specializing in COVID-19 treatment. 2020Q1 y/y GDP growth is not yet available. A monthly indicator of economic activity points to Q1 growth of 1.2 percent y/y.

Reopening of the economy. Costa Rica began easing some coronavirus measures starting May 1. Theaters, gyms and athletic centers will be permitted to reopen during the week but with limited capacity and under strict rules (cleaning, distances etc.). The Health Ministry announced a further loosening of restrictions, to be implemented in four phases over 80 days. The first phase starts on May 16 when some national parks and hotels will re-open at limited capacity and contact sports will be permitted without spectators, among other easing measures.


Key Policy Responses as of May 20, 2020

Fiscal
  • The government announced a package of revenue and expenditure measures to protect workers and companies against the economic effects of COVID-19, including (i) an interest-free 3-month moratorium on the payment of value-added taxes, business income taxes, and customs duties, and making social security contributions proportional to the time worked, as well as a deferral of payment of social security contributions; (ii) a 4-month moratorium on taxes to be paid to the Costa Rican Tourism Institute for firms in the tourism sector facing liquidity constraints; (iii) a monthly subsidy of ¢100-200,000 for 3 months to about 375 thousand households economically affected by the crisis. In addition, salary increases for public employees (except for the police) are suspended this year to direct more resources to the attention of COVID-19. In addition, the government announced public investment of 3.1 billion colones over 2020-2021 (out of which 1.1 billion colones are for PPPs).

Monetary and macro-financial
  • The Central Bank cut its policy rate by a full percentage point to a record low of 1.25 percent to soften the economic damage caused by the pandemic and to improve credit conditions for households and businesses. In addition, the Central Bank started purchasing government securities (issued pre-2020, in Costa Rican colones, and with a maximum maturity of 10 years) in the secondary market to provide liquidity during market distress. Further measures that aim at protecting workers and companies include (i) reducing the cost of credit (including through ¢900,000 million loans at preferential interest rates to firms across all sectors from state-owned banks); (ii) relaxed regulations on restructuring of loans and on buybacks; (iii) a minimum 2-month moratorium on the payment of principal and/or interest for personal credit, mortgages, auto loans, credit card loans, consumer loans, and education loans for affected households and firms (announced and to be approved by Congress); (iv) a temporary reduction in the minimum accumulation of countercyclical provisions for financial entities to zero; (v) the temporary suspension of provisioning rules for financial entities that record losses for at least 6 out of 12 months; and (vi) authorization for complementary pension operators to provide partial funds to employees affected by COVID-19.

Exchange rate and balance of payments
  • The BCCR continues to maintain exchange rate flexibility and intervenes in the FX market to limit disorderly market conditions.


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Côte d’Ivoire

Background. Côte d’Ivoire is being hit by COVID-19 with 2301 confirmed cases as of May 21, 2020. The authorities swiftly adopted containment measures including (i) declaring a state of emergency and establishing a curfew from 9pm to 5am; (ii) banning all international travels, except for humanitarian aid purpose; (iii) prohibiting public gatherings of more than 50 people; (iv) closing schools, nightclubs, restaurants, bars, theatres and other recreational facilities; and imposing restrictions on public transportation and movements between regions in the country; (v) making wearing masks mandatory and encouraging teleworking. On March 30, 2020, the authorities launched a vast cleaning and disinfection operation in Abidjan.

Reopening of the economy. On May 7, 2020, the authorities announced the relaxation of the containment measures, which were further eased on May 14, 2020. In the Grand Abidjan district, they lifted the curfew and the closure of restaurants on May 15, while the reopening of schools and universities is planned for May 25. The isolation of the Grand Abidjan district will remain in place until May 31. Regarding the remaining regions, the curfew and the closure of restaurants, schools and recreational facilities were lifted on May 8; the prohibition of public gatherings will be shifted from 50 people to 200 people.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government adopted an emergency health response plan of 96 billion CFAF (or 0.3 % of GDP). It will (i) provide free care for those with the infection and equipping intensive care units; (ii) strengthen epidemiological and biological surveillance (virus testing; creation of a free call center, rehabilitating and equipping laboratories); (iii) reinforce capacities of pharmaceutical industries and financing research on the virus. On March 31, the government announced a package of economic measures to prop the income of the most vulnerable segments of the population through agricultural input support and expanded cash transfers, provide relief to hard-hit sectors and firms, and support public entities in the transport and port sectors to ensure continuity in supply chains. In this regard, the authorities created 4 special Funds to be spent over 2 years, including the National Solidarity Fund of 170 billion CFAF (0.5 % of GDP), the Support Fund for the informal sector of 100 billion CFAF (0.3 % of GDP), the Support Fund for the small and medium enterprises of 150 billion CFAF (0.4 % of GDP) and the Support Fund for large companies of 100 billion CFAF (0.3 % of GDP). They will also provide financial support to the agriculture sector by 300 billion CFAF (0.8 % of GDP). On April 27, 2020, Heads of states of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU growth and stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of the Covid-19 pandemic. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the Covid-19 crisis. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted of a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount for such special T-Bills issued by Cote d’Ivoire amounted to 1.5 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Croatia

Background: The Croatian economy is expected to be significantly affected by COVID-19, given its dependence on tourism and its largest trading partner being Italy. Containment started early and was gradually tightened from border controls, to closure of schools, universities, open markets, and restrictions on intercity travel. Croatia quickly adopted 63 different economic measures and additional measures were announced beginning of April in order to preserve jobs and alleviate the impact of COVID-19.

Reopening of the economy: On April 23, the government announced a gradual easing of containment measures in three phases, but subject to a review after each stage. Beginning April 27, some retailers (except shopping malls), libraries, museums, galleries, service-based activities not requiring close client contact (e.g., tailors, photoshops, locksmiths) reopened. Public transportation in cities and suburbs and boat connections for islands that do not have ferries resumed. Beginning May 4, service industries where close contact with people is unavoidable (e.g., hairdressers, beauticians) can reopen. Public and private health systems will be fully operational except for special cases decided by epidemiologists. Playgrounds and sports fields can reopen. Beginning May 11, public gatherings of up to 10 people were allowed outdoors (previously capped at 5 people). Shopping malls, preschools and elementary schools (grades 1-4), cafes and restaurants, sports and fitness centers and national parks can reopen. Inter-county public transportation and domestic air traffic can resume. Shopping centers can operate. Until further notice: schools (grade 5 and above), universities, night clubs, cinemas, and theaters will remain closed. On May 29, Croatia will open its borders for Slovak, Czech, Hungarian, and Austrian citizens. Parliamentary elections will be held on July 5.


Key Policy Responses as of May 21, 2020

Fiscal
  • Key measures include: deferment of public obligations, free of interest for three months, which can be extended by additional three months if necessary; temporary suspension of payments of selected parafiscal charges; interest free loans to local governments, the Croatian Health Insurance Institute, and the Croatian Pension Insurance Institute to cover the deferred payments; subsidization of net minimum wages for three months to preserve jobs, which could be extended for another three months; and early refund of taxes for individuals. Beneficiaries of some EU Structural and Investment Funds will be able to receive larger advance payments. Part of the EU funds envelope has been reallocated to micro loans, a new credit line was introduced, accompanied by measures to facilitate faster disbursements of loans with lower interest rates, and larger partial risk guarantees. The government has also resorted to purchases of unsold stocks of finished goods in agriculture, food processing industry, medical equipment, and similar strategic goods. On April 1, the government announced additional measures, including: an increase of the subsidization of the net minimum wage; tax obligations of companies to be reduced or written-off depending on their turnover and loss; VAT payments will not be due until payment is received from customers and the deadline for the 2019 financial reports will be extended to June 30.

Monetary and macro-financial
  • The Croatian National Bank (CNB) has provided additional liquidity, supported the government securities market, and temporarily eased the regulatory burden on banks ( https://www.hnb.hr/en/home ). Liquidity was provided via: (i) the structural repo facility, used for the first time since December 2018 (5-year kuna liquidity of HRK 3.8 billion at a fixed interest rate of 0.25 percent); (ii) regular weekly repos used by banks for the first time since December 2017 (but no bidders at recent auctions). This repo rate has been reduced from 0.30 to 0.05 percent; and (iii) a reduction of the reserve requirement ratio (from 12 to 9 percent). The CNB has supported the domestic bond market three times (by HRK 13.8 billion). The European Central Bank and the CNB have agreed on a €2 billion swap line.

    A moratorium for three months on obligations to banks has been introduced. Banks will not apply enforcement measures during this period. The Croatian Banking Association has agreed to defer repayment of loans to the tourism sector until end-June 2021. Depending on clients' possibilities and needs, regular interest may be paid for the duration of the moratorium, according to the existing payment schedule, or the loan maturity may be extended to adapt monthly loan instalments to clients' possibilities and cash inflow. The CNB has temporarily adjusted its supervisory practices in line with the EBA statement of March 12 ( https://eba.europa.eu/eba-statement-actions-mitigate-impact-covid-19-eu-banking-sector ). Banks will not distribute dividends.

    The Croatian Bank for Reconstruction and Development (HBOR) has issued a moratorium on debt service for three months, can provide liquidity loans, export guarantees, and restructure obligations. The European Commission has approved several subsidized loan programs.

Exchange rate and balance of payments
  • The CNB has intervened to mitigate depreciation pressures.


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Cyprus

Background. COVID-19 has been spreading across Cyprus with 941 confirmed cases as of May 28, 2020. Since March, the government implemented a range of measures to limit the spread of coronavirus, including travel and mobility restrictions, a 14-day mandatory quarantine for travelers to Cyprus, and closure of schools, hotels and businesses.

Reopening of the economy. With daily new infections remaining in the single digit since end-April, the government has started implementing lifting of restrictions in four phases. The first phase started on May 4, allowing reopening of construction sites, retail stores and public sector under social distancing and health guidelines. The second phase started on May 21, allowing reopening of public schools and open-air restaurants as well as free movement within the country. The third phase, scheduled to start on June 9, depending on epidemiological data, will allow reopening of airports and shopping malls.


Key Policy Responses as of May 28, 2020

Fiscal
  • A support package amounting to €896 million (4.3 percent of GDP) for the health sector, households and businesses has been approved. The package includes: (i) a €100 million support for the health sector to combat the pandemic; (ii) income support for households including leave allowance for parents and those with health issues, allowance for employees who continue to be employed but do not receive salaries from affected businesses; (iii) support for affected businesses to maintain jobs, support for the tourism sector, and deferring VAT payments due in two months, and (iv) three-month suspension of a scheduled increase in the contribution to the General Healthcare System, which benefit both businesses and households. The government announced a new support package on May 27, including grants to small businesses and self-employed, interest subsidies for business and housing loans, participation in the Pan-European Guarantee Fund, increased state guarantees to expand existing European Investment Bank (EIB)-supported loans to SMEs, increased government borrowing from EIB to expand existing funding scheme for SMEs, and a temporary VAT cut and spending measures to stimulate tourism/hospitality sector.  http://mof.gov.cy/en/press-office/minister-s-press-releases/683/?ctype=ar

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    The Central Bank of Cyprus (CBC) announced additional measures on March 18th. They include a release of capital and liquidity buffers for banks directly supervised by the CBC (€100 million), simplification of documentation requirements for new short-term loans and other credit facilities, encouraging banks to apply favorable interest rates for new loans and newly restructured loans, and simplification of approval processes for loan restructuring.

    The Parliament passed a bill on March 29 providing a general moratorium on loan repayments for all creditworthy borrowers until end-December 2020.

    The Central Bank announced additional capital release measure on April 10, with a twelve-month extension of the phased-in introduction of Other Systemically Important Institutions capital buffer. This corresponds to a release of additional funds of approximately €90 million as of January 1, 2021.

Exchange rate and balance of payments
  • No measures.


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Czech Republic

Background. The Czech Republic has recorded about 8,700 confirmed cases of Covid-19, as of May 21, 2020. The government had declared a state of emergency and a nationwide quarantine limiting free movement and international travel to contain the spread of the virus. It further implemented a range of measures to support the population, jobs and businesses. GDP fell by 2.2 percent in Q1-2020 compared to a year earlier.

Reopening of the economy. The list of permitted activities, including the reopening of shops and the partial reopening of restaurants, has been gradually expanded over the past weeks. The state of emergency expired on May 17, yet several restrictions are retained. International borders were partially reopened on May 11, but, with some exceptions, all persons must provide negative Covid-19 test results to enter the country. Most business restrictions and the requirement to wear face masks in public are planned to be lifted on May 25. On the same date, primary and vocational school classes will partially reopen at limited class sizes and on a voluntary basis for pupils. Events will be phased in starting with a size limit of 300 people on May 25 to 1,000 people by June 22.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government announced a fiscal package of CZK 257bn (€9.7bn, 4.6 percent of GDP). Measures include the contribution of 80 percent of wages (incl. SSC) to employers if (i) employees are sent into quarantine; or (ii) employers’ businesses have been closed or reduced as a result of the crisis management or emergency measures taken by the Government. A contribution of 60 percent of wages (incl. SSC) is paid to employers due to obstacles to work on the part of the employer caused by the current epidemiological situation and related measures to prevent the spread of the disease both locally and abroad. Self-employed may receive a lump sum of CZK 500 per day for the period between Mar 12 and Jun 8. The same lump sum also applies to very small businesses (Ltd) for the period between Mar 12 and Jun 8. The state will further cover 50% of rents of businesses after mandating a reduction of 30%, while tenants will have to cover the remaining 20%. The Government has also approved a bonus for workers in social and health services of CZK 6.3bn in total. The government further pledged close to CZK 500bn (EUR 18.9bn, 9¼ percent of GDP) in potential guarantees. Advance payments on personal and corporate income tax are suspended for Q2 2020 and penalties are waived for failing to pay property tax and file tax returns on time. The government approved a moratorium on bank loans (subject to certain criteria and limitations) of up to six months. Interest will still be accrued, and loan duration will be extended.

Monetary and macro-financial
  • The Czech National Bank (CNB) lowered the policy rate by 50 bps on March 16 , and 75 bps on March 26 and May 7 , respectively, to 0.25 percent. It also increased the frequency of repo operations from one to three times a week and reduced the countercyclical capital buffer rate by 75bps to 1 percent, effective April 1, 2020. The CNB relaxed credit ratios for new mortgages, increasing the maximum recommended LTV ratio from 80 to 90 percent, the DSTI ratio from 45 to 50 percent and removing the DTI ratio from its list of recommendations (previously set at a multiple of 9). An amended CNB act extends the CNB’s powers regarding the types of securities and counterparties it can engage with in secondary markets in case of disorderly market conditions.

Exchange rate and balance of payments
  • No measures.


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Denmark

Background. Denmark has reported 11,117 confirmed cases of COVID-19 infection, with 554 deaths as of May 20, 2020. The government has implemented a range of measures to contain the spread of the Covid-19 virus, and to support people, jobs and businesses. These include closure of all bordersprohibition of events with more than 10 peopleclosure of schools, universities and daycare centersclosures of entertainment, hospitality and public leisure facilitiessending home non-essential public employees and asking all private businesses to keep employees home when possible.

Reopening of the economy. The authorities announced a careful and gradual lift of some containment measures (April 6). In the 1st Phase primary schools and under, as well as additional health care sectors and liberal professions opened up mid-April. As part of the 2nd Phase , retailers (May 11), restaurants (May 18), and secondary schools (May 18) are opening up while borders remain closed and events with more than 10 people remain prohibited. To enable a comprehensive testing of the population as part of the reopening strategy, the authoritiesadjusted the criteria for Covid19 testing.

Key Policy Responses as of May 20, 2020
Fiscal
  • The authorities responded to the ongoing crisis by providing discretionary fiscal support to the tune of about DKK 60 billion (2.6 percent of 2019 GDP). The increased spending will mainly finance additional health care needs and extraordinary budgetary measures to support workers and businesses . Another 2.5 percent of 2019 GDP in countercyclical support is expected to come through Denmark’s strong automatic stabilizers—including from weaker tax receipts and higher social benefits. Temporary liquidity measures, including postponement of tax payments and government guarantees , will further support activity in the first half of year. Local governments will bring forward medium-term investment programs worth DKK 2.5 billion to 2020. EU finance ministers agreed on a EUR 540 billion recovery package (April 9). Danish authorities have agreed to adjust and extend initial fiscal measures until July 8. Thus, providing an additional DKK 30.7 billion (1.3 percent of 2019 GDP) in fiscal support and about DKK 70 billion (3.0 percent of 2019 GDP) in guarantees and liquidity measures. On May 19, a political agreement was reached on green renovation of public housing (DKK 30.2 billion or 1.3 percent of 2019 GDP) during the period 2021-26.

Monetary and macro-financial
Exchange rate and balance of payments
  • Denmark’s krone is pegged to the Euro. The fixed exchange rate policy has served Denmark well. The DN has stated its objective of preserving the peg.


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Djibouti

Background. Djibouti has had 1828 confirmed COVID-19 case as of May 21, 2020. The government has implemented various prevention measures, including restrictions of air, land, and sea borders, interruption of passenger flights and trains to (and from) Djibouti; suspension of visa issuance; confinement of non-essential employees, and steps to encourage social distancing (including school closures and cancellation of public gatherings).

The Ministry of Health and its partners have increased their preparedness by building surveillance, testing, quarantine and health worker capacity. The WHO has delivered protective and medical equipment, including tests and respirators.

Reopening of the economy. The government has started to gradually relax containment measures from May 17. Transport, retail, services, construction and public administration are allowed to re-open. Wearing a mask is mandatory in public spaces as well as other hygiene measures such as hand washing and regular sanitization of spaces receiving the public. Other sectors will gradually be reopened in the next months, with borders and international travel expected to be reopened starting in September.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has announced a package of measures to respond to the shock amounting to 2.4 percent of GDP. It includes increases in health and emergency spending in support of households and firms affected by the pandemic. Additional support to vulnerable households so far has been provided in the form of food vouchers.

Monetary and macro-financial
  • The Central Bank of Djibouti has stepped up its financial sector surveillance.

Exchange rate and balance of payments
  • No measures.


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Dominican Republic

Background. As of May 27, 2020, the number of COVID-19 cases stood at 15,264 (468 fatalities; 8,534 recovered). The authorities declared a national emergency (extended until June 12), introduced a country-wide curfew, closed schools, borders, and non-essential businesses, suspended public activities and mass gatherings, and introduced teleworking arrangements for public servants. Social distancing measures are strictly enforced, more than 1,600 businesses closed for violating them and the curfew as of April 30.

The Emergency and Health Management Committee to Combat the Coronavirus, established on April 2, advises on response strategies, promotes public-private partnerships to increase the healthcare system’s capacity, and supervises the implementation of adopted measures. The Ministry of Health created an AI-based e-platform “Aurora MPS”, to inform citizens about the outbreak and connect them with doctors, when needed. A unified command center called C5i was created to centralize patient information from various sources in one place and generate computer models to develop epidemiological profiles, predict the behavior of the virus in the following days, and provide a “live” number of medical personnel and available supplies.

The presidential and congressional elections, originally slated for May 17, are rescheduled for July 5. If no candidate wins more than 50 percent of the vote, a second round will be held on July 26. However, the date for the change of administration stays the same (August 15, 2020).

Reopening of the economy. On May 17, the President announced a plan to reopen the economy, following a four-phases schedule, which started on May 20 with the reopening of most businesses, operating at up to 50 percent capacity. Each phase is planned to last 14 days. The completion of this plan will depend crucially on the evolution of the pandemic.

  • Phase one (began on May 20): Public transportation resumes work; curfew hours are reduced; barber shops, beauty salons and medical offices will resume activities but only by appointment; and workers will be allowed to return to their duties (up to a half of the workforce in micro, small and medium businesses, and up to 25 percent in large firms).
  • Phase two (scheduled for June 3): Up to 100/75/50 percent of staff will be able to return to work in micro/small and medium/large businesses respectively; the shopping centers, private transportation; gaming (except for the casinos), and Sunday religious services may resume.
  • Phase three (scheduled for June 17): Businesses with up to 50 employees will be able to operate with 100 percent of staff, while companies with more than 50 workers will have to employ 75 percent of their staff; religious services will be held three times a week.
  • Phase four (scheduled for July 5 (election day)): All companies will resume operations with 100 percent of staff; tourism, hotels, airports, gyms and restaurants will open. Reopening is accompanied with a strict protocol for the routine environmental cleaning and disinfection at least every two hours.

Key Policy Responses as of May 27, 2020

Fiscal
  • The latest economic measures announced by President Medina amounted to RD$32 billion (about US$576 million, or ¾ percent of GDP). These include higher social spending: (i) the Quédate en Casa program (RD$17 billion), subsidizing the most vulnerable households, including informal workers. Coverage under the existing program Comer es Primero, paying RD$5,000 (about US$90) per month increased from 0.8 to 1.5 million households, of whom 0.9 million households already received payments as of April 22; 452,817 families will receive additional transfers of RD$2,000 (about US$36) per month; (ii) the newly created Employee Solidarity Assistance Fund (FASE) (RD$15 billion), which will benefit about 754,000 families of formal workers who were laid-off with a monthly transfer up to 70 percent of wages (minimum of RD$5,000, RD$8,104 on average). On May 17, the government announced an extension of Quedate en casa and FASE for one month, until the end of June. Also, a new program called Pa’ti is introduced to support independent works, providing RD$5,000 a month to each beneficiary in May and June. The government increased healthcare spending on medical supplies and equipment, tests in private labs, rent of two private medical centers, and support of the pharmaceutical industry, including through budget reallocations. Tax relief is provided through extended payment deadlines and some tax benefits. Also, the government stablished a special allowance for health workers, operational staff and military and police officers, which would amount to an expense of RD$2.4 billion. Consequently, the Ministry of Finance estimates a fiscal deficit of 4.5 percent of GDP for 2020. To cover financing gaps, the authorities are mobilizing loans and commercial credit lines from the IMF, World Bank, the Interamerican Development Bank, Latin American Development Bank, and the Central American Bank for Economic Integration; and raising private donations for healthcare needs. The government also placed domestic debt in the amount of US$ 0.7 billion (in 4 series), with the maturities of 10-20 years at an interest rate of 10-10.875 percent.

Monetary and macro-financial
  • On March 16, the Monetary Council of the Central Bank of the Dominican Republic (BCRD) eased its policy stance and took measures to provide additional liquidity and support the economy. Interest rate measures include the monetary policy rate cut (from 4.5 to 3.5 percent per annum), reduction of the 1-day REPO facility rate (from 6.0 to 4.5 percent), and the overnight deposit rate cut (from 3.0 to 2.5 percent). Banks were allowed to cover reserve requirements with public and BCRD bonds up to RD$22.3 billion (about ½ percent of GDP), which is equivalent to a 2 percent reduction in the reserve requirement rate and a release of RD$30.13 billion (US$553.7 million; about ? percent of GDP) to the economy. These resources will be used for credit to households and businesses at an interest rate capped at 8.0 percent. On April 16, the Monetary Board lessened the criteria to access these resources by allowing financial intermediaries to lend to any economic sector and extended the maturity of the loans from 1 to 4 years. The BCRD has also made available liquidity for loans to small businesses and personal microcredits. The first window amounts to RD$15 billion accessible through Banco de Reservas. It will be available for 3 years and loans would carry an interest rate of up to 8 percent. At the same time, the BCRD released RD$5.7 billion from the reserve requirement (about 0.5% of reserve requirements) for new loans, refinancing of previous debt and debt consolidation for small businesses and personal microcredit under loans for 4 years at an interest rate of up to 8 percent. Liquidity measures include easing other REPO operations for RD$50 billion (about 1 percent of GDP) to provide funds to the financial system, and provisions of U.S. dollar liquidity (US$0.622 billion, roughly 3/5 percent of GDP) through REPO operations and allowing banks to use public bonds towards reserve requirements on foreign currency deposits. Interest rate on these REPOS was lowered from 1.8 percent to 0.9 percent. In addition, the BCRD made arrangements with the Federal Reserve for a liquidity facility worth US$1-US$3 billion through short-term repos. The IMF Rapid Financing Instrument was approved on April 29, 2020, for US$0.65 billion. Debt relief measures include a temporary freeze of debtor ratings and provisioning; classifying overdue loans for a 60-day period; and giving 90 days to debtors to update loan guarantees. In addition to these measures, on May 7, the BCRD announced a new facility to provide financing up to RD$20 billion for businesses operating in tourism, construction, exports, and manufacturing. Loans under this facility would carry an interest rate of 8 percent and would receive the same regulatory treatment as all other facilities put in place so far.

Exchange rate and balance of payments
  • The BCRD continues to intervene in the foreign exchange markets to prevent disorderly market conditions. In the last three months, the BCRD injected US$ 2.1 billion into financial sector as the supply of foreign exchange has been affected by declines in tourism, trade activities in the free zones, and foreign direct investment, compounded by a decrease in remittances and exports due to the global pandemic. Nonetheless, international reserves position remains strong, at about US$8.3 billion (around 10 percent of GDP), as of May 27, 2020.


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Eastern Caribbean Currency Union

Background. The Eastern Caribbean Currency Union consists of eight members (Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia and Saint Vincent and the Grenadines) with a common central bank (the Eastern Caribbean Central Bank). As of May 21, the number of COVID-19 infected cases is 128 (up from 126 last week), and the number of deaths is four (unchanged from last week). Authorities are taking medical precautions in line with international recommendation, including travel restrictions, suspension of cruise ship visits, school and university closures, social distancing, expansion of hospital capacity (e.g., procuring medical equipment and supplies, identifying quarantine and isolation facilities, and training medical staff). The COVID-19 shock, if prolonged to the hurricane season (August-November), could compound recurrent risk of natural disasters, aggravating the impact on the economy and society.

Reopening of the economy. Many ECCU authorities have begun a gradual phased approach to easing containment measures and Reopening of the economy since early May, including the expansion of the list of businesses that are permitted to operate. On May 4, CARICOM leaders discussed a phased approach to reestablishing intra-regional travel.


Key Policy Responses as of May 21, 2020

Fiscal

Several ECCU members have announced fiscal measures.

  • Anguilla. On April 15, the Premier announced several measures, including (i) unemployment assistance and direct financial support, (ii) waiving of duties and taxes on essential food and hygiene item imports, (iii) a fund to grant small low interest loans, and (iv) waiving all interest and penalties on debt obligations (excluding arrears) and social security payments by employers. On April 16, the UK government announced an emergency grant of US$ 1.5 million to fund the COVID-19 response. The government removed all regulations restricting movement and gatherings, effective April 29.

  • Antigua and Barbuda. On March 26, the government announced several measures, including (i) an increase in health spending (0.5 percent of GDP), (ii) a 20 percent reduction in electricity costs to the public and fuel costs to fishermen for 90 days; (iii) one year investment incentives for home renovation and construction; (iv) suspension of the common external tariff on food imports and all new tax measures announced in 2020 budget; and (v) expansion of social safety net programs. On April 22, the Cabinet appointed 7 sub committees as part of an Economic Recovery Committee (ERC) tasked to formulate and recommend policies for rebuilding the economy and promoting growth in the post COVID-19 environment. The ERC will mandate the sub committees to review various sectors of the economy and submit final recommendations for Cabinet’s consideration. Since April13, the government has begun a gradual phased approach to easing containment measures and reopening of the economy. Most businesses including personal services have been allowed to operate, and access to churches and beaches has been granted. On May 13, the State of Emergency was extended to July 31, but curfew hours were reduced to 9pm to 5am, and all businesses and public activities were allowed to recommence within specific health protocols. The government also announced the re-opening of borders from June 1 and has identified health protocols for returning nationals as well as visitors.

  • Dominica. On May 17th, the Prime Minister announced the following measures: i) Extension of the deadline for filing of personal and corporate income tax returns; ii) Extension of three months for payment of corporate income tax; iii) Waiving penalties for businesses that enter into payment plans within 6 months of the new payment deadline; iv) Reduction in the corporate income tax rate (from 25 percent to 17 percent) to companies which commit to continue to employ at least 80 percent of their staffing as of January 1, 2020, for a period of 12 months; v) Reduction to zero percent in the import duty and the value-added tax charged on disinfectants, cleaning supplies, protective gears and face masks; vi) Increased budgetary funding to the Ministries of Health and Agriculture; vii) Cash grants to approximately 2,500 individual crop farmers, based on the size of the farmers holding; ix) Implementation of multiple infrastructure projects with expenditure of up to US$100 million, with total additional investments in construction expected to amount to at least US$296.8 million; x) Pay to small contractors and merchants with amounts owed by the Government of EC$100,000 and less, utilizing the resources approved by the IMF under the Rapid Credit Facility (RCF) xi) Income support for the period April-June 2020 for heads of families and single persons who are currently unemployed. The Government announced it plans to establish a fund to seek contributions from overseas-based Dominicans, including CBI citizens and agents, to assist with the country’s efforts to deal with the effects of Covid-19. Effective May 18th, the following sectors were allowed to reopen, initially by appointment only: Hair salons and barbershops; Sulphur spas; Manicure and pedicure and massage parlors.

  • Grenada. The government announced various fiscal and financial measures on March 20, effective for April-June in the first instance, to mitigate the impact of COVID on the economy. These include: (i) payroll support to the affected sectors (such as tourism) and individuals, (ii) expansion of government employment programs; (iii) credit support to small businesses; (iv) increased health care spending, and (v) reduced or deferred payment of some taxes. In late April, the government created a broad-based task force on re-opening with representation from the government, various business sectors, and trade unions. On April 27, the Cabinet appointed 7 sub committees as part of a task force for rebuilding the economy post COVID-19 to identify short and medium-term priorities, implementation plans, resource requirements, risks, and mitigation measures. The sub committees will also collaborate with the Working Group for the National Sustainable Development Plan 2020-2035 to ensure alignment with national priorities. On May 10, the Prime Minister announced a plan for a gradual re-opening of the economy effective from May 11, with several sectors, including construction, real estate, laundromats, landscapers and gardeners, flower shops, hire purchase shops, and companies offering payday loans opening immediately, with specific procedures being in place for re-opening of projects in the construction sector. It was also announced that Grenada’s borders could be re-opened in June, subject to agreement on requisite protocols.

  • Montserrat. On April 1, the government announced a broad set of fiscal and financial measures, including (I) increasing the tax threshold, and a deferral of all business related taxes, (ii) providing financial support to vulnerable tourism sector employees, (iii) providing EC$900 (US$ 333) per month in benefit support to unemployed persons, (iv) providing additional food packages and food delivery to low income groups and (v) providing financial support to the agricultural sector to enhance food security. On April 8, the government announced that it would receive an additional US$ 3.1 million in financial aid from the UK government to fund its COVID-19 measures. The premier issued a new order on May 6 regarding the phased Reopening of the economy, by expanding the list of businesses that are permitted to operate, including mechanics, landscapers, fisheries, hardware stores.

  • St. Kitts and Nevis. On March 22 and March 26, the Prime Minister announced an increase in the health budget (½ percent of GDP). He also announced a slew of fiscal stimulus measures (3¾ percent of GDP), including (i) an injection of funds to SMEs and the agriculture sector; (ii) waiving of customs duties for essential hygiene and health products imports; (iii) additional support for poverty alleviation program; (iv) a reduction of the corporate income tax rate from 33 percent to 25 percent, and of the Unincorporated Business Tax rate from 4 percent to 2 percent, for three months; (v) funding for mortgage loans to citizens of St. Kitts and Nevis; and (vi) a moratorium on payments for electricity services for affected businesses and individuals for a three months. Since May 11th designated businesses can operate all weekdays between 5am and 8pm implementing physical distance protocols. Full curfew is still in place during the weekend.

  • St. Lucia. On April 8, the government announced the Social Stabilization Plan (2 percent of GDP), including (i) temporary income support, (ii) an extension of tax payments, (iii) tax credit to companies that at least retain part of their staff, (iv) suspension of rental payments for six months for small enterprises renting from government, (v) government assistance to local entrepreneurs that produce certain sanitary products. On May 18, the government announced a phased approach to reopening the island’s tourism sector in a responsible fashion, beginning June 4, 2020.

  • St. Vincent and the Grenadines. On April 7, the government approved a fiscal package (4 percent of GDP) in response to the pandemic crisis. The main measures include: (i) increased health spending, (ii) waiving of VAT and duties on health and hygiene products, (iii) relief to the hardest-hit sectors (i.e. tourism, transport, and agriculture), (ii) expansion of social safety net programs, and (iv) deferred payment of personal income taxes and various license fees.

Monetary and macro-financial
  • On March 19, the Monetary Council of the Eastern Caribbean Central Bank (ECCB) approved grant funding to the ECCB Member Governments, totaling EC$4 million (EC$500,000 each), to help in their fight against the COVID-19. On March 20, the ECCB and ECCU Bankers Association announced a support program for customers and residents during this time of difficulty and uncertainty. The program includes: (i) a loan repayment moratorium for an initial period up to 6-months, with a possible extension upon review; (ii) waiver of late fees and charges to eligible customers during this period; and (iii) targeted supervisory flexibility. On March 27, the ECCB decided to increase credit line limits for governments (by reducing those for banks), and on April 3, it reduced its discount rate from 6.5 percent to 2 percent.

Exchange rate and balance of payments
  • No measures.


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Ecuador

As of May 20, Ecuador has reported 34,151 confirmed cases and 4,531 deaths. The Government responded with series of measures to protect the population and support the economy. These include closing schools and universities, public spaces and non-critical commercial activities, halting public transport, and imposing curfew. Ecuador has shut all its borders since March 18th. On March 22nd, the Government requested the joint commandment of the armed forces to manage the province of Guayas as a zone of national security, with the objective to enforce confinement measures, in the province concentrating the largest share (70 percent) of confirmed cases in the country.

Reopening of the economy. On May 4th, Ecuador’s confinement policy changed from “social isolation” to “social distancing”. In the phase of social distancing, there are three types of stages: red, yellow, green. The red stage involves strict restrictions on mobility with a curfew between 2pm and 5am. The orange stage has intermediate restrictions on mobility with a curfew between 9pm and 5am. The green stage has low restrictions on mobility with a curfew between 12pm and 5am.


Key Policy Responses as of May 20, 2020

Fiscal
  • On March 19th, further measures were announced to support the population and businesses, such as deferral of payroll contributions, exceptional cash transfer amounting to USD120 to 400 thousand poor families, later extended to 950 thousands families, distribution of food baskets, and a financing of USD50 million in credit lines for small- and medium-size businesses. On April 16th, President Moreno sent two urgent economic laws to the National Assembly First, an "Organic Law of Humanitarian Support to Combat the Health Crisis of COVID-19" which seeks to collect tax revenues from two main sources, an additional tax of 5 percent on the profits of the companies that have earned more than USD1 million in 2019, and a progressive income tax for people whose monthly salary is greater than USD500. Those special contributions will be managed by an extra-budgetary fund with the sole purpose of supporting the health and economic crisis. The proposed law also includes changes to labor regulations that seek to make labor contract more flexible. Second, an "Organic Law for the Regulation of Public Finances" has also been submitted. This project seeks to establish fiscal rules for the expenses of the non-financial public sector institutions and improve the use, control and evaluation of public resources. The National Assembly has 30 days -until May 16- to vote on the proposals.

Monetary and macro-financial
  • On March 24th, the Monetary and Financial Policy and Regulation Board issued some temporary modifications to the Monetary, Financial, Securities Code and Insurance Resolutions to support the private sector, including extraordinary deferrals of credit obligations, including from public banks, and a requirement of additional generic provisioning on banks’ gross lending portfolio during 2020.

Exchange rate and balance of payments
  • No measures.


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Egypt, Arab Republic of

Background. According to the WHO, as of May 19, 2020, Egypt has 12,764 confirmed cases of COVID-19 and 645 deaths. The pandemic is likely to impact the Egyptian economy primarily due to declining travel and tourist activity, reduced worker remittances, capital outflows, and slowdown in domestic activities as people are asked to stay home. The weaker demand in the global market will also reduce Egypt’s exports as well as earnings from the Suez Canal. The authorities have taken a host of precautionary measures to improve testing as well as to limit the community spread of the virus, including setting up testing centers, imposing a nighttime curfew, temporarily closing places of worship, temporarily halting all air travel, and encouraging civil servants to work from home in non-essential sectors. Authorities have also suspended the export of all types of legumes for a period of 3 months and plan to start increasing strategic food reserves to meet domestic demand. The central bank and the government are actively implementing measures to contain economic implications of the epidemic.

Reopening of the economy. According to a Cabinet statement on April 30, 2020, the government has started to draw up plans to ‘coexist’ with COVID-19 in the long term, saying there is currently ‘no end in sight’ to the outbreak. Since the last week of April 2020, shopping malls and retail outlets have been allowed to open on weekends until 5 pm, while restaurant customers have been allowed to place takeaway orders in-store. After temporarily suspending most public services and court proceedings, Egypt has relaxed some restrictions in the first week of May, including resuming work at car licensing units at traffic departments, real estate registry offices, and some court services. Starting May 4, 2020, hotels have been allowed to operate at 25 percent capacity until June 2020 and at 50 percent capacity thereafter. Egypt’s Health Ministry has published a 3-stage plan for coronavirus management that contains required procedures in preparation for the gradual return of normal life in the country.


Key Policy Responses as of May 19, 2020

Fiscal
  • The government has announced stimulus policies in the USD 6.13 billion package (EGP 100 billion, 1.8 percent of GDP) to mitigate the economic impact of COVID-19. Pensions have been increased by 14 percent. Expansion of the targeted cash transfer social programs, Takaful and Karama, are also being extended to reach more families. A targeted support initiative for irregular workers in most severely hit sectors has been announced, which will entail EGP 500 in monthly grants for 3 months. To support the healthcare sector, EGP 8 billion has been allocated, targeted at providing urgent and necessary medical supplies, and disbursing bonuses for medical staff working in quarantine hospitals and labs. To support medical professionals, including doctors working in university hospitals, a 75 percent allowance over the wages has been announced. Energy costs have been lowered for the entire industrial sector; real estate tax relief has been provided for industrial and tourism sectors; and subsidy pay-out for exporters has been stepped up, discount on fuel price has been announced for the aviation sector As part of the EGP 100 billion stimulus, EGP 50 billion has been announced for the tourism sector, which contributes close to 12 percent of Egypt’s GDP, 10 percent of employment, and almost 4 percent of GDP in terms of receipts, as of 2019. The moratorium on the tax law on agricultural land has been extended for 2 years. The stamp duty on transactions and tax on dividends have been reduced. Capital gains tax has been postponed until further notice.

Monetary and macro-financial
  • The central bank has reduced the policy rate by 300bps. The preferential interest rate on loans to tourism has been reduced from 10 to 5 percent, for SMEs, industry and housing for low-income and middle-class families, has been reduced from 10 percent to 8 percent. A government guarantee of EGP 3 billion on low-interest loans by the central bank has been announce for the tourism industry soft loans. The central bank has also approved an EGP 100 billion guarantee to cover lending at preferential rates to the manufacturing, agriculture and contracting loans. Loans with a two-year grace period will be made available to aviation sector firms. Support has been announced for small projects harmed by COVID-19, especially in the industrial and labor-intensive sectors, through the availability of short-term loans of up to a year, to secure the necessary liquidity for operational expenses until the crisis is over. The limit for electronic payments via mobile phones has been raised to EGP 30,000/day and EGP 100,000/month for individuals, and to EGP 40,000/day and EGP 200,000/per week for corporations. A new debt relief initiative for individuals at risk of default has also been announced, that will waive marginal interest on debt under EGP 1 million if customers make a 50 percent payment. Microlenders have been instructed to also consider delays on a case-by-case basis, of up to 50 percent of the value of monthly installments for struggling clients. The regulations issued last year requiring banks to obtain detailed information of borrowers have been relaxed. Suspension of credit score blacklists for irregular clients and waiver of court cases for defaulted customers have been announced. The central bank has also launched an EGP 20 billion stock-purchase program which it has not yet used. A temporary daily limit has been for deposits and cash withdrawals for individuals and companies.

Exchange rate and balance of payments
  • Large capital outflows have resulted in a drawdown of reserves to avoid excessive exchange rate volatility from the severe turbulence in financial markets.


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El Salvador

Background. El Salvador has reported 1571 positive cases (31 deaths, 531 recovered) as of May 20, 2020. The government has implemented a range of measures to contain the spread of the virus, including travel restrictions, closure of schools, universities and the non-essential public sector, social distancing, and closure of restaurants. It has also transformed a convention center into a hospital specialized in the treatment of COVID-19 patients. On March 21, 2020, the government issued a nationwide stay-at-home order and closed all non-essential businesses. 2020Q1 y/y growth is not yet available.

Reopening of the economy. The authorities and the Private Sector Chamber have discussed the opening protocol for the economy. The government announced that a gradual Reopening of the economy could take place under strict sanitary rules, starting June 6, but no further details are available yet.


Key Policy Responses as of May 20, 2020

Fiscal
  • Key spending and tax measures include: (i) a US$ 150 salary raise for all employees of the Ministry of Health and other public institutions affected by COVID-19; (ii) a one-time US$ 300 subsidy to approximately 75 percent of all households; (iii) distribution of 2.7 food baskets to affected families worth US$ 56 each; (iv) a 3-month deferral of utility payments; (v) a 3-month extension for income tax payments for taxpayers operating in the tourism sector with a taxable income lower than US$ 25,000, taxpayers operating in the electricity and telecommunication provision sectors, and all taxpayers with a tax obligation below US$ 10,000; (vi) a 3-month exemption from the special tourism tax for companies operating in the tourism industry; and (vii) a temporary elimination of import duties on essential medical and food imports (medical textiles, sanitizer, flour, rice, beans).

Monetary and macro-financial
  • Key measures include: (i) lowering banks’ reserve requirements by 25 percent for newly issued loans; (ii) reducing banks’ reserve requirements for various liabilities by about 8 percent of deposits (to about 14 percent); (iii) amending provisioning for NPLs through freezing credit ratings; (iv) imposing a temporary moratorium on credit risk ratings; and (v) temporarily relaxing lending conditions through a grace period for loan repayments.

Exchange rate and balance of payments
  • No measures.


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Equatorial Guinea

Background. There are 882 confirmed cases of COVID-19 in Equatorial Guinea as of May 19, 2020. Ten deaths have been reported. The government has been proactive in implementing preventive measures, including a stay-at-home order through end May, closure of all non-essential shops and establishments, a complete border closure, and bans on domestic flights and movement between all districts of the country.


Key Policy Responses as of May 21, 2020

Fiscal
  • Fiscal policy is facing large two shocks: the Coronavirus and lower oil prices.

    The government approved a package of measures at end-March to address the crisis. It broadens emergency health spending (0.3 percent of GDP), mainly to improve hospital preparedness to respond to local transmission. It also further improves the first response system, quarantine facilities for incoming travelers, and laboratory facilities/testing which had already been operationalized earlier in March. The package also envisages a social assistance scheme for the most vulnerable and measures to ensure continuity of education. It also provides some targeted and temporary support to the private sector, including by halving withholding tax rates and delaying tax payment deadlines for small and medium-sized firms , while safeguarding public revenues. Finally, a more recent measure reduces electricity bills for firms affected by the Covid crisis, with a focus on SMEs, and for households. In addition, in light of the recent oil price decline, Equatorial Guinea is facing a large fiscal revenue shock, given that hydrocarbons accounted for more than ¾ of fiscal revenues. To address this shock, the government is contemplating to mobilize more financing. The government is also postponing execution of non-priority capital expenditures to the second half of 2020, identifying savings to non-wage current expenditures, as well as to continuing implementation of plans to strengthen the tax administration.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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Eritrea

Background. The State of Eritrea reported its first positive COVID-19 case to the World Health Organization (WHO) on March 21, 2020. As of May 16, all 39 confirmed cases have recovered fully. The government imposed a 21-day national lockdown effective from April 2, which was extended without a timeframe on April 22. All citizens are compelled to stay at home except for those engaged in indispensable developmental and security tasks. All trading activities and transactions are banned during this period except in major productive and service sectors (manufacturing, food processing, construction, trucking etc.) which will continue their functions. Food production, supply and processing enterprises as well as grocery stores, pharmacies and banks will continue to provide services but must close at 8:00 pm every evening. All government institutions stopped routine services and functions to focus on indispensable developmental and security tasks. Except for citizens employed in institutions that will continue their functions, all other individuals confined to their homes are not allowed to use their private cars during this period. Meanwhile, to gauge the spread of COVID-19 in the country, the first phase of the random and extensive testing was carried out in several sections of Asmara on May 17. Towns and villages in border areas, as well as front-line employees in the Ministry of Health and other relevant institutions will also be part and parcel of this first phase testing.

Reopening of the economy. There are currently no plans for reopening or relaxing of containment measures described above.


Key Policy Responses as of May 19, 2020

Fiscal
  • No measures.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Estonia

Background. The COVID-19 pandemic is affecting the Estonian economy. COVID-19 registered 1,851 infections with 66 deaths as of May 28, 2020. The government has implemented a range of measures aimed at containing and mitigating the impact of the pandemic for workers and businesses. The measures include travel restrictions, social distancing, declaration of state of emergency, distance learning for schools, ban of public gatherings and sanitary inspections.

Reopening of the economy. The Government is rolling out the exit strategy approved on April 27, 2020. After being in place for 68 days, the emergency situation ended on May 18. Shopping centers and restaurants reopened on May 11; ferry links between Tallinn and the Finnish capital, Helsinki partly reopened for work-related traffic on May 14; schools reopened on May 15 with most of the learning remaining online; Baltic states now allow travel among the three nations but travelers from outside the region need to undergo 14-day quarantine. However, children’s playrooms, casinos, slot machine halls and entertainment facilities including bowling alleys, billiard halls and adult clubs will remain closed. Gyms and swimming pools restarted operations on May 18. Large public events are expected to resume in July while some movie theaters are scheduled to reopen on June 1. Estonia has started to test digital immunity passports, seeking a safer return to workplaces following the coronavirus lockdown.


Key Policy Responses as of May 28, 2020

Fiscal
  • In addressing the socio-economic impact of the health crisis, the parliament approved a supplementary budget on April 15, 2020. Under this budget, the government is considering a support package of about €2 billion (7 percent of GDP) that would bring the nominal fiscal deficit to above 9 percent of GDP. The package would help among other things to buy supplies for the health facilities and to support workers and businesses. The package includes support to the Unemployment Insurance Fund to cover for wage reduction (€250 million); health insurance fund (€213 million); business loans to rural companies through the rural development fund (€200 million); guarantees/collateral for bank loans to allow for rescheduling of payments (€1 billion); business loans earmarked for liquidity support to companies (€500 million); support to local authorities (€130 million); investment loans to companies (€50 million); and compensation for direct costs of cancelled cultural and sporting events (€3 million). The government has also suspended payments to the Pillar II pension fund. The government signed an order raising the maximum volume of short-term notes that can be issued by Estonia by €600 million from previously €400 million bringing the total to €1 billion. The government has signed with the Nordic Investment Bank a 15-year loan of €750 million and further plans to issue €1 billion Eurobonds to finance the increased spending needs due to COVID-19.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    Additionally, the Eesti Pank reduced the systemic risk buffer for the commercial banks from 1 percent to 0 percent on March 25, 2020 to free up resources for loan losses or new loans. The measure is expected to free up about €110 million for the banks. The Eesti Pank also announced that it will allocate ¾ of its 2019 profits equivalent to €18.9 million and maximum amount possible to support the state budget in the wake of COVID-19.

Exchange rate and balance of payments
  • No measures.


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Eswatini

Background. Eswatini has reported 217 positive cases (2 deaths) as of May 20, 2020. Starting on March 17, the government has declared a national state of emergency, and implemented containment measures, including suspension of private and public gatherings of 20 people or more, schools closures, suspension of non-essential travel within cities for all citizens, closure of borders to all but goods, cargo, returning citizens, and legal residents, and mandatory self-isolation for residents/citizens coming from abroad. On March 27, a partial lockdown went into effect, and a month later the Manzini region, where a third of the population resides, went into full lockdown. The authorities in collaboration with the WHO have built domestic detection capacity. Economic activity has been affected by the closure of some ports of entry with South Africa and the lockdown in South Africa. The exchange rate against the US$ depreciated by 28 percent in the first quarter.

Reopening of the economy. Effective May 8, the government has begun the process of carefully easing the partial lockdown and announced the demarcation of three risk zones (red, orange, and yellow) based on most number of cases. The red zone will have stricter restrictions easing down while the yellow zone will adhere to core preventative measures. The national emergency was extended by one month starting on May 19.


Key Policy Responses as of May 20, 2020

Fiscal
  • In FY19/20 (ending March 31, 2020), a supplementary budget was approved for additional public healthcare of E100 million (0.14 percent of GDP). Low priority recurrent spending will be redirected to the fight against the pandemic and a portion of the capital budget will be reallocated towards refurbishing hospitals and completing new hospitals. Food assistance will be provided to the most vulnerable, benefiting over 300,000 people. Additional expenditure policies are being considered but have not yet been finalized. Revenue measures to mitigate the impact of the virus include: (i) taxpayers projecting losses will file loss provisional returns and no payment will be required; (ii) extension of returns filing deadlines by 3 months before penalties kick-in; (iii) payment arrangements for taxpayers facing cash flow problems; (iv) waiver of penalties and interest for older tax debts if principal is cleared by the end of September 2020; and (v) up to E90 million (0.13 percent of GDP) in tax refunds for SMEs that have complied with tax obligations, retain employees, and continue to pay them during this period. The authorities have reduced the price of fuel twice and postponed the planned increase in water and electricity prices. For more information see http://www.gov.sz/.

Monetary and macro-financial
  • The Central Bank of Eswatini has: (i) reduced the discount rate twice by a cumulative 200 basis points to 4.5 percent; (ii) reduced the reserve requirement to 5 percent (from 6 percent); (iii) reduced the liquidity requirement to 20 percent (from 25) for commercial banks and to 18 percent (from 22) for the development bank; (iv) encouraged greater use of electronic payments; and (v) encouraged banks to consider loan restructuring and repayment holidays. Banks have announced that those individuals and companies that need short term financial support or relief can approach them and each application will be assessed on a risk-based approach. For more information see https://www.centralbank.org.sz/.

Exchange rate and balance of payments
  • No measures.


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Ethiopia

Background. As of May 21, there were 398 cases of COVID-19 reported in Ethiopia and five deaths. In response, the authorities have closed borders, closed schools, ordered the shuttering of nightclubs and entertainment outlets, announced social distancing measures, and called in retired and in-training medical personnel. In addition, all people entering Ethiopia from another country are subject to a mandatory 14-day quarantine at designated hotels at the traveler’s expense. The authorities postponed the elections, which were scheduled for August 29. On April 8, the Prime Minister declared a state of emergency under Article 93 of the constitution, which allows it to impose more stringent measures. Among them, most states have banned inter-regional public transport and public gatherings. Layoffs by private employers have also been forbidden. The international border with Djibouti remains fully open to transport of commercial goods.

Ethiopia is highly exposed to the shock through the large contribution of air transportation to exports: the national carrier, Ethiopian Airlines, which has the largest fleet in Africa, announced the suspension of 80 flight routes. Flower exports to Europe have also declined significantly due to lack of demand and closure of airports on the continent. Finally, while Ethiopia benefits from lower oil prices, the prices on its main export commodities such as coffee and oil seeds have been adversely impacted by the crisis. The potential risk for COVID-19 transmission is high due to the large number of internally displaced persons living in collective sites with no options to implement the recommended norms of social distance, and no access to proper sanitation facilities and essential supplies. The dire health situation and the capacity challenges of the health system are exacerbated by other public health challenges such as cholera and measles outbreaks. According to recent projections of National Disaster Risk Management Committee, an estimated 30 million people could experience food consumption gaps. The urban poor are likely to be highly affected. In rural communities, food insecurity will worsen among households that rely on market purchases. COVID-19 prevention measures in some regions will likely contribute to delays in movement of commercial goods (and humanitarian goods) in the country, resulting in localized food insecurity due to shortages of food items or price increases. Finally, the humanitarian community is concerned about the ongoing deportation of Ethiopian migrants from Saudi Arabia, Djibouti, Kenya and Somalia, considering the risk of COVID-19 contagion into Ethiopia, and challenges related to their reception and assistance in quarantine centers. 

GDP growth over this fiscal year and next (starting in July 2020) is expected to suffer a cumulative reduction of 5½ percentage points relative to the pre-crisis baseline.

Reopening of the economy. There are currently no plans for reopening or relaxing of containment measures described above.


Key Policy Responses as of May 21, 2020

Fiscal
  • Ethiopia initially announced a Br 300 million package to bolster healthcare spending in early March. On March 23, the Prime Minister announced the aid package would be increased to Br 5 billion (US$154 million or 0.15 percent of GDP) but details on the precise modalities of the assistance were not made available. On April 3, the Prime Minister’s office announced a COVID-19 Multi-Sectoral Preparedness and Response Plan, with prospective costing of interventions. The plan is to be implemented over the next three months and will require US$1.64 billion in funding (about 1.6 percent of GDP). The funds are expected to be allocated as follows: (i) $635 million (0.6 percent of GDP) for emergency food distribution to 15 million individuals vulnerable to food insecurity and not currently covered by the rural and urban PSNPs; (ii) $430 million (0.4 percent of GDP) for health sector response under a worst-case scenario of community spread with over 100,000 COVID-19 cases of infection in the country, primarily in urban areas; (iii) $282 million (0.3 percent of GDP) for provision of emergency shelter and non-food items; (iv)The remainder ($293 million, 0.3 percent of GDP) would be allocated to agricultural sector support, nutrition, the protection of vulnerable groups, additional education outlays, logistics, refugees support and site management support.

  • On April 30, the Council of Ministers approved another set of economic measures to support firms and employment. These include forgiveness of all tax debt prior to 2014/2015, a tax amnesty on interest and penalties for tax debt pertaining to 2015/2016-2018/2019, and exemption from personal income tax withholding for 4 months for firms who keep paying employee salaries despite not being able to operate due to Covid-19.

  • A broader set of measures including further support to enterprises and job protection in urban areas and industrial parks is under discussion with the donor community but has not been formalized. The expansion of the Urban Productive Safety Net Programme to 16 additional cities over the next two months is under active consideration, in collaboration with the World Bank, at an estimated cost of $134 million).

  • Ethiopian authorities have formally requested IMF support in the form of an RFI at 100 percent of quota (given maxed out use of PRGT resources under the ongoing ECF/EFF program).

Monetary and macro-financial
  • The central bank has provided 15 billion birr (0.45 percent of GDP) of additional liquidity to private banks to facilitate debt restructuring and prevent bankruptcies. It has also provided 17 billion birr of additional liquidity to the Commercial Bank of Ethiopia.

Exchange rate and balance of payments
  • No measures.


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European Union/Euro Area

Background. COVID-19 has spread all across Europe with more than 1.3 million confirmed cases and  163,515 reported deaths in the EU/EEA and the United Kingdom as of May 28. In the euro area, real GDP contracted by 3.3 percent in Q1-2020 compared to Q1-2019. In the European Union, it dropped 2.7 percent over the same period. Most European countries have taken several containment measures ranging from lockdowns and travel restrictions to school closures and bans on large gatherings for an extended period. As the numbers of new cases and deaths have moderated, some countries have started easing lockdown restrictions. On May 20, the European Commission proposed country-specific recommendations providing economic policy guidance to all EU Member States, with a focus on the most urgent challenges brought about by the pandemic and on relaunching sustainable growth.

Reopening of the economy. The European Commission presented guidelines for exit strategies and called for a common framework across member states. The criteria include: (i) sustained reduction and stabilization of new cases, (ii) sufficient health system capacity such as adequate hospital beds, pharmaceutical products, and equipment, and (iii) appropriate monitoring capacity to quickly detect and isolate infected individuals as well as to trace contacts. The Commission invited Schengen Member States and Schengen Associated States to extend the temporary restriction on non-essential travel to the EU until 15 June and presented further guidance on a gradual lifting of border restrictions.


Key Policy Responses as of May 28, 2020

Fiscal
  • The European Commission’s latest package of about €540 billion (4 percent of EU27 GDP) includes (i) allowing the European Stability Mechanism (ESM) to provide Pandemic Crisis Support (based on existing precautionary credit lines) up to 2 percent of 2019 GDP for each euro area country (up to €240 billion in total) to finance to finance health related spending; (ii) providing €25 billion in government guarantees to the European Investment Bank (EIB) to support up to €200 billion to finance to companies, with a focus on SMEs (which augments previously agreed guarantees of €40 billion for the EIB’s on-lending activities); and (iii) creating a temporary loan-based instrument (SURE) of up to €100 billion to protect workers and jobs, supported by guarantees from EU Member States. The Pandemic Crisis Support from the ESM has become operational and the European Council has adopted the SURE.

    Key measures from the EU Budget (about €37 billion and 0.3 percent of 2019 EU27 GDP) include (i) establishing the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Investment Initiative Plus (CRII+) in the EU budget to support public investment for hospitals, SMEs, labor markets, and stressed regions; (ii) extending the scope of the EU Solidarity Fund to include a public health crisis, with a view of mobilizing it if needed for the hardest-hit EU Member States (up to €800 million is available in 2020); (iii) redirecting €1 billion from the EU Budget as a guarantee to the European Investment Fund to incentivize banks to provide liquidity to SMEs and midcaps; (iv) announcing credit holidays to crisis-affected debtors; and (v) adopting a proposal for a €3 billion macro-financial assistance (MFA) package to ten enlargement and neighborhood partners to help them limit the economic fallout of the coronavirus pandemic. The European Commission also activated the general escape clause in the EU fiscal rules, which suspends the fiscal adjustment requirements for countries that are not at their medium-term objective and allows them to run deficits in excess of 3 percent of GDP. After announcing a flexible interpretation of EU State Aid rules to support national support measures for critical sectors, the European Commission has further directed Member States to apply Article 107(2)(b) TFEU, which enables them to compensate companies for the damage directly caused by exceptional occurrences, such as COVID-19, including measures in sectors such as aviation and tourism. To date, national liquidity measures, including schemes approved by the European Commission under temporary flexible EU State Aid rules amounted to about €2.5 trillion.

    On May 8, the European Commission adopted a second amendment to extend the scope of the State aid Temporary Framework to recapitalization and subordinated debt measures to further support the economy in the context of the coronavirus outbreak. The amended Temporary Framework will be in place until the end of December 2020, except for recapitalization measures which has an extended period by the end of June 2021. The Commission will assess before these dates if they need to be extended

Monetary and macro-financial
  • The ECB decided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020 under the existing program (APP), and (ii) temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) between June 2020 and June 2021, with interest rates that can go as low as 50 bp below the average deposit facility rate. More recently, the ECB introduced a new liquidity facility (PELTRO), which consists of a series of non-targeted Pandemic Emergency Longer-Term Refinancing Operations carried out with an interest rate that is 25bp below the average MRO rate prevailing over the life of the operation. The PELTROs commenced in May will mature in a staggered sequence between July and September 2021. Further measures included an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until end-2020, an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs). The ECB also announced a broad package of collateral easing measures for Eurosytem credit operations in early April. These include a permanent collateral haircut reduction of 20 percent for non-marketable assets, and temporary measures for the duration of the PEPP (with a view to re-assess their effectiveness before the end of 2020) such as a reduction of collateral haircuts by 20 percent an expansion of collateral eligibility to include Greek sovereign bonds as well as an expansion of the scope of so-called additional credit claims framework so that it may also include public sector-guaranteed loans to SMEs, self-employed individuals, and households. In a move to mitigate the impact of possible rating downgrades on collateral availability , on April 22, the ECB also announced that it would grandfather until September 2021 the eligibility of marketable assets used as collateral in Eurosystem credit operations falling below current minimum credit quality requirements of “BBB-“ (“A-“ for asset-backed securities) as long as their rating remains at or above “BB” and “BB+”, respectively. Assets that fall below these minimum credit quality requirements will be subject to haircuts based on their actual ratings.

    The ECB Banking Supervision allowed significant institutions to operate temporarily below the Pillar 2 Guidance, the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical capital buffer (CCyB) by the national macroprudential authorities will enhance its capital relief measures. The ECB Banking Supervision further decided to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans (NPLs) that are covered by public guarantees and COVID-19 related public moratoria; it also recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions and opt for the IFRS9 transitional rules. More recently, ECB Banking Supervision asked banks to not pay dividends for the financial years 2019 and 2020 or buy back shares during COVID-19 pandemic, from which the conserved capital should be used to support households, small businesses and corporate borrowers and/or to absorb losses on existing exposures to such borrowers. The ECB Banking Supervision also provided some temporary capital relief for market risk by adjusting the prudential floor to banks’ current minimum capital requirement. The European Commission adopted a banking package that proposes targeted amendments to EU banking rules, including, amongst other measures, a two-year extension of the current transitional arrangements for the IFRS9 implementation in the CRR.

Exchange rate and balance of payments
  • No measures.


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Fiji

Background. Fiji announced its first case of COVID-19 on March 19, 2020. The authorities have been proactive in their efforts to keep the virus out of Fiji by early imposition of travel restrictions. They reacted to the first confirmed case with a broad set of measures, including massive screenings of the population, the closure of the international airport, restrictions on domestic travel and public gatherings, closures of schools and certain types of businesses (e.g. cinemas, gyms, etc.), a nationwide curfew and lockdowns of affected areas.

Reopening of the economy. The number of active cases started declining mid-April and no new cases have been detected in more than 30 days, making Fiji free of COVID-19. The authorities started relaxing containment and mitigation restrictions at the national level on April 26th but a number of restrictions remain in place.


Key Policy Responses as of May 21, 2020

Fiscal
  • A stimulus package was announced on March 26, 2020 in response to the COVID-19 pandemic. Up to FJ$1 billion (8.7 percent of GDP) in supplemental expenditures on public health, lump sum payments through the Fiji National Provident Fund (FNPF), tax and tariff reductions, and loan repayment holidays (up to F$ 400 million of the total envelope) aim at protecting public health, supporting the economy and ensuring food security. An Agricultural Response Package to ensure food security has also been announced. It includes the scaling up of the existing Home Gardening program and a new Farm Support Package which aims at boosting the production of short-term crops through seeds and materials distribution.

Monetary and macro-financial
  • The Reserve Bank of Fiji reduced the overnight policy rate to 0.25 percent from 0.5 percent on March 18 to counter the economic impact of COVID-19. The RBF also: (i) expanded the SME Credit Guarantee Scheme to assist small entities, (ii) raised its Import Substitution and Export Finance Facility by FJ$100 million to provide credit to exporters, large scale commercial agricultural farmers, public transportation and renewable energy businesses at concessional rates, and (iii) raised its Natural Disaster and Rehabilitation Facility to FJ$60 million to include businesses affected by epidemics or pandemics, renaming it the Disaster Rehabilitation and Containment Facility. No government policies with respect to the financial sector have been announced so far.

Exchange rate and balance of payments
  • Fiji’s currency is pegged to a basket of currencies amid limited capital mobility. The Fiji dollar has depreciated by about 3 percent vis-à-vis the U.S. dollar since March 10, partly reflecting dollar appreciation against other currencies in the basket. The Reserve Bank of Fiji tightened exchange controls on April 3 to ensure that adequate foreign reserves can be maintained. It reported foreign exchange reserves stood at F$2,214 million (6.9 months of retained imports) as of April 30, 2020.


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Finland

Background. There have been 6,743 confirmed cases of COVID-19 in Finland, claiming 313 lives as of May 28, 2020. In response to the crisis, in addition to measures announced by the euro area, the Finnish government announced a package of fiscal, liquidity and regulatory measures which – combined with existing automatic stabilizers – would constitute an impulse of nearly 30 percent of GDP. On March 16, the government invoked the Emergency Powers Act, which was used to close borders, restrict domestic movements, and expand service obligations of essential personnel. In response, unemployment climbed to nearly 12 percent in March.

Reopening of the economy. Restrictions to and from the region of Helsinki were lifted on April 14.   On May 4, the government announced a plan to lift broad restrictions in favor of more targeted containment measures, including: on May 14, resumption of primary and lower secondary school and cross-border movement of essential traffic; on June 1, reopening of restaurants and public facilities and limits on public gatherings increased from 10 to 50 people; on July 31, resumption of public events with more than 500 people.


Key Policy Responses as of May 28, 2020


Fiscal
  • Key discretionary tax and spending measures (close to 3 percent of GDP) include additional spending for (i): healthcare and testing, protection and medical equipment, public safety and border controls, and research on the coronavirus epidemic, in particular to develop methods for rapid diagnostics and vaccines and a knowledge base for timely decision-making on coronavirus measures, (especially on the exit strategy) (€1 billion); (ii) lower pension contributions through the remainder of 2020 (€1.05 billion); (iii) grants to SMEs and self-employed (€650 million); and (iv) expanded parental allowance, social assistance and unemployment insurance (€3 billion). In addition to discretionary measures, automatic stabilizers are expected to increase the fiscal deficit by about 4-5.0 percentage points of GDP. Deferral of tax and pension payments for 3 months are expected to provide additional short-run relief of 2 percent of GDP (€4.5 billion). Finland is also contributing €5 million to international non-profit companies working on the development of a COVID-19 vaccine. On April 15, the Finnish Government agreed to increase funding for the World Health Organization (WHO) to EUR 5.5 million. This brings funding to the 2015 level and marks a EUR 1.9 million increase from 2019. On April 29, the government announced a €500 million recapitalization scheme for Finnair (which is 56% state-owned). Finally, on May 8, the government published a third supplementary budget proposal for 2020 which includes EUR 700 million (0.3 percent of GDP) for share acquisitions in state ownership steering, EUR 123 million for supporting restaurant and catering businesses, and EUR 16 million for vaccine and drug development research. The supplementary budget proposal also includes guarantees for the Employment Fund (880 million EUR), SURE (EUR 432 million), and the EIB (EUR 372 million). The total guarantee increase amounts to EUR 1.68 billion (0.7 percent of GDP).

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    Key measures within Finland include: (i) Bank of Finland to support liquidity through investing in short-term Finnish corporate commercial paper (€1 billion); (ii) 1 ppt reduction in the structural buffer requirements of all credit institutions by removing the systemic risk buffer and adjusting institution-specific requirements (increases Finnish banks’ international lending capacity by an estimated €52 billion – that, plus other countries’ measures, increase lending capacity to Finnish households and firms by an estimated €30 billion); (iii) Finland’s Export Credit Agency is expanding its lending and guarantee capacity to SMEs by €10 billion to €14.2 billion  (and the government will increase its coverage of the agency’s credit and guarantee losses from 50 to 80 percent); (iv) the State Pension Fund will also invest in commercial paper (€1 billion); (v) a state guarantee for Finnair (€600 million); (vi) state guarantee for shipping companies (€600 million); and (vii) easier re-borrowing of pension contributions allowed; support restaurants in employing workers (€40 million) and compensation for the imposed restrictions on activities (€ 83 million).

Exchange rate and balance of payments
  • No measures.


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France

Background. The coronavirus has significantly affected France, with 149,071 confirmed cases as of May 28 In mid-March the government introduced a range of measures to reduce the spread of COVID-19, including school closures, the ban of all non-essential activities, outings and long-distance travel, and the introduction of night-time curfews in some cities. The French economy contracted by 5.8 percent in Q1-2020 compared to the previous quarter.

Reopening of the economy. As of May 11, France has started to gradually ease the containment measures, beginning with the reopening of primary schools, shops, and industry, on a differentiated regional basis. Internal travel restrictions have also been relaxed and the use of masks is obligatory for public transport.


Key Policy Responses as of May 28, 2020

Fiscal
  • The authorities have announced an increase in the fiscal envelope devoted to addressing the crisis to €110 billion (nearly 5 percent of GDP, including liquidity measures), from an initial €45 billion included in an amending budget law introduced in March. A new draft amending budget law has been introduced on April 16. This adds to an existing package of bank loan guarantees and credit reinsurance schemes of €315 billion (close to 14 percent of GDP). Key immediate fiscal support measures include (i) streamlining and boosting health insurance for the sick or their caregivers; (ii) increasing spending on health supplies; (iii) liquidity support through postponements of social security and tax payments for companies and accelerated refund of tax credits (e.g. CIT and VAT); (iv) support for wages of workers under the reduced-hour scheme; (v) direct financial support (solidarity fund) for affected microenterprises, liberal professions, and independent workers; and (vi) postponement of rent and utility payments for affected microenterprises and SMEs; (viii) additional allocation for equity investments or nationalizations of companies in difficulty; (ix) facilitating granting of exceptional bonuses exempt from social security contributions; and (x) extension of expiring unemployment benefits until the end of the lockdown and preservation of rights and benefits under the disability and active solidarity income schemes. The authorities announced a gradual phasing-out of support measures starting in June, except for industries that still face opening restrictions (e.g. tourism, which will benefit from targeted exemptions from taxes and social security contributions, and the reduced-hour scheme and the solidarity fund until end-2020). They have also announced additional support plans for the hardest-hit sectors (e.g. incentives to purchase greener vehicles and green investment support for the auto sector). See also: https://www.economie.gouv.fr/coronavirus-soutien-entreprises.

     

Monetary and macro-financial
Exchange rate and balance of payments
  • No measures.


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Gabon

Background. Gabon, as all oil exporters, is being hit by two shocks—the global impacts of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The number of COVID-19 cases stands currently at 1,502 with 12 deceases from the virus and the 318 patients cured. Authorities have taken early action attempting to suppress COVID19. They have been following WHO-recommended measures and enhancing them over time. The primary measures, which included bans on social gatherings and travel restrictions have been enhanced over time to closing all borders, the air space, imposing a night curfew and a full lockdown in Libreville since Easter Sunday, as cases started to increase.

Reopening of the economy. Since Monday, April 27th, some of these measures were relaxed, including the full lockdown in Libreville. The night curfew has been maintained and working hours were changed from 7am till 2pm Authorities have announced a comprehensive-testing strategy informing what is priority groups for testing.


Key Policy Responses as of May 20, 2020

Fiscal
  • Authorities’ current projection envisages the control of non-priority expenditure and redirect savings and development partners support of FCFA 66.1 billion (USD 110.2 million or 0.74 percent of GDP) to COVID-19 related spending. The government also plans to allocate additional FCFA 115.9 billion (USD 193.2 million or 1.3 percent of GDP) as an economic response, including through food stamps, electricity and water subsidies, direct support to SMEs and tax holidays. The Minister of Finance has created a fund available at their Caisse de Depots et Consignation (CDC) and designated a public accountant in order to facilitate disbursements of the health-related spending of that fund. An additional mechanism of around USD 375 million has further been announced to facilitate access to commercial banks financing for private (formal and informal) companies, including SMEs.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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The Gambia

Background. As of May 21, The Gambia has registered 24 confirmed cases of COVID-19. One infected person died, 13 recovered, and ten are still undergoing treatment. Of the 24 confirmed cases, 15 were imported, while the remaining 9 cases were through local contagion. 108 people are currently under quarantine. A large operation of voluntary testing at community level was conducted around Bakau (Greater Banjul area) a fortnight ago, after detecting a few cases there. The President declared a state of emergency starting March 27 including closing all non-essential public and private businesses following the earlier order to close the airspace and land borders for 21 days. On April 4, the National Assembly approved the extension of the state of emergency for 45 days. Emergency powers were used to freeze prices of essential commodities, such as rice, meat, fish, cooking oil soap, sanitizers and cement. To enforce social distancing, all commercial vehicles are only allowed to carry half of their licensed passengers. All public gatherings including funerals are limited to a maximum of 10 people. Tourism—a key driver of foreign exchange and trade has halted and is experiencing difficulties. Interest rate on T-bills has increased. Remittances have fallen due to the stoppage of private transfers through informal channels outweighing the increase in private transfers through formal channels (banks, money transfer operators).

The National Assembly declined to approve a second 45-day extension of the state of emergency early this week. However, based on the role played by the emergency measures in containing the spread of the disease, the President used the executive power to proceed with the extension by the maximum 21 days period effective May 19 (which is allowed under the Constitution as the National Assembly is now not in session). Meanwhile, a supplementary appropriation bill is being prepared, among others, to seek NA approval for the revision of spending plans in response to the pandemic and to ensure accountability for COVID-19 related expenditures.

Reopening of the economy. The emergency powers were recently eased to allow partial reopening of businesses. Buses are being provided and fuel prices were reduced to prevent transport price hikes and help ease the burden on commercial vehicles which are required to carry only half of their capacity. The ease of the lockdown measures in Senegal including the reopening of mosques is creating pressure for the authorities in The Gambia, who have hitherto remained firm, to follow suit.

Key Policy Responses as of May 21, 2020

Fiscal
  • In mid-March, the authorities prepared a US$9 million (0.5 percent of GDP) COVID-19 action plan, for which they have already obtained grant financing. The government has reallocated 500 million dalasi (0.6 percent of GDP) from the current budget to the Ministry of Health and other relevant public entities for containment measures to prevent and control the spread of the COVID-19 outbreak. The government has also launched a student relief fund to support Gambian students abroad and a GMD 800 million (US$15.8 million) nation-wide food distribution program to benefit 84 percent of the households. In addition, 2000 tons of fertilizer will be distributed to support the needs of farmers. These actions that benefit from the technical support of partners including WFP and FAO, are subject to enhanced oversight by the National Assembly. The authorities are working on a relief package for the municipal councils and the tourism sector. RCF and CCRT financing from the IMF (see below) could be used to cover these additional costs.

    Donor agencies, including the UNDP, WFP, WHO, FAO, UNICEF, UNFP and UNICEF, have focused financial assistance (about $1.5 million cumulatively, so far) to strengthen social assistance support for programs aimed at vulnerable groups impacted by COVID-19 by improving communication, safeguarding nutrition and ensuring food security. The WFP provided technical support and training on targeting, design and distribution of the government food relief program, and it is also working on a food distribution program. On April 2, The World Bank (WB) approved a US$10 million grant for the COVID-19 Response and Preparedness Project to enhance case detection, tracing, prevention, and social distancing communication as well as the provision of equipment to isolation and treatment centers. The WB is accelerating the rollout of its Social Safety Net project to help mitigate the impact of COVID-19 on the most vulnerable population. The European commission provided at end-April a Euro 9 million COVID-19 support to Gambia. Many of the other donors will also be expanding their social assistance support through cash transfers using mobile money and direct payments targeted to poor households, new mothers and farmers using existing databases of past recipients, village lists and voter rolls.

    The Gambia Revenue Authority has extended, by two months, the filing of the 2019 annual tax return and the payment of final 2019 tax, as well as for the filing of the first quarter 2020 declaration and the payment of the first quarter installment. It has also revised down its annual revenue target by about 2.2 percent of GDP.

Monetary and financial
  • Domestic financial conditions have tightened with the average yield on the most utilized 364-day T-bills increasing to 11.84 percent (444 bps higher in late-May than at end-December 2019). To ease liquidity conditions, the central bank (CBG) reduced the monetary policy rate by 50 basis points at end-February 2020 to 12 percent and increased the standing deposit facility rate by the same margin to 3 percent. The CBG is also actively monitoring the situation, remains in close communication with the commercial banks, and stands ready to respond to the situation as inflationary pressures warrant. Further measures are under consideration to provide emergency liquidity support, together with increased intensity and frequency of supervision to address any financial stability concerns. The CBG successfully completed a remote IMF safeguard assessment mission, which found good progress made by the CBG since the last assessment in 2017. The CBG in consultation with MoFEA will be looking to implement the recommendations in the near term.

Exchange rates and balance of payments
  • The CBG stepped up the monitoring of banks’ FX net open positions but has not imposed any specific exchange measures; the CBG is committed to maintaining a flexible exchange rate to absorb balance-of-payments (BOP) shocks.

    On April 15, the Executive Board of the IMF approved a US$21.3 million for The Gambia under the Rapid Credit Facility (RCF), which could be on-lent to the Treasury. The RCF support supplements earlier financing from the IMF under a US$47.1 million Extended Credit Facility (ECF) arrangement approved on March 23, 2020. To accommodate the worsened BOP outlook, the IMF also agreed to modify the performance criteria on net usable international reserves and net domestic assets of the central bank under the ECF-supported program. The Gambia has also benefited from debt relief under the catastrophe containment window of the Catastrophe Containment and Relief Trust (CCRT) approved on April 13, 2020. The first tranche of US$2.9 million (corresponding to debt service due to the Fund in the first six months of 2020) has been already approved for delivery. The total debt relief can be extended up to US$10.8 million if resources are identified to extend the initiative for 24 months. The Gambia is also seeking debt service deferral under the G20 initiative that could provide between US$0.81 million from the creditors already endorsing the initiative to close to US$8.39 million if the plurilateral and private creditors endorse the initiative.


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Georgia

Background. Georgia has reported 166 active positive cases, 557 recovered and 12 deaths as of May 27, 2020, the 14th week into the outbreak of COVID-19. With the number of the active COVID cases declining sharply, the government ended the national state of emergency on May 22, 2020. During the state of emergency, commenced on March 21, 2020 the country lived under numerous containment measures, including social distancing, lock down of high-risk districts, closure of border crossing, travel ban for foreign visitors, quarantine for nationals returning to Georgia, closure of shops (other than groceries and gas stations) and schools. The two-week ban on the private vehicle intercity movement ended on April 27th. Intercity and intracity public transport movement was prohibited for about two months and is expected to end by end May. A mandatory curfew was in place during the state of emergency ends, requiring the population to remain indoors from 21:00 to 06:00. All individuals had to carry an identity document when outside of their dwelling (on foot or otherwise). Stricter restrictions on movement were in place for individuals aged 70 and above. Various forms of economic activity, including tourism, has come to a standstill.

Reopening of the Economy. On April 24, the government presented a timeline for opening the economy in 6 stages, depending on the development of COVID19 statistics. It was planned to keep 2-week gap between the stages, but the improving COVID19 statistics and decline in the number of the active cases of COVID 19, allowed the government to open the economy quicker. The first stage commenced on April 27, 2020 as the passenger cars, taxies, online trade, deliveries and open air-markets became operational. Starting from May 5: construction, production of construction materials, carwash, computer and equipment repair shops, parks are open. Since May 11, all shops that have their own entrance from ground (other than malls, apparel and footwear shops) are open; all kinds of production and publishing services are also operational. The beauty parlors and aesthetic medical centers also opened faster than initially planned (May 18th). Tbilisi and other big cities are now open for intercity travelers. The public transport, including metro, is now scheduled to open on May 29; All types of shops as well as the malls will open on June 1,; all the restaurants and hotels will re-open on June 8; (i.e. about 1 month earlier than initially planned), however, all the above-mentioned need to observe strict cautionary measures: wearing face masks is mandatory inside the shops and while using public transport. To become operational, the hotels need a prior authorization from the ministry of health. Domestic tourism will open on June 15th; international tourism will re-open on July 1st. Georgia intends to require valid COVID19 test results for the international travelers and visitors. At the same time international flights will resume. Georgia intends to have COVID free touristic zones and serve groups of travelers from similar risk countries.


Key Policy Responses as of May 27, 2020

Fiscal
  • The ‘Anti-Crisis Economic Action Plan’ unveiled on April 24, listed the government’s initiatives to support the population and businesses along with the measures already implemented or announced by the government, such as the payment for gas, electricity and utilities for the for users consuming up to 200 kW of electricity and/or up to 200 m3 natural gas monthly; The government introduced the State Program for Maintaining Prices of Primary Consumption Food Products. The program envisages subsidies for certain imported products to keep their local price stable (rice, pasta, buckwheat, sunflower oil, sugar, milk powder, beans, wheat, and wheat powder) for the period from 15 March to 15 May 2020; 3m bank loan service holidays for individuals; income and property tax holidays for hotels (until Nov 1, 2020). Within the frame of the new program “Co-financing Mechanism for Supporting Family-owned, Small and Medium-size Hotel Industries”, Enterprise Georgia (the agency of the Ministry of Economic and Sustainable Development of Georgia) will co-finance up to 80 per cent of the annual interest rate on loans issued to family-owned, small and medium-sized hotels. The custom clearance term for vehicles imported before 1 April 2020 was extended to 1 September 2020 for car importers; The credit guarantee scheme will be enhanced; VAT refunds will become automatic and will accelerate. In his recent address to the parliament, the Prime Minister stated that the government plans to support agriculture and construction sectors.

    The new initiative envisages provision of targeted social assistance to those formerly employed people who lost their job or was placed on an unpaid leave due to the spread of the coronavirus pandemic will receive 200 GEL per month over the course of 6 months; employers will receive a state subsidy for each job maintained. Namely, over the course of 6 months: (1) salaries up to 750 GEL will be fully exempt from income tax; for the salaries below 1500 GEL per month, the first GEL 750 will be exempt from income tax. one-time assistance of 300 GEL will be provided to people who are self-employed or employed in the “informal sector”; Over the course of the upcoming 6 months, 600 GEL in assistance will be given to families who have (1) a social rating score in the 65,000–100,000 range, as well as (2) families with a social rating score in the 0-100,000 range and three and more children under the age of 16. A financial assistance in the same amount will be provided to persons with severe disabilities and children with disabilities; Starting from January 2021, the rule of indexation of pensions will be introduced. According to this rule, the pensions will increase by at least the rate of inflation; for pensioners aged 70 and above: the pensions will increase in addition by 80% of the real economic growth rate. Regardless of the actual rates of inflation and economic growth, the pension increase will be at least GEL 20 for the pensioners below 70 and above GEL 25 GEL for pensioners above age 70.

    Commercial banks will gain access to a long-term financial resource of GEL 600 million. GEL 500 million will be provided to support businesses, including through the credit guarantee scheme. Financing for working capital will increase.  Additional funds of about GEL 350 million will be directed to health spending including lab testing and quarantine expenditures as well as increased costs associated with hospitalization, medical treatment, and medical supplies. All this will be spelled in the budget amendment that is expected to be approved by the parliament in the near future.

Monetary and macro-financial
  • The National Bank of Georgia (NBG) announced measures to support capital and liquidity in the banking sector. Banks have been asked to evaluate the quality of the loan portfolio; on-site inspections have been suspended; and a moratorium on fines was introduced where a breach emerged due to the crisis. The NBG reduced its policy rate by 50 bp in on April 29. Next MPC meeting will be on June 24. The NBG has closed office operations of currency exchange booths and other payment service providers, among others. To ease lari liquidity pressures, the NBG started FX swap lines with banks and microfinance institutions in mid-April. Tighter financial conditions have resulted in portfolio outflows from domestic government securities. The Georgian Lari has depreciated by 15 percent vis-à-vis the dollar since March 6th.

Exchange rate and balance of payments
  • NBG has sold $160 million in five interventions in the foreign exchange market, to prevent disorderly depreciation.


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Germany

Background. Germany is totaling over 181,918 COVID-19 cases as of May 28, 2020, while the outbreak has claimed 8,464 lives. The government has responded with a range of measures to contain the spread of virus through border closures, closure of schools and non-essential businesses, social distancing requirements and a ban on public gatherings.

Reopening of the economy. On April 20th, smaller shops re-opened subject to social distancing requirements. Select grades in schools gradually re-opened on May 4th, as did cultural and leisure venues. On May 6th, the government announced further easing of containment measures extending to all shops, restaurants and sports facilities, with the exact timeline to be determined at state level. Re-opening is subject to an “emergency brake”, whereby an occurrence of more than 50 new infections per 100.000 inhabitants over 7 days will require state governments to reverse the re-opening and re-institute containment. Border controls to neighboring countries are being gradually lifted starting May 16th. Quarantine requirement for travelers from EU-countries has been lifted in several states starting May 18th On May 26th, federal and state governments agreed to ease restriction on public gatherings for up to 10 people or two separate households subject to minimum distancing and face mask requirement in public places.


Key Policy Responses as of May 28, 2020

Fiscal
  • In addition to running down accumulated reserves, the federal government adopted a supplementary budget of €156 billion (4.9 percent of GDP) which includes: (i) spending on healthcare equipment, hospital capacity and R&D (vaccine), (ii) expanded access to short-term work (“Kurzarbeit”) subsidy to preserve jobs and workers’ incomes, expanded childcare benefits for low-income parents and easier access to basic income support for the self-employed, (iii) €50 billion in grants to small business owners and self-employed persons severely affected by the Covid-19 outbreak in addition to interest-free tax deferrals until year-end, €2bn of venture capital funding for start-ups, (iv) temporarily expanded duration of unemployment insurance and parental leave benefits. At the same time, through the newly created economic stabilization fund (WSF) and the public development bank KfW, the government is expanding the volume and access to public  guarantees for firms of different sizes and credit insurers, some eligible for up to 100 percent guarantees, increasing the total volume by at least €757 billion (24 percent of GDP). In addition to the federal government’s fiscal package, many local governments (Länder and municipalities) have announced own measures to support their economies, amounting to €141 billion in direct support and €63bn in state-level loan guarantees.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    The authorities extended all ECB-issued regulatory and operational relief to German banks under national supervision. In addition to measures at the euro area level: (i) release of the countercyclical capital buffer for banks from 0.25 percent to zero; (ii) additional €100 billion to refinance expanded short-term liquidity provision to companies through the public development bank KfW, in partnership with commercial banks; and (iii) following the structure of the former Financial Stabilization Fund, €100 billion is allocated within the WSF to directly acquire equity of larger affected companies and strengthen their capital position. A payment moratorium on consumer loans established before March 15th is granted until June 30th 2020 if the debtor is financially affected by the COVID-19 crisis. Loans issued under KfW guarantees are exempt from the calculation of lenders’ own funds requirement, their leverage ratio, as well as the large exposure limit.

Exchange rate and balance of payments
  • No measures.


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Ghana

BackgroundAs of May 20, 2020, Ghana recorded 6,096 confirmed COVID-19 cases and 31 deaths. Starting March 16, the government adopted sweeping social distancing measures and travel restrictions to avert an outbreak, including (i) suspension of all public gatherings exceeding 25 people for four weeks; (ii) closure of all universities and schools until further notice; and (iii) mandatory 14-day self-quarantine for any Ghanaian resident who has been to a country with at least 200 confirmed cases of COVID-19, within the last 14 days. On March 23, Ghana closed all its borders to travelers. On March 30, a partial lockdown of major urban areas was implemented. As an oil exporter, Ghana is significantly affected by the large decline in oil prices.

Reopening of the economy. Starting on April 23, the partial lockdown has been lifted following aggressive contact tracing, expansion of treatment and isolation centers, enhanced testing capacity, better understanding of the virus contagion dynamics, increased capacity to produce sanitizers and medicines, and severe impact of the lockdown on the most vulnerable.


Key Policy Responses as of May 22, 2020

Fiscal
  • The government committed US$100 million to support preparedness and response, and about US$210 million under its Coronavirus Alleviation Programme to the promotion of selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), the support of SMEs and employment, and the creation of guarantees and first-loss instruments. Additional funds have been earmarked to address availability of test kits, pharmaceuticals, equipment, and bed capacity. On April 26, a major investment in healthcare infrastructure was announced, including the construction or upgrade of 100 district and regional hospitals.

    To compensate for larger spending related to the COVID-19 crisis, the government plans cutting spending in goods and services, transfers, and capital investment (also reflecting the lower absorption capacity of the economy due to the pandemic), for a total of at least GHc 1.1 billion (0.3 percent of GDP). Also, the government has agreed with investors to postpone interest payment on non-marketable domestic bonds held by public institutions to fund the financial sector clean-up for about GHc 1.2 billion (0.3 percent of GDP).

    To reduce the financing needs, the government will draw US$218 million from the stabilization fund, and will borrow up to GHc 10 billion from the Bank of Ghana.

Monetary and macro-financial
  • The Monetary Policy Committee (MPC) cut the policy rate cut by 150 basis points to 14.5 percent on March 18, and announced several measures to mitigate the impact of the pandemic shock, including lowering the primary reserve requirement from 10 to 8 percent, lowering the capital conservation buffer from 3 to 1.5 percent, revising provisioning and classification rules for specific loan categories, and steps to facilitate and lower the cost of mobile payments. The committee also signaled it would continue to monitor the economic impact of COVID-19 and take additional measures if necessary.

    At its May 15 meeting, the MPC kept the policy rate unchanged and announced a new bond purchasing program to provide emergency financing to the government in light of a higher projected fiscal financing gap. A 10-year bond with a face value of GHc 5.5 billion (1.4 percent of GDP) has been purchased, and the MPC indicated that future purchases may increase up to GHc 10 billion. The MPC also announced relief measures for small depository institutions and a US$1 billion repo agreement with the U.S. Federal Reserve under its FIMA facility.

Exchange rate and balance of payments
  • No measures


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Greece

Background. Greece has reported 2,910 positive cases as of May 27, 2020. The government has adopted strict containment measures to delay the spread of coronavirus, including (i) a national lockdown that restricts all but essential movement and economic activity, (ii) school closures, (iii) domestic travel restrictions, (iv) travel bans on visitors from high-risk countries, and (v) quarantines for international visitors and Greek nationals returning from abroad.

Reopening of the economy. The government has started implementing a gradual re-opening with a target date of July 1st for full normalization of economic activity (except for large public events).


Key Policy Responses as of May 27, 2020

Fiscal
  • The government has announced a fiscal package of measures totaling about 14 percent of GDP (€24 billion), including loan guarantees, financed from national and EU resources (some of the latter involves reprogrammed funds). Key measures include: (i) health spending increases including for new hiring of more than 3,300 doctors and nurses, procurement of medical supplies, and cash bonuses to health sector workers; (ii) transfers to vulnerable individuals, including cash stipends and full coverage of pension and health benefit payments for employees working in hard hit firms and for self-employed professionals, extension of unemployment benefits, support to short-term employment, subsidies to primary residency borrowers and paid leave for parents who have children not going to school; (iii) liquidity support to hard hit businesses through loan guarantees, interest payment subsidies, refundable advance payment, rent reductions, and deferred payments of taxes and social security contributions; and (iv) VAT rate reductions for critical products needed for COVID protection, research spending and transportation and hospitality sectors.

Monetary and macro-financial
  • While Greece is not eligible to additional asset purchases of €120 billion until end-2020 under the existing APP from the ECB, Greece is eligible for other ECB monetary support measures, including temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) from June 2020 through June 2021. Further measures by the ECB for which Greece is eligible include an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until end-2020, an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs).

    The ECB Banking Supervision is allowing significant institutions to operate temporarily below the Pillar 2 Guidance, the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical buffer by the national macroprudential authorities will enhance its capital relief measures. The ECB Banking Supervision entity, the Single Supervisory Mechanism (SSM) further decided to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans (NPLs) that are covered by public guarantees and COVID-19 related public moratoria; and recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions. Furthermore, the ECB recommends that banks opt for the IFRS9 transitional rules.

    Banks will allow deferral of principal payments on existing loans for hard-hit individuals and firms through end-September (in addition to the interest payment subsidies mentioned above).

Exchange rate and balance of payments
  • No measures.

For additional information, visit the Greek Government Website: https://government.gov.gr/


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Guatemala

Background. As of May 21st, Guatemala has reported 2,265 confirmed cases and 45 fatalities of COVID-19. On March 13th, the government declared a State of Calamity, in force through June 4th. Non-essential activities remain suspended, all national borders remained closed, all travel between departments is prohibited, a curfew (5pm to 5am) is in force, and a full shutdown is in order over the weekends.

Reopening of the economy. The government allowed the re-opening of convenience stores under strict conditions.


Key Policy Responses as of May 21, 2020

Fiscal
  • For COVID-19 prevention and mitigation, Congress approved three fiscal packages, totaling around 3.4 percent of GDP. This fiscal stimulus is financed mainly by a US$250 million IADB Budget Support loan, a US$200 million World Bank Disaster Risk Management loan, the issuance of treasury bonds and the use of emergency budgetary reserves (about US$60 million). The fiscal response is now focused on two programs: i) stepping up healthcare resources (0.2% of GDP) and ii) providing support to different sectors in the economy through cash transfers (1.2% of GDP), salary subsidies (0.3% of GDP) and funding to SMEs (0.6% of GDP). A facility for coronavirus patients (financed through a US$1 million grant from the Central American Bank of Economic Integration) will add 3,000 beds to the existing capacity (350 beds). As part of the National Emergency and Economic Recovery Plan, additional targeted measures to support the economy were enacted: i) streamlining tax credit refunds to exporters (freeing up to 0.2% of GDP), ii) deferring income tax payments and social security contributions (one quarter), iii) waiving taxes on medical supplies, iv) increasing the coverage and amount of electricity subsidies, and v) fostering low income housing. As part of its financing strategy, Guatemala has raised from international markets US$1,200 million on April 21st (third LatAm sovereign issuer since the onset of the COVID crisis alongside Panama and Peru). This covers over one third of the intended issuance this year by the sovereign domestically and internationally.

Monetary and macro-financial
  • Banco de Guatemala has lowered its policy rate by 75 basis points to 2 percent since March 18 and stands ready to secure liquidity provision facilities, including by acting as lender of last resort. To support the financial sector, the Monetary Board has eased through year-end credit regulations to enable loan restructuring for borrowers facing temporary liquidity constraints.

    Upon Congress’ authorization, Banco de Guatemala granted a special loan to the government for GTQ 11 billion (about USD 1.5 billion). These resources will be used for programs to serve the most vulnerable population and strengthen resources for the COVID-19 emergency (first tranche of the loan for GTQ 3.5 billion, USD 470 million) was disbursed on April 24.

    The Superintendency of Banks is closely monitoring the incidence in the financial system of the temporarily relaxation of credit risk regulations.

Exchange rate and balance of payments
  • No measures.


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Guinea

Background. As of May 20, 2020, 2 863 cases of COVID-19 were confirmed in Guinea. The authorities have adopted several measures to reduce the risk of contagion. Notably, large public gatherings have been banned, the international airport has been closed to non-essential flights, and public areas (markets, religious facilities) are required to have hand sanitizing equipment. All schools have been closed. Other measures included closure of land borders, suspension of public events, religious, and leisure facilities; limiting public transport; and a nationwide night curfew. Guinean embassies and consulates have suspended visa issuance to travelers from countries with more than 30 confirmed cases. On March 26, Guinea declared a state of emergency and tightened lockdown. Starting April 18, wearing a face mask is mandatory in public places.

Reopening of the economy. On May 15, Guinea extended the containment measures and the state of emergency for one month but started easing the lockdown restrictions. The authorities lifted the curfew in the rest of the country and relaxed the limit on mass gatherings from 20 to 30 people. The curfew remains in force in the greater region of Conakry but is shortened from 10pm - 5am to 11pm - 5am.


Key Policy Responses as of May 21, 2020

Fiscal
  • A National Emergency Preparedness and Response Plan for a COVID-19 outbreak was prepared, with the support of international development partners. Key measures focus on strengthening surveillance at ports of entry; reinforcing capacity for COVID-19 detection; increasing the number of quarantine centers; expanding treatment facilities and acquiring needed medical equipment; and conducting a communication campaign. The implementation cost of the National Emergency Plan is estimated at US$47 million (0.3 percent of GDP).

    In addition, a COVID-19 economic response plan was announced on April 6, 2020. The Plan aims at strengthening infrastructure in the health sector, protecting the most vulnerable, and supporting the private sector, notably small and medium enterprises. The authorities estimate the cost of the Plan at about USD 290 million (2 percent of GDP). Key measures include: the introduction of temporary exonerations on taxes, social contributions and payment of utilities for firms in the most affected sectors; the implementation of labor-intensive public works, provision of cash transfers, a waiver on the payment of utilities for the most vulnerable. The authorities are contemplating additional support measures to some agricultural commodity chains such as cashew, pineapple and potatoes.

Monetary and macro-financial
  • As announced in the April 6 COVID-19 economic response plan, the central bank of the Republic of Guinea (BCRG) unveiled on April 16 some support measures to mitigate the economic impact of the pandemic on the financial sector. The policy rate and the reserve requirement ratio were both reduced by 100 basis points to 11 and 15 percent respectively. The BCRG allows banks, for the duration of the pandemic, to count against their reserves credit provided to SMEs, businesses in the services sector affected (hotels, restaurants and transport), and major importers of food and pharmaceutical products. The central bank also announced a program of liquidity injection, including a window for the provision of long-term liquidity.

    Moreover, the central bank announced measures to mitigate prudential requirements. These include: lowering the liquidity coverage ratio from 100 to 80 percent; suspending the NPL classification for businesses and individuals impacted by the pandemic and the provisioning of such loans; and relaxing the limits on foreign exchange positions (from 20 to 25 percent of capital for the net position, and 10 to 12.5 percent for the position in each currency). Dividend payments have been suspended while financial institutions are required to limit technical assistance fees paid to their parent companies to the strict minimum. Financial institutions have been granted a three-month postponement of the payment of supervision -related fees as well as contributions to the deposit insurance scheme. Insurance companies are to postpone the payment of premia falling due during the epidemic and to suspend policies at the request of customers. Identification requirements for e-money accounts have been eased and companies are encouraged to reduce e-money transfer fees.

Exchange rate and balance of payments
  • No measures.


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Guinea Bissau

Background. There are one thousand and ninety (1090) confirmed cases, including six fatalities as of May 21st, 2020. On March 18, borders were closed and flights to Bissau interrupted. Schools and outdoor markets are closed. A state of emergency was declared on March 28 and extended three times until May 26. A National Covid-19 Contingency Plan was adopted at the end of March. Public transportation vehicles are not allowed to circulate in the country. All circulation is forbidden between 2pm and 7am and a curfew is in place 8pm-6am. Guinea-Bissau is fighting the pandemic in the midst of a political crisis related to the result of the December 2019 presidential election. It is amongst the 25 beneficiary countries of the IMF debt service relief through the Catastrophe Containment and Relief Trust (CCRT), approved on April 15.


Key Policy Responses as of May 21, 2020

Fiscal
  • Emergency health measures of CFAF 485 million (US$ 0.8 million or 0.06 percent of GDP) have been spent to supply the Ministries of Health, Home Affairs and Defense. These were focused on upgrading the main national hospital, and providing medicines, food, and medical equipment. The authorities are seeking support from multilateral donors to finance additional expenses. The government has also provided some assistance to households. CFAF 525 million (US$ 0.9 million or 0.06 percent of GDP) are used to distribute 20,000 bags of rice and 10,000 bags of sugar throughout the country. The authorities are seeking international financial support to complement its assistance program.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with COVID-19 related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Guinea Bissau amounted to 4.2 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Guyana

Background. Guyana reported 125 confirmed COVID-19 cases and 10 deaths as of May/21/2020. The government has announced containment and mitigation measures (including imposing staying home order, bans on public gatherings, except for essential services, mandatory social and physical distancing for essential services, curfews, domestic and international travel restrictions, closure of schools and borders, mandatory quarantine for those infected or exposed to the disease, providing tests to suspected infection cases, and additional supplies to medical professions, and raising public awareness).

Reopening of the economy. The government has not announced any plans for reopening, and with increasing number of positive cases, the curfew has been extended to June, 3, 2020.


Key Policy Responses as of May 21, 2020
Fiscal
  • The Ministry of Finance and the Guyana Revenue Authority have implemented waivers of VAT and duties on COVID 19 medical supplies and lab testing kits, as well as tax deductions for all donations made by local businesses to staff and health institutions for the treatment of the virus. The authorities have also implemented the deferral of payments of corporate and individual advance taxes for the 2020 income year, pay as you earn schemes for affected businesses until June 30, 2020, the removal of VAT on water and electricity effective from April 01, 2020 to June 30, 2020; domestic air travel effective from April 08, 2020 to June 30, 2020; and the extension of the April 30th deadline for the filing of tax returns to June 30, 2020. Finally, the authorities have also expedited the processing of VAT refunds for businesses and pay as you earn refunds to employees. The Ministry of Business has started providing relief grants to small businesses experiencing challenges to sustain operations and retain employees and for training and development.

Monetary and macro-financial
  • The Bank of Guyana (BoG) has urged commercial banks to consider reducing interest rates on loans and to allow for deferral of repayments to cushion the financial effects from COVID-19 on both individuals and businesses. The institution has granted a three-month moratorium to classify affected accounts as non-performing, and has waived on the regulatory treatment or condition for renegotiating loans under the supervisory guidelines. Other measures proposed to banks by the BoG include; the deferment of loan payments to assist customers in good standing, companies with liquidity requirements; and waiving or reducing fees and penalties for transactions with ATMs, POS, EFT, debit cards, loan processing, and late payments on loans.

Exchange rate and balance of payments
  • The Bank of Guyana maintains an accommodative monetary stance.


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Haiti

Background. The COVID-19 pandemic comes at a time of economic contraction and considerable macro-economic imbalances. Haiti has so far reported 596 cases of Covid-19 with 22 deaths (as of May 20). Tourism had already declined sharply in 2018-2019 due to the political instability and social unrest. The main economic impact from COVID-19 will come through remittances, which represent about 30 percent of GDP and are expected to drop with the income shock in the United States and other source markets.

Reopening of the economy. The state of health emergency that had been declared by the Government on April 19th over the spread of COVID-19 was renewed until July 19. The country’s ports, airports and borders will continue to be closed until then, after which most of the measures are expected to be eased gradually. In order to guarantee jobs provided by subcontracting companies in the textile industry, the Government authorized these factories to gradually resume their activities from April 20th, while respecting the measures to prevent the spread of the virus. These measures include, among others, the operation of the factories on rotating basis with only 30 percent of their workforce, measuring the temperature of the workers upon entry to the factory, and the obligation to wear facial masks. Reopening borders would be very challenging --- absent either a vaccine and/or some form of reliable visitor health certification, the virus could be easily re-imported into the country from the Dominican Republic.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities launched a public health preparedness plan for containment and treatment; they plan to boost some social programs, and are also considering additional health care and security spending, as well as transfers to support workers and households, including supporting wage payments temporarily in some sectors. Altogether, spending should increase by 4.0 percent of GDP, of which 2.3 percent of GDP on healthcare, 0.6 percent of GDP to protect vulnerable populations (including dry food rations) and 0.9 percent of GDP in other transfers.

Monetary and macro-financial
  • The central bank moved immediately to ease conditions in the financial system, including reducing the refinance and reference rates, lowering reserve requirements on domestic currency deposits, easing loan repayment obligations for three months, and suspending fees in the interbank payment system.

Exchange rate and balance of payments
  • No measures.


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Honduras

Background. Honduras has reported 4401 (188 deaths) as of May 28, 2020. The government has declared a national state of emergency and adopted containment measures, including a nation-wide curfew and closing of national frontiers. The authorities have taken fiscal and monetary and macro-financial measures actions to respond to the healthcare and humanitarian crisis, protect employment and mitigate the impact on economic activity.

Reopening of the economy. The government has been implementing weekly extensions of the lockdown—the latest to May 31. Honduras has been in lockdown since March 16, with only essential services operating since then (food production and distribution, banks, pharmacies and production of medical supplies, energy, telecoms, and related transport activities). Access to retail grocery stores has been restricted by day according to last digit in ID numbers. The only re-openings of non-essential activities have been hardware stores (since April 16), restaurants for delivery (since May 4), construction (starting May 11, sequenced by priority and size of projects), selected government services, churches with limited attendance, and hair salons (since May 19). The government and the private sector have agreed on a plan to gradually reopen the economy by regions, starting on June 1, and reaching full normalization of activities by July 15, July 30, or August 15 depending on the incidence of COVID by region. According to the plan, out of 298 municipalities, 232 without known cases of COVID would start with 60% of workers, 53 municipalities with limited incidence of COVID with 40% of workers, and 13 with high incidence and population density (including the capital and main business hub San Pedro Sula) with 20%. Plan implementation is conditional on the evaluation of the status of the pandemic by the state emergency management agency in charge of the lockdown.


Key Policy Responses as of May 28, 2020

Fiscal
  • The authorities are deploying a well-targeted fiscal response to the pandemic while establishing strong transparency and accountability frameworks. In this context and following a request to Congress to make use of the emergency clause included in the Fiscal Responsibility Law (FRL), the authorities’ program envisages a fiscal deficit of the Non-Financial Public Sector of 4 percent of GDP in 2020—after 1 percent deficit in 2019 in line with the FRL—and budget reallocations of non-priority current expenditure. Congress has already approved additional borrowing by the government of $2.5 bn in 2020-21, about 10 percent of GDP in total

    Efforts are concentrated on supporting the fragile health system and providing targeted support to families, workers, and firms. Additional crisis-related spending needs are estimated at 2.1 percent of GDP in 2020, including emergency healthcare expenditures (0.9 percent of GDP), temporary unemployment benefits to formal workers (0.6 percent of GDP), delivery of food supplies to poor families (0.2 percent of GDP), and cash transfers to informal workers (0.4 percent of GDP). The authorities have identified significant nonpriority spending reallocations to partly finance these emergency expenditures. Congress approved a decree authorizing expedited purchasing procedures for emergency expenditures related to the crisis.

    The authorities are accommodating an estimated 1.5 percent of GDP decline in tax revenues as a result of the recession caused by the pandemic. In addition, Congress approved reduced advance payments in corporate income tax to provide cash flow relief to companies for about 0.5 percent of GDP, as well as temporary VAT exemptions for medical supplies with estimated cost of 0.1 percent of GDP. There is also a one-off income tax credit (10 percent of salary expenses) for companies maintaining pre-crisis employment levels. Beyond these measures that will impact the fiscal deficit in 2020, Congress has approved deferrals to the second half of 2020 for payments of income taxes and social contributions, favoring especially SMEs. VAT payments were also deferred for SMEs in non-essential sectors not operating during the curfew.

    The government introduced a 1-month freeze in prices of goods in the basic consumption basket, as well as 1-month free access to emergency telecommunications services related to the Covid-19 crisis—these measures do not have a budgetary cost.

Monetary and macro-financial
  • The central bank cut the policy rate by 75 bps to 4.5 percent—following cuts of 50 bps in December and January—and reduced the spread over the policy rate for its emergency lending facility (by 50 bps) and its repo operations (by 25 bps). The BCH also announced the suspension of liquidity absorption operations until end-June, and accelerated the implementation of previously announced elimination of obligatory investments in the central bank, providing estimated liquidity injection of L21,400 mn, about 3.5 percent of GDP.

    Second-tier public development bank Banhprovi will provide L6,875 mn (1.1 percent of GDP) in guarantees to cover potential losses on new loans to SMEs and other companies, with varying coverage of commercial banks' exposures on the loans covered by the guarantee scheme. The bank will also deploy additional L5,625 mn (0.9 percent of GDP) to finance loans to SME and other sectors affected by the pandemic. These guarantee and loan financing schemes will be funded with loans from the regional development bank CABEI.

    The government also issued a decree mandating all supervised financial institutions to provide temporary debt service relief to companies and individuals whose incomes have been affected by the crisis. Debt service of affected sectors will be suspended until end-June, without penalties or impact on credit classification. The government also announced a 3-month moratorium on service of bank loans financed by Banhprovi (covering about 5 percent of total bank credit to the private sector).

Exchange rate and balance of payments
  • No measures.


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Hungary

Background. On May 27, the number of confirmed COVID-19 cases in Hungary was 3, 793, with 505 deaths. The economy has been hit hard by the outbreak as it is tightly intertwined globally through supply chains and tourism. The government declared a state of emergency on March 11 and implemented various containment measures, including travel and activity restrictions, and mandatory distance learning for schools and universities. On March 27, mandatory shelter-in-place in place was imposed, except for essential business and activities (e.g., food shopping, healthcare).

Reopening of the economy. As of May 4, the country started to follow a schedule of a gradual reopening of the economy. The government has lifted certain restrictions (e.g. stores, malls, museums, etc. are allowed to reopen, outdoor seating is permitted in restaurants, higher education students can return to school, masks are required in shops and public transport). Ordinary health services are gradually being restarted. On May 18, a new phase of loosening took effect, mostly related to the countryside and the county of Pest, while Budapest will still faces restrictions due to a still higher incidence of infections. However, stores, restaurants ,and churches are now open everywhere. Social distance rules are expected to still be heeded everywhere. All public events are banned till August 15, but sports may be conducted in closed doors, including training. Inward business travel ban is lifted for citizens of the Czech Republic, Poland, South-Korea, Germany, Austria, Slovakia. Twelve international flights have started to depart from Budapest Airport. Several crossings on Austro-Hungarian border are now open. Borders with all European countries with low epidemic risk to be opened as of June 15. The government has submitted a draft law to remove the state of emergency, expected to be passed on Jun 20. Simultaneously, the government submitted another draft bill, providing for some of the implemented epidemiological and economic measures to be maintained despite the removal of the state of emergency. In addition, the proposed amendment will also allow the government to declare a health crisis, which will re-instate an emergency-like situation, in which the government will be able to rule by decree no parliamentary authorization will be needed.


Key Policy Responses as of May 27, 2020

Fiscal
  • A first wave of fiscal measures were introduced earlier in the epidemic, including, on the revenue side, measures to alleviate the fiscal burden on businesses: (i) employers' social contributions will be lifted in the most affected sectors; (ii) the health care contributions will be lowered through June 30; (iii) around 80,000 SMEs (mainly in the services sector) will be exempt from the small business tax (the payment of the tax by other companies in affected sectors will be deferred until the end of the state of emergency); (iv) the tourism development contributions will be temporarily cancelled; (v) media service providers will be given a tax relief for incurred losses of advertising revenue; and, (vi) procedures for collecting tax arrears will be suspended during the state of emergency. On the spending side, about HUF 245 billion (0.6 percent of GDP) was reallocated to the healthcare sector.

    On April 8, a new package of new measures was announced, supported by the creation two new funds, the Anti-Epidemic Protection Fund and the Economy Protection Fund. The latter Fund will be financed through new taxes on the private activity and reallocations from ministries and from the Employment Fund. Their spending targets (i) job protection, notably by subsidizing wages to companies on workers who were put on shortened work hours (with rules that were made more flexible on April 23); (ii) job creation by supporting investments worth a total of HUF 450bn; (iii) support for priority sectors, including tourism, health, food, agriculture, construction, logistics, transport, film and entertainment industries; (iv) provision of interest-subsidized and guaranteed credit facilities to Hungarian companies; (v) an extra week of pension will be paid out every February during 2021-24. On April 16, the government introduced three new export support measures through the state-owned Eximbank: (i) EUR 800,000 grant for investments of export companies; (ii) preferential working capital loans, and (III) a new guarantee and insurance scheme. On April 23, a state-owned development bank MFB launched a HUF 1,490bn package of financial support instruments for companies, consisting of three loan products, two guarantee instruments and four capital programs. On May 7, the government announced it will purchase up to HUF 150 billion (0.3 percent of GDP) of bonds issued by banks in order to support lending during the crisis and to ensure financial stability. On May 20, the government announced a new wage subsidy program for new hires, with the condition for a company of keeping a worker for at least nine months.

Monetary and macro-financial
  • Since the start of the pandemic, the central bank (MNB) increased access to liquidity through: (i) an increase in the regular forint-liquidity swap stock at regular auctions; (ii) the introduction of the daily provision of one-week forint-liquidity swaps; (iii) the expansion of eligible collateral; (iv) the introduction of a long-term unlimited collateralized lending facility; and (v) suspension of penalties for unmet reserve requirements. On April 1st, it introduced a one-week deposit tender at the Lombard rate, which effectively tightened overall liquidity and eased depreciation pressures on the HUF. On April 7, the MNB announced (i) a change in the overnight lending rate by 95 bps to 1.85 percent, making the interest rate corridor symmetric (with the overnight deposit rate at -0.05 percent; the base rate at 0.9 percent; and the overnight lending rate at 1.85 percent); (ii) an increase in the one-week lending rate to 1.85 percent; and (iii) the elimination of the target on the amount of the liquidity injection or withdrawal to give greater flexibility to monetary policy. A quantitative easing program was also launched, consisting of buying government securities on the secondary market, and the mortgage bond purchase program is being re-started. The details of these two programs will be announced later. Measures were also taken to provide financial relief to households and corporates borrowers, including: (i) the provision of a grace period of repayment of loans to the Growth Funding Facility (subsidized lending to SMEs supported by the MNB); (ii) the extension of short-term loans to businesses until June 30; (iii) a repayment moratorium on all existing loans, corporate and retail, until the end of this year, with a reprofiling of debt payment thereafter to avoid an increase in monthly payments; and, (iv) a cap on the average annual percentage rate (APR) on new unsecured consumer credit at the central bank base rate (currently, 0.9 percent) plus 5 percent. On 4 May, the MNB launched its government securities and mortgage bonds purchase program as a part of Quantitative Easing strategy to strengthen monetary policy transmission. On April 7, a new SME lending program was also announced (FGS GO!) with increased amounts and increase in the interest rate subsidy. The corporate bond purchase program (BFGS) remained in place but maturities of eligible bonds were extended and amount per business group was increased. The MNB intends to sterilize liquidity injected through both the FSG GO! and BFSG programs through a preferential deposit facility bearing a 4 percent interest rate.

    Regarding macro-prudential measures, (i) the Foreign Exchange Coverage Ratio (FECR), which imposes a limit on the difference between forex-denominated assets and liabilities of credit institutions as a percent of total assets, was reduced from 15 to 10 percent; and (ii) the additional capital buffer requirement for systemically-important banks will be temporarily eliminated as of July 1.

Exchange rate and balance of payments
  • The exchange rate has been adjusting flexibly.


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Iceland

Background. As a country dependent on tourism, Iceland has been highly exposed to health, economic, and financial contagion from the global spread of the COVID-19 virus. By May 21, the epidemics is already under control: Ninety-nine percent of the 1,803 confirmed COVID-19 cases have recovered. Ten have died. The strategy to contain the disease involved a national pandemic plan with significant focus on mass testing, contact tracing, and quarantines. The economic impact of the drop in external demand and containment measures is partially being offset by Iceland’s use of its available policy space.

Reopening of the economy. Containment measures were relaxed on May 4, including reopening schools and personal services venues and increasing to 50 (from 20) the size of social gatherings. On May 18 swimming pools were reopened. To allow for a safe reopening of tourism, by June 15, individuals arriving to Iceland will be allowed to choose between a 14-day quarantine, taking a COVID-19 detection test at Keflavik airport, or presenting a recognized COVID-19-free health-certificate from abroad.

Key Policy Responses as of May 21, 2020

Fiscal
  • Two packages of fiscal measures of up to ISK 290 billion krona (9.9 percent of 2020 GDP) have been approved by parliament to ease the strain on households and firms and, looking forward, to help the economy recover. Key measures to support households and firms include tax cuts, deferrals, and loss offsets, increased unemployment benefits, one-off child allowances, quarantine grants and state-guaranteed bridge loans to companies. Key measures to restart the economy include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage domestic tourism. On May 15, the government submitted to parliament draft bills to extend the partial unemployment benefit through June 1, introduce simpler temporary rules for financial restructuring of companies, and contribute to firms’ dismissal costs to prevent bankruptcies of viable firms and protect workers’ rights. See also: Link1 , Link2 , and Link3 .

Monetary and macro-financial
  • The Central Bank of Iceland (CBI) has provided monetary support and has taken measures to preserve financial stability. Since the outbreak, the Monetary Policy Committee has cut policy rates by 175 basis points to 1 percent and reduced deposit institutions’ average reserve requirements to 1 from 2 percent to ease their liquidity positions (by about 1 percent of 2020 GDP). To increase liquidity in circulation, the CBI has also stopped offering 30-day deposits. The CBI Financial Stability Committee reduced the countercyclical capital buffer from 2 percent to 0 percent, providing scope for banks to increase lending by ISK 350 billion (12 percent of 2020 GDP). See also: Link4 and Link 5 .

Exchange rate and balance of payments
  • The CBI has allowed the exchange rate to adjust flexibly, while preventing disorderly market conditions. Between January 1 and May 11, the CBI intervened in the foreign exchange market on 10 days selling €114 million (0.6 percent of 2020 GDP).


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India

Background. India has 86,110active COVID-19 cases as of May 28, with 4,531 deaths attributed to the disease. Prime Minister Modi announced on March 24 that the entire country will go under lockdown, now extended for the third time to May 31. Prior to this announcement, numerous containment measures had already been imposed, varying in intensity across the country, including travel restrictions (complete restriction of incoming international commercial passenger aircraft and some restrictions on domestic travel including cancellation of domestic passenger air traffic); closing educational establishments, gyms, museums, and theatres; bans on mass gatherings; and encouraging firms to promote remote work.

Reopening of the economy. On April 15, with a view to supporting economic activities, the government announced several relaxation measures in geographical areas designated as non-hotspot, with effect from April 20, 2020. On April 29, the government permitted inter-state movement of stranded people, including migrant workers, managed by the nodal authorities who are designated by the states. Some graded relaxations in economic activities have been allowed in geographic areas designated as orange and red zones on May 4 and domestic air travel restarted on May 25. On May 12, the PM announced a relief package of around 10 percent of GDP, including previously announced monetary and fiscal measures.


Key Policy Responses as of May 28, 2020

Fiscal
  • Finance Minister Sitharaman on March 26 announced a stimulus package valued at approximately 0.8 percent of GDP. The key elements of the package are: in-kind (food; cooking gas) and cash transfers to lower-income households; insurance coverage for workers in the healthcare sector; and wage support to low-wage workers (in some cases for those still working, and in other cases by easing the criteria for receiving benefits in the event of job loss). These measures are in addition to a previous commitment by Prime Minister Modi that an additional 150 billion rupees (about 0.1 percent of GDP) will be devoted to health infrastructure, including for testing facilities for COVID-19, personal protective equipment, isolation beds, ICU beds and ventilators. Several measures to ease the tax compliance burden across a range of sectors have also been announced, including postponing some tax-filing and other compliance deadlines. Numerous state governments have also announced measures to support the health and wellbeing of lower-income households, primarily in the form of direct transfers (free food rations and cash transfers)—the magnitude of these measures varies by state, but on aggregate measures thus far amount to approximately 0.2 percent of India’s GDP. During May 13-17, the Finance Minister announced new measures targeting businesses (about 2.7 percent of GDP),expanding support for poor households, especially migrants and farmers (about 1.5 percent of GDP), targeted support for the agricultural sector (about 0.7 percent of GDP), and some expansion of existing programs providing work opportunities to low-wage laborers (about 0.2 percent of GDP). Key elements of the business-support package are various financial sector measures for micro, small, and medium-sized enterprises and non-bank financial companies; liquidity injection for electricity distribution companies; and a reduction in up-front tax deductions for workers. Additional support to migrants and farmers will mainly be in the form of providing concessional credit to farmers, as well as a credit facility for street vendors and an expansion of food provision for non-ration card holders (mainly migrants). The main measure for the agricultural sector is support for infrastructure development.

Monetary and macro-financial
  • On March 27, the Reserve Bank of India (RBI) reduced the repo and reverse repo rates by 75 and 90 basis points (bps) to 4.4 and 4.0 percent, respectively, and announced liquidity measures to the tune of 3.7 trillion Rupees (1.8 percent of GDP) across three measures comprising Long Term Repo Operations (LTROs), a cash reserve ratio (CRR) cut of 100 bps, and an increase in marginal standing facility (MSF) to 3 percent of the Statutory Liquidity Ratio (SLR). Earlier in February, the CRR was exempted for all retail loans to ease funding costs. The RBI has provided relief to both borrowers and lenders, allowing companies a three-month moratorium on loan repayments and the Securities and Exchange Board of India temporarily relaxed the norms related to debt default on rated instruments. At the same time, the implementation of the net stable funding ratio and the last stage of the phased-in implementation of the capital conservation buffers were delayed by six months. On April 1, the RBI created a facility to help with state government's short-term liquidity needs, and relaxed export repatriation limits. On April 3, the RBI revised trading hours for various markets to optimize thin resources and ensure safety of personnel. Earlier, the RBI introduced regulatory measures to promote credit flows to the retail sector and micro, small, and medium enterprises (MSMEs) and provided regulatory forbearance on asset classification of loans to MSMEs and real estate developers. CRR maintenance for all additional retail loans has been exempted, and the priority sector classification for bank loans to NBFCs has been extended for on-lending for FY 2020/21. During April 17-20, the RBI reduced the reverse repo by 25 bps to 3.75 percent, announced: (a) a TLTRO-2.0 for an initial amount of around 0.2 percent of GDP, in extension of the initial TLTRO program of around 0.4 percent of GDP (funds to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs); (b) special refinance facilities of around 0.2 percent of GDP for rural banks, housing finance companies, and small and medium-sized enterprises; (c) a temporary reduction of the Liquidity Coverage Ratio (LCR) from 100 to 80 percent and restriction on banks from making dividend payouts to conserve capital; (d) a standstill on asset classifications during the three-month loan moratorium period with 10 percent provisioning requirement, and an extension of the time period for resolution timeline of large accounts under default by 90 days. Furthermore, state’s Ways and Means Advance (WMA) limits have been increased by 60 percent (compared with 30 percent earlier) and the limit for the central government’s WMA for the remaining part of first half of the FY 2020/21 has been revised up from Rs1.2 to 2.0 trillion. The guideline to banks on loans to delayed commercial real estate projects was extended to NBFCs. On April 20, the Securities and Exchange Board of India (SEBI) reduced the required average market capitalization of public shareholding and minimum period of listing. The RBI asked financial institutions to assess the impact on their asset quality, liquidity, and other parameters due to spread of COVID-19 and take immediate contingency measures, including BCPs, to manage the risks following the impact assessment. On April 27, the RBI announced a special liquidity facility for mutual funds (SLF-MF) of Rs500 billion and a fixed-rate 90-day repo operation for banks exclusively for meeting the liquidity requirements of mutual funds, along with regulatory easing for liquidity support availed under the facility; and the SEBI reduced broker turnover fees and filing fees on offer documents for public issue, rights issue and buyback of shares by 50 percent. On April 30, the RBI extended the regulatory benefits under the SLF-MF scheme to all banks, irrespective of whether they avail funding from the RBI or deploy their own resources under the scheme. On May 13, the government announced measures targeting businesses: (i) a collateral-free lending program with 100 percent guarantee, (ii) subordinate debt for stressed MSMEs with partial guarantee, and (iii) partial credit guarantee scheme for public sector banks on borrowings of non-bank financial companies, housing finance companies (HFCs), and micro finance institutions. The government also announced (i) a Fund of Funds for equity infusion in MSMEs, and (ii) a special purpose vehicle (SPV) to purchase short-term debt of the eligible non-bank financial companies and housing finance companies, fully guaranteed by the government and managed by a public sector bank. The RBI’s policy measures since February 8 represent liquidity injection of around 4 percent of GDP. On May 22, the RBI eased policy rates by 40 basis points (repo to 4.0 percent and reverse repo to 3.35 percent), accompanied by further regulatory easing, which includes the extension of the loan moratorium and support for working capital financing by another three months (through end-August), the increase in the large exposure limit from 25 percent to 30 percent of bank capital, relaxation of some of the norms for state government financing, credit support to the exporters and importers and extension of the tenor of the small business refinancing facilities.

Exchange rate and balance of payments
  • On March 16, RBI announced a second FX swap ($2 billion dollars, 6 months, auction-based) in addition to the previous one with equal volume and tenor. The limit for FPI investment in corporate bonds has been increased to 15 percent of outstanding stock for FY 2020/21. Restriction on non-resident investment in specified securities issued by the Central Government has been removed. Foreign direct investment policy has been adjusted requiring that an entity of a country that shares a land border with India can invest only after receiving the government approval.


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Indonesia

Background. Indonesia has reported 23,851 confirmed COVID-19 cases, 1,473 deaths, and 6,057 recovered patients as of May 27, 2020. The government adopted various containment measures, including temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and other restrictions on public events. The government also banned Indonesia’s traditional annual exodus for Muslim holidays in an effort to curb the spread of the virus from Jakarta and other high-risk regions.

Reopening of the economy. While a comprehensive relaxation of social restriction measures has not yet been announced, a few airlines have resumed operations with enhanced health protocols, and the government is allowing exceptions in movement restrictions to accommodate special and urgent needs.

Indonesia’s growth slowed in the first quarter of 2020 to 3 percent y/y (from 5 percent in Q4:2019) or -2.4 percent (q/q), mostly driven by reduced consumption and investment as containment measures were step up in late February. External pressures have moderated in recent weeks, although volatility remains. Year-to-date, the rupiah depreciated by 6.1 percent vis-à-vis the U.S. dollar, reversing more than half of the 19 percent depreciation through late March; equity prices dropped by 26 percent, up from a 40 percent decline in late March; and the yield on rupiah denominated 10 year government bonds increased by 29 bps to 7.35 percent, down from a 132 bps spike in late March.


Key Policy Responses as of May 27, 2020

Fiscal
  • In addition to the first two fiscal packages amounting to IDR 33.2 trillion (0.2 percent of GDP), the government announced a major stimulus package of IDR 405 trillion (2.6 percent of GDP) on March 31, 2020, which was further expanded to IDR 641 trillion (3.9 percent of GDP) on May 19, 2020, as part of a national economic recovery program. The stimulus packages comprise (i) support to the health care sector to boost testing and treatment capability for COVID-19 cases; (ii) increased benefits and broader coverage of existing social assistance schemes to low-income households such as food aid, conditional cash transfers, and electricity subsidy; (iii) expanded unemployment benefits, including for workers in the informal sector, (iv) tax reliefs, including for the tourism sector and individuals (with an income ceiling); and (v) permanent reductions of the corporate income tax rate from 25 percent to 22 percent in 2020-21 and 20 percent starting in 2022. In addition to tax and spending measures, the stimulus package under the national economic recovery program also includes capital injection into SOEs and interest subsidies, credit guarantees, and loan restructuring funds for micro, small, and medium enterprises (MSMEs).

Monetary and macro-financial
  • · Bank Indonesia (BI) reduced the policy rate by 50 bps cumulatively in February and March 2020, to 4.5 percent. BI also announced other measures to ease liquidity conditions, including: (i) lowering reserve requirement ratios for banks; (ii) increasing the maximum duration for repo and reverse repo operations (up to 12 months); (iii) introducing daily repo auctions; (iv) increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions; and (v) increasing the size of the main weekly refinancing operations as needed. BI also adjusted macroprudential regulation to ease liquidity conditions and support bond market stability. A Presidential decree has expanded BI’s authority to maintain the stability of the financial system in presence of the COVID-19 shock, including by facilitating BI liquidity assistance to banks, allowing BI to purchase government bonds in the primary market as a last resort, and financing the deposit insurance agency (LPS) for bank solvency problems. BI has started to purchase government bonds in the primary market during the latest Islamic bonds auction. BI has also taken measures to further strengthen financial deepening, access to financial services, and monetary operations, including by facilitating collaboration between the banking industry and Fintech companies, and introducing Sharia-compliant instruments. To ease stock market volatility, the regulator OJK has introduced a new share buyback policy (allowing listed companies to repurchase their shares without a prior shareholders’ meeting) and introduced limits on stock price declines. OJK has also relaxed loan classification and loan restructuring procedures for banks to encourage loan restructuring and extended the deadline?by 2 months?for publicly listed companies to release their annual financial reports and hold annual shareholders meetings.

Exchange rate and balance of payments
  • BI has intervened in the spot and domestic non-deliverable foreign exchange markets, and in the domestic government bond market to maintain orderly market conditions. BI has also reaffirmed that global investors can use global and domestic custodian banks to conduct investment transactions in Indonesia. The stimulus packages also include measures to lift restrictions on imports and exports, aiming to ease global supply-chain disruptions caused by the virus.


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Iran, Islamic Republic of

Background. Iran reported its first confirmed COVID-19 cases on February 19, 2020 in the city of Qom. By May 21, it has reported almost 130,000 cases and 7,249deaths. After the outbreak, the government introduced a range of measures to limit the spread of the virus, including stopping flights from China, closing schools, malls, markets and key religious sites, and banning cultural and religious gatherings. On March 25, President Rouhani announced a partial lockdown, closing businesses and government offices for two weeks and banning travel between different cities. The Purchasing Managers’ Index in March 2020 decreased by more than 30 percent compared to the previous month.

Reopening of the economy. Concerned about the economic damage from the outbreak, the government ordered a step-by-step reopening of businesses that it considered to be at low or average risk in terms of spreading the virus starting on April 8. On April 27, Iran reopened all international borders, except with Turkmenistan, to revive regional trade, whilemosques and schools reopened respectively on May 12 and May 16. After the re-opening, at least eight provinces and Tehran were declared red zones – areas where new COVID-19 cases are increasing again.

At the end of March President Rouhani announced around 10 percent of GDP in COVID-19 relief and recovery measures.


Key Policy Responses as of May 21, 2020

Fiscal
  • Key measures include (i.) moratorium on tax payments due to the government for a period of three months (7 percent of GDP); (ii) subsidized loans for affected businesses and vulnerable households (4.4 percent of GDP); (iii.) extra funding for the health sector (2 percent of GDP); (iv.) cash transfers to vulnerable households (0.3 percent of GDP) and; (v.) support to the unemployment insurance fund (0.3 percent of GDP). Sukuk bonds and the National Development Fund will provide part of the financing.

    On April 15, the government embarked on its biggest-ever initial public offering, selling its residual shares in 18 companies (including 12 percent share of Social Welfare Fund (SHASTA), the largest public company) to generate income as it struggles with the economic consequences of COVID-19 and U.S. sanctions. The estimated privatization proceeds are at around 165 trillion rials (0.6 percent of GDP) from banks and insurance companies and 70 trillion rials (0.2 percent of GDP) from SHASTA. On May 3, the government’s spokesman said that shares of four state-owned oil refineries will begin to be offered to the public soon.

Monetary and macro-financial
  • The Central Bank of Iran has (i.) announced the allocation of funds to import medicine; (ii.) agreed with commercial banks that they postpone by three months the repayment of loans due in February 2020; (iii.) offered temporary penalty waivers for customers with non-performing loans; and (iv.) expanded contactless payments and increased the limits for bank transactions in order to reduce the circulation of banknotes and the exchange of debit cards.

Exchange rate and balance of payments
  • The Central Bank of Iran announced it injected USD 1.5 billion in the foreign exchange market to stabilize the rial.


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Iraq

Background. Iraq has been hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. The number of COVID-19 cases stands at 3877 as of May 21 with 140 fatalities. The authorities have implemented a range of measures to limit the spread of the virus, including closing borders, travel restrictions (including on international flights and internal public transportation), closing schools and universities, and a nationwide lockdown and curfew was introduced on March 22. These containment and mitigation measures will have a significant negative impact on non-oil activity, predominantly from 2020 Q2 onwards. Non-oil GDP is projected to contract by 9 percent in 2020. In addition to the direct impact of COVID-19, the decline in oil prices has resulted in a sharp fall in oil revenues since the beginning of the year. Revenues are likely to remain low throughout the year, reflecting both a lower profile for oil prices and a decline in production, following the OPEC+ agreement.

Reopening of the economy. There has been a modest relaxation of mitigation measures. The curfew was partially lifted at the start of Ramadan: the curfew is currently daily from 5pm-5am, with a total curfew on Friday and Saturday. Work is permitted in shops and factories only during non-curfew hours and gatherings of more than three people are prohibited. The number of customers permitted in a store is limited to one per each five square meters. A road-rationing system has been introduced, allowing vehicles to be on roads and public highways on alternate days and plans have been discussed to reopen Iraq’s cement manufacturing plants.

The recent acceleration in new cases has resulted in a tightening in curfew restrictions. A full lockdown has been re-imposed in six Baghdad districts, from May 20 to June 3, with entry and exit from these areas prohibited. The government has declared 21 – 28 May as a national Eid Al-Fitr holiday and, given the recent rise in cases, will impose a total curfew during this period.


Key Policy Responses as of May 21, 2020

Fiscal
  • To support the Ministry of Health's efforts to fight the COVID-19 pandemic, the Central Bank of Iraq has established a fund to collect donations from financial institutions with initial donations of $20 million from the CBI itself and $5 million from the Trade Bank of Iraq. The authorities have reduced spending in non-essential areas and have safeguarded budgetary allocations to the Ministry of Health. The Supreme Committee for Health and National Safety is introducing a cash transfer scheme, targeting workers in the private sector that do not receive salaries or benefits from the government. Each eligible individual is expected to receive 30,000 dinars each month, with an expected cost of around 600 billion dinars over 2 months.

Monetary and macro-financial
  • The Central Bank has announced a moratorium on interest and principal payments by small and medium-sized enterprises through its directed lending initiative (the “one trillion ID” initiative), and encouraged banks to extend maturities of all loans as they deem appropriate. The Central Bank also encouraged the use of electronic payments to contain the transmission of the virus, and instructed vendors to eliminate commissions on such payments for the next six months.

Exchange rate and balance of payments
  • No measures.


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Ireland

Background. Ireland has reported 24,841 confirmed cases of Covid-19 claiming 1639 lives as of May 28.The government has implemented a wide range of health and containment measures. On March 27, the government has issued strict restrictions on business activity, social distancing and travel -  everyone is to stay at home wherever possible with only few exceptions i) to travel to or from work for those providing an essential service; ii) shop for food and medicines; iii) to carry out vital services like caring; iv) brief individual exercise within 2km; v) farming.  Economic data releases for April-May 2020 show large increase in unemployment claims and fall in payments, mobility indicators and business activity, especially in services.  

Reopening of the economy. The authorities announced a gradual reopening plan starting on May 18th. The “stay-at-home” order is eased in five phases three weeks apart: phase 1)has started last Monday includes return of outdoor workers and small groups of family and friends are permitted to meet in the open; in phase 2) small retail outlets and marts where social distancing is possible can reopen; 3) cafes and restaurants may reopen; (4) return to work for those who cannot work from home; phase 5) envisages return to work across all sectors. Schools and colleges will re-open at the beginning of the next academic year in September and October. These phases may have to be reversed back if the rate of the infection increases significantly as the lockdown is eased. Similarly, the government may speed up the plan if Covid cases continue to fall.


Key Policy Responses as of May 28, 2020


Fiscal
  • The Irish authorities have announced a comprehensive fiscal package of €6.8 billion (about 2 percent of GDP) including: (i) income support measures, namely (a) the COVID-19 Wage Subsidy scheme refunding employers up to 70 percent of an employee's wages – up to a level of €410 to allow employers to pay their employees during the current pandemic (for workers earning less than €24,400 per year the replacement rate has been increased to 85 per cent); (b) the COVID-19 Enhanced Illness Benefit (“sick pay”) of €350 per week for medically-certified self-quarantined individuals (for a maximum of two weeks); (c) the COVID-19 Pandemic Unemployment Payment – a payment available to all employees and the self-employed who have lost employment due to a downturn in economic activity caused by the COVID-19 pandemic at a flat rate of €350 per week; ii) liquidity support for affected businesses which has been increased to €1 billion; iii)  €2bn health expenditure to expand the capacity in public hospitals, develop primary and community-based responses particularly for vulnerable people and procure the necessary essential equipment to deal with the impact of the coronavirus. Furthermore, a Memorandum of Understanding was formally agreed between the Departments of Health for the Republic of Ireland and Northern Ireland to underpin and strengthen North-South co-operation on the primary and community-based responses and procurement of additional essential equipment.

    On Saturday May 2, the government announced a range of additional supports for businesses amounting to €6.5bn, bringing the total pledged package to 4% of GDP. The measures include; a) a €10,000 restart grant for micro and small businesses based on a rates/waiver rebate from 2019; b) a three month commercial rates waiver for impacted businesses; c) a €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises; d) a €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates which will guarantee 80% of loans of between €10,000 and €1m to the SME sector; e) the ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue.

    Revenue Commission outlined some key advice and actions taken to assist small and medium enterprise SMEs: (i) Tax deferral Returns for the most immediately affected businesses, primarily in the retail, hospitality, leisure and childcare sectors, until the end of May. (ii) Application of interest on late payments is suspended for January/February VAT and both February and March PAYE (Employers) liabilities. (iii) Debt Enforcement is suspended until further notice. (iv) RCT (Relevant Contract Tax) rate review scheduled to take place in March 2020 is suspended. (v) Critical pharmaceutical products and medicines will be given a Customs ‘green routing’ to facilitate uninterrupted importation and supply.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    Additional measures announced by Central Bank of Ireland (CBI) include: (i) the release of the countercyclical capital buffer, which will be reduced from 1% to 0%.; ii) payment breaks available for mortgages, personal and business loans for customers affected by COVID-19 that were extended from three to six months. The payment break will not affect borrowers’ credit record and recording on the Central Credit Register will be adjusted; this will result in any arrears being exempt from the classification and loan loss provisioning as NPLs.

    Additionally, there are moratoriums on evictions and rent increases for duration of Covid emergency; and notice period for tenancies of less than six months was increased to 90 days; the Commission for Regulation of Utilities has issued a moratorium on disconnections of domestic customers for non-payment to the gas and electricity suppliers.

Exchange rate and balance of payments
  • No measures.


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Israel

Background. Israel has been significantly affected by the global spread of COVID-19, with 16,809 cases confirmed and 281 deaths as of May 28. The government has implemented a range of measures to contain and mitigate the spread of the virus, and to support people, jobs, and businesses. Measures in response to the COVID-19 outbreak have included increased testing, travel restrictions, social distancing measures—including restricting Israelis to 100-meter radius of their home for recreation, and closures of businesses—except essential services—and indoor premises.

Reopening of the economy. Starting on April 17, the authorities took gradual steps to ease containment measures by increasing the share of allowed employees in the workplace and reopening most stores. In May, the authorities also allowed schools to gradually open by the end of the month, eased movement and gathering restrictions. Malls opened early in the month, while restaurants towards the end of the month. The authorities have issued safety guidelines for distancing and sanitation in businesses and requiring the use of face masks in public places.

Key Policy Responses as of May 28, 2020
Fiscal
  • The parliament approved a package of NIS 80 billion (about 6.1 of 2020 GDP), which includes NIS 11 billion for health expenses. The package supports the social safety net (NIS 20bn), funding a relaxation in the requirements for unemployment benefits and grants for self-employed workers. It also provides NIS 41bn in liquidity assistance through (i) direct and government-guaranteed loans for large companies, SMEs, and other organizations, (ii) property tax relief for businesses, (iii) payment deferrals for VAT, municipal taxes, utilities, and income taxes, (iv) accelerated tax refunds, and (v) business grants. The package also contains NIS 8 bn for infrastructure projects, including IT support for SMEs and government digitalization. A one-time NIS 500 grant for families with children, the elderly and other vulnerable population groups was also approved by parliament. The authorities have announced additional 15.6 billion, including grants for businesses and increased guarantees for SMEs.

Monetary and macro-financial
  • Key monetary policy measures include: (i) the announcement of government bond purchases up to NIS 50 billion (NIS 13.2 billion purchased as of end-April), (ii) repo operations to provide shekel liquidity to the banks (NIS 1.8 billion as of end-April); (iii) a cut in the policy rate of 15bp to 0.1 percent, (iv) expanding the acceptable collateral for repos to include corporate bonds rated AA or higher and (v) a term funding scheme amounting NIS 5 billion to provide 3-year loans for banks to fund credit for small and microenterprises. The Bank of Israel has taken measures to ease financial conditions for households and companies by: (i) reducing bank’s regulatory capital requirement by one percentage point; (ii) increasing the loan-to-value cap on residence-backed loans (from 50 to 70 percent); (iii) eliminating the additional 1 percent capital requirement on housing loans, (iv) allowing banks to calculate the debt-payment to income ratio for mortgage loans using pre-crisis income, under certain circumstances (v) raising the cap (from 20 to 22 percent) on the banks’ loan portfolio allocated to construction companies; and (vi) allowing commercial banks to increase customers’ overdraft credit facilities and suspend restrictions on accounts of customers with checks returned due to insufficient funds. The Bank of Israel also announced a comprehensive framework that has been adopted by the banking system for deferring loan payments as assistance to bank customers in dealing with the ramifications of the coronavirus crisis. See also: https://www.boi.org.il/en/Pages/CoronaUpdates.aspx

Exchange rate and balance of payments
  • The Bank of Israel is providing additional USD liquidity through foreign exchange swaps of up to USD 15 billion (NIS 7.5 billion provided as of end-April).


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Italy

Background. Net inflows of COVID-19 cases have become negative. As of May 27, the number of active cases has declined to below 51,000, number of hospitalized patients and those in intensive care units is also declining. About 33,000 people have died.

Reopening of the economy. The nation-wide lockdown expired on May 4. Since then, manufacturing and construction have reopened under new safety rules (e.g., staggered shifts, spaced workstation, temperature checks, masks). The government has moved forward some of the reopening plans this week. In addition to retail shops, restaurants, cafes and hairdressers have reopened on May 18 (the initial reopening plan was June 1). Sports facilities will reopen on May 25, followed by cinemas and theatres on June 15. Regional governments are allowed the discretion to adjust the dates in both direction. People can now travel within their own region, and mobility restrictions across regions will be lifted on June 3, when international borders will also reopen without restriction to and from other EU countries.


Key Policy Responses as of May 27, 2020


Fiscal
  • On March 17, the government adopted a €25 billion (1.4 percent of GDP) “Cura Italia” emergency package. It includes (i) funds to strengthen the Italian health care system and civil protection (€3.2 billion); (ii) measures to preserve jobs and support income of laid-off workers and self-employed (€10.3 billion); (iii) other measures to support businesses, including tax deferrals and postponement of utility bill payments in most affected municipalities (€6.4 billion); as well as (iv) measures to support credit supply (€5.1 billion). On April 6, the Liquidity Decree allowed for additional state guarantees of up to €400 billion (25 percent of GDP). The guarantee envelope from this and earlier schemes is aimed to unlock more than €750 billion (close to 50 percent of GDP) of liquidity for businesses and households (see below). On May 15, the government agreed on a further €55 billion (3.2 percent of GDP) “Relaunch” package of fiscal measures. It provides, among other things, further income support for families (€14.5 billion), funds for the healthcare system (€3.3 billion), and other measures to support businesses, including grants for SMEs and tax deferrals (€16 billion).

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    Key measures adopted in the government’s Cura Italia’ and the Liquidity Decree emergency packages include: a moratorium on loan repayments for some households and SMEs, including on mortgages and overdrafts; state guarantees on loans to all businesses; incentives for financial and non-financial companies in the form of Deferred Tax Activities; state guarantee to the state development bank—Cassa Depositi e Prestiti—to support lending and liquidity to banks to enable them to finance medium- and large-sized companies; con-insurance scheme for exporters.

    The Bank of Italy have announced a series of measures to help banks and non-bank intermediaries under its supervision, in line with the initiatives undertaken by the ECB and the EBA. These include the possibility to temporary operate below selected capital and liquidity requirements; extension of some reporting obligations; and rescheduling of on-site inspections. On May 20, 2020, to promote the use of credit claims as collateral and to incentivize lending to small and medium-sized enterprises, the Bank of Italy has extended the additional credit claim frameworks to include loans backed by COVID-19-related public sector guarantees.

    IVASS (Insurance supervisory authority) followed the EIOPA recommendations and called insurance companies to be prudent about dividends and bonus payments to protect their capital position; insurance companies are asked to provide updated Solvency II ratios on a weekly basis.

    CONSOB called a three-month ban on shorting of all shares and lowered a minimum threshold beyond which it is required to communicate the participation in a listed company. These measures are aimed to contain the volatility of the financial markets and to strengthen the transparency of the holdings in the Italian companies listed on the Stock Exchange.

Exchange rate and balance of payments
  • No measures.



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Jamaica

Background. The total number of confirmed COVID-19 infections has reached 529 cases, with 9 recorded deaths as of May 21. The government has taken early and proactive measures to contain the spread of infection across the island, including cancellation of all large public and private events, school shutdowns, quarantine of entire communities. Both the imposed daily curfews across the island, and closure of the island’s borders to incoming visitors remain in place.


Key Policy Responses as of May 21, 2020

Fiscal
  • The Minister of Finance announced tax cuts of around 0.6 percent of GDP, along with targeted measures for up to 0.5 percent of GDP to counteract the effects of COVID19. This is largely expected to be financed by ongoing asset divestment. Additional measures have been announced to support the most affected sectors by the virus and contain labor shedding, including SCT and custom duty waivers on medical supplies and sanitizers and a COVID-19 Allocation of Resources for Employees (CARE) program, which envisages (i) temporary cash transfers to businesses in targeted sectors based on the number of workers employed; (ii) temporary cash transfer to individuals where loss of employment can be verified since March 10; (iii) grants targeted at the most vulnerable segments of society. The Minister also noted that the Fiscal Responsibility law contains an escape clause that would allow for some temporary flexibility in meeting the fiscal targets, should the economic situation deteriorate further. On May 13, the Ministry of Finance tabled in Parliament a Supplementary Budget for FY2020/21 targeting a primary balance of 3.5 percent of GDP to account for the expected revenues shortfalls and necessary spending reallocations as a result of the COVID-19 crisis.

Monetary and macro-financial
  • The overnight policy rate remains unchanged at 0.5 percent, but Bank of Jamaica has taken additional actions to ensure uninterrupted system wide liquidity, with an estimated J$57 billion liquidity injection to date, and removal of limits on the amounts that deposit taking institutions can borrow overnight without being charged a penalty rate and a broadening of the range of acceptable repo collateral. The authorities are also encouraging the banking sector to conserve capital by postponing dividends payments to shareholders reschedule loans and mortgages, in addition to the mortgage rate cuts already announced by the National Housing Trust.

Exchange rate and balance of payments
  • The Bank of Jamaica has intervened in the FX market through limited sales of reserves via the B-FXITT auction mechanism, issuance of US$ linked notes and, repos of FX denominated Government of Jamaica bonds with banks and securities dealers.


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Japan

Background. As of May 29, 2020, Japan has reported 16,647 confirmed COVID-19 cases and 886 deaths. In response to the outbreak, the authorities have taken several measures targeted towards health and containment efforts. Japan expanded entry bans on an additional 15 countries as of April 29; as a result, this brings to a total of 90 countries currently subject to Japan’s entry ban which will restrict the entry of foreigners who have visited COVID-19 affected countries and regions within the last 14 days. On April 16, Prime Minister Shinzo Abe declared a nationwide state of emergency, expanding the coverage of the state of emergency to all Japanese prefectures from the seven prefectures (including Tokyo, Saitama, Kanagawa, Chiba, Osaka, Hyogo, and Fukuoka) announced on April 7. The nationwide state of emergency will be in place through May 6, which will enable prefectural governors in the designated areas to request people to stay at home, order closures of schools and public facilities, build temporary medical facilities, and adopt actions to support medical and food supplies. On May 4, PM Abe extended the nationwide state of emergency through May 31. The 2020 Tokyo Olympic Games have been postponed to July 23-August 8, 2021.

Reopening of the economy. Amid the declining trend of daily new confirmed cases of COVID-19 since the beginning of May, the state of emergency was lifted for 39 prefectures out of a total of 47 prefectures on May 14 and for Osaka, Kyoto, and Hyogo on May 21. On May 25, the state of emergency was lifted for all prefectures, earlier than the previous May 31 expiry date.


Key Policy Responses as of May 29, 2020

Fiscal
  • On April 7 (partly revised on April 20), the Government of Japan adopted the Emergency Economic Package Against COVID-19 of ¥117.1 trillion (21.1 percent of 2019 GDP) and subsumed the remaining part of the previously announced packages (the December 2019 stimulus package (passed in January 2020) and the two COVID-19-response packages announced on February 13 and March 10 respectively). The April package aims at five objectives, including to: (i) develop preventive measures against the spread of infection and strengthen treatment capacity (expenditure of 0.5 percent of 2019 GDP), (ii) protect employment and businesses (16.0 percent of 2019 GDP), (iii) regain economic activities after containment (1.5 percent of 2019 GDP), (iv) rebuild a resilient economic structure (2.8 percent of 2019 GDP), and (v) enhance readiness for the future (0.3 percent of 2019 GDP). The key measures comprise cash handouts to every individual and affected firms, deferral of tax payments and social security contributions, and concessional loans from public and private financial institutions.

    On May 27, the Government of Japan announced the second FY2020 draft supplementary budget. The package, worth ¥117.1 trillion (21.1 percent of 2019 GDP), covers (i) health-related measures, (ii) support to businesses, (iii) support to households, (iv) transfers to the local governments, and (v) raising the ceiling of the COVID-19 reserve fund. The specific measures include expansion of the work subsidies, provision of subordinated loans by the public financial institutions to affected firms, and subsidies to affected firms for their rent payments.

    Japan is the largest contributor to IMF financial resources, and largest contributor to the Fund’s concessional lending facilities. In early April, Japan pledged an additional US$100 million contribution to the IMF’s Catastrophe Containment and Relief Trust as immediately available resources to support the Fund’s capacity to provide grant-based debt service relief for the poorest and most vulnerable countries to combat COVID-19. In order to provide emergency financing for broader emerging markets and developing countries to meet their prospective imminent needs, on April 16, Japan announced that it is aiming at doubling its contribution to the Poverty Reduction and Growth Trust (PRGT) from the current SDR 3.6 billion. Japan made available the first SDR 1.8 billion immediately. Japan calls on other member countries to follow quickly, and Japan will match an additional SDR 1.8 billion with their contributions.

Monetary and macro-financial
  • On March 16, the Bank of Japan (BoJ) called a monetary policy meeting and announced a comprehensive set of measures to maintain the smooth functioning of financial markets (notably of U.S. dollar funding markets), and incentivize the provision of credit. These include targeted liquidity provision through an increase in the size and frequency of Japanese government bond (JGB) purchases, special funds-supplying operation to provide loans to financial institution to facilitate financing of corporates, a temporary increase in the annual pace of BoJ’s purchases of Exchange Traded Funds (ETFs) and Japan-Real Estate Investment Trusts (J-REITs), and a temporary additional increase of targeted purchases of commercial paper and corporate bonds. The BoJ has provided lending support through the special funds-supplying operation, and made purchases of Japanese government securities, commercial paper, corporate bonds, and exchange-traded funds.

  • At its April 27 monetary policy meeting, the BoJ announced additional measures to maintain stability in financial markets and support credit provision. The BoJ decided to purchase a necessary amount of JGBs without setting an upper limit on its guidance on JGB purchases. In addition, it raised the maximum amount of additional purchases of commercial paper and corporate bonds, lifting the upper limit of commercial paper and corporate bond holdings to ¥20 trillion (US$186 billion) in total. The special funds-supplying operations have been scaled up by expanding the range of eligible counterparties and collateral to private debt (including household debt), as well as by applying a positive interest rate of 0.1 percent to the outstanding balances of current accounts held by financial institutions at the BoJ that correspond to the amounts outstanding of loans provided through this operation. On May 22, the BoJ introduced a new fund-provisioning measure to support financing of mainly small- and medium-sized enterprises, providing funds against loans such as interest-free and unsecured loans made by eligible counterparties based on the government’s emergency economic measures.

  • The BoJ in coordination with the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve and the Swiss National Bank enhanced the provision of U.S. dollar liquidity on March 15, by lowering the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points. During May 25-29, the BoJ provided U.S. dollar funding through the swap line of US$1.5 billion for 84 days and US$5.3 billion for 7 days. Japan also has several important bilateral and regional swap arrangements with Asian countries.

  • The government expanded the volume of concessional loan facilities (interest free without collateral) primarily for micro, small and medium-sized business affected by COVID-19 through the Japan Finance Corporation and other institutions. The government will also enhance access to loans with the same conditions from local financial institutions, such as local banks. To support borrowers during this period of stress, the Financial Services Agency has reassured that banks can assign zero risk weights to loans guaranteed with public guarantee schemes, draw down their capital conservation and systemically important bank buffers to support credit supply, and draw down their stock of high-quality liquid assets below the minimum liquidity coverage ratio requirement.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly.


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Jordan

Background. Jordan has reported 672confirmed cases, and 9 deaths related to COVID as of May20th. At the onset of the global epidemic, the authorities implemented a range of measures to try and limit the spread of the virus. Measures included the suspension of all international flights, the closure of all schools and universities, the closure of restaurants and archeological sites, the interruption of all public events and gatherings, and quarantines. The defense law was enacted to enforce strict curfews, close businesses, and place restrictions on the movement of people within the country to counter the epidemic. The authorities also launched a public communication and awareness campaign to inform the public on examination and treatment facilities. The number of medical and nursing staff was increased in hospitals. The government has allowed only food and dairy industries and some export-oriented industries such as pharmaceuticals, potash and phosphates to continue some of their operations.

Reopening of the economy. On May 4th, Jordan lift all restrictions on economic activity and reopened all economic sectors, with safety guidelines to be implemented. Universities and schools remain closed and a curfew continues to be in effect at night. This follows a phased out easing of the lockdown, which started on April 6th, when factories within industrial zones were allowed to start operations again, but only foreign workers living inside the zones were allowed to resume work while not circulating outside the zones. Certain industrial sectors were permitted to resume work with a maximum of 40 per cent of their employees in two shifts. On April 14th, Prime Minister Azzaz announced that the government will soon ease the lockdown by allowing more businesses to return to work. On April 13th, the Ministry of Labor allowed private sector entities to apply for wage reductions of employees who are not currently working as a result of the curfew prompted by the COVID-19 pandemic. On April 21st, selected sectors were allowed to reopen and operate with a manpower of 30%. From April 22nd, the Tafilah, Karak, and Ma’an governorates were closed to the outside, so that all sectors within those areas could reopen as in the Aqaba governorate. The government also started organizing the return of Jordanians that were abroad at the onset of the crisis and had not been able to return given the interruption of international flights. On April 30th, commercial activities in malls and shopping centers were permitted, except for restaurants, cinemas, entertainment places and children's playgrounds, which will remain closed. Strict distancing measures were still being implemented and the government announced it will issue a new Defense Order under which penalties will be imposed on establishments and public transport entities that do not adhere to public safety and security measures put in place to combat the spread of the virus.The Ministry of Health and local companies developed the “Aman” (“Safety”) application, which alerts users when they come into contact with someone who has COVID-19. On May 21st, the Government announced a three-day comprehensive curfew, as the number of infections increased significantly in the preceding week.

On May 20th, 2020, the Executive Board of the International Monetary Fund (IMF) approved Jordan’s request for emergency financial assistance under the Rapid Financing Instrument (RFI) equivalent to SDR 291.55 million (about US$ 400 million, or 85 percent of quota). The purchase under the RFI is expected to cover part of Jordan’s financing needs stemming from the COVID-19 shock.


Key Policy Responses as of May 21, 2020

Fiscal
  • On March 18, the Ministry of Finance announced a host of measures in response of the epidemic. Measures included (i) the postponement, until the end of the year of the collection of sales tax on all domestic sectors, and imports related to health, and the supply of medicines; (ii) the allocation of 50 percent of the maternity insurance revenues (JD 16 million) to material assistance for the elderly and the sick; (iii) the introduction of price ceilings on essential products; (iv) the postponement of 70 percent of the value of customs duties for selected companies and the reduction of social security contributions from private sector establishments (from 21.75 to 5.25 percent). On March 31, Prime Minister Omar Razzaz issued the Defense Order No. 4, establishing a coronavirus relief fund under the name "Himmat Watan" (a nation's effort), to which local and foreign donations will be deposited to support the Kingdom’s efforts to eradicate COVID-19.

Monetary and macro-financial
  • The Central Bank of Jordan reduced most policy rates by 50 basis points on March 3, and further by 100 basis points on March 16th. In addition, the Central Bank announced a package of measures aimed at containing the impact of the Coronavirus on the economy. The measures included: (i.) allowing banks to postpone the credit facilities installments granted to clients of sectors impacted by the virus; (ii.) pumping additional liquidity to the banks of JD 550 million by reducing the compulsory reserve ratio on deposits with banks from 7 percent to 5 percent.

Exchange rate and balance of payments
  • No measures.


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Kazakhstan

Background. Kazakhstan reported 6,969 cases of COVID-19 and 35 deaths as of May 20, with about half of the cases outside of Nur-Sultan and Almaty, the initial focal sites. A state of emergency was announced by President Tokayev in mid-March to contain the spread of the coronavirus. Large cities are under quarantine. Overall growth in the first four months was negative (yoy) despite strong performance in January and February. The President announced a significant anti-crisis package ($13 billion or 9 percent of GDP) in two rounds in March. Policy actions have included some trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, access to medical care for the uninsured (from April 1 to July 2), and targeted assistance.

Reopening of the economy. The state of emergency was lifted on May 11, though some of the quarantine measures remain in place to safeguard public health. Enterprises in selected sectors have resumed work with strong sanitary and epidemiological measures. Shopping malls, hotels, cafes, and restaurants reopened on May 18 in Nur-Sultan. Domestic flights have also resumed operations, while international ones continue to be suspended. Restrictions on food exports, which were introduced during the state of emergency to ensure domestic food supply, are expected to be removed on June 1. The government recently announced further measures to restore economic growth (see below).


Key Policy Responses as of May 20, 2020

Fiscal
  • The anti-crisis package includes cash payments to the unemployed and self-employed, an increase in pension and social benefits, additional health spending, and support for employment and business. Subsidized lending of KZT 1 trillion (1½ percent of GDP) is being provided under State Program “Economy of Simple Things,” along with actions to help small and medium-sized enterprises (SMEs) finance working capital (KZT 600 billion). KZT 1.8 trillion is allocated to support employment under an “Employment Roadmap” program, including some large-scale projects to modernize the transportation infrastructure. Selected enterprises and individual entrepreneurs are also eligible for new tax incentives. Further measures recently announced to restore economic growth include: a subsidized mortgage program for households, tax incentives to hard-hit sectors (civil aviation, tourism), credit support to SMEs and manufacturing enterprises (the latter via a newly created industry development fund), and infrastructure development.

Monetary and macro-financial
  • The National Bank (NBK) raised its policy rate from 9.25 percent to 12 percent on March 10 after pressures on the tenge (KZT) intensified with the drop of oil prices. It cut the base rate to 9.5 percent and further widened the interest-rate corridor to +/-200 bps in early April to support activity. The authorities have encouraged banks and other lenders to grant loan repayment deferral to eligible borrowers. To encourage lending, the authorities have also lowered risk weights for SME exposure in tenge (from 75% to 50%) and for FX loans (from 200% to 100%) until October. Cash withdrawals limits will be temporarily imposed on legal entities starting early June. A pilot biometric information center has been launched to help banks identify customers in order to provide remote banking services.

Exchange rate and balance of payments
  • The NBK allowed the tenge to depreciate by over 15 percent to almost 450 KZT/$ from March 9, intervening to mitigate excessive volatility. It also introduced a limit on bid-ask spread and lowered the ceiling of FX purchase without supporting import documents for the duration of the state of emergency. Since April, the tenge has partially recoveredand the NBK has ceased FX interventions, but the tenge remains vulnerable to oil price volatility.


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Kenya

Background. As of May 6, 2020, Kenya has reported 582 cases of COVID-19 (26 deaths). The government has adopted a number of containment measures, including social distancing and closure of most non-essential social spaces to gatherings; encouragement of teleworking where possible; a suspension of international flights (with the exception of cargo flights) and imposition of a 14-day quarantine for those recently returning from abroad; establishment of isolation facilities; and limitations on public transportation passenger capacity.


Key Policy Responses as of May 7, 2020

Fiscal
  • The government has earmarked Ksh40 billion (0.4 percent of GDP) in funds for additional health expenditure, including enhanced surveillance, laboratory services, isolation units, equipment, supplies, and communication; social protection and cash transfers; food relief; and funds for expediting payments of existing obligations to maintain cash flow for businesses during the crisis. Given lower revenues due to decreased economic activity and the need to accommodate emergency spending, the government is currently reassessing the budget deficit target for FY 2019/20. A package of tax measures has been adopted, including full income tax relief for persons earning below the equivalent of $225 per month, reduction of the top pay-as you earn rate from 30 to 25 percent, reduction of the base corporate income tax rate from 30 to 25 percent, reduction of the turnover tax rate on small businesses from 3 to 1 percent, and a reduction of the standard VAT rate from 16 to 14 percent.

Monetary and macro-financial
  • On March 24, the central bank (1) lowered its policy rate by 100 bps to 7.25 percent; (2) lowered banks’ cash reserve ratio by 100 bps to 4.25 percent; (3) increased the maximum tenor of repurchase agreements from 28 to 91 days; and (4) announced flexibility to banks regarding loan classification and provisioning for loans that were performing on March 2, 2020, but were restructured due to the pandemic. The central bank has also encouraged banks to extend flexibility to borrowers’ loan terms based on pandemic-related circumstances and encouraged the waiving or reducing of charges on mobile money transactions to disincentivize the use of cash. On April 15, the central bank suspended the listing of negative credit information for borrowers whose loans became non-performing after April 1 for six months. A new minimum threshold of $10 was set for negative credit information submitted to credit reference bureaus. On April 29, the central bank lowered its policy rate by 25 bps to 7.0 percent.

Exchange rate and balance of payments
  • No measures.


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Kiribati

Background. Kiribati does not have any confirmed cases as of May 7, 2020. Travel restrictions have been in place since January and borders have been closed on March 21, except for delivery of essential goods (quarantine requirements apply at all ports). A press release to prevent speculations and panic was released on March 17 and government task forces have been formed to address commodity and cargo buffers; communication and awareness; isolation centers and containment efforts; and border control. A state of public emergency has been declared and schools suspended on March 28.


Key Policy Responses as of May 7, 2020

Fiscal
  • No measures.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Korea

Background. Korea has reported 11,265 confirmed COVID-19 cases and 269 deaths as of May 27, 2020. The authorities have implemented comprehensive testing and tracking, which has enabled early isolation and treatment while minimizing widespread mobility restrictions. After registering more than 500 new cases per day in late February and early March, the number has slowed to an average of about 15-20 per day in May. Real GDP in Q1-2020 declined by -1.2 percent in quarterly terms and year-in-year growth slowed to 1.3 percent, from 2.5 percent in Q4-2019. Schools and public facilities that were closed are proceeding in May and June with gradual re-opening under “everyday life quarantine” guidelines announced by the authorities.


Key Policy Responses as of May 27, 2020

Fiscal
  • On March 17, the National Assembly passed the 1st 2020 supplementary budget. The supplementary budget includes a decline in revenue by KRW 0.8 trillion, and additional KRW 10.9 trillion spending on disease prevention and treatment, loans and guarantees for business affected, support for households affected, and support for local economies affected.

    On April 30, the National Assembly passed the 2nd 2020 supplementary budget. The supplementary budget includes an increase in spending by KRW 8 trillion to fund an emergency relief payment program of KRW 14.3 trillion that provides transfers to households.

    On April 22, the government announced additional KRW 10.1 trillion spending on wage subsidies and assistance for the unemployed. The proposal is expected to require approval from the National Assembly.

    On May 14, the government announced that it would (1) create 1.56 million more public sector jobs; (2) work on expanding unemployment insurance to platform workers, freelancers and other contractual workers. Both plans are expected to require approval from the National Assembly.

    Other announced measures, which either do not require approval from the National Assembly or have not reached supplementary budget proposal stage include:

    • February 5-19: Tax, customs and financial support for businesses affected by the disease; coastal vessel financing.
    • February 28: Financial and tax support for families and businesses affected, including 50 percent income tax cuts given to landlords for rent.
    • March 30: Social security contribution relief. A total of KRW 7.5 trillion payment deferrals and 0.9 trillion contribution cuts are expected. The government will also provide an expected KRW 1.3 trillion in electricity bill payment deferrals.
    • April 1: Support for tourism-dependent businesses, telecommunications businesses and film industries.
    • April 8: Measures to frontload public sector investment and purchases; tax support for boosting private sector spending.
    • April 9, Financial support for childcare due to school and daycare closure will be expanded.

     

Monetary and macro-financial
  • The Bank of Korea (BOK) has taken several measures to ensure continued accommodative monetary conditions and facilitate financial system liquidity. These include 1) lowering the Base Rate by 50 basis points , from 1.25 percent to 0.75 percent; 2) making unlimited amounts available through open market operations (OMOs); 3) expanding the list of eligible OMO participants to include select non-bank financial institutions; 4) expanding eligible OMO collateral to include bank bonds, certain bonds from public enterprises and agencies, and government-guaranteed MBS issued by KHFC; 5) easing collateral requirements for net settlements in the BOK payments system; and 6) purchasing Korean Treasury Bonds (KRW 3.0 trillion). To augment available funding for SMEs, the BOK increased the ceiling of the Bank Intermediated Lending Support Facility by a total of KRW 10 trillion (about 0.5% of GDP) and lowered the interest rate to 0.25 percent (from 0.5-0.75 percent).

    On March 24, President Moon announced a financial stabilization plan of KRW 100 trillion (5.3 percent of GDP). The main elements are: 1) expanded lending of both state-owned and commercial banks to SMEs, small merchants, mid-sized firms, and large companies (the latter on a case-by-case basis) including emergency lending, partial and full guarantees, and collateralization of loan obligations; 2) a bond market stabilization fund to purchase corporate bonds, commercial paper, and financial bonds; 3) financing by public financial institutions for corporate bond issuance through collateralized bond obligations and direct bond purchases; 4) short-term money market financing through stock finance loans, BOK repo purchases, and refinancing support by public financial institutions; and 5) an equity market stabilization fund financed by financial holding companies, leading financial companies, and other relevant institutions.

    On April 22 additional measures were announced totaling KRW 25 trillion (1.3 percent of GDP), mainly through creation of a special purpose vehicle to purchase corporate bonds and commercial paper (KRW 10 trillion) and additional funds for SME lending (KRW 10 trillion). Financing support to exporters and specific industries has also been announced. On April 8, a package of measures totaling KRW 36 trillion (1.9 percent of GDP) was announced to ease financing constraints for exporters, including increasing the amount and maturity of trade credit and expanding trade insurance. On April 22, President Moon announced a key industry stabilization fund would be established for KRW 40 trillion (2.1 percent of GDP) and operated by Korea Development Bank to support seven key industries: airlines, shipping, shipbuilding, autos, general machinery, electric power, and communications. Funds will be raised by issuance of government-guaranteed bonds and contributions of private funds. Support will be provided through loans, payment guarantees, and investments. As conditions for accessing support, businesses will be required to maintain employment, limit executive compensation, dividends, and other payouts, and share benefits from business normalization in the future.

    Other measures taken pertaining to financial market stability include expansion of BOK repo operations to non-banks, creation of a BOK lending program to non-banks with corporate bonds as collateral, a temporary prohibition on stock short-selling in the equity markets, temporary easing of rules on share buybacks, and temporary easing of loan-to-deposit ratios for banks and other financial institutions and the domestic currency liquidity coverage ratio for banks.

Exchange rate and balance of payments

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Kosovo

Background. Number of confirmed COVID-19 cases has reached 1,048 with 801 been recovered and 30 deaths as of May 27. Containment measures taken by the government in order to delay the spread of the coronavirus include temporary suspension of educational process on all levels, closures of all non-essential businesses, social distancing, travel and movement restrictions. Starting from April 15th stronger movement restriction been introduced allowing people to go out only for 1.5 hours, since May 4th this was extended to 3 hours per day and from May 18 to 4 hours. From May 27, movement of people been extended to 16 hours per day from 5.00 until 21.00.

Reopening of the economy. Starting from May 4, relaxation of some containment measures has started by Ministry of Health. Business activities under construction sector, real estate, trade of vehicles and some small shops been allowed to work. Second phase of relaxation measures has started on May 18 when more business activities allowed to work such are dentists, barbers, restaurants (take away), green market, museums, art galleries, urban transport . Starting from June 1st third phase will be implemented where almost all business activities will be allowed to work.


Key Policy Responses as of May 27, 2020


Fiscal
  • Key spending and tax measures include: (i) allocation of €6 million to the health ministry; (ii) deferrals for corporate income and personal income taxes, and VAT; (iii) advancing payments for social assistance schemes by additional one month's amount (from one month to two months) to support families in need; (iv) removal of VAT on imports of wheat and flour; (v) deferral of public utilities payments until end of April. In addition, fiscal package in the amount of 170 million euro (2.5 percent of GDP) been adopted by government and execution of it to start soon. Ministry of Finance has approached IFIs (e.g., IMF, WB, EU and EBRD) and other bilateral donors for financial support. Ministry of Finance has started making payment to workers as been planned under fiscal package where 55 million been paid so far and more payments to take place in coming days.

Monetary and macro-financial
  • The Central Bank of Kosovo (CBK) together with the Kosovo Banking Association decided to suspend the payment of loan instalments for businesses and individuals starting from March 16 until April 30. This suspension could be extended depending on the situation. The CBK will apply regulatory forbearance on loan provisions and capital requirements on reprogrammed loans.

Exchange rate and balance of payments
  • No measures on balance of payments controls or restrictions. No exchange rate measures are possible as Kosovo is unilaterally euroized.


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Kuwait

Background. Kuwait has been hit by two related shocks - the COVID-19 outbreak and sharp drop in oil prices. The first case was reported on February 24, and, as of May 20, the number of confirmed COVID-19 cases stood at 17,568 with 124 deaths and 4,885 recoveries. The government acted early with a range of measures to contain the spread of the virus. These included imposing a curfew and travel restrictions, suspending inbound commercial flights, closing schools and universities, banning public celebrations and gathering, and suspending nonessential work in governmental entities. A full curfew is in place until May 30. The authorities also adopted a package of policy measures to cushion the social fallout from the pandemic and prevent a permanent scarring of the economy, focusing on small- and medium-size enterprises and preserving employment.

Reopening of the economy. No measures.


Key Policy Responses as of May 20, 2020

Fiscal
  • The government allocated KD 500 million ($1.6 billion or 1.4 percent of GDP) additional funds to support efforts in fighting the spread of COVID-19. It has formed a committee to implement stimulus measures to ease the negative impact of COVID-19 on economic activity. In particular, the authorities implemented the following measures:

    (i) postpone social security contributions for 6 months for private sector companies;

    (ii) remove government fees on selected sectors provided that savings are passed on to customers;

    (iii) continue providing full unemployment benefits to nationals;

    (iv) provide concessional, long-term loans to SMEs though joint financing from the SME fund and banks.

Monetary and macro-financial
  • The Central Bank of Kuwait (CBK) has been working with commercial banks to ensure uninterrupted access to financial services, including online banking, payment, settlement and electronic clearing systems, and access to disinfected banknotes. In addition, the CBK implemented the following measures:

    (i) Committed to provide liquidity if needed;

    (ii) Reduced interest rates on all monetary policy instruments by 1 percentage point, following the U.S. Fed’s decision to cut interest rates to zero;

    (iii) Instructed banks to delay loan payments from companies affected by the shock for six months;

    (iv) Instructed banks to provide SMEs affected by the shock with financing at maximum of 2.5% interest rate.

    (v) Decreased the risk weights for SMEs (from 75 percent to 25 percent) in calculation of risk-weighted assets for determining capital adequacy;

    (vi) Reduced banks’ capital adequacy requirements by 2.5 percentage points, to 10.5;

    (vii) Reduced the regulatory Net Stable Funding Ratio and Liquidity Core Ratio from 100 percent to 85 percent, and the Liquidity Ratio from 18 percent to 15 percent;

    (viii) Increased the Loan-to-Value limits for land purchase for residential projects from 50 to 60 percent, for existing homes from 60 to 70 percent, and for home construction from 70 to 80 percent.

Exchange rate and balance of payments
  • No measures.


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Kyrgyz Republic

Background. The COVID-19 pandemic has been hitting the economy very hard and created an urgent balance of payments need. As of May 21, there were 1,313 confirmed COVID-19 cases and 14 deaths in the country. All sectors are being impacted with extreme severity as measures are being taken to stop the spread of the virus. The authorities have taken drastic measures to prevent the outbreak, including the closure of borders with China where 36 percent of imports of goods originate, border restrictions with Kazakhstan and Uzbekistan, the quarantine of people coming from abroad, a lockdown of all non-essential activities, and a curfew. As a result, tax revenue has declined substantially. At the same time, the weakening of oil prices has resulted in a decline in economic activity in Russia and a fall in remittances from Kyrgyz workers in that country. The state of emergency ended on May 10 and the curfew was lifted, while the quarantine regime will work until the stabilization of the epidemiological situation.

Reopening of the economy. The state of emergency ended on May 10 and the curfew was lifted, while the quarantine regime will work until the stabilization of the epidemiological situation. The authorities plan to resume all activities in the economic and social spheres from June 1, 2020, with some restrictions on cultural, sports, and family events; entertainment activities, and preschool activities. Large shopping centers and public transport will open on May 21, and May 25, respectively. The authorities will strictly monitor compliance with sanitary and epidemiological standards.


Key Policy Responses as of May 21, 2020

Fiscal
  • The authorities will safeguard health spending at around budgeted levels and create space for increasing health and other spending. In collaboration with international organizations, the authorities have recently adopted a health sector contingency plan, with an estimated cost of $16 million (0.2 percent of GDP) to provide training for health-care workers, procure personal protective equipment and medical tests, and to put in place a communication plan about measures to contain COVID-19. To mitigate the impact on the economy, the authorities have approved the first package of anti-crisis plan economic measures of $15 million (0.2 percent of GDP) including the postponement of tax payments, time-bound exemptions of property and land taxes, and temporary price controls on 11 essential food items. They are preparing a second package of economic measures of about $540 million (7 percent of GDP), including temporary tax exemptions for SMEs, support food security program to the vulnerable groups, and subsidized credit to banks to provide funding to small and medium-size enterprises through soft loans. The implementation of containment measures has caused 11 percent (y-o-y) drop in tax revenue in Q1 2020, which will lead to a temporary widening of the budget deficit. The authorities are seeking donor financial support to close the financing gap. On March 26, the IMF Board agreed to provide $121 million in emergency financial support to the Kyrgyz authorities. On May 8, the IMF Board approved $121 million, the second emergency assistance to the Kyrgyz Republic since the outbreak of the pandemic.

Monetary and macro-financial
  • The NBKR raised the policy interest rate by 75 basis points to 5 percent in February, amid global uncertainty and the increase in inflation.

    The NBKR will postpone enactment of several financial regulations until further notice. In addition, it took the following decisions: 1) liquidity ratio (ratio between liquid assets and liabilities) is lowered to a minimum of 30% (from the current 45%); 2) liquidity ratio requirements (7-day and overnight/instant) will be removed; 3) minimum threshold level for mandatory reserve requirements is reduced from 80 to 70%; 4) risk-weights of FX corporate and retail loans will be reduced from 150% to 100%; 5) banks and Non-Bank Financial Institutions (NBFIs) should create a loan-loss reserve equal to 100% for the amount of overdue accrued interest payments on loans that have been given the status of non-accrual of interest income when overdue arrears are 270 days or more (from the now 90 days); 6) in the event of arrears arising from COVID-19, banks or NBFIs have the right not to downgrade the classification category due to financial condition of the borrower.

Exchange rate and balance of payments
  • The National Bank of the Kyrgyz Republic (NBKR, the central bank) has already sold $217 million of foreign exchange reserves so far (about 50 percent more than total FX interventions for the whole year of 2019) and the KGS has depreciated by 7.7 percent vis-a-vis the US$ since the beginning of the year after a long period of stability since mid-2016. The external position is weakening as remittances and tourism receipts are falling (i.e. remittances by 19 percent in January-March compared to the same period last year).


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Lao P.D.R.

Background. Lao P.D.R. has 19 confirmed casesof COVID-19 as of May 20, 2020. A nationwide lockdown between April 1 and 19 was declared on March 29, and on April 15, it was extended until May 3.

Reopening of the economy. Restriction measures have been partially lifted on May 4 and some more restrictions have been further removed on May 18. The new loosened measures allow public offices and businesses to resume and are expected to last until June 1. It aims to mitigate the economic impact especially on the service sector. Restaurants, food vendors, retail and wholesale outlets, fresh markets, supermarkets, personal care services as well as development projects, companies and factories are also permitted to resume operations, but must abide by strict preventative measures introduced by the National Taskforce. In country travel and public transport are now permitted. Some classes at primary, lower and upper secondary schools can resume on May 18 while all others are slated to open on June 2. All indoor and outdoor sporting activities are now permitted. However, border checkpoints, night markets, and entertainment venues remain closed. Price control of essential goods is still in place. The Taskforce Committee for COVID-19 Epidemic Prevention, Control and Response is monitoring latest developments and coordinates the authorities’ response. A separate Taskforce Committee and its seven working groups are in place to address the economic impact of the crisis.

Key Policy Responses as of May 20, 2020
Fiscal
  • Fifty-two billion kip has been allocated for prevention and control. In parallel, the Taskforce Committee has launched a fundraising campaign from the public (as of May 6, 15.5 billion kip in cash and 52 billion kip in kind have been raised). A proposed 13-measure economic stimulus package has been endorsed by the cabinet. Measures include establishing a separate task force to address the economic impact of COVID-19. A new electricity tariff, to ensure supply of electricity, in effect from May 1, 2020 through December 31, 2025, is in place. Extra efforts to ensure revenue collections through automated platforms and inspections targeting at stockpiling of essential goods are being considered.

    Recent mitigation policies include income tax exemption for both civil servants and employees of private sector with income less than 5 million kip per month for three months; profit tax exemption for microenterprises with annual income between 50-400 million kip for three months; duty fee exemption for imports of goods to be used towards the outbreak; deferring tax collection from tourism related businesses for three months; postponing mandatory contribution to social security by affected businesses for three months and extending the submission of the 2019 financial report (annual tax filing) by two months and road tax payment by three months.

    The government has agreed with an allowance of 500,000 kip per worker who currently participates in the Social Security Scheme. Of the 170,000 members, close to 80,000 will benefit from this scheme through June.

    Cuts in administrative expenses by at least 10 percent of annual budget have been approved and intentions to cut unnecessary spending in proportion to revenue shortfall has been signaled.

Monetary and macro-financial
  • On March 20, the Bank of Lao P.D.R. (BOL) announced a reduction in the reserve requirements, from 10 to 8 percent on foreign exchange, and from 5 to 4 percent on local currency, effective on April 2. On March 26, BOL issued a new credit policy for those impacted, asking banks and financial institutions to restructure loans and provide new loans to businesses affected by the outbreak. Under this policy, banks and financial institutions that implement debt restructuring and new loan provisions will benefit from regulatory forbearance on loan classification and provisioning. On March 30, BOL cut its policy rate from 4 to 3 percent for one-week loans; from 5 to 4 percent for one-two week loans; and from 10 to 9 percent for two-week to one-year loans. On May 11, BOL has issued additional instruction on the implementation of its credit policy issued on March 26, expanding coverage of this policy to non-bank financial institutions including microfinance institutions, savings and credit unions, leasing companies, and pawnshops.

Exchange rate and balance of payments
  • Lao P.D.R. has a managed exchange rate (crawl-like arrangement). Under this arrangement, the exchange rate has depreciated. No new balance of payment or capital control measures have been adopted.


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Republic of Latvia

Background. Latvia reported its first COVID-19 case on March 2, 2020. As of May 28, the number of COVID-19 confirmed cases is 1,061, the number of deaths is 24, and the number of tests performed has reached 105,504. The government has imposed strict containment measures after declaring a state of emergency, including the shutdown of most international passenger services from March 17 onward, closure of school and banning the gathering of more than 2 people in public indoor and outdoor areas. The Q1-2020 year-on-year growth was -1.4 percent according to the flash estimate. The state of emergency has been extended to June 9.

Reopening of the economy. Since May 12, people have been allowed to gather in both public and private events on condition that the number does not exceed 25, and if the event is indoor, the length does not exceed 3 hours. Facilities including those related to culture, entertainment, and sports are allowed to open from 7 a.m. until midnight. Kindergartens reopen for five and six-year old children.  Since May 28, the government has allowed entry for citizens of the EU, EEA and Switzerland as well as those who reside in those countries permanently. Covid-19 control measures need to be taken in the reopening phase.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government announced a support package of about €2 billion (6 percent of 2019 GDP) to support businesses and employees, including through tax holidays, sick pay leave, and loan guarantees. The measures aim to relieve sectors suffering losses as a result of the coronavirus crisis including by covering 75 percent of employees’ wages from the state budget with the maximum monthly payment per employee set at €700. In addition, the covered wages will not be subject to personal income tax and social contributions. Taxpayers affected by the crisis will be able to apply for an extension of tax payment deadlines for up to three years. Companies involved in the production and storage of alcohol used to produce disinfectants can apply for an excise discount of up to 90 percent. About €8 million has been earmarked to cover salary increases for three months for about 4,500 “front line” medical workers. In addition, about €2 million will be allocated to mass media outlets, about €14 million will be used to increase the capital of the three largest hospitals, about €45 million will be spent to support the farming sector, about €75 million to support the road construction sector, about €100 million to be allocated to large manufacturers, about €250 million will be invested in the share capital of airBaltic, and about €283 million to be allocated to transport sector projects. As part of the program to support businesses, about €900 million will be made available through the Altum emergency program: €200 million in a loan financing program for struggling business; and about €700 million through a government guarantee scheme. These measures are partly financed by the issuance of €1.5 billion Eurobond. Besides, the government has signed a 10-year €500 million COVID-19 mitigation loan from the Nordic Investment Bank. EU funds worth €500 million will be redirected to support measures aimed to mitigate the impact of the coronavirus crisis, and EU has earmarked €2.9 billion from the EU Economic Recovery Fund for Latvia. The prime minister has issued a decree instructing all ministers to review the expenses of public institutions, resulting in freeing up €4.4 million.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    Other national measures include: (i) a 50 percent cut in interest rates on loans for SMEs in the tourism sector and a 15 percent cut for large enterprises; (ii) an increase of the reserve capital of the Finance Development Institution Altum by €100 million to raise its capacity to provide support to companies through loans and guarantees. In addition, Altum issued €20 million bond as a part of its Second Program for the Issuance of Notes to expand its financial capacity.

Exchange rate and balance of payments

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Lebanon

Background. Lebanon’s underlying economic situation is challenging, with high public debt, current account deficit, and funding needs. The spread of COVID-19 is contributing to the economic recession. The number of COVID-19 cases stands at 1024 and 26 deaths. The authorities have implemented a range of measures to try and limit the spread of the virus encompassing a general mobilization with compete closure of all private sector and public institutions until May 24, 2020; educational establishments have been closed for the rest of the school year. Lebanon also closed the airport—after suspending flights from 11 countries—as well as seaports and land borders and completed the implementation of the first phase of the plan to repatriate Lebanese citizens wishing to return to Lebanon from various countries; the second phase started on April 26, 2020.

Reopening of the economy. On April 24, 2020 a five-phase plan was approved to gradually ease the general mobilization in a manner that takes into consideration potential risks within the categories of different economic activities. The five-phase plan, now under phase three, gradually opens up the different economic sector over a period of five weeks and culminates in the resumption of full economic activity and opening up of schools and universities and the resumption of air travel on June 8, 2020. However, two weeks into the gradual easing, and with the continued repatriation of expats, infection cases spiked. Consequently, the government reinstated a full lockdown for the period May 14-18, 2020. It then announced resumption of the plan to gradually reopen the economy.


Key Policy Responses as of May 22, 2020

Fiscal
  • The government established a national solidarity fund that would accept in-kind and monetary donations. The ministry of finance announced the extension of all deadlines related to payment of taxes and fees. The ministry of social affairs, in collaboration with the ministries of industry, agriculture, defense, interior, labor, finance, economy and information, started the implementation of a plan—to be executed in coordination with municipalities, mayors, social affairs centers and the army—to distribute cash assistance to families hit economically and financially as a result of COVID-19.

Monetary and macro-financial
  • The Banque Du Liban (BDL) issued circular 547 allowing banks to and financial institutions to extend exceptional five-year zero percent interest rate loans in Lebanese Pounds and in dollars to customers that already have credit facilities but are unable to meet their obligations, operating expenses, or pay the salaries of their employees during March, April and May 2020 as a result of the interruption of activity due to the COVID-19. BDL will in turn provide banks and financial institutions five-year zero percent interest rate credit lines in dollars equivalent to the value of exceptional loans granted.

Exchange rate and balance of payments
  • No measures.


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Lesotho

Background. Lesotho has reported one confirmed cases as of May 20, 2020. Lesotho created an inter-ministerial committee to coordinate the response to Covid19 and adopted a range of containment measures, including social distancing, travel restrictions, declaration of a national state of emergency, closure of borders to all but essential goods, closure of schools, extension of initial 21-day lockdown of the country for two weeks (until May 5) and suspension of some shops (e.g. gyms, hair/beauty parlors, arcades, liquor stores, etc.). The Ministry of Health has developed a Preparedness and Response Plan. The government has been developing the National Covid-19 Response Integrated Plan 2020 in collaboration with development partners.

Reopening of the economy. The lockdown of the country was lifted after it expired on May 5. Private businesses (non-essential) will open but some (e.g., alcohol) will follow WHO’s recommendations. Public servants are going back to work but work in shifts and practice social distancing. People are required to wear masks in public. There are food packages delivered to the vulnerable with the help of local government officials. Church services are resuming but congregants limited to 50. Schools will open gradually under the guidance of ministry of education.


Key Policy Responses as of May 22, 2020

Fiscal
  • Mainly two packages: (i) A M700 million (about 2 percent of GDP) fund was set aside for the National Covid-19 Response Integrated Plan 2020, more than half of which is being used for health care personnel and purchase of critical goods and services, with the remainder covering logistics, security, and border management. (ii) Economic mitigation measures are also being implemented including 1.2 billion for emergency assistance and expanding social protection: Existing cash transfers, such as the Child Grant Program will be topped-up. Public assistance will be expanded for 3 months, to add vulnerable groups such as children, elderly disabled, and those working in the informal sector. The authorities intend to provide a subsidy to 45 thousand industrial workers, and grants and stipends to tertiary students studying domestically or abroad. M100 million in subsidies to support food production. Regarding supporting businesses, the authorities also intend to clear arrears to MSMEs and are expanding credit guarantee facilities by M450 million. They are also offering grants and rent subsidies to MSMEs and rent holidays to firms renting from the Lesotho National Development Corporation and local/municipal governments. The Lesotho Revenue Agency will defer CIT for the first two quarters for all businesses and provide tax deferrals for the Pay as You Earn (PAYE), VAT, and Simplified Business Taxes for non-essential service providers.

Monetary and macro-financial
  • On March 23, 2020, following an extraordinary meeting of the Monetary Policy Committee (MPC), the Central Bank of Lesotho (CBL) announced (i) an increase of the NIR target floor from US$630 million to US$660 million, and (ii) a reduction of the CBL policy rate by 100 basis points from 6.25 to 5.25 percent. To encourage the use of non-cash payments, the CBL has negotiated with mobile network operators the removal of fees for transactions below M50 and temporarily raised mobile money transaction limits. On April 14, following another extraordinary meeting of the MPC of the CBL announced a reduction of the CBL policy rate from 5.25 to 4.25 percent.

    Additional financial sector measures were also unveiled in the Prime Minister’s speech on April 13: (i) Banks have been asked to suspend loan repayments for three months for affected borrowers, while insurance companies have been asked to suspend instalment payments for affected policy holders. (ii) The implementation of Basel II.5 was postponed to free up funds that would otherwise go towards additional capital buffers.

Exchange rate and balance of payments
  • No measures. The local currency is pegged to South Africa?s Rand, which has depreciated substantially since the Covid-19 outbreak.


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Liberia

As of May 15, Liberia currently has a total of 223 confirmed cases of COVID-spread across 9 of 15 counties, with the first one detected on March 16, 2020. Of these, there have been at least 20 fatalities. Liberian health care workers now account for over 20 percent of confirmed cases.

On March 21, 2020 the Liberian authorities issued a declaration designed to enforce severe social distancing, including: closure of all schools, night clubs, cinemas, beaches, spas, mosques and churches; banning of all street selling and gatherings of more than 10 people; limits on admittance to banks and restaurants to five customers kept six feet apart; Social distancing for health facilities and pharmacies (which are to remain open); mandatory washing with soap and clean water at all public and private establishments; and a hotline was established to report those exhibiting CORVID-19 symptoms.

On midnight April 10, Government announced and began enforcing a State of Emergency, which was subsequently approved by the Legislature as required in the Constitution. The provisions prohibit inter-county movement of persons while, in the four hardest-hit counties, residents—excepting essential workers—have been ordered to stay at home outside of very restrictive periods. All non-essential businesses and government offices will remain closed. To render a future more complete lockdown viable, the Legislature has indicated it will enact the request by the Executive to allocate US$25 million—to be supplemented by donor funds—for a World Food Program-implemented food distribution in the four hardest-hit counties.

The World Bank approved US$17 million of off-budget project funding for the health sector, of which US$7.50 million was new investment financed by the COVID-19 Fast Track Facility (March 23); and $9.5 million was temporarily diverted from existing projects (March 30).

The African Development Bank is preparing a significant budget support operation under the COVID-19 Response Facility which was approved on April 8.


Key Policy Responses as of May 15, 2020

Fiscal
  • Aside from some measures to speed up and facilitate the importation process—including by removal of the pre-shipment inspection requirement and some protective surcharges—and to develop a preparedness plan, no other special fiscal measures have yet been adopted.

    The authorities are hoping to finalize a COVID-19 preparedness plan in conjunction with the donor community, and the draft is still evolving. The World Bank has to date disbursed about US$4.for actions under the plan from its overall funding envelope.

    Areas of concentration under the plan include support to health care workers, purchase and rehabilitation of health care equipment, procurement of drugs and other medical supplies, deployment of surge staff to contact tracing activities, border areas, rapid response teams, training of responders, planning, communications and information sharing, staffing and equipping of laboratories, and logistical and supply support.

Monetary and macro-financial
  • No changes to monetary policy are envisaged at this stage, as the shortage of Liberian dollar banknotes coupled with the lack of confidence in the banking system precludes any meaningful response to the pandemic using monetary policy instruments. In mitigation of this situation, the CBL is expediting the procurement of additional banknotes to help meet the Liberian dollar demand in the economy. In response to the difficulties being felt by the private sector, the CBL is also allowing banks to practice limited forbearance on asset classification, provisioning, and lending policies in hard-hit sectors of the economy, while remaining vigilant for signs of banking sector stress.

    On the payments side, to better facilitate the use of electronic payments, the CBL has suspended fees and charges for most electronic transfers and point-of-sale outlets used by merchants and mobile money operators; and increased allowable daily limits. The bank has also increased the allowable daily and aggregate limits for mobile money transactions for a period of three months.

Exchange rate and balance of payments
  • No measures so far, but the authorities are committed to allowing the exchange rate to adjust in line with market forces.


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Libya

Background. Libya reported its first COVID-19 positive case in late-March and identified the patient as a 73-year old man who had recently returned from a trip to Saudi Arabia via Tunisia. As of May 27, the Tripoli-based National Center for Disease Control (NCDC) reported that Libya has about 79 positive COVID 19 patients. The NCDC also reported that three patients have died from COVID 19 related complications thus far. While over the past week the total confirmed infections have increased by 10 cases, deaths have remained unchanged. The number of positively identified Coronavirus cases and deaths are likely to be understating the true spread of the disease in Libya because of limited access to testing across the country and limitations in data compilation. The NCDC continues to implement strict measures to contain the spread of the Coronavirus into and within Libya. The country’s borders have been closed, large public gatherings banned, and travel restrictions instituted, including between cities. On March 29, the Tripoli-based Government of National Accord (GNA) freed some 470 inmates from local and regional prisons to reduce the risk of COVID 19 infections in Libyan detention centers. Also, on March 29, it was announced that all court proceedings would be suspended until the end of April. On April 15, the GNA imposed a 24-hour curfew, with limited exceptions, that would start on Friday, April 17, and last for ten days. The authorities in the Eastern region of the country have ordered a dusk-to-dawn curfew. In the week of April 6, they also reported their first positive COVID 19 case of a patient who had returned from travel to Tunis.

So far, the continued civil war has had a severe social and economic impact than COVID-19. Libya’s economy is contracting sharply because of the steep drop in oil prices and the collapse of oil production of more than 90 percent due to the conflict. Water supply to Tripoli and surrounding areas that was shut off in early April as a result of the ongoing fighting has reportedly been restored. However, Tripoli has started to experience rolling electricity blackouts in the week of April 20, as a result of unreliable and intermittent gas supplies reaching critical power stations. The combination of civil war and a widening of pandemic could prove devastating. In response, the United Nations has renewed its calls for a ceasefire to address this extraordinary threat to the health and safety of the Libyan people. Despite this appeal, the fighting has intensified, particularly in and around Tripoli and west toward the Tunisian border. In late-April, Field Marshall Khalifa Haftar declared himself the ruler over Libya “by virtue of a popular mandate,” ending the UN-sponsored Skhirat Libya Political Agreement of December 2015. This declaration was rejected by the GNA as a farce. The United States regretted Haftar’s unilateral action. More recently Haftar’s forces appear to have been pushed out of the important Al Watiya airbase in Western Libya and from some of the outskirts of Tripoli.


Key Policy Responses as of May 27, 2020

Fiscal
  • The Government of National Accord (GNA) announced a package of LD 500 million (about 1 percent of GDP) in emergency COVID-19 related spending. While the exact nature and use of this spending is yet to be specified, it is believed to be aimed at supporting the health system in expanding testing and responding to a possible surge in infections. Certain medical equipment and personal protective gear are already in short supply as a result of the civil war which has impacted imports and impeded the free flow of goods within Libya’s borders. In an effort to protect declining reserves, in mid-April the GNA announced a 20 percent pay cut for civil servants.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Republic of Lithuania

Background. Lithuania has reported 1,656 cases of COVID-19 and 68 deaths as of May 28, 2020. The government began implementing a range of containment measures on March 16 to slow the spread of coronavirus, including a nationwide quarantine, closed borders, increased testing, the closure of schools and cancellation of public events, as well as the shutdown of non-essential shops, museums, cinemas, and similar establishments.

Reopening of the economy. On April 15, the government began the first phase of easing containment measures, with the opening of certain non-food stores and services businesses. The government further eased restrictions on April 27 by lifting the ban on outdoor activities as well as outdoor cafes and restaurants, libraries, and museums, and eased again on April 30 by allowing a wider range of leisure activities, the provision of health services, and full trading in marketplaces and public places. Gradual easing continues with the planned opening of kindergartens and preschools, a wider set of health care services, indoor restaurants and cafes, and outdoor group events as of May 18, and the easing of movement across borders with Latvia, Estonia and Poland as of May 11. A new round of will begin June 1 when professional sports games, including , will resume, public events can be organized with a larger capacity, and cafes and restaurants operating hours will be extended. International travel will also be allowed from citizens of euro area countries, Switzerland and the UK if the incidence of COVID-19 cases in that country did not exceed 25 per 100,000 people over the previous 14 days. Restrictions on customer flow and other health and safety requirements and guidelines are being established for a variety of activities. The government has recently announced a COVID-19 management strategy to coordinate efforts in containing the virus and in preparation for possible future outbreaks over the next two years.


Key Policy Responses as of May 28, 2020

Fiscal
  • On March 16, the government announced an overall fiscal package of 2.5 billion euros (5 percent of 2019 GDP). Within this amount, spending measures by the General Government amounts to 1.1 billion euros (2.3 percent of 2019 GDP) which includes (i) additional funds for the healthcare system and emergency management (500 million euros), (ii) additional funds for caring for the sick and disabled, including for parents of school children who now need to stay home, support for the self-employed (250 million euros), and wage subsidies for employees in affected firms (250 million euros), and (iii) co-financing of climate change investment projects (about 20 percent of 250 million euros). In addition, the government expanded guarantee schemes, including guarantees for agricultural as well as SME loans by around 1.3 billion euros (2.6 percent of 2019 GDP). Finally, the government increased the borrowing limit by 5 billion euros (10 percent of 2019 GDP).

    Various schemes and measures have been introduced since then. The government is establishing a with a target value of 1 billion euros (2.1 percent of 2019 GDP), consisting of 100 million euros in public contributions, 400 million euros from bond issuances, and possible contributions from international financial institutions and private investors. The objective of the fund is to provide liquidity to medium and large businesses through direct loans or investments in equity and debt securities through the end of 2020. The government has also allocated 23 million euros to provide SMEs with interest compensation for deferred loans or finance lease payments. An additional 50 million euros has been allocated to a new facility to provide soft loans of up to 500,00 euros to eligible SMEs, and a new financial instrument for businesses to form portfolios from risky business loans and leasing transactions has been announced. The government has also allocated 50 million euros to another financial instrument for SMEs facing working capital shortages to obtain loans or leases from a broader range of financial institutions. Further, the government can subsidize up to 50 percent of rental costs for businesses whose activities are banned by government decree if the property manager agrees to a 30 percent discount, and now offers an 80 percent subsidy for the rental costs of tenants in publicly owned properties. For micro-enterprises with 1 to 9 employees, the government has allocated 100 million euros to provide grants of up to 200,000 euros over three years, depending on the sector and the amount of taxes paid by the enterprise in 2019.On April 30 t The government has also allocated 3 million euros for salary increases of around 15 percent for health care workers.

    On May 7, the government an additional of nearly 1 billion euros (2 percent of 2019 GDP) to support an economic recovery for businesses and households, to be enacted if signed by the President. The package includes extended wage subsidies for persons returning from downtime or unemployment (380 million euros), job search allowances of 200 euros for those who have dropped out of the labor force (265 million euros), an increase in social benefits to pensioners and others (182 million euros), additional funds for the self employed and for vocational training (15.6 million euros), and an increase in unemployment benefits of 42 euros per benefit. In addition, the universal child benefit of 60 euros has been increased to 100 euros for a period of six months after the end of the national quarantine for families who lost income during the quarantine.   

    On May 19, a long-term investment plan was announced comprising 6.3 billion euros 13 percent of 2019 GDP), of which 1.8 billion euros (3.7 percent of 2019 GDP) is new investment and the remainder is already planned investment that will be accelerated. The plan covers investments in human capital, digital economy and business, innovation and research, infrastructure and climate change and energy.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    In addition to policies from the ECB, the Bank of Lithuania has lowered its counter-cyclical capital buffer from 1 to 0 percent and has encouraged banks to be flexible and negotiate, on a case-by-case basis, loan terms with borrowers if necessary (within the existing regulatory framework). Solvent credit or other financial institutions—including payment and electronic money institutions, management companies and insurance undertakings—which are facing temporary liquidity problems can apply to the Bank of Lithuania for emergency liquidity assistance in the form of loans provided at the European Central Bank’s Marginal Lending Facility rate. Regular conditions apply including adequate collateral and having exhausted all other options.  

    As of April 16, the Bank of Lithuania had purchased 370 million euros in government bonds on the secondary market and through bilateral transactions (including purchases under PEPP with the ECB).

Exchange rate and balance of payments
  • No measures.


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Luxembourg

Background. As of May 28, Luxembourg has reported 4,008 confirmed cases of Covid-19 and 110 deaths. In response to the outbreak, the government has taken a wide range of health and containment measures to curb the spread of the virus and protect vulnerable groups, including closures of schools and non-essential businesses, strict social distancing measures, and increase in testing capacity. Furthermore, the government declared a state of emergency, providing it with additional powers to quickly take decisions, and adopted a large fiscal stimulus package to bolster the resources for the health system and help maintain businesses and jobs.

Reopening of the economy. On April 15, the government announced a multiphase lockdown exit strategy, with phases comprising activities/tentative opening dates as follows: phase 1—construction sites and selected activities—including craft, landscaping, and recycling services (April 20); phase 2—secondary education and vocational training, retail stores, beauty salons, museums and libraries, drive-in movie theaters, outdoor sports activities, and outdoor gatherings of up to 20 people, subject to strict safety measures such as mandatory wearing of face masks and maintaining physical distance (May 4–11); phase 3—basic education and childcare facilities, with classes alternating weekly attendance in school, and increasing public transport’s capacity (May 25); phase 4—selected activities in the hospitality sector (bars, cafes and restaurants), and public gatherings of more than 20 people (including sport and cultural venues, movie theaters, weddings, funerals and protests), subject to mandatory safety measures (May 29); later phases—commercial and event activities. To achieve a well-sequenced lifting of the lockdown restrictions and avoid a second wave of Covid-19 infections, the government envisages to perform large-scale testing on a voluntary basis, including cross-border commuters. The testing strategy consists of segmenting the population into different contingents (starting with high school students and teachers) with people that have tested positive being isolated, and their contacts traced and quarantined. The government has been distributing free face masks to residents and cross-border workers.


Key Policy Responses as of May 28, 2020

Fiscal
  • A large fiscal package to address Covid-19 effects has been partly adopted by the Parliament, including spending measures (€2.3bn or 3.6 percent of 2019 GDP) and liquidity support for eligible businesses and self-employed (€8.1bn, 12.8 percent of 2019 GDP). Key spending measures include: (i) acquiring medical equipment and infrastructure (€194 million, 0.3 percent of 2019 GDP); (ii) covering employees’ leave for family reasons (€226 million, 0.4 percent of 2019 GDP) and sick leave (€106 million, 0.2 percent of 2019 GDP); (iii) paying partial-unemployment benefits (€1bn, 1.6 percent of GDP); (iv) granting capital advances to cover companies’ operating costs (€400 million, 0.6 percent of 2019 GDP); and (v) providing non-repayable financial aid to micro enterprises and eligible self-employed (€250 million, 0.4 percent of 2019 GDP). Liquidity support measures include postponing tax and social-security contribution payments for the first half of the year (€4.6bn, 7.2 percent of 2019 GDP), and extending credit guarantees for new bank loans and special anti-crisis financing for SMEs and large companies (€3.6bn, 5.6 percent of 2019 GDP). To finance higher spending, the government issued a €2.5bn bond (3.9 percent of 2019 GDP) at a negative interest rate.

    On May 20, the government announced a new fiscal package to support economic recovery (up to €800 million, 1.3 percent of 2019 GDP). Measures include: (i) providing structural partial unemployment benefits for affected businesses based on recovery/employment retention plans; (ii) providing non-repayable financial aid to businesses not yet allowed to reopen (including retail, hospitality, tourism and events sectors); (iii) flat-rate aid to support the non-food retail stores and personal care providers (less than 250 employees); (iv) financial incentives to support national tourism; (v) extending leave for family reasons to take care of adults with disabilities and elderly and increasing the cost-of-living allowance for low-income households; and (vi) fiscal incentives to support private investment and green recovery (including aid for development and energy efficiency projects).

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    The Luxembourg authorities have intensified off-site oversight of key risks in the banking sector and stepped up surveillance of investment funds, including new requirements for weekly updates on financial data, notifications on significant events and large redemptions, and fund managers’ governance arrangements. They introduced a draft law which, among others, grants the supervisory bodies powers to extend, for the duration of the COVID-19 crisis, reporting deadlines for entities under their remit. In line with the ECB’s recommendation on dividend distribution during the COVID-19 pandemic, banks were advised to refrain from distributing accumulated profits should this constrains their capacity to meet their clients’ credit and liquidity needs. They also issued guidance on COVID19-related financial crime and AML/CT issues, and released Q&As clarifying, among others, reporting requirements for investment funds, and the prudential treatment of Covid-19 industry-wide private moratoria as well supervisory flexibility to avoid IFSR9-related procyclical effects for banks. Also, Luxembourg banks committed to offer a 6-month moratorium on loan repayment for SMEs, self-employed and liberal professionals.     

Exchange rate and balance of payments
  • No measures.


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Madagascar

Background The number of confirmed COVID-19 cases stands at 405 (2 deaths, 131 recovered) as of May 21, 2020. As of March 23, the government has declared a national state of emergency that has been extended several times (the last one through June 1) and adopted a range of measures to limit the spread of the virus including travel restrictions (on international flights and internal public transportation), a 15-day quarantine period for people in contact with the infected ones, a curfew in the three major cities between 8PM and 5AM, closure of schools and public offices (except for critical public services), a ban on public gatherings, and increased testing. Facing a severe impact from the global pandemic, the economic activity has contracted significantly in the first quarter of 2020. The authorities’ immediate priority is to ensure the health of the population and preserve macroeconomic stability. Following the activation of their national contingency plan, the authorities are beginning to take measures to increase health spending, help the most vulnerable, support the private sector, and preserve the stability of the financial sector.


Key Policy Responses as of May 21, 2020
Fiscal
  • Key measures include: (i) increased spending on epidemic prevention and control; (ii) cash-transfers and in-kind necessities to the poorest and those unemployed; and (iii) tax relief, suspension of government fees and waived social contributions. Accprding to World Bank estimates, support to social sectors could reach more than US$160 million (about 1.1 percent of GDP). Due to very limited resources, the authorities are actively seeking additional budget support from development partners, beyond what was already disbursed or committed. On April 3, 2020, IMF approved a disbursement under the Rapid Credit Facility (RCF) equivalent to $165.9 million to meet the large external financing gaps arising from Covid-19. On March 12, 2020, the World Bank provided a grant of $3.7 million to strengthen prevention against the COVID-19 pandemic, purchase materials and equipment, and train health workers. On April 2, 2020, the World Bank approved $100 million Development Policy Operation (DPO) for budget support to improve the human capital. The government is working on a revised budget law that will consider additional fiscal and support measures to be presented to parliament.

Monetary and macro-financial
  • The central bank provided monetary policy support and acted to safeguard financial stability. The central bank has started to provide liquidity to the commercial banks (planning up to MGA620 billion (about 1.2 percent of GDP) and relaxed some mandatory deposit limits to encourage banks to defer delayed payments on existing loans and increase lending to businesses.

Exchange rate and balance of payments
  • The authorities are maintaining the flexible exchange rate regime. Based on the latest available data, the central bank made some limited interventions (guided by an algorithm based on market movements), and the exchange rate depreciated by about 5 percent vis-à-vis US$ since the beginning of the year.


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Malawi

BackgroundAs of May 20, there are seventy-six confirmed cases of COVID-19 and three deaths, though local COVID-19 testing capabilities continue to be expanded with assistance from development partners (DFID, UNICEF, and the Global Fund).

To curb the spread of the pandemic, on April 4, the government instituted a partial lockdown of the country, with essential services continuing to function and critical businesses working in shifts. All international flights to Malawi have been suspended except those carrying essential health & other supplies and returning Malawian citizens or residents. A two-week mandatory self-quarantine for people arriving from areas highly affected by coronavirus disease is in effect. These measures combined with spillovers from the global slowdown, border closures, and economic disruption in neighboring countries have slowed domestic economic activity. As a result, growth for 2020 is expected to decline to 1 percent.


Key Policy Responses as of May 20, 2020
Fiscal
  • The government’s response plan includes US$20 million (0.25 percent of GDP) in spending on health care and targeted social assistance programs; this includes hiring 2000 additional health care workers. In addition, tax waivers will be granted on imports of essential goods to manage and contain the pandemic. An Emergency Cash Transfer Program of about $50 million (0.6 percent of GDP), mostly financed by development partners, will be implemented during May-November 2020 to support small businesses in major urban areas.

Monetary and macro-financial
  • The domestic currency Liquidity Reserve Requirement (LRR) has been reduced by 125 basis points to 3.75 percent (aligned with the foreign currency LRR) and the Lombard Rate has been reduced by 50 percent to 0.2 percentage points above the policy rate. An Emergency Liquidity Assistance (ELA) framework has been introduced to support banks in the event of worsening liquidity conditions and to provide support to banks on a case-by-case basis. However, financial sector buffers, including banks’ capital and liquidity buffers, are expected to counter risks to the banking system. To support small and medium enterprises (SMEs), commercial banks and micro-finance institutions will be, on a case-by-case basis, restructuring SME loans and providing a three-month moratorium on their debt service. Fees on mobile money transactions have been temporarily waived to encourage cashless transactions.

Exchange rate and balance of payments
  • No measures.


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Malaysia

Background. Malaysia is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. COVID-19 cases were 7,009, with 114 deaths, as of May 21, 2020. A Movement Control Order (MCO), introduced on March 18, has been extended for a third time and will be effective until at least May 12: borders, schools, universities and non-essential businesses are closed; public gatherings are banned.

Reopening of the economy. The authorities started easing the MCO by allowing most businesses to reopen from May 4, 2020. However, 7 states out of 14 have opted for a more delayed approach.


Key Policy Responses as of May 21, 2020

Fiscal
  • A fiscal stimulus package of RM 6 billion (0.4 percent of GDP) was approved on February 27, 2020, including increased health spending; temporary tax and social security relief; cash transfers to affected sectors; and rural infrastructure spending. Additional measures—electricity discounts and temporary pay leave—for RM 0.62 billion (less than 0.1 percent of GDP) were announced on March 16, 2020. Some investment spending planned for 2020 is being frontloaded.

    A second stimulus package of RM 25 bn (1.7 percent of GDP) was released on March 27, 2020, including additional health spending; cash transfers to low income households; wage subsidies to help employers retain workers; and infrastructure spending in East Malaysia. The government also setup a RM 50 bn fund for working capital loan guarantees for all COVID-19 affected businesses. Furthermore, employees will be allowed special withdrawals from their Employment Provident Fund (EPF) account for a 12-month period and businesses will be allowed to reschedule their EPF payments. On April 6,2020, the authorities announced a third stimulus package of RM 10 bn (0.7 percent of GDP), includinggrantsfor micro SMEs,scaled-upwage subsidies, anda25 percent discount on foreign workers’ fee.

Monetary and macro-financial
  •  (i) on March 3, 2020, Bank Negara Malaysia (BNM) lowered the Overnight Policy Rate (OPR) by 25 basis points to 2.50 percent, citing market disruptions, greater risk aversion and financial market volatility, and tighter financial conditions due to COVID-19; on May 5, the BNM lowered the OPR again to 2 percent, citing weakening global economic conditions and subdued inflationary pressures.

    (ii) BNM lowered the Statutory Reserve Requirement (SRR) Ratio by 100 basis points to 2 percent effective March 20. On May 5, the BNM announced that banking institutions can use MGS and MGII to fully meet the SRR compliance until May 2021. On March 27, BNM  increased its Financing Facilities by RM4 bn to RM13.1 bn (0.9 percent of GDP). On March 25, BNM announced temporary easing of regulatory and supervisory compliance on banks to help support loan deferment and restructuring. BNM also announced relief measures for insurance policy holders and takaful participants.

    (iii) on March 23, 2020, the Securities Commission Malaysia (SC) and Bursa Malaysia suspended short-selling until April 30; on April 28, the suspension was extended through June 30. SC also waived annual licensing fees for capital market licensed entities. On April 16, SC announced regulatory relief measures for public listed companies. On April 10, 2020, the Companies Commission of Malaysia announced measures to enhance protection of distressed companies against liquidation.

Exchange rate and balance of payments
  • No announced measures.


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Maldives

Background. Maldives is expected to be hit hard by the outbreak. The number of confirmed COVID-19 cases has reached 1481 and 5 deaths as of May 28, 2020. Maldives’ economy is also very dependent on tourism, with tourism receipts representing about 60 percent of GDP. The government declared a Public Health Emergency on March 12, 2020. There are several adopted containment measures, including temporary suspension of on-arrival visa for all passengers arriving to Maldives by air and sea ; quarantine for all passengers traveling to Maldives by air except for tourists checking-in to resorts; screening at ports of entry; restrictions on travel between resorts and inhabited islands; ban on all cruise ships from entering and docking; requirements on all guest houses and city hotels operating in the Maldives to temporally suspend all tourist check-ins since March 17; and school closures.

Reopening of the economy. Local community transmission was detected in Mid-April. The greater Malé region was placed on full lockdown during April 15-May 28, with all people going outside their homes needing the approval of the Maldives Police Service. Phase one of lockdown easing started on May 28, with an ease in temporary permissions for leaving homes as well as allowing certain commercial businesses to open and operate . International flights as well as tourism resorts are expected to reopen in July.


Key Policy Responses as of May 28, 2020
Fiscal
  • To minimize the economic impact of the COVID–19 virus, the authorities announced on March 20 an Economic Recovery Plan of 2.5 Billion rufiyaa (2.8 percent of GDP). Under the plan, the Government of Maldives will (i) reduce recurrent expenditure by 1 billion rufiyaa (1.1 percent of GDP); (ii) increase the amount of funds allocated for the health sector; (iii) subsidize 40 percent of electricity bills and 30 percent of water bills for the months of April and May; (iv) special allowance to those who lose their jobs due to Covid-19; and (v) ensure through banks, availability of working capital to businesses.

Monetary and macro-financial
  • The Maldives Monetary Authority (MMA) has been in close contact with the banks to discuss the impact on the domestic financial system and has identified the measures that can be taken through the financial institutions to reduce economic disruptions and loss of jobs and output. The announcedmeasures include: (i) reduction of the minimum required reserves (RR) up to 5 percent as and when required (RR were reduced to 7.5 percent on April 23); (ii) making available a short-term credit facility to financial institutions as and when required; (iii) introducing regulatory measures to enable a moratorium of 6 months on loan repayments for those impacted by the current situation (customers have to submit their requests to the banks in order to avail themselves of this moratorium).

Exchange rate and balance of payments
  • The MMA will increase its foreign exchange interventions and use other available facilities to maintain the exchange rate peg against the US dollar. At the same time, the authorities have announced their intention to obtain a foreign currency swap facility amounting to US$150 million under the currency swap agreement signed between the MMA and the Reserve Bank of India.


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Mali

Background. The COVID-19 pandemic has hit at a time when the country is facing a challenging security situation in the northern and central regions. 947 confirmed cases and 60 deaths have been reported as of May 21, 2020. Since mid-March, the government has been responding to the global emergence of the pandemic with preventive containment measures. These include the suspension of commercial flights (except cargo flights), the closure of land borders, a curfew from 9:00pm to 5:00am, the suspension of all public gatherings, the prohibition of social, sports, cultural and political gatherings of more than 50 people, and the closure of schools (until June 2nd). As of May 9th the night curfew has been lifted and it has become mandatory to wear masks in public. In addition, the government has set up a crisis response unit, a hotline for signaling any suspicious case, and is stepping up sensitization campaigns, strengthening testing capacities, expanding quarantine and hospitalization facilities, and improving medical care capacities. Working hours in the public administration have been reorganized to end earlier (at 2:30pm), to protect civil servants. Retail markets will remain open from 6:00am to 4:00pm, to prevent disruptions in the supply of population with basics goods. 10 million masks have been distributed to the population. On May 20th 400 prisoners were released as a preventive step against the spread of COVID-19.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has updated its medical response plan to prevent the spread of COVID-19 and strengthen its medical care capacity, in collaboration with the World Health Organization, now costed at about 0.5 percent of GDP (including bonuses to health workers). The government is also working with the World Bank to enhance its medical care capacity, notably in terms of medical equipment (respirators, quarantine facilities, etc.). The government unveiled a package of social measures to support the most vulnerable households. These measures include the setup of a special fund to provide targeted income support to the poorest households, a mass distribution of grain and food for livestock to poorest households, the supply of electricity and water free of charge to the poorest consumers for the months of April and May 2020, a 3-month exemption from VAT on electricity and water tariffs, and a 3-month exemption from customs duties on the import of basic food (rice and milk). A package of economic measures was also announced to ease liquidity constraints on ailing firms, including an SMEs-support guarantee fund, clearing the budget spending float, granting tax deferral and relief to ease liquidity constraints on the hardest-hit companies, especially in the hospitality sector (hotels, restaurants, transportation). On April 27, Heads of States of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU growth and stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of the Covid-19 pandemic. Stability, Growth and Solidarity among its member-countries. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the Covid-19 crisis. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken preemptive steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. The BCEAO had also announced: (i) an extension of the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-bills issued by Mali amounted to 0.8 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Malta

Background. Malta reported 615 confirmed cases and 7 deaths as of May 21. The government responded swiftly to mobilize the healthcare system and implement containment measures, including travel restrictions, social distancing, closures of schools, childcare centers, bars, restaurants, sport centers, non-essential shops and services, as well as the cancellation of all mass gatherings.

Reopening of the economy. Containment measures are gradually lifted with the reopening of certain non-essential shops since May 4, while people are required to practice social distancing and wear face masks in shops and on public transports. More activities and businesses will be allowed starting May 22, including restaurants, hair salons, hotels, funerals, individual sports, outdoor pools and gatherings of up to 6 people.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government has announced a series of spending measures, projected to cost €520 million (4 percent of GDP). These include (i) more than €130 million (1 percent of GDP) healthcare spending; (ii) allowances to support individuals unable to work from home (such as families with children, persons with disabilities); (iii) special unemployment benefits; (iv) wage subsidies for businesses and self-employed individuals affected by the pandemic; (v)support for businesses to cover costs of quarantined employees and invest in teleworking facilities; and (vi) increases in rent subsidies for unemployed individuals. In addition, the government will provide deferrals of tax payments for income tax, VAT, social security and maternity fund contributions. These measures were originally issued for March and April, and later extended to cover May and June. The government also approved a direct grants scheme of €5.3 million to support investment in research and development (R&D) related to the coronavirus outbreak, and a rent subsidy scheme for SMEs with a budget allocation of €2.5 million, covering February 2020 to December 2022.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    A Guarantee Fund of €350 million (2.7 percent of GDP) has been allocated by Government, through the Malta Development Bank, for the purpose of guaranteeing loans granted by commercial banks in Malta to businesses affected negatively by the pandemic. The amount of loans under guarantee could reach up to €780 million (6 percent of GDP). The government will be subsidizing the interest rate on these loans for two years up to 2.5 percent. In addition, banks were directed to offer a six-month moratorium on repayments on capital and interest for borrowers who have been negatively affected by COVID-19.

Exchange rate and balance of payments
  • No measures.


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Republic of Marshall Islands

Background. As of May 21, no COVID-19 case had been confirmed in the Marshall Islands. The government responded with swift precautionary measures early on. Travel restrictions from affected countries have been imposed since January 24.  Entry of all international travelers by commercial flight has been suspended since March 8. To ensure food and other supplies, container vessels and fuel tankers have been exempted from entry restrictions, but with strict safety requirements including prohibition of human contacts and a minimum of 14 days between departure from ten restricted countries and arrival in RMI. Fisheries, port-related activities, and the hotel and tourism sectors are experiencing significant losses.

Reopening of the economy. To ensure continuity of transshipment services, a limited number of carrier vessels and purse seiners can enter RMI for transshipment, after spending 14 days at sea and only after clearance by corresponding agencies.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has formulated a Coronavirus Disease Preparedness and Response Plan and is preparing preventive measures amounting to about US$7 million (3.1 percent of GDP), including construction of quarantine and isolation units, purchases of medical equipment, installment of washing stations, and funding for overtime of health workers. Tax revenues for March declined by 25 percent year-on-year and risks to revenues from fishing license fees are significant. The authorities are currently working with multilateral and bilateral development partners in search for financial support.

Monetary and macro-financial
  • The U.S. dollar is the country’s legal tender.

Exchange rate and balance of payments
  • Not applicable, given the adoption of U.S. dollar as legal tender.


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Mauritania

Mauritania has reported 173 (4 death and 6 recoveries) as of May 21, 2020. The authorities continue to monitor developments and take needed measures, including an active contacts tracing and testing. The government has taken stringent containment measures to limit the spread of the virus, including suspension of all commercial flights into and from the country; closure of all land borders except for the transportation of goods; closure of schools and universities, as well as of all non- essential businesses, including restaurants and cafés; suspension of non-essential interregional movements of people; a curfew from 9 pm to 6am throughout the country; and suspension of the Friday prayer. The authorities stepped up imports of medical equipment and medicines.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government on March 25 announced the creation of an emergency fund of about $80 million (1.1 percent of GDP) for urgent procurements of medical supplies and equipment; subsidies to 30,000 poor households; and financial support to small individual businesses. It also waived customs duties and taxes on imports of essential goods and signaled that it will take additional measures as more resources are mobilized. On May 6, 2020 the government approved additional health, medical supplies, social protection, SME support, foodstuff stocks, and security-related expenditures to address the pandemic (about $210 million (about 3.2 percent of GDP). To help provide much-needed resources for health services and social protection programs, the IMF Board on April 23, 2020 granted to Mauritania an emergency financing of SDR 95.68 million (about $130 million) under the Rapid Credit Facility. The country has also appealed to development partners for additional financing.

    Reopening of the economy. On May 7, 2020 the government took the following measures to relax the containment and reopen the economy: (i) the opening of most of the businesses, but restaurants will only operate for carry-out meals; (ii) the relaxation of the curfew that will now take place from 11pm to 6am, instead of from 9pm to 6am; (iii) the authorization for collective prayer on Friday, but with clear guidelines on social distancing, masks wearing, and hands washing. However, following the recent spike in new infections, the Friday collective prayer was suspended again on May 14, 2020.

Monetary and macro-financial
  • The central bank took measures to ease liquidity conditions and support the financing of the economy, including: a reduction in the policy rate from 6.5 percent to 5 percent; a reduction in the marginal lending rate from 9 percent to 6.5 percent; and a reduction in banks’ reserve requirements from 7 percent to 5 percent.

Exchange rate and balance of payments
  • No measures.


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Mauritius

Background. Mauritius reported its first cases on March 18, 2020. By the end of April, it has reported 332 positive cases and 10 deaths. No new cases nor deaths are recorded since. The authorities have implemented a range of containment measures since mid-March, including bans on public gatherings, followed by a curfew order, closing borders, discontinuing public transportation, closing schools, universities, shopping malls and attraction sites, suspending employee attendance at government and private workplaces (except for essential staff), and increasing testing. On March 25, the authorities further tightened the lockdown by closing all supermarkets, bakeries and shops and the next day the government began direct food distribution to needy households. On April 2, the stores were reopened with increased safety measures. On April 10, the government extended the nationwide curfew to May 4, which was further extended to June 1. The economy has been severely affected by the crisis, with tourism coming to a halt and slowing of activity in other sectors.

Reopening of the economy. On April 27, mass testing for antigens was initiated. With no new cases being recorded for almost 3 weeks and no active cases since May 11 , a strategic phased resumption of economic activities began on May 15. To return to office, the employees must obtain a Work Access Permit issued by the authorities, except for those working in essential sectors. Arrangements have been made by the public transport companies to comply with the prescribed health measures and to keep a social distance between the passengers. Schoolchildren will have to stay at home until August 1, while the courses will continue to be delivered remotely. Banks and supermarkets will still operate on an alphabetical order, and the same will apply to post offices. On May 15, two bills were passed in the parliament – Covid-19 Bill and Quarantine Bill – which specify the details of the transition process from the curfew by strengthening the surveillance control and health system preparedness. This will allow the progressive reopening of economic and other activities with strict sanitary rules and added measures to avoid a resurgence of the disease.

Key Policy Responses as of May 21, 2020

Fiscal
  • The authorities have announced plans to increase general public health spending by Rs1.3 billion (0.25 percent of GDP). A range of fiscal support measures have been taken to limit the socio-economic impact of COVID-19. These include the implementation of a Wage Assistance Scheme to provide financial support to employees who became technically unemployed during the lockdown/curfew period, as well as a Self-Employed Assistance Scheme for those employed in the informal sector or self-employed. An amount of Rs6.75 billion (1.4 percent of GDP) have been spent for the months of March and April and the amount is expected to rise. In addition, the State Investment Corporation is raising some Rs4 billion (0.7 percent of GDP) to make equity investments in troubled firms, including SMEs. The Development Bank of Mauritius Ltd will give Rs200 million (0.04 percent of GDP) in credit for firms short on cash. All labor contracts set to expire this year have been extended through December 2021. The government has also established CoVid-19 Solidarity Fund aimed at funding COVID-19 related projects (financial support to Mauritian residents and the financing of projects related to the COVID-19 virus and other related health issues), with around Rs145 million raised by the public and enterprises as of May 5, 2020.

Monetary and macro-financial
  • The Bank of Mauritius (BOM) reduced the Key Repo Rate from 3.35 percent to 2.85 percent on March 10, followed by a further reduction to 1.85 percent on April 16. On March 13, the BOM also adopted a set of measures focused on economic operators which are being directly impacted by COVID-19, including: i) reduction of the cash reserve ratio from 9 to 8 percent, with the amount released through the cut earmarked to be made available to affected economic operators economic operators; ii) special credit line of Rs5 billion (1 percent or GDP) through commercial banks for affected firms to meet their cash flow and working capital requirements; iii) commercial banks will provide a moratorium of six months on capital repayment for existing loans of affected economic operators; iv) the BOM also eased supervisory guidelines on handling credit impairments; and v) Rs5 billion (1 percent of GDP) of 2.5 percent two-year BOM savings bonds which will be made available to retail investors.

    On March 23, BOM announced additional support measures: i) six-month moratorium on household loans at commercial banks, while BOM will bear interest payments for households with the lowest income; ii) Special Foreign Currency (USD) Line of Credit ($300 million) targeting operators having foreign currency earnings, including SMEs; iii) swap arrangement to support import-oriented businesses (initial amount $100 million); and iv) Shared ATM Services - waving ATM fees during national confinement period.

Exchange rate and balance of payments
  • The central bank has maintained the flexible exchange rate regime and has intervened modestly in the domestic foreign exchange market to prevent disorderly fluctuations and maintain FX liquidity in the financial system.


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Mexico

Background. The Mexican authorities have reported 78,023 confirmed cases and 8,597 deaths as of May 27th, 2020, and estimated the total number of cases to be 104,562 as of May 3rd.

To delay the spread of the coronavirus, the government declared a health emergency and implemented a range of measures, including travel restrictions, social distancing, closure of schools and shutdown of non-essential activities. On April 5, President Lopez Obrador outlined his government’s policy priorities to combat the economic effects of COVID-19, including more health spending and strengthening of the social safety net.

Mexico was also hit by the global selloff in financial markets and the declining oil price—since February 20, local government bond markets saw nonresident outflows of around US$ 13.4 billion (1.3 percent of GDP), the 10-year dollar credit spread widened from 132 bps to 424 bps at peak on April 28th but has since declined to 269 bps for the sovereign and from 377 bps to 793 bps for Pemex after peaking at 1187 bps, while the peso has depreciated by 15 percent relative to the US$ (as of May 28, 2020).

Reopening of the economy. On May 14, the government announced plans to begin the normalization of economic activities, including a green-yellow-orange-red color system for states to represent the extent of activities allowed (e.g. states with most active cases are red and would remain in a forced quarantine), the resumption of school and labor activities in municipalities free of infection, and the addition of construction, mining, and transport equipment manufacturing as essential activities.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government announced that it would: 1) ensure that the Ministry of Health has sufficient resources and does not face red-tape, and sufficient supply of medical equipment and materials; 2) advance pension payments to the elderly; 3) accelerate the tender processes for public spending to ensure full budget execution; and 4) consider setting-up a Health Emergency Fund to request additional resources from Congress, that could reach up to 180 billion pesos (0.7 percent of 2019 GDP).

  • In his speech to the nation on April 5, President Lopez Obrador outlined the government’s priorities to combat the economic effects of COVID-19. Besides higher health spending and strengthening of the social safety net, the plan includes measures like: 1) frontloading of social pension and disability payments by four months; 2) accelerating procurement processes and VAT refunds; 3) lending to SMEs; 4) liquidity support by development banks; 5) some workers accessing loans against their social security accounts. In addition, the government announced 1) public housing credit institute covering three months of workers’ debt (defer further six months for those let go); 2) lending to small businesses who has not fired workers or reduced salaries since the outbreak. Overall, the above-the-line fiscal measures amount to 0.2 percent of GDP in health spending. Below-the-line measures amount to around 0.7 percent of GDP in loans: (i) lending programs for the self-employed and SMEs that maintain employees on payroll. These loans are provided by the Ministry of Economy and the Mexican Social Security Institute (IMSS); and (ii) development banks to provide loans, particularly to small- and medium-scale enterprises (SMEs). The week of April 19 the President further announced an austerity program for public expenditures including wage reductions and a hiring in order to finance additional health expenditures and priority investment.

Monetary and macro-financial
  • The central bank has cut rates by 150 basis points since the pandemic break, from March until May 2020. Conducted several government bond exchanges, mainly to shorten maturities; and revised plans for new government bond issuance. Announced additional measures to provide MXN and USD liquidity to the banking system and improve the functioning of the domestic financial markets: 1) reduce the mandatory regulatory deposit with Banxico (by 50 billion pesos, or about 15 percent of the current stock); 2) halved the cost of repos; 3) provide USD liquidity (via auctions) to banks by drawing on the $60 billion swap line with the Fed ; and 4) in conjunction with the Ministry of Finance, seek to strengthen market making in the government bond market. Activated the swap line with the Fed, auctioned already US$ 5 billion to commercial banks and announced a second auction (US$ 5 billion) . Temporarily adjusted the accounting rules for banks and other financial institutions to facilitate debt service rescheduling ; recommended suspension of dividend payments and share buybacks . The central bank has also substantially expanded its liquidity facilities making them more affordable, accepting a broader range of collateral and expanding eligible institutions while establishing a corporate securities repo facility to support the corporate bond market. The central bank has opened financing facilities for commercial and development banks (350 billion pesos) to allow them to channel resources to micro, small- and medium-size enterprises and individuals affected by the COVID-19 pandemic. Credit will be provided in exchange for conventional repo collateral as well as banks’ corporate loans, which would free up liquidity in the banks’ balance sheets currently used especially by corporate credit lines for new credit extension.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly, while supporting US$ liquidity. The non-deliverable forward hedging program (NDF, in domestic currency) was extended by $10 billion to $30 billion; two NDF auctions were conducted offering $2 billion each (allocated $2 billion total, 0.2 percent of 2019 GDP). A new tool was added permitting the central bank to intervene in offshore non-deliverable forwards markets, in case intervention is warranted during European or Asian trading hours.


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Federated States of Micronesia

Background. As of May 28, 2020, there are no confirmed COVID-19 cases in the Federated States of Micronesia (FSM), but the country’s health system has limited capacity for handling an outbreak (see S. Department of State travel advisory for the FSM). FSM implemented a public health emergency on January 31, 2020. The national and state governments have introduced travel restrictions; banning or requiring 14-day self-quarantine in a COVID-19-free area prior to entry into the FSM; and restricting residents from traveling abroad. The state of Chuuk closed schools.


Key Policy Responses as of May 28, 2020

Fiscal
  • To address the emergency caused by COVID-19, the national government has prepared a US$20 million (or about 5 percent of GDP) COVID-19 Response Framework, in order to develop quarantine and isolation facilities across the nation, provide mandatory infection control training for all first responders, and increase testing capacity and ventilators for each island state in the FSM. On April 22, 2020, the government approved the economic stimulus package of US$15 million (about 3.8 percent of GDP). The package includes measures to support affected businesses, including wage subsidies, debt relief, as well as social security tax and other tax rebates.

Monetary and macro-financial
  • No monetary policy response. With the U.S. dollar its legal tender, the FSM does not have a central bank.

Exchange rate and balance of payments
  • No exchange rate policy response, given that U.S. dollar is the legal tender of the FSM.


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Moldova

Moldova has recorded 7,725 COVID-19 infection cases, of which 1,564 is medical staff, 4,278 individuals that have recovered, and 282 people that died as of May 28, 2020. Confirmed cases have risen progressively, prompting a declaration of a state of national emergency, restrictions on border crossings, and limits on economic and social activity. Among other provisions, the state of emergency allowed Moldovan authorities to impose additional border controls, limit movement, prohibit large gatherings, manage food supplies, and coordinate media messaging about the pandemic. A National Public Health Emergency has been declared from May 16 to June 30, this follows on from the expiration of the National State of Emergency on May 15.


Key Policy Responses as of May 28, 2020

Fiscal
  • While a comprehensive fiscal package has been adopted, following several targeted fiscal measures to support businesses and vulnerable households, such as expanding unemployment benefits and strengthening existing targeted social assistance, tax relief for sectors affected by state-imposed restrictions, delaying tax payment deadlines to mid-2020, suspending tax audits and other controls, and increasing state budget allocations to the budget emergency and health funds and to a mortgage guarantee program.

Monetary and macro-financial
  • The National Bank of Moldova decreased the base rate applied to the main short-term monetary policy operations by 2.25 percentage points to 3.25 percent, decreased the required reserve ratio in local currency by 6.5 percentage points to 34 percent, while the required reserves ratio in freely convertible currencies increased by 1.0 percentage point to 21 percent. These measures were taken with a view to support the economy, ease liquidity conditions, and enhance financial system resilience. Financial sector policy has thus far focused on providing credit institutions with flexibility to manage near-term payment obligations of individuals facing financial difficulties without recourse to adjustment of prudential provisions, including in cases of loan rescheduling.

Exchange rate and balance of payments
  • The National Bank of Moldova announced that it stands ready to intervene in the foreign exchange market to counter disorderly market pressures and excessive exchange rate volatility.


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Mongolia

Background. Mongolia reported 161 confirmed cases (no fatalities) and 43 recovered COVID-19 patients as of May 28, 2020. The authorities declared the state of high alert on February 13 and quickly implemented a broad range of measures including a travel ban from high-risk countries, temporary suspension of coal exports to China, social distancing, public events cancellations and school and university closures.


Key Policy Responses as of May 28, 2020

Fiscal
  • MNT17 billion (0.04 percent of GDP) of additional health spending has been approved and allocated to epidemic prevention and control, acquisition of medical supply and medical staff overtime salaries. This measure is financed by a Government Reserve Fund withdrawal.

    On March 27, a comprehensive set of fiscal measures for consideration was proposed by the cabinet to protect vulnerable household and businesses and to support the economy. These include: (i) tax exemptions on several imported food and medical items; (ii) increase of child allowance and unemployment benefits; (iii) exemptions on CIT, PIT, and social security contributions until the end of September; and (iv) an increase in credit guarantees to SMEs and soft loans from the development bank to cashmere producers. On April 13, Parliament approved tax exemption measures as proposed by the cabinet.

    On May 6, a second package of fiscal measures (amounting to roughly 2 percent of GDP) was announced to protect the vulnerable groups. These include: (i) a further increase in child money allowance; (ii) a scale-up of food stamp allowance; and (iii) an increase in social welfare pensions for the elderly, disabled, dwarfs, orphans, and single parents with more than 4 children. The government has indicated they expect to fully offset these measures with expenditure cuts.

Monetary and macro-financial
  • On March 11, the Bank of Mongolia (BOM) (i) reduced the policy rate by 100 bps to 10 percent; (ii) reduced the MNT reserve requirement of banks by 200 basis points to 8.5 percent; and (iii) narrowed the policy rate corridor to ±1 percent. The lower reserve requirement released MNT 324 billion (0.8 percent of GDP) of additional liquidity in the banking system. On March 18, the BOM and the Financial Regulatory Commission implemented temporary financial forbearance measures on prudential requirements, loan classifications, and restructuring standards. On April 13, the BOM: (i) cut the policy rate by 100 bps to 9 percent and (ii) allowed existing consumption loan borrowers to defer their principal and interest payments by up to 12 months.

    The Anti-Pandemic Law approved by Parliament on April 30 compels the BOM to implement nonconventional measures, including a SOE-issued bond purchase to compensate banks’ profit loss related to pension-backed loan cancellation, short-term concessional financing to gold miners, and temporary resumption of the subsidized mortgage program which ended at end-2019.

Exchange rate and balance of payments
  • In line with the closure of border to China, most mineral exports to China, accounting for about 90 percent of total exports, have been suspended since February 10, though coal exports started to gradually resume on March 15.


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Montenegro

Background: Montenegro has had 324 registered cases of COVID-19 infections (of which only one is still active, and nine deaths), as of May 21, 2020. There have been no new cases reported since May 4. Since the pandemic erupted, the government had implemented a range of containment measures including travel restrictions, border closures, as well as the closures of schools, restaurants, and public transportation.

Reopening of the economy:A phased Reopening of the economy began on May 4, with social distancing restrictions as well as sanitary and protective conditions that need to be implemented by the respective facilities. Retail outlets and services (such as hairdressers, gyms and fitness centers, driving schools, etc.) were allowed to operate, and citizens allowed to visit their holiday homes in other municipalities. Public and taxi transportation in municipalities with no active cases were also resumed. A gradual return to sporting activities was also allowed from May 6. In the second phase (from May 15), restaurants, cafes, hotel terraces, beach bars, beaches and shopping malls were reopened. Intercity transit will be resumed from June 1. These reopening dates are contingent on the epidemiological situation remaining under control.


Key Policy Responses as of May 7, 2020

Fiscal
  • On April 24, the Montenegrin cabinet approved the second package of measures. This EUR 75 million package (with a net impact of EUR 40 million) includes (i) subsidies in April and May of 70 percent of the minimum wage for employees in sectors that are closed because of the pandemic, employees who are unable to work due to childcare for children aged under 11, or people who have to be self-isolated and quarantined; (ii) a subsidy of 50 percent of the minimum wage for employees in sectors at risk due to the pandemic-related lockdown; (iii) a subsidy of 70 percent of the gross minimum wage of newly employed workers in SMEs for six months if these workers are registered as unemployed; (iv) state bodies and state-owned companies will impose a six-month moratorium on the enforcement of claims for companies that are not operating due to the pandemic; (v) energy firms will exempt the fixed portion of electricity bills for businesses that have stopped operating due to the pandemic-related lockdown; (vi) the state utility EPCG will double its electricity subsidies for vulnerable households; (vii) assistance to the agriculture and fisheries sector, including one-off assistance to fishermen and payments for the contributions of insured agricultural workers; and (viii) one-time assistance of EUR 50 to all persons recorded as unemployed in the Employment Agency of Montenegro and who did not receive any compensation.

    Previously announced measures include: (i) the removal of the excise on medical alcohol sold in pharmacies; (ii) the delay of tax payments and social security contributions; (iii) the creation of a new Investment Development Fund (IRF) credit line of EUR 120 million to improve the liquidity of entrepreneurs; (iv) the deferral of lease payments for state-owned real estate; (v) advance payments to contractors for capital projects; (vi) one-off financial assistance to low-income pensioners and social welfare beneficiaries in the amount of EUR 50 each (EUR 1 million has been allocated); (vii) and an increase in the March wages of healthcare workers by up to 15 percent (EUR 0.5 million has been allocated).

Monetary and macro-financial
  • On March 17, the central bank announced a moratorium on loan repayments for a period of up to 90 days. The moratorium is available to all borrowers, and includes the interim suspension of all payments of obligations based on the loan (principal, interest, default interest, fees, etc.). On May 20, it was further announced that banks can approve a new moratorium for borrowers facing difficulties due to the pandemic. Banks may also, under clearly specified conditions, approve the restructuring of loans, including unsecured cash loans.

    The central bank has also announced measures to temporarily prohibit banks from paying dividends to shareholders, except in the form of equity, and to allow banks to increase exposures to a person or group of related parties beyond the prescribed exposure limits (25 percent of the bank’s own funds), with prior central bank approval. More details here.

    Other measures include the decision to halve the fee that banks are required to pay for withdrawing reserve requirement liquidity (announced on May 7) and the reduction of the reserve requirement rate by 2 percentage points (announced May 12).

Exchange rate and balance of payments
  • No measures.


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Morocco

Background. Morocco has reported 7,133 confirmed cases of COVID-19 and 194 deaths as of May 14, 2020. The government created an emergency committee chaired by the Minister of Finance in charge of monitoring the situation. The authorities declared a state of health emergency, adopted containment measures, including quarantine, suspended all international passenger flights, forbid all public gatherings, and closed mosques, schools, universities, restaurants, cafes, and hammams. The authorities also decided to regulate prices and control the distribution channels of facemasks and hydro alcoholic gels.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities have created a special fund dedicated to the management of the pandemic, of about 2.7 percent of GDP financed by the government and by voluntary contributions from public and private entities which will be tax deductible. This fund will cover the costs of upgrading medical facilities and support businesses and households impacted by the pandemic. Businesses with less than 500 employees made temporarily idle and experiencing a reduction in turnover of more than 50 percent can defer social contribution payments until June 30. Their employees who become temporarily unemployed and are registered with the pension fund will receive 2,000 dirhams a month and can put off debt payments until June 30. In April, almost 1 million workers from 134,000 companies were eligible to these transfers. Companies with annual turnover lower than 20 million dirhams can also defer tax payments. In addition, the government has decided to accelerate payment to its suppliers to support businesses.

    The government also took measures to support households working in the informal sector. Households’ benefiting from the non-contributory health insurance (RAMED) will receive a mobile payment of DRH 800-1200 (USD 80-120) in April, depending on households’ composition. Other households which do not benefit from RAMED will be able to claim cash support by registering online. In April, 85 percent of eligible households in the informal sectoral were covered. The government postponed the deadline for personal income tax filing from end-April to end-June 2020 and provided a tax exemption for additional compensation paid by firms to employees in the formal sector up to a limit of 50 percent of the average monthly net salary. A decree-law adopted on April 6 authorizes the government to increase external borrowing beyond the ceiling approved in the 2020 Budget Act.

Monetary and macro-financial
  • The central bank reduced the policy rate by 25 bps to 2.0 percent on March 19. To support companies, loan payments are suspended for small and medium-sized businesses and self-employed people until June 30. To reduce volatility, the Capital Market Authority decided to revise downwards the maximum variation thresholds applicable to financial instruments listed in Casablanca Stock Exchange.

    Given growing demand for liquidity support in the banking system (both in DRH and in EUR/USD), Bank al-Maghrib decided on a three-pronged approach to increase liquidity provision to the banking sector: (i) expand the range of collateral accepted for repos and credit guarantees to include public and private debt instruments (including mortgages), (ii) increase and lengthen central bank refinancing operations to support banking credit to (V)SMEs, and (iii) provide FX swaps to domestic banks.

    On March 29, the central bank decided the following measures to support the banking sector: (i) Banks are authorized to go below the 100 percent liquidity coverage ratio (LCR) until end-June 2019; (ii) Provisioning requirements are suspended for loans’ benefiting from a temporary payment moratorium until end-June 2019; (iii) The capital conservation buffer (CCB) is reduced by 50 bps for one year. In addition, the central bank has call on banks to suspend dividend payments for FY2019.

    On April 24, the Moroccan insurance supervisor relaxed some provisioning requirements to mitigate the impact of COVID-19 on the insurance sector.

    In addition, Morocco has established a funding for lending facility (Damane Oxygene) which provides loans to (V)SMEs at subsidized interest rates with a guarantee of 95 percent from the Central Guarantee Fund. On May 15, this program was extended to end-2020, and collateral requirements were removed to improve access for (V)SMEs. 17,500 companies have benefitted from this facility, for a total oustanding amount of DH 9.5 billion.

    In addition, the government will provide interest-free loan of up to dirham 15,000 to self-employed, with a repayment period of three years and a grace period of one year. The government also cancelled capitalized interests on mortgages (up to DRH 3000 per month) and consumer loans (up to DRH 1500 per month) accrued from March to June 2020 for all households experiencing income losses.

    On May 21, the government announced a post crisis facility to support businesses that will provide financing to cover working capital needs at subsidized interest rate (with a 4 percent maximum interest rate, equivalent to the current policy rate + 200 basis points). A sovereign guarantee of 95 percent will be provided to SMEs, for an equivalent of up to ten percent of annual turnover. Larger firms will benefit from a sovereign guarantee of 80 to 90 percent of the outstanding loan, which will be capped at one month of turnover for most sectors. Firms will have 7 years to repay with a 2-year grace period. In addition, the government will guarantee state-owned enterprises’ loan that will be provided by banks exclusively to repay their suppliers.

Exchange rate and balance of payments
  • As part of a gradual and orderly transition to a more flexible exchange rate regime, the authorities broadened the dirham’s fluctuation band to +/- 5 percent (from +/- 2.5 percent) on March 6, 2020.

    On April 7, the Moroccan authorities purchased all available resources (about US$ 3 billion or 240 percent of quota and about 3 percent of GDP) under the Precautionary and Liquidity Line (PLL) arrangement. This purchase will help the authorities limit the social and economic impact of the COVID-19 pandemic and allow Morocco to maintain an adequate level of official reserves to mitigate pressures on the balance of payments.


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Mozambique

Background. Mozambique reported its first COVID-19 case on March 22, 2020 and as of May 20, Mozambique had reported 156 positive cases of Covid-19 and no deaths.

Early on, the government took several actions early on to contain an outbreak of Covid-19 in the country, stating that “prevention remains the best strategy.” These actions include (i) the shutdown of schools form pre-school up to university, (ii) the ban of all gathering – including religious services - of more than 50 persons, (iii) the ban and cancellation of all entry visas, (iv) a 14 day quarantine for all travelers entering Mozambique and (iv) the creation of a technical and scientific committee to advise the government. The government has recently made it obligatory to wear face masks in public places.

On March 30, President Nyusi declared the state of emergency for the month of April, and it has then been extended until May 30. The measures to prevent the spread of the new coronavirus now include: (i) imposing limitations on movements within the country and border entries (only cases of State interest, the transport of goods by duly accredited operators and health-related situations” are exempted); (ii) ban on all types of public or private events; (iii) closure of non-essential shops or, where applicable, their reduction in activity; (iv) monitoring prices of essential goods for preventing price gouging; (v) redirecting the industrial sector toward the production of goods necessary for the prevention and mitigation of the Covid-19 pandemic; (vi) introducing job rotation (or other forms of organization); and (vii) ensuring the adoption of preventative actions in all institutions, public or private. The measures were taken based on a report by the scientific commission created to advise and monitor the pandemic. While testing capacities are currently only available in Maputo, the government is planning to expand those to provinces, with the objective to initially test 400 people a day in four provincial laboratories and to scale it up to 6,000 tests a day. As of May 20, about 6,750 people had been tested in Mozambique.


Key Policy Responses as of May 22, 2020

Fiscal
  • The government has increased the budget allocation for health, from about MT 2 billion (or about 0.2 percent of GDP) to about MT 3.3 billion (0.3 percent of GDP). In addition, the Government is asking Mozambique’s development partners for US$ 700 million for help to deal with the economic impact of the pandemic. This fiscal package would finance (i) temporary and well-targeted tax exemptions to support families and the health sector (VAT and import tariff exemptions on food, medicine and medical equipment), and (ii) higher spending to respond to the health crisis and humanitarian needs, including higher health related spending on goods and services, and higher cash transfers and subsidies to the poorest households as well as micro-businesses and SMEs. In May, the government introduced a price subsidy to benefit cotton farmers and extended the VAT exemption on sugar, vegetable oil and soap until the end of the year.

Monetary and macro-financial
  • To ease liquidity conditions, on March 16, the central bank reduced reserve requirements by 150 basis points for both foreign currency and domestic currency deposits (to 11.5 percent and 34.5 percent respectively). On March 22, it announced measures to support financial markets and encourage prudent loan restructuring by: (i) introducing a foreign currency credit line for institutions participating in the Interbank Foreign Exchange (FX) Market, in the amount of US$ 500 million, for a period of nine months; and (ii) waiving the constitution of additional provisions by credit institutions and financial companies in cases of renegotiations of the terms and conditions of the loans, before their maturity, for clients affected by the pandemic, until December 31. On March 30, the central bank announced measures to easy payment system transactions and liquidity conditions by: (i) lowering fees and charges for digital transactions through commercial banks, mobile banking and e-currency, for a period of three months, and (ii) waiving specific provision on foreign currency loans, until December 31. The central bank reduced the policy rate by 150 bps to 11.25 percent on April 16. On April 29, the central bank introduced a requirement for exporters to exchange at least 30 percent of FX proceeds into domestic currency.

Exchange rate and balance of payments
  • The metical has been allowed to adjust flexibly and has depreciated by almost 4.5 percent against the US dollar since early March 2020.


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Myanmar

Myanmar has 199 confirmed COVID-19 cases (6 deaths and 108 recovered) as of May 21, 2020. The economy has been deeply affected by the outbreak, with sharp declines in tourist arrivals, supply chain disruptions for the garment sector, and losses for SMEs, which have resulted in large layoffs and factory closures. In response, the government has announced measures to limit the spread of the virus including travel restrictions (including quarantine requirements, suspension of visa issuances and international flights), closure of several land borders, and bans on mass public gatherings. A National Central Committee on Prevention, Control and Treatment of 2019 Novel Coronavirus has been established to coordinate the authorities’ response. A second committee, the Control and Emergency Response Committee on COVID-19, was setup on March 30 to help with stricter administrative measures to control the spread of the virus including quarantining migrant workers coming from neighboring countries. The Myanmar government has developed the COVID-19 Economic Relief Plan (CERP) consisting of seven goals, 10 strategies, 36 action plans and 76 actions that cover a range of emergency fiscal and monetary measures. The CERP seeks to mitigate the inevitable economic impact posed by COVID-19 while establishing a foundation to facilitate Myanmar’s rapid economic recovery.


Key Policy Responses as of May 21, 2020

Fiscal
  • Measures include: (i) the allotment of MMK 300 million (US$0.2 million) to the Ministry of Health and Sports for additional health related expenditures; (ii) income and commercial tax payments due in the second and third quarters of the fiscal year have been made extendable to end of the fiscal year, and an exemption for the 2 percent advance income tax on exports to the end of the fiscal year has been announced; and (iii) a COVID 19 Fund worth MMK 100 billion (US$70 million, 0.1 percent of GDP) has been established at the Myanmar Economic Bank to provide soft loans to affected business (particularly the priority garment and tourism sectors and SMEs) at reduced interest rates. Households without a regular income are being provided with food during the long holidays and electric bills, for up to 150 units, are exempt for most until the end of April. The Ministry of Hotels and Tourism announced that fee for renewal license of hotels and tourism businesses will be exempted for one year up to end of March 2021. Starting April 20, the customs department has reduced duties for businesses operating with the Myanmar Automated Cargo Clearance System. The National Food Reserve has been allocated 38 billion kyat. Government expenditure is being reprioritized to provide space for potential Covid-19 related spending. The CERP action plan includes the immediate waiver of specific goods tax, customs duty and commercial tax on critical medical supplies and products related to the prevention, control and treatment of COVID-19. The Ministry of Labour, Immigration and Population will provide 40 percent of the social security fees for about 1.3 million insured workers from factories and workshops that are temporarily suspended for health inspections.Up to 10 percent of FY 2019/20 initial budget expenditure (excluding those implemented by foreign loans and grants) of each ministry will be re-allocated to fight against COVID-19.

Monetary and macro-financial
  • The Central Bank of Myanmar (CBM) cut the policy interest rate by 0.5 percentage points on March 12 and by 1 percentage point on March 24, and has announced a further 1.5 percentage points reduction to be effective May 1. Deposit auctions have been halted to maintain adequate liquidity in the interbank market. On April 9, the CBM announced a temporary reduction in banks’ required reserve requirement ratio from 5.0% to 3.5% of deposits till September 30, 2020. It also announced a temporary revision to the formula for calculating the liquidity ratio, increasing the weight of government treasury bonds with a remaining maturity of more than one year from 50 percent to 90 percent, till September 2019. On April 23, CBM announced the extension of the deadline for compliance with four prudential regulations (enacted in July 2017) by three years from end-August 2020 to end-August 2023 to enable banks to support the economy cope with the impact of COVID-19.

Exchange rate and balance of payments
  • The kyat has been allowed to adjust flexibly, with limited rules-based intervention to manage excessive exchange rate volatility.


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Namibia

Background. Namibia has reported 16 positive cases (no deaths) as of May 21, 2020. The government declared a national state of emergency and adopted containment measures, including social distancing, work from home initiatives (including suspension of the parliament for 21 days), lockdowns in some regions, and travel bans on visitors from high-risk countries, and screening at ports of entry. The domestic travel lockdown was relaxed on May 4th (so people can travel inside the country with some constrains on number of vehicle occupants), while foreigners are still not allowed in the country.

Key Policy Responses as of May 21, 2020
Fiscal
  • On April 1st the government launched the Economic Stimulus and Relief Package to mitigate the impact of COVID-19 (8 billion Namibian Dollars, or 4.25 percent of GDP), including i) expenditure measures of 2.2 bn for health, wage subsidies for affected sectors, and income grants; and ii) guarantees of up to 2.3 bn to support low interest loans for small and agricultural businesses, and individuals. In addition, the government called off the Independence Celebrations and reallocated the corresponding financial outlay to the fight against COVID-19.

Monetary and macro-financial
  • The central bank reduced the policy rate by 100 bps to 4.25 percent on April 15 (200 bps total since the state of emergency was declared). On March 26, the central bank announced changes in the financial sector and its regulatory setting, including i) allowing banks to grant loan payment moratorium (payment holidays) ranging from 6 to 24 months, ii) regulatory and policy relief changes, such as relaxing the determination on liquidity risk management, reducing the capital conservation buffer rate to 0 percent for at least 24 months to support banking institutions to supply credit, and postponing the effective date of implementation of the 25 percent single borrower limit and concentration risk limit.

Exchange rate and balance of payments
  • No measures.


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Nauru

Background. As of May 28, 2020, Nauru has no confirmed cases of COVID-19. It remains one of only 13 countries in the world with no confirmed cases, as per the Johns Hopkins Coronavirus Tracker.

The government has imposed a number of containment measures including a near-total ban on entry by air into Nauru which was effective March 16th. Cargo flights are operating at normal frequency at this time, but subject to strict handling on arrival, including on contact with crew. Screening and quarantine measures have also been in effect since March 16th and apply to all passengers on arrival, including a mandatory 14-day stay in approved transition accommodation and further measures for symptomatic cases. On April 9, the Government of Nauru extended the emergency measures to be in force until they announce an easing [date unspecified]. Social distancing measures have been encouraged including limiting or cancelling public gatherings and recommending working arrangements from home where possible.


Key Policy Responses as of May 28, 2020

Fiscal
  • While mitigation measures have not been needed, containment efforts have been sizeable and expenditures on keeping the national airline and other SOEs afloat have been significant at about 5.5 percent of 2019 GDP. Initial estimates from the health and immigration department suggest an estimated AUD 3.5 million for health expenditures and isolation costs per 500 individuals (approximately 4 percent of the population), AUD 5.1 million on liquidity injections to Nauru Airlines, an estimated AUD 0.5 million in budget support to SOEs in managing inventory from limited freight and cargo services. The authorities have reprioritized expenditures and drawn down on cash buffers and general reserves to support the fiscal measures, including necessary medical expenditures. Apart from containment and mitigation, the government has also used its cash buffers for the repatriation of Nauruans abroad. As of May 27, 2020, the authorities have implemented a testing regime for COVID-19 and reduced the mandated time in quarantine, alleviating some of the budgetary implications of containment.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Nepal

Background. Nepal has 444 confirmed COVID-19 cases and 2 deaths as of May 21. Containment measures imposed include a nationwide lockdown (until June 2), a ban on domestic and international flights (until June 14), and a closure of land border crossings. Nepal’s Central Bureau of Statistics estimates that growth in FY2019/20 will be 2.3 percent, down from 7.1 percent in FY2018/19 (fiscal year ends July 15)—this estimate combines actual data through mid-April and projections for the rest of the FY.


Key Policy Responses as of May 21, 2020

Fiscal
  • Measures announced March 30. Health spending will be increased, including by providing additional insurance coverage to all medical personnel fighting the coronavirus, importing additional medical supplies (with duty on said items eliminated), and setting up quarantine centers and temporary hospitals. Social assistance will be strengthened by providing those most vulnerable with daily food rations, subsidizing utility bills for low-usage customers, extending tax-filing deadlines, and taking measures to partially compensate those in the formal sector for lost wages in the event of job loss.

    Measure announced April 26. Informal sector workers who have lost their jobs due to the ongoing crisis will be given the opportunity to participate in public-works projects for a subsistence wage or receive 25 percent of local daily wage should they choose not to participate.

Monetary and macro-financial
  • Measures announced March 29. To provide liquidity to the financial system, the Nepal Rastra Bank (NRB) lowered its cash reserve ratio from 4 to 3 percent and reduced the interest rate on the standing liquidity facility rate from 6 to 5 percent. The NRB is no longer requiring banks to build up the 2 percent countercyclical capital buffer that was due in July 2020. The NRB temporarily relaxed reporting norms and announced that bank and financial institutions will not be charged or penalized for their non-compliance with regulatory and supervisory requirements in April. The size of the Refinance Fund has been increased to provide subsidized funding for banks willing to lend at a concessional rate to priority sectors including small and mid-size enterprises affected by the pandemic.

    Measures announced April 29. The NRB announced that banks will defer loan repayments due in April and May until mid-July. For working capital loans, banks will extend the repayment schedule of the amount due during the lockdown up to 60 days. Businesses in affected sectors, if they can show the needs, can qualify for additional working capital loans of up to 10 percent of the approved amount of their existing working capital loans, to be repaid within a year at most. The NRB directed banks to apply lower interest rates (up to 2 percentage points) when calculating the interest due for the period of mid-April to mid-July, applicable to borrowers from affected sectors.

Exchange rate and balance of payments
  • On April 1, the NRB imposed a temporary ban on luxury goods imports, such as gold over 10 kg and vehicles worth over US$50 thousand, and will temporarily provide a minimum currency exchange facility to qualifying students abroad (less than US$500 per student).


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The Netherlands

Background. The first cases of COVID-19 infections were reported in the Netherlands in late February. As of May 28, there are 45,578confirmed cases, and 5,856 deaths. The authorities have taken measures to limit the spread of the virus, including ordering closure of schools and many catering businesses, and advising to avoid social contact and work from home to the extent possible.

Reopening of the economy. As the number of new infections and death continue to decline, the Dutch government is laying down a progressive easing of the lockdown measures under strict conditions. From May 11, childcare services and primary schools were allowed to reopen, as well as some businesses (including for example hairdressers and nail stylists). Starting on June 1st, secondary schools and more businesses (e.g. restaurants and cafes, cultural institutions) will also reopen. The authorities have stressed that further relaxion of the containment measures will be considered only to the extent that the spread of the virus remains under control. They are communicating on safety measures to be followed while stressing the importance to remain alert.


Key Policy Responses as of May 28, 2020

Fiscal
  • A package of fiscal measureswas announced and has been subsequently upgraded to contain the economic impact of the outbreak. The package includes spending measures estimated at about 20.1 billion euros (2.7 percent of GDP) in 2020, and covering  (i) compensation of up to 90 percent of labor costs for companies expecting a reduction in revenues of 20 percent or more; (ii) compensation for affected sectors (hospitality, travel, agriculture, culture, and others); (iii) support for entrepreneurs and the self-employed, start-ups and small innovation companies; (iv) scaling up of the short-time working scheme (unemployment benefit compensation available to companies needing to reduce their staff by at least 20 percent). In addition, companies can defer tax payments without penalties, and calculate provisional taxes on the basis of expected reduced activity levels. In 2020, revenue losses from deferral of tax payments are estimated at 36 billion euros (or 4.8 percent of GDP).  Also, public guarantee schemes, especially for SME loans (but also covering large firms), are expanded to help the most vulnerable companies to manage their liquidity problems. A guarantee scheme for supplier credit is also established. The total cost of these programs will depend on demand. With the lockdown measures being progressively relaxed, the government has announced a new package of measures aiming to support businesses as they slowly restart their activities, and to extend for another four months some of the measures already in place. The new package (estimated to cost around 13 billion euros, or 1.7 percent of GDP) includes allowances for SMEs to help them finance their fixed costs.

Monetary and macro-financial
Exchange rate and balance of payments
  • No measures.


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New Zealand

Background. As of May 20, New Zealand had 1,503 confirmed and probable cases of COVID-19, and 21 deaths. On March 25, 2020, New Zealand moved to Alert Level 4 restrictions after domestic transmission of the virus was found. The authorities declared a state of emergency and implemented strong containment measures including the closure of all non-essential businesses, cancellation of all events and gatherings, closure of schools, and cancellation of discretionary domestic air travel. This followed the closure of all borders and entry ports to non-residents on 19 March with returning citizens and residents required to self-isolate, and since 10 April to enter into two weeks of supervised quarantine. New Zealand’s economy was strongly affected by the decline in Chinese tourists in the first quarter (usually the high season due to Chinese New Year). Preliminary indications are that also merchandise exports to China declined in the first quarter of the year.

Reopening of the economy. The country moved to Alert Level 2 on May 14, lifting lock-down restrictions and maintaining social distancing in public and for private gatherings of more than 10 people, and 50 people for funerals. Schools reopened fully on 18 May while bars can reopen on May 21. Businesses re-opened with health and social distancing requirements, and domestic travel has been allowed. The borders remain closed to all but New Zealand residents, who must isolate in dedicated facilities for 14 days upon entry. The country had previously moved to Alert Level 3 from Alert Level 4 on April 28, allowing many businesses to re-open, though without physical contact to customers, and schools to re-open with limited capacity. People were encouraged to continue to stay and work from home if possible.


Key Policy Responses as of May 21, 2020

Fiscal
  • With the FY2020-21 budget and previous fiscal packages, the government has announced fiscal measures amounting to a total of NZ$62.1 billion (20.7 percent of GDP) through FY2023-24, of which NZ$20.5 billion will be disbursed by end-June. The total amount includes the NZ$50 billion COVID-19 Response and Recovery Fund, a majority of which is yet to be allocated to specific spending programs. Already specified fiscal measures include: (i) healthcare-related spending to reinforce capacity (NZ$0.5 billion or 0.2 percent of GDP); (ii) a permanent increase in social spending to protect vulnerable people (total NZ$2.4 billion or 0.8 percent of GDP); (iii) a lump sum 12-week wage subsidy to support employers severely affected by the impact of COVID-19 (NZ$15.2 billion or 5.1 percent of GDP); (iv) a permanent change in business taxes to help cashflow (NZ$2.8 billion or 0.9 percent of GDP); (v) a temporary tax loss carry-back scheme (NZ$3.1 billion or 1 percent of GDP); and (vi) support for the aviation sector (NZ$0.6 billion or 0.2 percent of GDP). The government has also approved a NZ$0.9 billion debt funding agreement (convertible to equity) with Air New Zealand to ensure continued freight operations, domestic flights and limited international flights. The New Zealand government also provides loans of up to NZ$100,000 to small businesses that employ 50 or less employees. In addition, on March 28 the government announced temporary removal of tariffs on all medical and hygiene imports needed for the COVID-19 response.

Monetary and macro-financial
  • The Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) unchanged at 0.25 percent on May 13 and signaled its intention to keep the OCR at this level for at least a year. The OCR was reduced by 75 basis points to 0.25 percent on March 17. The RBNZ has also announced a near doubling of the Large-Scale Asset Purchase program (LSAP) to purchase government bonds and Local Government Funding Agency (LGFA) in the secondary market up to $60 billion over the next 12 months. The RBNZ has doubled the overdraft on the crown settlement account to NZ$10 billion for April-June to meet the government's short-term cash needs.

    The RBNZ has been providing liquidity in the FX swap market and re-established a temporary US dollar swap line (US$30 billion) with the U.S. Federal Reserve. The RBNZ has established a new Term Auction Facility (TAF), which allows banks access to collateralized loans of up to 12 months, and announced a corporate facility in which the RBNZ will offer up to NZ$500 million per week in open market operations with banks against corporate paper and asset-backed securities for 3 months. The RBNZ is also introducing a Term Lending Facility (TLF), a longer-term funding scheme for banks at 0.25 percent for up to 3 years duration, available to use for six months from May 26. Access to the TLF is linked to each banks’ lending under the Business Finance Guarantee Scheme (see below) and will require approved eligible collateral. The RBNZ has reduced bank’s core funding ratio requirement to 50 percent from 75 percent to help banks make credit available. To further support the stability of the financial system, the start date for a regulatory change requiring higher capital for banks has been postponed for 12 months, to July 2021 (to support up to about NZ$47 billion of additional lending), with other regulatory initiatives in the pipeline also put on hold for at least six months. The RNBZ has also agreed with the banks that during this period there will be no dividend payments on ordinary shares and redemption of non-CET1 capital instruments. The RBNZ has removed, effective as of May 1, mortgage loan-to-value ratio (LVR) restrictions for the next 12 months.

    The New Zealand government, the RBNZ, and the New Zealand Bankers Association have also announced a number of financial measures to support SMEs and homeowners. These include six-month principal and interest repayment deferrals to mortgage holders and SMEs affected by COVID-19 and a NZ$6.25 billion Business Finance Guarantee Scheme for SME loans, in which the government covers 80 percent of the credit risk.

    Other related measures taken by the government that could contribute to financial stability include a six-month freeze on residential rent increases and increased protections for tenants for termination of tenancies. The government has also committed to a temporary law change to enable businesses to put existing debt into hibernation for six months.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly.


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Nicaragua

Background. As of May 26, Nicaragua had reported 759 confirmed cases of COVID-19, including 35 deaths. Confirmed cases have been treated in accordance with international protocols. In response to the COVID-19, the government has implemented several measures, including the declaration of a state of national alert, the implementation of Epidemiological Surveillance Protocols at the national level, and the execution of sanitary control measures at land, air and sea entry points in accordance with international protocols.

On January 30, the National Inter-institutional Commission for the Early Detection, Care and Prevention of COVID-19 was created. A total of 19 hospitals have been officially designated nationwide for the care of COVID-19 cases upon detection. The Ministry of Health monitors and provides weekly reports on the status of the outbreaks in the country. Doctors and relevant health personnel from the Ministry of Health have received training on the prevention, detection, containment and treatment of COVID-19 and have exchanged experiences on these topics with international experts. Education on the prevention of the COVID-19 is also taking place at the national level and a National Information Center has been set up with free direct telephone lines for emergency calls and to answer queries related to the virus, including preventive information.

The central and local governments launched a cleaning and disinfection program of public schools, public transportation units, taxis, markets and other public spaces at a national level. In addition, the Ministry of Health is promoting a campaign to take preventive measures including proper hand washing, physical distancing, adequate use of masks and the care of vulnerable groups, such as the elderly and with chronic diseases.


Key Policy Responses as of May 26, 2020

Fiscal
  • The government has continued to prioritize programs to strengthen the social safety net, including the provision of food packages among vulnerable families. Sixty thousand food packages were distributed in April.

Monetary and macro-financial
  • Since March, the Central Bank of Nicaragua (CBN) reduced its repo reference rate, and the 1-day and 7-day repo window rate by 125 bps. The rate for domestic currency deposit window has been cut by 25 bps, and the rate for foreign currency deposit window has also been cut by 60 bps. On March 24, the CBN updated its Business Continuity Plan COVID-19 (activated on March 11) to guarantee the continuity of financial, treasury, accounting and administrative operations.

Exchange rate and balance of payments
  • No measures.


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Niger

Background. Niger registered 955 COVID-19 cases, 802 recoveries, and 64 deaths as of May 28, 2020. The first case was reported on March 19, 2020. On March 27, 2020, the President declared a national emergency and imposed a night curfew in the capital in addition to shortened work hours and earlier measures that include the closure of Niger’s borders and a ban on large gatherings.

Reopening of the economy. The night curfew and restriction on religious gatherings were lifted on May 13. The quarantine of Niamey and the ban on inter-city travel were lifted on May 14. The moratorium on seminars and conferences; restricted work hours and limits on non-essential government business were lifted on May 25. The border closure and mandatory 14-day quarantine of foreign visitors remain in place.

Niger secured US$114.5 million in emergency financing from the IMF on April 14, 2020 and relief from its debt service to the IMF on April 13, 2020.


Key Policy Responses as of May 28, 2020

Fiscal
  • An updated crisis response plan has been presented to donors with an estimated cost of 18.4 percent of GDP, divided into an immediate health response and broader economic and social mitigation. Key elements are already being implemented, such as food distribution, two months of free utilities to the vulnerable households and temporary tax relief for hard-hit sectors. Finance Ministry also announced credit support to the private sector in the form of loan guarantees. The revised cost includes large-scale support for agricultural production, revenue shortfalls, and the building of liquidity buffers. On May 8, the cabinet approved a supplementary budget with 1.3 percent of GDP in resources re-allocated to additional spending toward health, security and social assistance.

    On April 27, Heads of states of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU Growth and Stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of COVID-19. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to COVID-19. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the WAEMU has taken preemptive steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with COVID19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Niger amounted to 1.4 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Nigeria

Background. Nigeria has been severely hit by the spread of COVID-19 and the associated sharp decline in oil prices. Government policy is responding to both these developments. The authorities have reported 6677 cases of COVID-19 and 202 deaths as of May 21, 2020. Over 40,043 samples have been tested. A range of measures were implemented to contain the spread of the virus, including closure of international airports, public and private schools, universities, stores and markets, and suspension of public gatherings, and lockdown of some states.

Reopening of the economy. Ease of lockdown continued with extended curfew from 8pm to 6pm every day in Abuja, Lagos, and Ogun state; lockdown in Kano state was extended for another two weeks; some states have lifted partial lockdown on May 21 and allows religious congregation. Nationwide measures were introduced, including nighttime curfew, ban on non-essential inter-state passenger travel, partial and controlled interstate movement of goods and services, and mandatory use of face masks or coverings in public. Work at home is also encouraged in several states and government institutions while isolation centers are being expanded in Lagos state. The president ordered the release of inmates in correctional facilities to decongest prisons.


Key Policy Responses as of May 21, 2020

Fiscal
  • Contingency funds of N984 million ($2.7 million) have been released to Nigeria’s Center for Disease Control, and an additional N6.5 billion ($18 million) was distributed for purchasing more testing kits, opening isolation centers and training medical personnel. Grant of N10 billion ($28 million) was released to the Lagos State to increase its capacity to contain the outbreak. The government is reviewing its 2020 budget and, given the expected large fall in oil revenues, announced plans to cut/delay non-essential capital spending by N1.5 trillion (close to 1 percent of GDP). A fiscal stimulus package, in the form of a COVID-19 intervention fund of N500 billion ($1.4 billion), has been approved by the President to support healthcare facilities, provide relief for taxpayers and incentivize employers to retain and recruit staff during the downturn. Import duty waivers for pharmaceutical firms will be introduced. Regulated fuel prices have been reduced, and an automatic fuel price formula introduced to ensure fuel subsidies are eliminated. The President also ordered an increase of the social register by 1 million households to 3.6 million to help cushion the effect of the lockdown.

Monetary and macro-financial
  • The Central Bank of Nigeria (CBN) maintained its current monetary policy rate in March but introduced additional measures, including: (i) reducing interest rates on all applicable CBN interventions from 9 to 5 percent and introducing a one year moratorium on CBN intervention facilities; (ii) creating a N50 billion ($139 million) targeted credit facility; and (iii) liquidity injection of 3.6 trillion (2.4 percent of GDP) into the banking system, including N100 billion to support the health sector, N2 trillion to the manufacturing sector, and N1.5 trillion to the real sector to impacted industries. In addition, the CBN announced another N1 trillion support to the agriculture sector as food shortages looms. Regulatory forbearance was also introduced to restructure loans in impacted sectors. The CBN is also coordinating a private sector special intervention initiative targeting N120 billion ($333 million) to fight COVID-19. As of April 16, N42.6 billion was received, including $50 million grant from the European Union. The Nigeria Solidarity and Support Fund was established, looking to raise $50 million to support physical infrastructure of healthcare centers in Local Governments and existing Social Investment Program.

Exchange rate and balance of payments
  • The official exchange rate has been adjusted by 15 percent, with an ongoing unification of the various exchange rates under the investors and exporters (I&E) window, Bureau de Change, and retail and wholesale windows. The authorities committed to let the I&E rate move in line with market forces, and it has so far depreciated by about 4 percent. A few pharmaceutical companies have been identified to ensure they can receive FX and naira funding. While I&E window turnover has been low since April, the CBN has resumed FX supply in some of the other windows.


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North Macedonia

Background. North Macedonia has reported 1898 confirmed cases and 111 deaths as of May 21, 2020. The government has declared a state of emergency, closed borders and imposed important social-distancing restrictions including a nationwide curfew to slow down contagion.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has adopted fiscal measures to help address firms’ liquidity problems, protect jobs and support the most vulnerable. The measures, which are temporary, include subsidies on private sector wages and social security contributions for firms that maintain employment, postponement of income tax payments, loans at favorable terms and loan guarantees, and sector-specific support. Also, vulnerable households will receive financial support through existing social assistance schemes and cash vouchers. Students will receive partial re-imbursement of university tuition fees and IT courses. Finally, the government has implemented price controls on basic food products, medicines, and disinfection products, and abolished the import duty on medical supplies.

Monetary and macro-financial
  • The National Bank of the Republic of North Macedonia (NBRNM) has cut its policy rate twice since the start of the crisis by a cumulative 50 basis points to 1.5 percent. The fees for withdrawing and returning cash to the National Bank’s central vault have been abolished to minimize any risk of transmitting the virus infection by coins and bills. In addition, the NBRNM has reduced by 60 percent the amount of CB bills offered to banks, thus providing additional liquidity to the economy. On financial sector measures, the NBRNM has revised its credit risk regulation, to encourage banks to restructure loans temporarily, and has relaxed the loan classification standards for NPLs. It has also reduced the base for the reserve requirement by the amount of new loans to firms in affected sectors and has extended the deadline for banks to submit their first Internal Liquidity Assessment Report in order to allow them to focus on providing credit while maintaining the quality of the loan portfolio.

Exchange rate and balance of payments
  • The National Bank of the Republic of North Macedonia intervenes regularly, given the de-facto exchange rate peg.


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Norway

Background. COVID-19 has been spreading rapidly across Norway with over 8,267 confirmed cases, claiming more than 234 lives as of May 20, 2020. The government has implemented a range of measures to mitigate the spread of coronavirus and to stabilize the economy. The former includes travel restrictions, a quarantine-after-travel requirement, social distancing measures, and closures of schools, universities and businesses.

On May 7, 2020, the government announced its plan to reopen the economy, with a gradual timeline that remains dependent on keeping the spread of infection under control. Accordingly, employers of operating businesses are required to ensure at least one-meter distance between coworkers, meetings up to 20 people and public events up to 50 are now permitted, all primary and secondary schools are reopened, and quarantine requirements are reduced. June promises an additional lifting of restrictions with regards to bars, restaurants, fitness centers and larger public events.


Key Policy Responses as of May 20, 2020
Fiscal
  • Key implemented and proposed fiscal measures (discretionary measures close to NOK 160 billion, or 5.5 percent of 2019 mainland GDP per the authorities’ estimates, excluding the government bond fund and any losses from government guarantees and loans above budgeted loss provisioning) include:

    Expenditure measures: (i) household income protection scheme offering larger wage subsidies for temporary lay-offs, more generous unemployment benefits, and expanded sickness and child care; (ii) measures for business offering a scheme to compensate heavily affected but otherwise sustainable businesses for unavoidable fixed costs, the reinstatement of a government fund that buys bonds issued by Norwegian companies, grants for start-ups and subsidies of domestic air routes; (iii) strengthening of critical sectors such as healthcare .

    Revenue measures: (i) lowering of reduced VAT rate from 12 to 6 percent; (ii) deferral of various tax payments, change in CIT regulations so that lossmaking companies can re-allocate their losses towards previous years’ taxed profits, and temporary amendments to the petroleum tax system to improve liquidity in the sector; suspension of aviation charges; temporary lowering of the employers’ social insurance contributions.

    Guarantee and loan schemes for businesses which include loan guarantees for SMEs, and a scheme for re-insurance of private credit insurance providers.

Monetary and macro-financial
  • Key monetary measures include: (i) reduction of the policy rate by 1.5 percentage points to 0.0 percent; (ii) provision of additional liquidity to banks in form of loans of differing maturities; (iii) the establishment of a swap facility of USD 30 billion between Norges Bank and the US Federal Reserve (mutual currency arrangement); and (iv) the expansion of banks’ ability to borrow in USD dollars against collateral.

    Key implemented and proposed macro-financial policies include: (i) easing of countercyclical capital buffer by 1.5 percentage points; (ii) the possibility that banks can temporarily breach the liquidity coverage ratio (LCR); (iii) temporary easing of mortgage regulations, in particular increase in the percent of mortgages that can deviate from the regulations; and (iv) urging from the Ministry of Finance to banks and insurance companies to not distribute profits.

Exchange rate and balance of payments
  • Norges Bank announced that it was continuously considering whether there is a need to intervene in the market by purchasing Norwegian krone.


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Oman

Background. Oman is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The number of registered COVID-19 cases stands at 6.043 as of May 20. The authorities have implemented a range of measures to try and limit the spread of the virus encompassing travel restrictions (including on international flights and internal public transportation and taxis), partial lockdowns, suspending prayers at mosques, closing all schools, universities, shopping malls and commercial establishments (except for groceries, pharmacies, food delivery, and gas stations), and limiting employee attendance at government workplaces and private businesses to minimum needed. On April 15, the government approved a set of measures aiming to maintain the employment of Omani nationals and support private sector firms, including by encouraging them to advance paid annual leave and negotiate salary cuts. For Omani employees whose salaries are lowered, their bank loans will be rescheduled without interest or additional fees for three months, fuel subsidies provided, and electricity and water bills postponed until the end of June 2020. Incentives offered to affected private sector firms include postponement of electricity and water fees for a period of three months. On April 29, the Ministry of Finance has issued a circular on the application of Omanisation policy and replacement of expatriates by qualified Omani citizens in government companies.

Reopening of the economy. On April 28, the government discussed proposals that consider public health and support the reopening of some business activities and decided to open some commercial activities including car servicing, repair, and rental, money exchanges, outlets selling electrical and electronic appliances, printing houses and quarries.


Key Policy Responses as of May 20, 2020

Fiscal
  • Because the decline in oil prices will result in a loss of government revenue, the authorities have announced that they will reduce spending in the 2020 budget by 10 percent (about 5 percent of GDP). The government announced several measures to support the economy on March 19. These include the suspension of municipal taxes and some government fees (till end-August) and rent payments for companies in industrial zones (for the next three months), reduction of port and air freight charges, as well as postponement of loan servicing for borrowers of Oman Development Bank and SME support fund for six months. On April 1, the Tax Authority announced a package of measures that include the waiving of fines and penalties for late disclosures, allowing the paying of taxes in instalments, and the deduction of donations made to combat the coronavirus.

Monetary and macro-financial
  • On March 18, the Central Bank of Oman (CBO) announced a set of policy measures effective immediately to support the financial sector and estimated its impact in terms of additional liquidity at OR 8 billion (US$ 20.8 billion). The measures included: reduction in the interest rate on repo operations by 75 basis points to 0.5 percent, and extension of the period of repo operations to three months; reductions in the interest rates for other money market instruments; reduction in the capital conservation buffer by 50 percent; increase in the lending ratio by 5 percent; accepting with immediate effect requests by affected borrowers for deferment of loan installment payments for the next six months without adverse impact on risk classification of such loans; deferring the risk classification of loans related to government projects for six months.

Exchange rate and balance of payments
  • No measures.


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Pakistan

Background. COVID-19 has been spreading rapidly in the past couple of months in Pakistan, with 48,091 confirmed cases claiming 1,017 deaths, as of May 21. In response, both the federal and provincial governments have implemented a range of measures to contain and mitigate the spread of the virus. These included quarantines in localized areas, border closures with neighboring countries, international travel restrictions, school and university closures, cancellation and banning of public events, social distancing measures, and varying levels of lockdown in cities and provinces across the country starting from March 23. The government has been repatriating migrant workers that are stranded in the Gulf countries, many of whom have tested positive for the coronavirus. The near-term economic outlook has worsened notably and growth is estimated at –0.4 percent in FY 2020. A gradual recovery is expected in FY 2021 as the economy reopens.

Reopening of the economy. The federal government in coordination with provinces had partially eased the lockdown since April 15, by allowing ‘low-risk industries’ to restart operation with newly developed Standard Operating Procedures (SOPs). A further relaxation of lockdown started on May 9, allowing several industrial units and small retail shops to reopen in phases using proper SOPs. On May 18, the Pakistan Supreme Court ordered shopping malls and markets to reopen across the country. Domestic flights and train services have resumed limited operations, while educational institutes are expected to restart starting July 15.


Key Policy Responses as of May 21, 2020

Fiscal
  • A relief package worth PKR 1.2 trillion has been announced by the federal government on March 24, 2020. Key measures include: (i) elimination of import duties on emergency health equipment; (ii) relief to daily wage workers including PKR 75 billion of approved cash disbursements to 6.2 million workers, (iii) cash transfers to low-income families (PKR 150 billion), (iv) accelerated tax refunds to the export industry (PKR 100 billion), and (v) financial support to SMEs and the agriculture sector (PKR 100 billion) in the form of relief on electricity bill payments, bank lending support, as well as subsidies and tax incentives. The economic package also earmarks resources for an accelerated procurement of wheat (PKR 280 billion), financial support to utility stores (PKR 50 billion), relief in fuel prices (PKR 70 billion), support for health and food supplies (PKR 15 billion), electricity bill payments relief (PKR 110 billion), an emergency contingency fund (PKR 100 billion), and a transfer to the National Disaster Management Authority (NDMA) for the purchase of necessary equipment to deal with the pandemic (PKR 25 billion).

    In addition, the authorities have launched a program for the construction sector to address the acute employment needs generated by the lockdowns, which include a special tax regime and no wealth declaration for projects launched during a short window until the end of 2020.

    Provincial governments have also announced fiscal measures, broadly consisting of cash grants to the low-income households, tax relief and additional health spending that includes increased compensation to healthcare workers. The government of Punjab announced a tax relief package of PKR 18 billion and a cash grants program of PKR 1.5 billion, while the government of Sindh has announced a cash grant and ration distribution program of PKR 1.5 billion for the low-income households.

Monetary and macro-financial
  • The State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate by a cumulative 525 basis points to 8.0 percent in the span of two months. The SBP has expanded the scope of existing refinancing facilities and introduced three new ones that aim at: (i) supporting hospitals and medical centers to purchase equipment to detect, contain, and treat COVID-19, (ii) stimulating investment in new manufacturing plants and machinery, as well as modernization and expansion of existing projects, and (iii) incentivizing businesses to avoid laying off their workers during the pandemic.

    Moreover, the SBP introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increase the regulatory limit on extension of credit to SMEs by 44 percent to PRs 180 million ; (iii) relaxation of the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year; (v) relaxation of regulatory criteria for restructured loans for borrowers who require relief beyond the extension of principal repayment for one year; and (vi) suspension of bank dividends for the first two quarters of 2020 to shore up capital.

Exchange rate and balance of payments
  • No measures.


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Palau

While there have been no confirmed cases of COVID-19 in Palau as of May 21, 2020, the authorities have adopted early prevention and containment measures. These include temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and restrictions on public events.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government is taking actions to support the health sector and the economy. The parliament is appropriating an additional $916,808 (0.3 percent of GDP) to the Hospital Trust Fund to help with prevention and preparation for COVID-19. The parliament is also authorizing additional funding (up of to $6 million or 2.1 percent of GDP) to help maintain government services in the face of declining tourism revenue.

Monetary and macro-financial
  • The National Development Bank of Palau announced plans to provide financial relief to affected business and households, including interest only payments, term extension, loan consolidation, and temporary payment deferral. Some private banks have introduced loan deferral and forbearance programs for three months.

Exchange rate and balance of payments
  • No measures.


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Panama

Background. As of May 27, 2020, Panama had 11,447 cases of COVID-19 (313 fatalities; 6,379 recovered). The authorities implemented prompt and strict containment measures. They declared a national emergency on March 13; set a sanitary fence around affected areas; ordered mandatory quarantine with a 24-hour curfew (to be replaced with a 7pm-5am curfew starting June 1); suspended all construction projects except health-related (extended for another 30 days on April 24); closed schools; canceled events; and suspended all commercial flights (except cargo and humanitarian). Through May 31, citizens can leave their homes only three times a week, during designated two-hour slots (women on Mondays, Wednesdays, and Fridays, men on Tuesdays, Thursdays, and Saturdays). Suspension of flights started with outbound flights to Europe and Asia (from March 14), extending to all commercial international flights (from March 22, now extended through June 22) and finally domestic flights with the grounding of Copa Airlines and Air Panama on March 23 and 25, respectively (Copa announced the resumption of flights from June 1).

Reopening of the economy. President Cortizo indicated that the gradual reopening will proceed in six “blocks”, by type of economic activity. The first (i) block reopened on May 13, and included local e-commerce/online retailers, mechanical and spare parts workshops, technical service providers such as plumbers, electricians, air conditioning and pool maintenance, and artisanal fishing and industrial aquaculture. Block (ii), which includes public works and non-metal mining, churches and parks, will reopen on June 1, subject to safety regulations (such as mandatory wearing of masks). Construction activity is suspended through June 8. No definite reopening date was announced for other sectors, which are divided into the remaining blocks: (iii) retail and wholesale trade, (iv) hospitality and airline travel, (v) education and recreation, and (vi) all other activities, which require effective treatment against COVID-19 or a vaccine to operate (concerts, fairs, etc. which involve mass gatherings). The guidelines for “return to normality post COVID-19" are published on the website of the Ministry of Health. The guidelines include key points that public institutions and private companies must comply with to ensure workers’ safety. On May 15, the Ministry of Labor published the guidelines for the gradual reopening of companies and reinstatement of workers.

Some private parties offer economic relief to their clients affected by the outbreak (e.g., the Association of Property Owners of Panama approved a suspension of evictions of tenants affected by COVID-19 (effective from April 1), while insurance companies voluntarily assumed coverage for COVID-19.


Key Policy Responses as of May 27, 2020

Fiscal
  • Amid the pandemic-related increase in healthcare and social spending, and with SFRL limits temporarily relaxed, the NFPS deficit is expected to rise to 6¼ percent of GDP in 2020, which is 3½ percent of GDP (some US$2.1 billion) higher than the budget. The package of fiscal measures includes: on the expenditure side, (i) higher spending on healthcare needs, including building a new hospital, purchases of medical supplies and equipment, test kits and educational materials, and training medical personnel; (ii) an augmentation in social spending, including payments to affected workers and small business owners through the "Panama Solidarity Plan" (the first tranche of US$6.7 million to be disbursed on April 30 to 84,000 beneficiaries; in-kind transfers include about 600,000 bags of basic food supplies distributed as of April 27); (iii) electricity subsidy (50 percent to customers who consume up to 300 kWh per month and 30 percent to those who consume between 301 kWh and 1,000 kWh per month); (iv) suspension of payments for public services (electricity, landline phones, mobile phone and internet) for March-June. On the revenue side, measures include tax relief through extended income-tax filing deadlines, some tax benefits, and suspension of payments for public services (for 4 months, without interest) for clients with a salary less than US$2,000 per month, retirees, or those displaced from the labor market. In addition to reallocation of spending, financing sources include bond placements and loans from international organizations. So far, Panama mobilized: (i) US$515 million from the IMF under the Rapid Financing Instrument; (ii) US$300 million from the Inter-American Development Bank (US$150 to finance micro and small businesses, and another US$150 million to help agricultural producers); (iii) US$41 million in the Deferred Disbursement Option for Catastrophe from the World Bank to expand the coronavirus care network; (iv) US$1 million grant from the Central American Bank for Economic Integration to finance COVID-19 prevention activities; and (v) a US$400,000 grant from the Development Bank of Latin America to acquire and install ventilators to care for patients severely affected by the virus. The President approved a law which allows the government to use liquid resources of the Panama Savings Fund (assets of US$1.3 billion). In addition, the authorities enabled 114 virtual procedures for taxpayers.

Monetary and macro-financial
  • The Superintendency of Banks of Panama (SBP) allowed banks to use the accumulated dynamic provisioning (about US$1.3 billion or 2 percent of GDP) to absorb the impact of credit losses. It allowed banks to undertake voluntary loan restructuring with troubled borrowers (banks can adjust existing loan conditions, grant grace periods, reduce interest rates, and eliminate some fees) and requested banks not to charge interest on the unpaid interest. To provide relief to borrowers affected by the pandemic, banks agreed to extend grace periods on the loan payments until December 31, 2020 (from 90-120 days offered earlier). Borrowers have to continue paying interest, but banks will not apply late fees, charge interest on unpaid interest, or record late payments in credit history. The measure applies to mortgages, personal, auto, credit card loans, and loans to SMEs, agriculture, commerce, and transport. The moratorium is not automatic; borrowers must provide a statement to the banks about the impact of pandemic on their employment or business activities. As of April 30, about 660,000 clients and businessmen applied for moratorium on loan payments (balance of US$14.7 billion).

Exchange rate and balance of payments
  • Panama is a fully dollarized economy; BOP is expected to deteriorate as a result of the COVID-19 shock given a fall in tourism, transit through the Panama Canal and lower foreign direct investment.


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Papua New Guinea

As of May 22, there were 8 confirmed cases COVID-19, but all have been resolved. The government had started imposing containment measures since early February, including a ban on travelers from Asian countries, reduced international flights, mandatory health declaration forms for incoming travelers and enhanced screening at designated ports of entries. On April 2, the PNG parliament voted to shut down the country and extended the State of Emergency, which started on March 24, for a further two months. The State of Emergency is scheduled to expire on June 2nd, unless renewed.


Key Policy Responses as of May 22, 2020

Fiscal
  • On April 2, the PNG government announced a K5.6 billion economic stimulus package in the parliament. The government has announced K600 million credit line to support businesses and individuals in coordination with the banks and financial institutions, and K500 million support from superannuation savings to employees affected by the economic slowdown. Moreover, the government has allocated K500 million more to support health, security and economic sector. A supplementary budget to accommodate the extra health spending and cut in low priority expenditure which will be tabled in the parliament in July.

Monetary and macro-financial
  • The Bank of Papua New Guinea (BPNG) has reduced the Kina Facility Rate (KFR) – the main policy rate - by 200 basis points to 3 percent from 5 percent and has asked the commercial banks to reduce their respective Indicative Lending Rates. BPNG has also reduced the Cash Reserve Requirement to 7 percent from 10 percent to provide additional liquidity to the commercial banks. In addition, BPNG has announced its intention to repurchase government securities in an open market quantitative easing program to provide liquidity to the holders of the instruments. To encourage interbank activity, BPNG has increased the margin on central bank borrowing by 25 basis point to 100 basis points of both sides of KFR. Moreover, the government is working with the commercial banks to provide a 3-months buffer on loan repayments. To cover for the 3-month loan repayment holiday for borrowers severely affected by the COVID crisis, BPNG will suspend loan-loss provisioning for affected loans during this period. The government has also asked the superannuation funds to allow members who have been laid off from work due to COVID-19 to access their savings. On April 8, Superfunds announced that its members whose employment was terminated by their employer as a result of COVID-19 will be entitled to a one-off payment of 20 percent of the member’s contribution.

Exchange rate and balance of payments
  • BPNG is committed to providing US dollar liquidity to domestic FX interbank market. However, it has directed the Authorized Foreign Exchange Dealers to give priority to retailers and wholesalers of medical drugs, medical and pharmaceutical companies, particularly the imports of products related to COVID-19.


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Paraguay

Background. The first case of COVID-19 was confirmed in Paraguay on March 7th, 2020. As of May 28, 2020, there are 900 confirmed cases and 11 deaths. The first confirmed cases were imported, though community and local transmissions quickly took off. The latest trend suggests that recent cases are mostly imported from Brazil. Starting March 12, the government implemented a series of measures to prevent the spread of the virus, including border closure and suspension of school, all activities that involve groups of people, as well as public and private events. The country implemented a total quarantine from March 20 to May 3, 2020.

Reopening of the economy. On May 25, 2020, Paraguay moved into the second stage of re-opening, under the country’s phased plan labeled “Smart Quarantine”. It allows the rehabilitation of commercial stores and shops with less than 800 square meters, corporate offices, general construction works, and professional sports at fresh air (without spectators). Face mask wearing is mandatory while moving in the public sphere and when entering public buildings and factories. Temperatures are measured at the entrances, and clients and employees must wash hands and rub them with disinfecting agents.Depending on the dynamics of the disease, a further gradual reopening phase is planned for June 15. Physical-presence school classes will remain suspended for the rest of the school year until December 2020.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government has lowered VAT on medical supplies to 5 percent and eliminated import tariffs on them. On March 23rd, 2020, the government submitted to congress a package of emergency spending measures of around $945 million (2.5 percent of GDP). The package includes additional health-related spending of $500 million, $400 million measures to support the vulnerable population, and $45 million emergence funding for small enterprises. The government has asked Congress to authorize additional borrowing of up to U.S. $1.6 billion (4 percent of GDP) from IFIs and through bond issuances. On April 23, the government successfully issued U.S.$1,000 million in international sovereign bonds. The 10-year bond was seven times oversubscribed at an interest rate of 4.95 percent.

Monetary and macro-financial
  • Since early March, the central bank has lowered the policy rate by 275 basis points, to 1.25 percent. The interest rate for the central bank’s overnight liquidity facility window has also been reduced, by 200 basis points, from 4.5 percent to 2.5 percent. The Central Bank has also reduced the minimum reserve requirements on domestic and foreign currency deposits, freeing up $959 million in the process for banks to make new loans. In addition, a National Emergency Special Credit Facility (FCE) was created to channel up to $760 million in liquidity support to SMEs. The government has also allowed banks to automatically refinance loans to private sector companies that are in repayment difficulties, and postponed collection of taxes and user fees for 2 months.

    The Development Finance Agency (AFD) has started programs to help refinance home loans for a period of 60 months, and to help SMEs finance working capital needs. A US$ 500 million MSME Guarantee Fund has been set up to support credit creation in the SME sector.

Exchange rate and balance of payments
  • The central bank is continuing with its policy of letting the exchange rate absorb shocks, and have its value determined by market forces. FX interventions are only carried out to prevent disorderly market conditions. On April 21, the IMF Executive Board approved an emergency financing loan under the RFI in the amount of $274 million.


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Peru

Background. The first case of COVID-19 was confirmed in Peru on March 6th and by May 28th there were 141,779 confirmed cases and 4,099 deaths. The government has declared a state of national emergency and implemented a number of measures to limit the spread of the virus, including closing of national borders, restrictions to interprovincial movement, a mandatory two-week national isolation period (extended five additional times until June 30th), and daily curfews from 8 pm to 4 am. In addition to the distortions associated with the domestic outbreak, the decline in copper (and other commodity) prices is reducing the country’s external and fiscal revenues.


Key Policy Responses as of May 28, 2020

Fiscal
  • The government has approved 1.1 billion soles (0.14 percent of GDP) to attend the health emergency. In addition, the government has approved approximately 3.4 billion soles (0.4 percent of GDP) in direct transfers to support poor households during the four-week national isolation period and it is likely to increase this amount given the extension of this period. The government has approved a three-month extension for the income tax declaration for SMEs and is granting flexibility to enterprises and households in the repayment of tax liabilities. These tax measures are estimated to provide a temporary relief in the order of 1.4 percent of GDP. The government has also approved the creation of a 300 million soles (or 0.04 percent of GDP) fund to help qualified SMEs to secure working capital and/or refinance debts. The government has announced a postponement of households’ payments of electricity and water. The government has recently announced a bigger fiscal support package which would take total fiscal support to over 7 percent of GDP.

Monetary and macro-financial
  • The central bank has cut the policy rate by 200 basis points, bringing it to ¼ percent, and is monitoring inflation developments and its determinants in order to increase the monetary stimulus if necessary. In addition, the central bank has reduced reserve requirements, provided liquidity to the financial system through repo operations, and has recently announced a package of 60 billion soles (over 8 percent of GDP) in liquidity assistance (backed by government guarantees) to support lending and the payments chain. The superintendence of banks has issued a notification allowing financial institutions to modify the terms of their loans to households and enterprises affected by the Covid-19 outbreak without changing the classification of the loans. These operations have to satisfy well defined conditions, including a maximum modification period of six months.

Exchange rate and balance of payments
  • The central bank has been intervening since late February to mitigate disorderly conditions in the foreign exchange market. By May 28th, the central bank had sold approximately USD 2 billion (or 0.9 percent of GDP) in foreign exchange swaps. International reserves remain significant, at over 30 percent of GDP.


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Philippines

Background. The Philippines has reported 12,942 cases of confirmed COVID-19 with a death toll of 837 as of May 20, 2020. The government put the Luzon island under an “enhanced community quarantine” (ECQ) until April 30 and has begun to gradually ease restrictions since May 1, although some areas, including Metro Manila, will remain under community quarantine until end-May with only limited re-opening of public transportation and select businesses allowed. Other containment and mitigation measures, such as suspension of flights from high-risk economies and restrictions on mass gathering also remain in place.

Financial market volatility has subsided recently, with the peso/US$ exchange rate staying remarkably stable. Meanwhile, real GDP in the first quarter of 2020 contracted by 0.2 percent on a year-on-year basis.


Key Policy Responses as of May 21, 2020

The government launched a 4-pillar socioeconomic strategy against COVID-19, which includes support to vulnerable groups and individuals, expanded resources for frontline medical workers, as well as fiscal and monetary measures.

Fiscal
  • The government launched a PHP 595.6 billion fiscal package (about 3.1 percent of 2019 GDP) for vulnerable individuals and groups, which includes the following measures: (1) PHP 205 billion cash aid program (1.1 percent of 2019 GDP) for 18 million low-income households, under which eligible households are expected to receive cash transfers of between PHP 5,000 and PHP 8,000 a month for a period of two months; (2) over PHP 56 billion social protection measures for vulnerable workers, including for displaced and overseas Filipino workers (0.3 percent of 2019 GDP); (3) over PHP 54 billion on COVID-19-related medical response (0.3 percent of 2019 GDP); and (4) PHP 120 billion (0.6 percent of 2019 GDP) credit guarantee for small businesses and support to the agriculture sector. Financial assistance will also be provided to affected micro-, small-, and medium-size enterprises (MSMEs) and vulnerable households through specialized microfinancing loans and loan restructuring.

Monetary and macro-financial
  • The Bangko Sentral ng Pilipinas (BSP) has reduced its policy rate thrice in 2020 by a cumulative 125 bps to 2.75 percent and lowered the reserve requirement ratio for commercial banks by 200 bps to 12 percent, effective from April 3.

    To support the government’s programs to counter the impacts of COVID 19, the BSP purchased PHP 300 billion worth government securities (about 1.5 percent of 2019 GDP) and remitted PHP 20 billion as dividend to the government even though it is no longer required to make dividend payments to the government under the newly amended BSP charter. The BSP has also announced a series of regulatory relief measures for the banking sector, including: (1) a temporary relaxation of requirements on compliance reporting, penalties on required reserves, and single borrower limits; (2) easier access to the BSP’s rediscounting facility; (3) a temporary relaxation of provisioning requirements (subject to the BSP approval), and (4) a relaxation of prudential regulations regarding marking-to-market of debt securities. These relief measures are intended to encourage banks, in turn, to provide financial relief to their borrowers (e.g., temporary grace period for loan payments). To encourage extension of loans to enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed loans to MSMEs to be counted as part of banks’ compliance with reserve requirements and assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corporation.

Exchange rate and balance of payments
  • The BSP has relaxed documentary and reporting rules for FX operations (March 27).


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Poland, Republic of

Background. Poland has reported 19983 confirmed COVID-19 cases (with 965 deaths) as of May 20, 2020. The government introduced containment measures including closures of schools, universities, restaurants, and all non-essential retail trade and service outlets, as well as bans on large gatherings, border controls, and travel restrictions. Initial economic data for March 2020 show the first effects of the containment measures implemented in mid-March. Retail sales declined 13 percent from February to March. Industrial production fell 7 percent from February, led by manufacturing, likely reflecting both demand and supply side causes. Construction activity proved more resilient in March. According to the flash GDP release, output growth declined 0.5 percent quarter-on-quarter in Q1 2020.

Reopening of the economy. On April 16, the government outlined a four-stage plan to reopen the economy. Starting on April 20 a larger number of people was allowed in shops and at religious gatherings, and public parks and forests were re-opened. The second phase of the lockdown easing plan was launched on May 4 with the re-opening of hotels and shopping malls (with limitations on the number of persons), the opening of daycares and pre-schools (as of May 6), as well as softening quarantine rules for cross-border workers and students. The third phase was launched on May 18, entailing reopening of restaurants, hairdressers and cosmetic salons, and permission for outdoor sport events with up to 50 persons with no audience. Primary schools are expected to open on May 25. All activities reopened in this phase will have to follow strict sanitary rules, with a maximum number of children allowed in class. The fourth stage, planned to be launched on June 1, will allow activities of fitness clubs, massage services, theaters and cinemas, all with stricter sanitary regimes than normal.

Key Policy Responses as of May 20, 2020

Fiscal
  • New budgetary measures have been legislated, estimated at PLN 102.5 billion (4.6 percent of GDP). New credit guarantees and micro loans for entrepreneurs estimated at PLN 75 billion (3.3 percent of GDP) were also approved. Additionally, the Polish Development Fund will finance a PLN 100 billion (4.5 percent of GDP) liquidity program for businesses. Key measures include:

    i. Additional funds for hospital equipment and supplies;
    ii. Wage subsidies for employees of affected businesses and self-employed persons. Businesses, regardless of their size, may apply for a three-month subsidy in the event of work stoppages or reduced working time. This subsidy covers social insurance contributions, and it ranges from 50 to 90 percent of the minimum wage for each employee, depending on recorded decrease in turnover in 2020. The subsidy includes furloughed employees.
    iii. Increased guarantees from the national development bank (BGK) for enterprises. A new Liquidity Guarantee Fund in BGK will be established offering guarantees for loans taken by medium and large companies;
    iv. Additional loans for micro-firms;
    v. Postponement or cancellation of social insurance contributions. For micro firms with up to 9 employees social insurance contributions are covered by the budget for 3 months. For companies employing from 10 to 49 employees, 50 % of social insurance contributions is paid by the budget. Possible deferral, payment in installments, or cancellation of taxes. The self-employed and employees working on civil law contracts can receive a one-time benefit.
    vi. Deduction of this year’s losses for 2021 tax settlement (tax returns for 2019 might be corrected in order to deduct the losses of 2020 from the 2019 income);
    vii. An allowance for parents of young children related to school closures;
    viii. Establishment of a new fund (COVID Fund) dedicated to combat the negative impact of the pandemic.
    ix. The Polish Development Fund providing liquidity loans and subsidies for micro, small/medium, and large enterprises. The total value of the program equals PLN 100 billion. Up to 60 percent of the financing may be non-returnable, with relevant conditions related to maintaining employment, continuing business activity, and the level of lost sales.

Monetary and macro-financial
  • The National Bank of Poland (NBP) reduced its policy interest rate by 50 bps on March 17, followed by an additional 50 bps reduction on April 8 to 50 bps. The NBP has re-introduced repo (fine-tuning) operations to provide liquidity to banks, reduced the required reserve ratio from 3.5 to 0.5 percent, and raised the interest rate on required reserves to the level equal to the policy interest rate. The NBP has also begun purchases of Polish Treasury securities in the secondary market, and on April 8 expanded eligible securities to include those guaranteed by the State Treasury. The NBP has also introduced a program to provide funding for bank lending to non-financial private enterprises. Through May 20 the NBP had purchased PLN 71 billion (3.2 percent of GDP) in Treasury and in government guaranteed securities in the secondary market.

    In addition, the 3 percent systemic risk buffer for bank capital requirements has been repealed. The Polish Financial Supervisory Authority (PFSA) announced measures related to provisions and reclassification of loans to existing SMEs/micro enterprises to allow distributing the impact of credit losses over a longer period. Some flexibility has been granted in how banks meet capital and liquidity requirements, and the PFSA is accepting the treatment of a BGK guarantee as fulfillment of the “special collateral” condition. The PFSA has adopted a flexible approach for the approval process of long-term guarantee measures under Solvency II for the insurance sector. Additionally, the Polish Banking Association has recommended voluntary deferral of loan payments for affected borrowers for up to three months. Banks have also increased limits for contactless credit cards.

Exchange rate and balance of payments
  • No information on foreign exchange intervention has been disclosed.


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Portugal

Background. As of May 28, Portugal had over 31,500 confirmed cases of COVID-19, which have resulted in 1,369 deaths. A ‘state of calamity’ is in operation until at least May 31, with containment measures including school closures, social distancing, and travel restrictions. Preliminary estimates suggest that first-quarter GDP declined by 3.9 percent compared to the previous quarter, suggesting a significant impact on economic activity. The government has responded with a range of measures to support the economy and jobs which are detailed below.

Reopening of the economy. As the number of new confirmed cases has begun to fall, details on current plans for the gradual relaxation of containment measures have been published. Among other measures, this includes - a gradual opening of stores, restaurants, cafes and shopping centers throughout May and early June; the reintroduction of many public-facing government services; and from mid-May, the re-opening of schools for certain age groups. The mandatory use of masks has been mandated when accessing these re-opened services.


Key Policy Responses as of May 28, 2020

Fiscal
Exchange rate and balance of payments
  • No measures.


Q


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Qatar

Background. Qatar is being impacted by two shocks—the spread of COVID-19 and the sharp decline in hydrocarbon prices. The authorities are putting in place policies to address these. As of May 28, the number of COVID-19 cases stands at 50,914 and 33 deaths have been reported. Measures implemented to contain the spread of the virus include: travel restrictions (suspension of all international passenger flights, a 14 day quarantine for all returning Qatari citizens, and suspension of public transportation); suspension of public and private schools (replaced with distance learning) and home services; closure of non-essential businesses (excluding groceries stores and pharmacies); banning all public gatherings and dining in cafes and restaurants; and cancellation of routine medical and dental appointments (except Well-baby, Vaccination Clinics, and Urgent Radiology and Ultrasound). These measures have been complemented by required teleworking for 80 percent of private sector employees and vulnerable groups (older than 55, pregnant women, and those with chronic illness), reduced working hours (to six per day), public health awareness campaigns, intensified food inspections to ensure health compliance, more testing for COVID-19 (including a drive through station), and disinfection of 12 thousand square meters in the Industrial Area. Home delivery medical services have been expanded to contain the spread of COVID-19. The private sector is providing meals and hygiene baskets to workers in quarantined areas. A 150-bed hospital for quarantined workers has been set up in the Industrial Area, where there has been a high concentration of COVID-19 cases. Starting May 17, 2020 all citizens and residents are required to wear a facemask when out in public. Starting May 22, 2020 all citizens and residents are required to install the Ehteraz App on their mobile phones before leaving their residence, which will help track COVID-19 transmission chains, help prioritize testing, and provide COVID-related updates.

Reopening of the Economy. The authorities have conducted widespread COVID-19 testing in the Industrial Area and are providing free healthcare to those affected, including by transporting 6,500 workers to a precautionary quarantine facility. Following these measures, the authorities fully opened the Industrial Area on May 6 (after closure since mid-March and partial opening since late April), though under strict and specific entry and exit regulations, where only employers and employees are allowed to enter or exit, and goods and materials may only enter or exit with an application to relevant authorities. Entry and exit regulations are implemented, in part, by the use of a mobile application. As of May 12, 2020, restaurants and cafés are allowed to resume the activity of delivering or handing over orders to customers outside the business place, with those establishments located in malls only allowed to process delivery orders and not hand over orders to customers both inside and outside the workplace. Exchange houses and bank branches inside commercial malls have been reopened, subject to maintaining enhanced security and health measures.


Key Policy Responses as of May 28, 2020

Qatar’s QAR 75 billion ($20.6 billion or about 13 percent of GDP) package to reduce the effects of COVID-19 was announced on March 16. The program aims at shoring up small businesses and hard-hit sectors (hospitality, tourism, retail, commercial complexes, and logistics), including through six-month exemptions on utilities payments (water, electricity). Logistics areas and small and medium industries are exempt from rent payments for six months.

Fiscal
  • Food and medical goods are exempt from customs duties for six months (provided that this is reflected in the selling price), and the price and profits for sanitizers and antiseptics have been set. Migrant workers who are in quarantine or undergoing treatment will receive full salaries.

Monetary
  • The Qatar Central Bank (QCB) has lowered its policy rates twice in March in line with the US Federal Reserve (to maintain the currency peg). The deposit rate has been reduced by 100bps to 1 percent; the lending rate has been reduced by 175 bps to 2.5 percent; and repo rate has been reduced by 100 bps to 1.5 percent. The QCB will also provide additional liquidity to banks operating in the country through a special repo window at zero interest rate for postponing loan installments or granting new loans.

Macro-Financial
  • QCB has put in place mechanisms to encourage banks to postpone loan installments and obligations of the private sector with a grace period of six months. The Qatar Development Bank will postpone installments of all borrowers for six months and will also administer the National Guarantee Program by allocating QAR 3 billion ($815,000) in government guarantees for a period of 12 months to local banks for loans to companies to help them meet wage and rental fees; Qatar Islamic Bank is providing interest free loans to private companies under this program. The Qatar Financial Center has cut the rate on late tax payments to zero from 5 percent until September 1, 2020. In addition, the deadlines for filing taxes and audited financial statements have been extended. Government funds have been directed to increase investments in the stock market by QAR 10 billion ($2.75 billion).

Exchange rate and balance of payments 

R


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Romania

Background. COVID-19 has been spreading across Romania with 18,791 confirmed cases and 1,229 deceased, as of May 28th . The government has implemented a range of measures to delay the spread of coronavirus and to support people, jobs, and businesses. This includes declaring national emergency, increased testing, social distancing measures, including the closure of schools and entertainment as well as travel and domestic movement restrictions, and capping prices of fuel and utilities. The Q1 2020 GDP growth slowed to 2.4 percent year-on-year according to the flash estimate, but remained stronger so far than most other EU countries.

Reopening of the economy. The gradual reopening started on May 15th. In a first stage, hairdressers, libraries, dentist practices, small shops and museums were reopened, and people can leave their homes without a sworn statement regarding the purposes of traveling (still required for travel outside cities). Shopping malls, restaurants and bars will remain closed. After May 15, it is compulsory to wear masks in enclosed spaces in public, such as shops and in public transport. Professional sport will resume in special conditions. Schools will remain closed for the remainder of the school year, except eight- and twelve-grade students who are facing graduation exams.


Key Policy Responses as of May 28, 2020
Fiscal
  • Key tax and spending measures announced so far about 2 percent of 2019 GDP include (i) additional funds for the healthcare system, (ii) covering partially the wages of parents staying home for the period the schools are closed, and (iii) measures to support businesses including covering in part the wages of self-employed and workers in danger of being laid off for an initial period of one month, deferral of utilities payments for SMEs. In addition, the government is providing RON15 billions of guarantees—equivalent to 1.5 percent of GDP—for loan guarantees and subsidized interest for working capital and investment of SMEs. Subsequently, the guarantee scheme was increased by Parliament to RON30 billions (3 percent of GDP). Other measures include faster reimbursement of VAT, suspending foreclosures on overdue debtors, suspending tax authorities’ control, discounts for paying corporate income taxes, and postponement of property tax by three months. See also: https://www.mfinante.gov.ro/pagina.html?categoriebunuri=covid19&pagina=acasa (Romanian only)

Monetary and macro-financial
  • Key measures include: (i) reducing the monetary policy rate by 0.50 percentage points to 2.0 percent; (ii) narrowing the corridor defined by interest rates on standing facilities around the monetary policy rate to ±0.5 percentage points from ±1.0 percentage points; (iii) providing liquidity to credit institutions via repo transactions (repurchase transactions in government securities); (iv) purchasing government securities on the secondary market; and (v) operational measures to ensure the smooth functioning of payment and settlement systems. In addition, the Government has issued legislation that banks will defer loan repayments for households and businesses affected by COVID-19 for up to nine months. See also: https://www.bnr.ro/NBR-measures-in-the-context-of-the-COVID-19-epidemic--21313.aspx .

Exchange rate and balance of payments
  • No measures.


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Russian Federation

Background. As of May 28, 2020, 379,051 cases of COVID-19 are confirmed, with 4,142 deaths. The authorities started preemptive containment at end-December 2019. They progressively closed the border with China and some European countries; mandated self-quarantine for people arriving from other countries and people at risk; closed schools, theaters, and sports facilities; and encouraged remote work. GDP grew by 1.6 percent in Q1 of 2020, compared to a year earlier. On March 30, the authorities announced an open-ended quarantine in Moscow requiring non-essential businesses to close and people to remain indoors. The central government has asked regional authorities to implement containment policies commensurate with the extent of infection in their regions. The COVID-19 shock is compounded by a collapse in oil prices and the associated instability in financial markets. The authorities have adopted an action plan to support households and businesses and stand ready to take further measures.

Reopening of the economy. The federal government has announced a three-stage reopening plan but it will be up to regional governors to decide when and how to proceed. During the first stage of reopening, people will be allowed to walk and exercise outdoors, and small shops and service-sector establishments will reopen. The second stage will allow schools and larger shops and service-sector businesses to open. In the third stage, parks, hotels, restaurants, and all shops will reopen. Criteria for lifting restrictions in specific regions include infection rates, the availability of hospital beds, and testing capacity. As of May 26, two-thirds of regions have reopened some service sector businesses. The reopening is conditional on safety guidelines, including social distancing and disinfection. The tourist industry will partially resume activity on June 1, with the resumption of some domestic trains and flights. Industrial enterprises and construction sites are largely back in business nationwide. Moscow will move to the second stage of reopening on June 1, opening some non-essential shops and service sector businesses with tightened safety requirements.


Key Policy Responses as of May 28, 2020

Fiscal
  • Key measures include: (i) increased compensation for frontline medical staff as well as health and safety inspectors; (ii) individuals under quarantine to receive sick leave benefits and sick leave pay to equal at least the minimum wage until the end of 2020; (iii) unemployment benefits to equal at least the minimum wage for three months; (iv) all children up to 3 years of age to receive an additional lumpsum benefit for 3 months, starting in April; all children 3-15 years of age eligible for a one-time lumpsum benefit; all families with children to get an additional lumpsum benefit for each child for 3 months if parents lose jobs; (v) interest rate subsidies for SMEs and systemically important enterprises; (vi) tax deferrals for most affected companies on most taxes; (vii) deferrals on social contributions for SMEs in affected sectors for 6 months; (viii) social contributions by SMEs on wages in excess of the minimum wage permanently reduced from 30 to 15 percent; (ix) a tax holiday on all taxes (excluding VAT) and social contributions for Q2 for SMEs, sole proprietors, and NGOs providing social services; (x) registered self-employed will be refunded their taxes for 2019 and get a partial refund on their 2020 taxes; (xi) sole proprietors will get a partial refund on their social contributions; (xii) deferrals on rent payments to all levels of government until the end of the year plus zero rent to the federal government for three months for SMEs in affected sectors; (xiii) budget grants for SMEs in affected industries to cover salaries at the rate of one minimum salary per employee for two months plus subsidized and forgivable loans for all enterprises in affected industries to pay minimum wages for 6 months; (xiv) zero import duties for pharmaceuticals and medical supplies and equipment; and (xv) guaranteed loans to SMEs and affected industries. The total cost of the fiscal package is currently estimated at 2.9 percent of GDP.

Monetary and macro-financial
  • On April 24, the CBR cut the policy rate by 50 bps to 5.5 percent. The Central Bank of Russia (CBR) started selling FX reserves from the National Welfare Fund on March 10, reflecting the fall in oil prices below the reference price under the fiscal rule and later for the purchase of Sberbank by the government. It also increased the limit on its FX swap operations. The CBR has temporarily introduced a long-term refinancing instrument (long-term repos are planned for one month and one year).

    CBR has introduced temporary regulatory easing for banks intended to help corporate borrowers, and more favorable treatment for FX loans issued to certain sectors. Forbearance as regards provisioning for restructured corporate and SME loans will apply to all sectors, not only affected by COVID. The CBR has introduced a new RUB 500bn facility for SME lending (of the total limit of 500 billion rubles, in addition to the already allocated 150 billion rubles to provide loans to SMEs for urgent needs to support and maintain employment, another 50 billion rubles will be allocated for similar purposes for borrowers who do not have the status of SMEs). On April 27, the interest rate on CBR loans aimed at supporting lending to SMEs, including for urgent needs to support and maintain employment was reduced from 4.0 to 3.5 percent.

    Banks have been allowed to value securities at their price from March 1. FX operations can also be valued at the exchange rate of March 1, except for those on open forex positions. The Deposit Insurance Fund contribution will be reduced from 0.15 percent to 0.1 percent through end-2020. Also, the CBR approved measures to ease liquidity regulations for systemically important credit institutions. A set of measures was taken to protect retail borrowers suffering from the pandemic. Parliament approved a law that guarantees the possibility for affected citizens and SMEs to receive deferrals of loan payments for up to six months. Banks are allowed not to classify such loans as restructured for loss provisioning purposes until September 30, 2020. Measures for households include the cancelation of add-ons to risk weights for mortgage loans issued before April 1.

    Other support measures to the financial sector included measures to ensure the availability of services of non-bank financial institutions and to promote remote customer services. Also, measures have been taken in the field of AML/CFT and currency control.

Exchange rate and balance of payments
  • No measures beyond FX sales mentioned above.


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Rwanda

Background. As of May 20, 2020, Rwanda has reported 314 cases of COVID-19 infection, of which 216 recoveries (no deaths). The government has implemented a range of containment measures  in response to the pandemic including border closure, suspension of domestic travel, cancellation of public gatherings, institution of teleworking, closure of schools, places of worship and non-essential businesses, and mandatory wearing of face masks.

Reopening of the economy. A gradual easing of lockdown measures was introduced on May 4, with selected businesses allowed to resume operations while adhering to health guidelines. Domestic movement restrictions were partially relaxed but strict physical distancing measures mandated in public buses. Borders, schools, places of worship, recreation centers and bars remain closed, and travel across provinces will continue to be prohibited through June.


Key Policy Responses as of May 20, 2020

Fiscal
  • The pandemic is expected to cause a revenue shortfall of 4 percent of GDP. The government’s Economic Recovery Plan in response to the pandemic is estimated at about 3.3 percent of GDP. Support to vulnerable households takes the form of a food distribution program (door-to-door provision of basic food stuffs every three days), cash transfers to casual workers, subsidized access to agricultural inputs, and measures to ensure poor households’ access to basic health and education. The government is also preparing to launch a fund to support affected businesses through subsidized loans from commercial banks and MFIs, and credit guarantees. It is expected to target SMEs and hard-hit sectors such as the hospitality industry. Tax deferral and relief measures include the following: (i) suspension of down payments on outstanding tax for amicable settlement, (ii)softening of enforcement for tax arrears collection, (iii) extension of the deadline for filing and paying CIT, (iv) fast-tracking of VAT refunds to SMEs, (v) CIT and PIT payments based on current year transactions, (vi) PIT exemption for private school teachers and tourism and hotel employees earning less than RWF 150,000/month, and (vi) VAT exemption for locally produced masks. The 30-day maturity period for the public health insurance scheme premium was removed to expedite access to medical services and the salaries of top civil servants for the month of April was redirected to welfare programs.

Monetary and macro-financial
  • On March 18, the central bank announced liquidity support measures: (i) an extended lending facility worth RWF 50 billion (0.5 percent of GDP) available to liquidity-constrained banks for the next six months. Under this facility, banks can borrow at the policy rate and benefit from longer maturity periods; (ii) Treasury bond purchases through the rediscount window for the next six months; and (iii) lowering of the reserve requirement ratio by 100 basis points, from 5 to 4 percent, effective from April 1. Loan repayment conditions were also eased for impacted borrowers, and charges on electronic money transactions waived for the next three months. The central bank is also working closely with the Minister of Economy and Planning to provide support to microfinance institutions. On April 30, the central bank cut the policy rate by 50 basis points to 4.5 percent.

Exchange rate and balance of payments
  • No measures. The central bank remains committed to maintaining exchange rate flexibility and limiting foreign exchange market interventions to avoiding excessive exchange rate volatility.


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Samoa

Background. No confirmed cases of COVID-19 have been reported in Samoa although some suspected cases exist, and they are under investigation as of May 7. The government is taking full precautions and preventive measures to control the transmission of COVID-19, including preparation of the health system to treat and care for patients. Social distancing measures are also in effect. The government declared a State of Emergency on March 20 and instructed the public to avoid mass gatherings (of five or more people), and unnecessary travel. The amended State of Emergency Orders was signed into law on March 26, which gives police officers the legal authority to enforce the Emergency Orders to the full extent of the law. Samoa implemented travel restrictions to protect citizens of the country on January 24, among the first countries in the world to do so and has gradually tightened the rules.

On April 24, the IMF Executive Board approved the disbursement of US$22 million in emergency financing under the Rapid Credit Facility (RCF) to help Samoa address urgent balance of payments needs created by COVID-19.

Press Release: https://www.imf.org/en/News/Articles/2020/04/24/pr20189-samoa-imf-executive-board-approves-us-million-disbursement-address-covid-19-pandemic

Reopening of the economy. The government issued the amendments of the Emergency Orders on May 13 and May 20, to gradually lift lockdown restrictions. Currently most businesses are under normal operations. Social distancing measures still apply for dining at restaurants, and public and village gatherings are permitted only on limited occasions. Social gatherings in public places remain closed until further notice.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has put together the first phase of the fiscal and economic response package, amounting to 66.3 million Samoan tala (about 3 percent of GDP). The package, approved by parliament on April 7, 2020, is centered around the mission of “Support the private sector so they can feed the nation,” and includes: (i) expenditure to cover the immediate medical response; (ii) assistance to the private sector; and (iii) assistance to individuals and households. The government has been stepping up its efforts to increase the level of preparedness and prevention. Temporary quarantine facilities have been established in key areas. There is a dire need for testing kits, medical consumables, as well as other clinical equipment and medication, to prepare for the confirmation/arrival and treatment of COVID-19. The support for the private sector includes: a temporary exemption on import duties on most commonly bought food items for households; duty concessions to be applied to an expanded list of agricultural and fishing materials; a grace period of three months to be applied for all loan payments; and a six-month moratorium on pension contributions for the hospitality sector. Support for citizens includes: establishment of the Emergency Price Control Board to keep wholesale and retail prices in check and bring them down, if necessary; provision of financial assistance to members of the National Provident Fund in the form of a refund of their loan payments for March 2020; and a temporary reduction of utility bills (both electricity and water) for six months through September 2020.

Monetary and macro-financial
  • The Central Bank of Samoa (CBS) continues to maintain an accommodative monetary policy. The CBS will encourage commercial banks to reduce interest rates, and/or associated bank fees and charges. The CBS will also make sure to maintain ample liquidity in the banking system to support businesses and stands ready to activate its lending facilities for the financial institutions. The proposed fiscal and economic response package includes provision of a three-month grace period to be applied for all loan payments. To compensate part of the losses in interest income, local commercial banks will receive payments from the government.

Exchange rate and balance of payments
  • No measures.


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San Marino

Background San Marino has been severely hit by the outbreak with over 668 confirmed COVID-19 cases and 41 deaths as of May 21, implying one of the highest rates of infection and deaths per capita in the world. The government imposed strict containment measures, including the lockdown of the entire country, suspension of all construction and retail activities except for essential services related to the provision of food and health, and reduction of the number of active employees by 50 percent on the premise in the manufacturing sector.

Reopening of the economy. The lockdown measures have been partially relaxed in phases. People were allowed to move within the territory and in the neighboring regions and some activities (retail, wholesale) reopened on May 6. Restaurants, bars (for dine-in), hairdressers and other personal services that involve closer personal interaction reopened on May 18. Swimming pools and sports centers will reopen on May 31. The government decided to require whole population to go through serological screening and subsequently molecular test in case of positive IgG or IgM.


Key Policy Responses as of May 21, 2020

Fiscal
  • The key measures approved by the government include: i) suspension of payment deadlines for government tax and non-tax obligations, utility bills, and other dues to provide liquidity to the private sector; ii) temporary freeze of all non-essential government spending and reduction in public sector wage bill to redirect spending to the health sector; and iii) extension of supplemental wage scheme to support workers displaced by COVID-19 containment measures; iv) deferral of income tax payment; v)minimum guaranteed income for poorer households; vi) other measures to support businesses, including tax credits, tax payments postponement and rescheduling; vii) an economic recovery fund, financed initially through a temporary solidarity levy applied on pensions (above 1500 euros).

Monetary and macro-financial
  • The government allows individuals and firms affected by the COVID-19 crisis to defer payments of loan principals to banks until March 2021. Commercial banks are providing loans with reduced rates to individuals and firms who are impacted by the COVID-19 outbreak. Through the end of the year, the government provides guarantees on loans with reduced rates to households (90 percent for loans up to 10,000 euros and 3 years maturity) and firms (70 percent for loans up to 500,000 euros and 6 years maturity) to support liquidity.

Exchange rate and balance of payments
  • No measures.


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São Tomé and Príncipe

The total number of confirmed Covid-19 cases to-date reached 269 as of May 21, with 11 deaths. Earlier cases were confirmed by tests conducted outside the country, while later samples were tested with use of rapid test kits recently acquired by the Government. The authorities continue to build capacity for combating the epidemic with external aid and have reinforced the state of emergency declared on March 17, mandating general confinement of the entire population and non-essential services, and suspending all international passenger flights.


Key Policy Responses as of May 21, 2020

Fiscal
  • Key measures include:

    (i).Implementation of the health contingency plan prepared in coordination with the WHO and increased health spending (on medicine, equipment, staffing, and treatment centers) to protect against COVID-19;

    (ii).Expansion of social assistance to the most vulnerable, including expansion of the WB-supported cash-transfer program, and increased support to the disadvantaged (the elderly, disabled and abandoned children);

    (iii).Protecting small businesses and employment, in particular through salary contributions and state-guaranteed loans;(iv)

    (iv).Financial assistance to workers who lost their jobs in both the formal or informal sectors.

    (v)Implementation of automatic stabilizers.

    (vi)Where supply chains are disrupted, the state will procure seeds, feedstock, and other essential inputs to be sold to farmers at market price.

    (vii)Introduction of a solidarity tax on public servants whose salaries are relatively unaffected by the shock.

Monetary and macro-financial
  • The Central Bank of Sao Tome (BCSTP) has reduced the policy rate and minimum cash reserve requirement, and temporary easing of some prudential ratios over three months to ensure adequate provision of liquidity in the market.

    Encouraged commercial banks to reduce some banking fees and grant a temporary moratorium on debt services to fundamentally sound businesses affected by the crisis. They are also working on options to increase liquidity to banks so that they will be able to grant credit to the economy.

Exchange rate and balance of payments
  • No measures.


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Saudi Arabia

Background. Saudi Arabia has been hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The number of COVID-19 cases stands at 80,185 of which 441 have died (as of May 28). The authorities have implemented a range of measures to limit the spread of the virus encompassing curfews; travel restrictions (including on international flights and internal public transportation and taxis); suspending prayers at mosques; closing all schools, universities, and shopping malls; suspending employee attendance at government and private workplaces (except for critical staff); and increasing testing. Further, early in April, the Ministry of Hajj called on countries to delay their bookings for the 2020 Hajj season. Mid-April, the authorities announced strict company guidelines including temporary housing accommodation for expatriate workers to help control the spread of the virus and on April 22 a repatriation program called “Auda” (or return) was launched online to facilitate the return of expatriates. High frequency indicators such as the PMI suggest a sharp slowing of activity in March/April. On May 12, the government announced the building of two makeshift hospitals in Mecca to accommodate any potential surge in COVID-19 cases.

Reopening of the economy. On April 26, the authorities ordered a partial lifting of the curfew in all regions, except in Mecca and previously isolated neighborhoods. Malls, wholesale and retail shops were allowed to reopen from April 29 to May 13. Strict restrictions (banning non-family gatherings and crowds of more than 5 people) have been put in place to preserve social distancing as the economy re-opens. On April 26, the government signed a $265 million contract to import 9 million tests needed for COVID-19 diagnosis. The reopening has been interrupted by a 5-day nationwide full lockdown and curfew during the Eid holidays from May 23 to May 27. On May 26, the authorities announced a phasing out plan for removing movement restrictions. Private sector employees are allowed to go back to offices with minimal staff and strict observance of coronavirus precautionary measures and domestic flights will be allowed to resume starting May 31. Curfew hours will be reduced from 8:00pm to 6:00 am in all regions except Makkah and prayers in mosques, including Friday prayer, will also resume (except for mosques in Makkah) during May 31 to June 20. The all clear phase will start on June 21, when all curfew restrictions will be completely lifted and the situation will be allowed to return to normal throughout the country (as it was before the curfew procedures), except in the city of Makkah.


Key Policy Responses as of May 28, 2020

Fiscal 
  • A SAR 70 billion ($18.7 billion or 2.8 percent of GDP) private sector support package was announced on March 20. The package includes the suspension of government tax payments, fees, and other dues to provide liquidity to the private sector and an increase in available financing through the National Development Fund. The government has  made budgetary reallocations (SAR 47 billion) to increase the resources available to the Ministry of Health to fight the virus. The authorities announced spending cuts in non-priority areas amounting to SAR 50 billion (2 percent of GDP) to accommodate some of these new initiatives within the budget envelope. Further, on April 3, the government authorized the use of the unemployment insurance fund (SANED) to provide support for wage benefits, within certain limits, to private sector companies who retain their Saudi staff (SAR 9 billion, 0.4 percent of GDP) and eased restrictions on expatriate labor mobility and their contractual arrangements. On April 15, additional measures to mitigate the impact on the private sector were announced, including temporary electricity subsidies to commercial, industrial, and agricultural sectors (SAR 0.9 billion). On May 10, the Ministry of Finance announced new fiscal measures to raise more non-oil revenues, rationalize spending and maintain the budget envelope. These measures consist of additional cut and delay in capital spending, removal of cost-of-living allowances, effective June 1 and increasing the VAT from 5% to 15% as of July 1, with an expected budget impact of SAR 100 billion. 

Monetary and macro-financial 
  • The Saudi Arabian Monetary Authority (SAMA) reduced its policy rates twice in March, lowering its reverse repo and repo rates by a combined 1.25 pp to 0.5 and 1 percent respectively. The Governor has announced that the central bank stands ready to supply liquidity if needed. On March 14, SAMA announced a SAR 50 billion ($13.3 billion, 2 percent of GDP) package to support the private sector, particularly SMEs, by providing funding to banks to allow them to defer payments on existing loans and increase lending to businesses. The central bank will also cover fees for private sector stores and entities for point-of-sale and e-commerce transactions for 3 months. SAMA has also instructed banks to delay payments of loans extended to all Saudi employees by three months without extra fees, to provide financing needed by customers who lose their jobs and to exempt customers from various banking fees.

Exchange rate and balance of payments
  • No measures.


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Senegal

Background. Senegal has reported 2,714 positive cases (30 deaths) as of May 20, 2020. The government has declared a national state of emergency and adopted strict containment measures, including suspension of international air travel, closure of borders, limits on inter-regional travel, bans on public gatherings, school closures, and a curfew. On May 11, some restrictions were eased: the curfew was shortened, and markets are allowed to reopen. Containment measures and the sudden stop of travel and tourism contribute to a significant economic slowdown, exacerbated by declining export demand and lower remittances. The IMF approved emergency financing of US$442 million to provide much-needed liquidity to support the authorities’ response to the crisis.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government implemented a resilience package of up to 7 percent of GDP. It consists of four main pillars: (i) improving the health system, (ii) strengthening social protection, (iii) stabilizing the economy and the financial system to support the private sector and employment, and (iv) securing supplies and distribution for key foodstuffs, medicine and energy products.

    Health system: The government has allocated FCFA 64 billion (0.4 percent of GDP) to improve testing, treatment, and prevention.

    Social protection: One million of the poorest households will receive food aid (FCFA 69 billion); the Senegalese diaspora will be supported with FCFA 12.5 billion: and utility payments for (for water and electricity) for poorer customers will be suspended for a 2-month period (FCFA 18,5 billion).

    Stabilizing the economy: Hard-hit sectors such as tourism and transport will receive direct support of about FCFA 100 billion; access to additional financing through a credit guarantee fund totaling FCFA 200 billion. The government will contribute up to FCFA 70 billion to this fund; and an expedited payment of unmet obligations will help strengthen firms balance sheets. On the tax side, the deadline for paying suspended tax obligations was extended from 12 to 24 months to improve the liquidity of firms. Their balance sheets will further profit from a partial write-off of tax debt. Tax rebates are envisaged for companies that keep their workforce and salaries above a certain level. Other tax measures include: faster reimbursement of VAT credits to companies, the possibility to postpone tax payments due in the first half of 2020 for SMEs and companies in the hardest hit sectors, and the possibility for people and companies that contribute to the COVID-19 Fund to make these gifts tax deductible.

    The fourth pillar related to the securing of key supplies and distribution channels for food, medicine and energy involves also increased support to the agricultural sector to privilege domestic food production, and putting in place policies so that Senegal can benefit as much as possible from low world oil prices (as an oil importing country).

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Senegal amounted to FCFA 103 billion.

Exchange rate and balance of payments
  • No measures.


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Serbia

Background.Serbia has reported 10,833 positive cases and 235 deaths as of May 21, 2020. The government declared a national state of emergency on March 15 and adopted several containment measures. These included closing borders, prohibiting movement of citizens during the weekends and between 5pm and 5am during weekdays (total ban for senior citizens), suspension of public transport and all activities in parks and public areas intended for recreation and sports, closing education centers and shopping malls (except grocery stores and pharmacies). GDP growth in Q1 reached 0.3 percent (s.a. qoq)—5 percent in yoy terms.

Reopening of the economy. Since April 21, containment measures have been gradually relaxed (with protective measures in place), including the reopening of green markets, fitness centers, hairdressers, parks, bars, coffee shops, and restaurants; and allowing outdoor sports and recreation activities. Inter-city and urban public transportation resumed on May 4. On May 7, the state of emergency was lifted, abolishing the ban on movement of citizens, including senior citizens. Shopping malls reopened on May 8 and kindergartens on May 11 and commercial flights have resumed since in mid-May. Since May 15, both Serbian and foreign citizens are allowed to enter the country presenting a negative PCR testing not older than 72 hours (Serbs could alternatively stay in quarantine for 14 days). As of May 22, a negative test will no longer be required to enter Serbia.


Key Policy Responses as of May 21, 2020

Fiscal
  • Fiscal measures adopted so far amount to about RSD 353bn (6.5 percent of GDP). Key measures include: (i) 10 percent wage increase for public healthcare sector (RSD 13bn) and increased healthcare spending (about RSD 26bn); (ii) one-off payment to all pensioners (RSD 7bn); (iii) universal cash transfer of EUR 100 to each citizen over 18 years old (about RSD 65bn); (iv) three-month deferment of labor taxes and social security contributions for all private companies, to be repaid in 24 installments starting from 2021 (RSD 100bn); (v) deferment corporate income tax advance payment during the second quarter of 2020 (RSD 21bn); and (vi) wage subsidies, including payment of minimum wages for all SME employees and entrepreneurs for three months (RSD 93bn) and payment of 50 percent of the net minimum wage for three months for employees in large private sector companies and for employees who are currently not working (RSD 4bn). Other measures include a 3-month moratorium on enforcement and interests on tax debt under rescheduling agreements and 10 percentage points reduction of the interest rate on tax debt. A state guarantee scheme for bank loans to SMEs has been approved (RSD 240bn), as well new loans to SMEs from the Development Fund (RSD 24bn).

Monetary and macro-financial
Exchange rate and balance of payments
  • The NBS has continued its practice of intervening in the foreign exchange market to smooth excessive short-term volatility.


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Seychelles

Background. Seychelles has reported 11 positive cases (no deaths) as of May 21, 2020. The government has adopted containment measures, including social distancing, travel bans on visitors from high-risk regions, screening at ports of entry, and school closures. Given that about 30 percent of the GDP directly or indirectly relates to tourism sector, the disruption to global tourism can have an adverse impact on the economy. Inflation is expected to increase only moderately as lower oil prices are expected to offset the impact of a depreciating rupee and supply side disruptions.

Reopening of the economy. Mandatory work-from-home was lifted on April 30. On May 4, all schools were reopened.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has announced a measure to subsidize wages for companies facing distress caused by COVID-19, whose fiscal cost is estimated up to about 5 percent of 2020 GDP. A revised 2020 budge was approved by the National Assembly in late April.

Monetary and macro-financial
  • The Central Bank of Seychelles (CBS) reduced the policy rate by 100 bps to 4 percent on March 23. On the same day, it announced that a credit facility of approximately $36 million will be set up to assist commercial banks with emergency relief measures to assist businesses and individuals struggling with the financial impact of the pandemic. The CBS also announced that commercial banks, the Development Bank of Seychelles (DBS) and the Seychelles Credit Union have agreed to consider a moratorium of six months on the repayment of principal and interest on loans to assist businesses in impacted sectors. The National Assembly has allowed the Central Bank to provide (i) a limited credit to government up to SCR 500 million, preferably through purchase of securities, and subject to central bank Board approval; and (ii) extending the maturity of credit to commercial banks to 3 years. The CBS is also considering easing reserve requirements. The CBS will continue to monitor potential market stress and any emerging risks to the financial sector and the economy.

Exchange rate and balance of payments
  • No measures.


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Sierra Leone

Background. As of May 20, Sierra Leone has 570 confirmed cases of COVID 19, 1978 people in quarantine, and 34 COVID-19 related fatalities. With the memory and economic and human costs of the Ebola health crisis (2014 15) still sharp in people’s minds, the Government has acted decisively to implement a range of prevention and containment measures. On March 24 the President declared a national state of emergency that is set to last for 12 months. Prevention and containment measures include:

  • Border controls and closure. A mandatory quarantine for anyone arriving from a country with 50 or more cases (monitoring of those with fewer than 50); Closure of land borders, enhanced border controls and a 3-month suspension of all incoming and outgoing regular passenger flights.
  • Social distancing. Closed education institutions as of March 31. Discourage gatherings of more than 100 people; restrict attendance of religious events and use of public beaches; shorten opening hours for entertainment industry; limit number of passengers on public transport; require face masks in public. In Freetown a special bus service was introduced to transport health workers to/from work.
  • Partial lockdown. A partial lockdown—extended from the initial 14 days in April—is in place until further notice. It restricts inter-district travel except for essential purposes, public working hours are shorter (9am to 4pm); and there is a national evening curfew (9pm to 7am). The country also implemented two full lockdowns (April 5 7 and then May 3–5) during which all were required to stay home.

With confirmed cases rising quickly, the government has indicated it does not intend to relax containment and mitigation measures in the near term.


Key Policy Responses as of May 20, 2020

Fiscal
  • The government is developing, in close collaboration with the Fund and other development partners, a health response and a broader economic package of measures. On April 2, the World Bank approved a $7.5 million International Development Association (IDA) grant to support preparedness of the Sierra Leonean health system in the context of COVID-19. On April 22, the government announced its plans to include incentives for healthcare workers (including a risk allowance, life insurance and compensation for living expenses when in-field) as part of the health response under development.

Monetary and macro-financial
  • The central bank held an emergency Monetary Policy Committee meeting on March 18. They decided to: (i) reduce the monetary policy rate (mostly signaling) by 150 bps from 16.5 percent to 15 percent, effective March 19; (ii) create a special credit facility (Le 500 billion) to support production, procurement and distribution of essential goods; and (iii) extend the reserve requirement maintenance period from 14 to 28 days to ease tight liquidity.

Exchange rate and balance of payments
  • Following the March 18 MPC meeting, the central bank announced its intention to provide FX resources to ensure the importation of essential goods. The exchange rate has been allowed to adjust.


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Singapore

Background. Singapore has reported 28794 confirmed cases and 22 deaths as of May 20, 2020. Safe distancing measures were considerably intensified in April to break the trend of increasing local transmission. In view of a significant decrease in community transmissions, the Government announced on May 2 that selected businesses and services will be allowed to progressively re-open in May and a three-phased approach to resume activities starting June 2 (see https://www.gov.sg/article/ending-circuit-breaker-phased-approach-to-resuming-activities-safely).Advance estimates suggest real GDP may have contracted by 2.2 percent in 2020Q1 on an annual basis.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities have announced 4 packages of measures on February 18, March 26, April 6, and April 21 amounting to a total stimulus of S$63.7 billion (13 percent of GDP). Funds to contain the outbreak are about S$800 million (mainly to the Ministry of Health). The Care and Support Package provides support to households (S$ 5.7 billion), including a cash payout to all Singaporeans, and additional payments for lower-income individuals and the unemployed. The Stabilization and Support Package provides support to businesses (about S$35.3 billion), including wage subsidies, an enhancement of financing schemes, and additional support for industries directly affected and the self-employed. It also sets aside loan capital of S$20 billion and introduces other economic resilience measures (S$1.9 billion).

Monetary and macro-financial
  • On February 14, the Monetary Authority of Singapore (MAS) welcomed the announcements from banks and insurers in Singapore to support their customers facing financial difficulties due to the impact of the COVID-19 outbreak, while adhering to prudent risk assessments. On March 31, the MAS and the financial industry announced a detailed package of measures to help individuals and SMEs facing temporary cashflow difficulties. The package has three components: (i) help individuals meet their loan and insurance commitments; (ii) support SMEs with continued access to bank credit and insurance cover; and (iii) ensure interbank funding markets remain liquid and well-functioning. A second package announced on April 30 extends the scope of relief for individuals to a broader set of loan commitments.

    On March 19, the MAS announced the establishment of a US$60 billion swap facility with the US Federal Reserve. The MAS intends to draw on this swap facility to provide USD liquidity to financial institutions in Singapore. The first MAS US$ auctions were held in late March and weekly auctions are held every Monday.

    On March 30, the MAS adopted a zero percent annual rate of appreciation of the policy band and reduced the mid-point to the prevailing level of the S$NEER, with no change to the width of the band.

    On April 7 the MAS announced that it will adjust selected regulatory requirements and supervisory programs to enable financial institutions to better deal with issues related to the pandemic.

    On April 8, 2020, the MAS announced a S$125 million support package to sustain and strengthen financial services and FinTech capabilities. The package, funded by the Financial Sector Development Fund, has three main pillars: (i) supporting workforce training and manpower costs; (ii) strengthening digitalization and operational resilience; and (iii) enhancing FinTech firms’ access to digital tools.

Exchange rate and balance of payments
  • No announcement.


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The Kingdom of the Netherlands—Sint Maarten

Background. As of May 21, Sint Maarten reported 77 positive cases and 15 deaths. The authorities began implementing the measures and travel restrictions to control the spread of COVID-19 on March 6. Nevertheless, the first positive case was diagnosed on March 17. On March 22, the borders were closed for all passenger traffic. On March 30, a night curfew was implemented and the border between Sint Maarten and Saint Martin closed and jointly patrolled with the French government. As the number of cases grew, the authorities declared a State of Emergency and a full lockdown on April 5, which was relaxed on April 17 when people were allowed access to essential services. The State of Emergency and the lockdown were extended until May 17, although allowing for a gradual relaxation of the restrictions in order to improve access to basic necessities.

Reopening of the economy. The government announced a four-phased approach to reopening its economy. The first phase of reopening began on May 11, with businesses and activities with a lower risk of COVID-19 transmission (e.g. construction, financial, consulting and accounting services, landscaping, drive-through restaurants, etc.) resuming work. In the second phase of the reopening (May 18), more businesses were allowed to operate, including, among others, medical, paramedical and rehabilitation services; utilities and telecommunications; primary schools; libraries; food vendors; employment agencies; and hardware stores. Taxis and school buses were required to operate at 50 percent capacity. Phase 3 of the reopening (June 1) will include various retail stores, pet shops, and bars. During Phase 4 (June 15), all remaining businesses will be allowed to operate. There is no schedule for opening the international border for now.


Key Policy Responses as of May 21, 2020

Fiscal
  • On April 19, the authorities published the Sint Maarten Stimulus and Relief Plan (SSRP) that elaborated fiscal measures for the second quarter of 2020. The direct relief measures included (i) a payroll support program (covering up to 80 percent of the payroll of qualifying businesses, (ii) income support for sole proprietors, vendor license holders, bus and independent taxi drivers (up to NAf 1,150 per person per month); (iii) income support for the unemployed (NAf 1,150 per person per month), and (iv) soft loans to SMEs (NAf 33 million). The SSRP also envisaged additional spending in the health sector (NAf 56.4 million) comprising additional healthcare expenses, liquidity support for the social security fund and the hospital. Finally, it included a food voucher program and a food box program for the most vulnerable groups, meals for the elderly and psycho-social care (NAf 9.3 in total). In order to cover the loss of fiscal revenue and the fiscal support measures in the second quarter of 2020, Sint Maarten requested financing in amount of NAf 258 million from the Netherlands. The total size of support will depend on available financing.

Monetary and macro-financial
  • On March 20, 2020, the Centrale Bank van Curaçao en Sint Maarten (CBCS) reduced the pledging rate--at which the commercial banks can borrow from the CBCS--by 150 basis points to 1 percent and suspended the 200 basis points surcharge on the pledging rate on loans exceeding NAf 20 million. Furthermore, the CBCS reintroduced the overdraft facility for commercial banks. The CBCS also announced that it would lower the interest rates on Certificates of Deposit (CDs) to ease the money market by absorbing less liquidity.

    On March 20, 2020, the CBCS (i) allowed commercial banks and credit institutions to provide a 3 to 6-month payment moratorium on interest and principal of all outstanding loans, without having to make an adequate provision, (ii) announced that commercial banks might exceed the debt service ratio (37 percent), to a maximum of 50 percent, and (iii) allowed life insurance companies and pension funds to provide clients a 3 to 6-month payment moratorium on policy premiums without having to make an adequate provision.

Exchange rate and balance of payments
  • On March 20, 2020, the CBCS suspended the extension of foreign exchange licenses for transfers abroad. This also applied to submitted applications that have not yet been granted a license.


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Slovak Republic

Background. There have been 1,515 confirmed cases (28 deaths) in the Slovak Republic as of May 27, 2020. The government implemented a range of measures to delay the spread of COVID-19 since March 13, including social distancing, closing schools and entertainment and hospitality premises, and limiting international travel. GDP declined by 5.4 percent q/q in 2020Q1 (3.9 percent y/y).

Reopening of the economy. The Slovak Republic started to gradually ease containment measures on April 22. The limited number of new cases allowed for an acceleration of reopening plans, and the final phase of reopening was launched on May 20, with most containment measures lifted for accommodation and restaurant facilities, theaters, shopping centers, and sports facilities. While the ban on international passenger air transport was extended to May 28 and cross-border checks to June 26, elementary schools and pre-schools will re-open on June 1.


Key Policy Responses as of May 27, 2020

Fiscal
  • Measures introduced by the new coalition government include (i) wage compensation for affected businesses and self-employed, and subsidies to individuals without income; (ii) enhanced unemployment benefits, and sickness and nursing benefits; (iii) temporary waiver of employers' health insurance and social security contributions for companies that remain closed due to the pandemic; (iv) easing of the administrative burden on businesses and relaxing labor code requirements; (v) deferral of payroll and corporate tax payments for businesses whose revenues decline by more than 40 percent; (vi) allowing companies to include loss carryback since 2014; and (vii) higher medical spending. These measures are estimated to amount to EUR 1.7 billion, or 1.8 percent of 2019 GDP. To ease liquidity pressures, the government announced several state guarantee programs, estimated to amount to EUR 500 million per month. Individuals, self-employed and SMEs are also allowed to defer loan repayments for up to 9 months, while a rent payment moratorium was imposed until June 30.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    The National bank of Slovakia (NBS) has implemented the following measures as part of a coordinated approach with the ECB and the European Banking Authority (EBA): i) banks may partially meet Pillar 2 requirements using capital instruments that do not qualify as common equity tier 1 (CET1) capital; ii) banks may, in duly justified cases, temporarily operate below the level of capital defined by the capital conservation buffer; iii) banks will also, where justified, be temporarily exempted from full compliance with the LCR. The NBS decided to leave the CCyB rate unchanged at 1.5 percent as of Aug 1, 2020, repealing its previous decision to increase the rate to 2.0 percent. The NBS also lowered the capital buffer for systemically important institutions for one of the systemically important banks (Postova Banka) from 1 percent to 0.25 percent, effective January 1, 2021.

Exchange rate and balance of payments
  • No measures.


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Republic of Slovenia

Background. The Covid-19 pandemic has significantly affected Slovenia, a small country with a population of 2.1 million. There are over 1,400 confirmed cases, 108 deaths, but less than 10 active cases (Government of Slovenia, as of May 27), with two or fewer new cases per day in the past week. Real GDP growth is projected to drop from 2.4 percent in 2019 to -8 percent in 2020. The authorities have implemented a range of measures to delay the spread of coronavirus and cushion the adverse impact on people and businesses. These include border checks, increased testing, limiting large gatherings, shutting down schools, public transit, restaurants and non-essential stores, restricting movements, and providing economic stimulus.

Reopening of the economy. With progress in containing the spread of the virus and in random testing for monitoring, the government started the gradual reopening with safety rules. This began with limited inter-city travel and some public transit that supports the industry in mid-April, then broadened incrementally to some services, and will expand to the full reopening of public transit, schools, and some sport activities later in May. In the process, the government issued detailed guidelines on protective measures. On May 15, Slovenia became the first EU country to declare the end of epidemic in country, although some anti-COVID-19 restrictions would remain in place.

Key Policy Responses as of May 27, 2020

Fiscal
Monetary and macro-financial
  • The ECB decided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020under the existing program (APP) and (ii) providing temporarily additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) starting between June 2020 and June 2021. Further measures included an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until end-2020, an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Euro system refinancing operations (MROs, LTROs, TLTROs). The ECB Banking Supervision allowed significant institutions to operate temporarily below the Pillar 2 Guidance, the capital conservation buffer and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical buffer by the national macroprudential authorities will enhance its capital relief measures. The ECB Banking Supervision further decided to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans (NPLs) that are covered by public guarantees and COVID-19 related public moratoria; and recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions. Furthermore, the ECB recommends that banks opt for the IFRS9 transitional rules.

    Key Slovenia measures include: (i) affected firms and individuals are allowed to obtain deferrals of bank loan repayments for up to 12 months ; (ii) Bank of Slovenia (BoS) extended all ECB measures to all banks and savings banks in Slovenia; (iii) BoS restricted profit distribution at banks and savings banks and (iv) BoS reduced the maximum level of allowed bank account fees, with higher reduction for the more disadvantaged groups .

Exchange rate and balance of payments
  • No measures.


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Solomon Islands

Background. Solomon Islands has no confirmed COVID-19 cases and deaths as of May21, 2020. COVID-19 preventative measures implemented by the government include suspension of all international flights until July 15 (except for those carrying essential COVID-19 related cargo), no entry of non-citizens, and strict mandatory quarantine for all returning passengers. In addition, the government has declared a state of emergency (extended until July 25), scaling down public services to essential services only, closing schools (all exam classes in low risk areas resumed by May 18) and temporarily suspending some services as well as restricting travel of its citizens to the capital, Honiara.

Reopening of the economy. Many of these services have been allowed to reopen since May 8. The Prime Minister has ordered the restriction of small craft vessels to and from the common border between Solomon Islands and Papua New Guinea. The border area has been declared as a second emergency zone in addition to Honiara. On May 20, the emergency zones went into a mock lockdown for 36 hours to test their capabilities in case of future needs. Starting May 26, the government will be repatriating its stranded nationals from Australia, New Zealand, Vanuatu and Fiji.

Key Policy Responses as of May 21, 2020

Fiscal
  • COVID-19 has had a significant negative impact on government finances, as a result of additional COVID-19 related spending pressures and lower revenue trends over the last three months. The government has adopted a COVID-19 economic stimulus package of SI$309 million (about 2.5 percent of GDP), to be financed by both government and donors. The package aims to provide social assistance to vulnerable households and firms, as well as supporting economic recovery. These includes ongoing payroll support for non-essential public servants; employment support for youth and women; capital grants to businesses to support investment in productive and resource sectors; tax and utility relief for affected businesses in specific sector; equity injection to government owned companies; and advancing planned infrastructure investment. On April 25, the government issued its first covid-19 domestic development bond of SB$120 million to finance its COVID-19 economic stimulus package. Two state owned enterprises (Solomon Islands Ports Authority and Solomon Islands Electricity Authority) have provided dividend payments to support the government’s COVID-19 preparedness and response plan. The country has two quarantine facilities with 120 rooms, all within close proximity to the Honiara International airport. On April 24, the Prime Minister confirmed that COVID-19 tests can be done in country after the arrival of medical testing equipment funded by its donor partners. The government is receiving funds and medical supplies from several countries, including Australia, China, New Zealand, the United States, and development partners (including the World Bank and the Asian Development Bank) to support its COVID-19 response. The IMF has provided debt service relief through its Catastrophe Containment and Relief Trust (CCRT).

Monetary and macro-financial
  • The central bank has confirmed its commitment to continuing an expansionary monetary policy stance and is also prepared to buy government bonds in the secondary market as part of its stimulus measures. The bank will be rolling out an export-import facility to assist businesses with opportunities for competitive financing. The government is encouraging commercial banks to grant a three to six-month grace period for all loan repayments.

Exchange rate and balance of payments
  • No measures.


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Somalia

Background. As of May 20 , Somalia has recorded 1,573 cases of COVID-19 infection and 61 deaths. The authorities have established a COVID-19 response coordination committee led by the Prime Minister and, in coordination with the WHO and the UN, the Ministry of Health has taken measures to contain the spread of the outbreak and to strengthen health systems, including restricting large meetings and gatherings; closing schools and universities; closing borders suspending international and domestic flights; and intensifying communication through various channels including radio, TV and social media. As of April 15, they imposed an evening curfew.

Travel suspensions, border closures and restrictions on public gatherings, together with recommended social-distancing, are impacting economic activity. The authorities and international health experts recognize that, given the country’s very weak health infrastructure and large vulnerable population, including internally displaced, Somalia would be ill-prepared to cope with any significant outbreak.

As the outbreak is spreading, Somalia’s partners and the Ministry of Health have launched a Country Preparedness and Response Plan (CPRP) to address the immediate humanitarian and socio-economic consequences. These joint efforts will focus on averting large-scale community spread through risk communication; testing; contact tracing; distribution of PPE to health workers; undertaking measures to mitigate risks to Internally Displaced Populations, refugees, asylum seekers and host communities; and minimizing risks in detention places.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities are seeking donor support to respond to the crisis and offset the impact of revenue losses. Effective April 15, they introduced a three-month tax holiday on some specific basic commodities (including rice), reduced consumption tax on some additional basic goods (including [flour]) by 50 percent and lifted restrictions on imports of rice from Vietnam. The authorities have also made additional transfers to federal member states and the Banadir region to help them respond to the impact of the pandemic.

Monetary and macro-financial
  • The Central Bank is releasing funding-for-lending support for medium and small enterprises through commercial banks., initially for $2.9 million with more in the pipeline and . encouraging commercial banks to use excess liquidity to support lending. To better monitor financial and liquidity conditions, the Central Bank has increased the frequency and granularity of data collection, including employing one-off surveys. It is also identifying an emergency response group and developing a crisis communication strategy. In coordination with international partners, it is exploring measures to ease the inflow of current transfers, including remittances.

Exchange rate and balance of payments
  • No measures. See support for remittance inflows above.


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South Africa

Background. South Africa has reported 25937 positive cases (552 deaths, 13451 recoveries, 634996 tests run) as of May 27, 2020. The government has declared a national state of disaster and adopted containment measures, including social distancing, travel bans on visitors from high-risk countries and quarantine for nationals returning from those countries, screening at ports of entry, school closures, screening visits to homes, and introduction of mobile technology to track and trace contacts of those infected. On April 27, a delegation of 217 infectious disease experts arrived at the request of the government to support its health response to Covid-19. A nationwide lockdown is in place from midnight March 26 and was extended through April 30 after being initially scheduled to end on April 16, with only critical workers and transport services, essential food and medicine production, and retail, operating. The banking sector is open for business.

On March 19 and 27, the Department of Trade and Industry introduced regulations against price gouging and export control measures on essential goods respectively. The government has also outlined measures for Covid-19 emergency procurement including the specifications of the health essentials it will purchase and the maximum prices for the personal protective equipment it will procure.

Reopening of the economy. On May 1 2020, a phased lifting of the lockdown began, allowing a few sectors to resume operation and others only partially. On May 13, a further relaxation of the lockdown was announced effective June 1. OnMay 24, it was specified that the June 1 relaxation will be broader than previously announced. Most economic activities will reopen under strict health and social distancing practices except for high risk ones (i.e. restaurants, bars, taverns, accommodation, domestic air travel, conferences, events, entertainment, sporting activities, and personal services). The sale of alcohol will be allowed on a restricted basis while the sale of tobacco remains banned. Remote work is still encouraged where possible. Net capital outflows (bonds and equities) since the beginning of the pandemic have amounted to $6.9 billion (2.5 percent of GDP); the sovereign’s dollar credit spread has more than doubled to 344.1 bps; and the rand has depreciated by 17.9 percent vis-à-vis the US dollar.


Key Policy Responses as of May 27, 2020

Fiscal
  • The government is assisting companies and workers facing distress through the Unemployment Insurance Fund (UIF) and special programs from the Industrial Development Corporation. Additional funds are available for the health response to Covid-19, workers with an income below a certain threshold are receiving a small tax subsidy for four months, and the most vulnerable families are receiving temporarily higher social grant amounts for six months. A new 6-month Covid-19 grant was also created to cover unemployed workers that do not receive grants or UIF benefits and the numbers of food parcels for distribution was increased. Funds are available to assist SMEs under stress, mainly in the tourism and hospitality sectors, and small-scale farmers operating in the poultry, livestock, and vegetables sectors. A new loan guarantee scheme is helping companies with turnover below a certain threshold to get bank financing for the payment of operating expenses as of May 12. Allocations are also being made to a solidarity fund to help combat the spread of the virus, with assistance of private contributions, and support municipal provision of emergency water supply, increased sanitation in public transport, and food and shelter for the homeless. The revenue administration is accelerating reimbursements and tax credits, allowing SMEs to defer certain tax liabilities, and has issued a list of essential goods for a full rebate of customs duty and import VAT exemption. A 4-month skills development levy tax holiday is also being implemented.

Monetary and macro-financial
  • The central bank (SARB) reduced the policy rate by 100 bps to 5.25 percent on March 19, another 100 bps to 4.25 percent on April 14, and then 50 bps to 3.75 percent on May 21. On March 20, it announced measures to ease liquidity conditions by: (i) increasing the number of repo auctions to two to provide intraday liquidity support to clearing banks at the policy rate; (ii) reducing the upper and lower limits of the standing facility to lend at repo-rate and borrow at repo-rate less 200 bps; and (iii) raising the size of the main weekly refinancing operations as needed. On March 23, the government announced the launch of a unified approach to enable banks to provide debt relief to borrowers. On March 25, the SARB announced further measures to ease liquidity strains observed in funding markets. The program aims to purchase government securities in the secondary market across the entire yield curve and extend the main refinancing instrument maturities from 3 to 12 months. On March 26, the SARB issued guidelines on modalities to provide debt relief to bank customers. On March 28, it announced temporary relief on bank capital requirements and reduced the liquidity coverage ratio from 100 to 80 percent to provide additional liquidity and counter financial system risks. On April 6, the SARB issued guidance on dividend and cash bonuses distribution to ensure bank capital preservation. Effective May 11, the SARB returned the number of repo auctions to once a day and, on May 12, announced a series of prudential priority measures for co-operative financial institutions on prudential matters, supervisory activities, as well as governance and operational issues.

Exchange rate and balance of payments
  • The SARB announced it will continue its longstanding practice of not intervening in the foreign exchange market.


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South Sudan, Republic of

Background. The Republic of South Sudan reported its first case of COVID-19 on April 4, 2020 and had 290 active cases as of May 15, 2020. The pandemic is progressing and the first Vice President tested positive for coronavirus along with some other high-ranked government officials. The government announced various precautionary measures, including (i) international flight suspension (with few exceptions for planes bringing in health-related cargo, such as medicine and medical equipment, and essential/critical food items; (ii) land border restrictions; (iii) passenger bus prohibitions; (iv) evening curfews; (v) social distancing; and (vi) a mandatory 14-day quarantine period for any traveler arriving from a virus-affected country. The government also encouraged businesses to allow their employees to telework and warned the business community against increasing prices and hoarding essential goods and commodities. However, lockdown measures were partially lifted on May 7. Concurrently, South Sudan is affected by the sharp decline in the international price of oil—the mainstay of the economy.


Key Policy Responses as of May 15, 2020

Fiscal
  • The government has allocated a COVID-19 fund of USD8.0 million. Of which, USD5.0 million was allocated to the Ministry of Health to combat the pandemic. The government has also redirected USD7.6 million from the World Bank’s grant of USD105 million for the UNICEF and ICRC, a third party implementing agency of the grant, to purchase items for pandemic prevention and treatment.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Spain

Background. Spain has been heavily affected by the COVID-19 outbreak, with nearly 238,000 confirmed COVID-19 cases and 27,119 deaths as of May 28, 2020. A state of emergency took effect on March 14, initially for 15 days and then was repeatedly extended until June 7, implying restrictions on movement to essential purposes only, limited commercial, cultural, recreational, hotel and restaurant activities, and reduced operation of public transport. From March 30-April 9, 2020, all non-essential activities were halted. Temporary restrictions were in place from May 15-24 on entries through ports and airports from Schengen countries, with only Spanish citizens, residents, cross-border workers, and health and elder care professionals allowed to enter. A 14-day quarantine was introduced for all people arriving from abroad starting from May 15, with a few exceptions. In the first quarter of 2020, the Spanish economy shrank by 4.1 percent from the same period last year as measures to contain the outbreak induced an unprecedented decline in private consumption and plunge in investments.

Reopening of the economy. A four-phase reopening plan was approved on April 28, possibly to be completed by end-June in a best-case scenario. Start dates for each phase will differ across provinces, depending on health conditions. In phase 0, starting from May 4, individual outdoor exercises, food pickup and commercial activities with appointments are allowed. Phase 1 allows the partial opening of small shops, terraces, hotels, and religious sites under certain restrictions, including capacity limits, as well as mobility within a province. Use of masks in public transport is highly recommended. In phase 2, shopping and conference centers, cinemas, theaters, and museums will open with one third capacity limits and other restrictions. Indoor events will be permitted for up to 50 people; outdoor events up to 400 people. As of May 28, about half of the population were in phase 1 and the other half were in phase 2. In phase 3, more flexible mobility is foreseen across provinces and the capacity limits of commercial establishments will be further relaxed. Schools will not reopen until September, except for graduating classes, but there will be arrangements for children with working parents.


Key Policy Responses as of May 28, 2020

Fiscal
  • Key measures (about 3 percent of GDP, €35 billion, subject to changes in the usage and duration of the measures) include budget support from the contingency fund to the Ministry of Health (€1.4 billion); advance transfer to the regions for the regional health services (€2.8 billion); additional funding for research related to the development of drugs and vaccines for COVID-19 (€46 million); entitlement of unemployment benefit for workers temporarily laid off under the Temporary Employment Adjustment Schemes (ERTE) due to COVID-19, with no requirement for prior minimum contribution or reduction of accumulated entitlement (€17.8 billion); increased sick pay for COVID-19 infected workers or those quarantined, from 60 to 75 percent of the regulatory base, paid by the Social Security budget (€1.4 billion); an allowance for self-employed workers affected by economic activity suspension (€3.8 billion); a temporary subsidy for household employees affected by COVID-19 with an amount equal to 70 percent of their contribution base (€3 million); a temporary monthly allowance of about EUR 430 for temporary workers whose contract (at least two months’ duration) expires during the state of emergency and are not entitled to collect unemployment benefits (€17.6 million); extension of unemployment benefit to cover workers who were laid off during the probation period (since March 9), as well as those who were switching jobs but with the new offer falling through (€42 million)); expansion of ERTE to cover workers and companies with significant activity reduction in sectors considered essential; strengthened unemployment protection for workers under permanent discontinuous contracts who cannot resume work but are not qualified for unemployment benefits (€99 million); additional budgetary funds of €300 million and further budget flexibility for the provision of assistance to dependents; transfer of €25 million to autonomous communities funding meals for children affected by the school closure; new rental assistance programs for vulnerable renters and additional state contribution to the State Housing Plan 2018-21 (€400 million); and extension of the social benefit for energy provision. Further measures include exemptions of social contributions by impacted companies that maintain employment under the ERTE (€2.2 billion); exemption from the payment of contributions for self-employed persons affected by the declaration of the state of alert (€980 million); tax payment deferrals for small and medium enterprises and self-employed for six months, with the first four months exempt from interest (€14 billion);  extension of the deadlines for filing tax returns and self-assessment to May 30 for SMEs and self-employed; flexibility for SMEs and self-employed to calculate their income tax and VAT installment payment based on the actual profit in 2020 (€1.1 billion); zero VAT rate on purchases of medical material essential to combat the COVID-19 until July 31, 2020 (€1 billion); reduction in VAT on digital publications from 21 to 4 percent (€24 million); 50 percent exemption from employer’s social security contributions, from February to June 2020, for workers with permanent discontinuous contracts in the tourism sector and related activities; a 6-month suspension of social security contributions for the self-employed (for the period May-July) and companies (for the period April-June) in selected industries (€352 million); deferral of social security debts for companies and the self-employed (€340 million); no surcharge for late payment of tax debts for companies obtaining financing through the ICO Guarantee Lines; more flexibility for workers to access savings from their pension plans; budget flexibility to enable transfers between budget lines and for local governments to use budget surplus from the previous years for supporting measures in the area of housing; modification of spending ceilings for certain lines of ministries and subnational governments; centralization of medical supplies; and an emergency management process for the procurement of all goods and services needed by the public sector to implement any measure to address COVID-19.

Monetary and macro-financial
  • For monetary policy at the currency union level, please see Euro Area section.

    In addition, the government of Spain has extended up to €100 billion government guarantees for firms and self-employed, covering both loans and commercial paper of medium-sized companies that participate in Spain’s Alternative Fixed Income Market (MARF); up to €2 billion public guarantees for exporters through the Spanish Export Insurance Credit Company; guarantees for loan maturity extensions to farmers using the special 2017 drought credit lines; a line of guarantees to provide financial assistance on housing expenses for vulnerable households (€1.2 billion); and additional loan guarantees for SMEs and self-employed through the Compañía Española de Reafianzamiento (€1 billion). These public guarantees could leverage up to €83 billion of liquidity support to companies through the private sector. Other measures include additional funding for the Instituto de Crédito Oficial (ICO) credit lines (€10 billion); introduction of a special credit line for the tourism sector through the ICO (€400 million); temporary authorization of ICO to participate as a buyer of new commercial paper issued at MARF; three-month moratorium on mortgage payments for the most vulnerable, including households, self-employed and homeowners who have rented out their mortgaged properties; automatic moratorium on rent payments for vulnerable tenants whose landlord is a large public or private housing holder during the COVID-19 crisis period; moratorium on non-mortgage loans and credits, including consumer credits, for the most vulnerable; suspension of interest and repayment of loans granted by the Secretariat of State for Tourism for one year with no need for prior request; deferred repayment of loans granted to businesses by the Ministry of Industry, Trade, and Tourism; enhanced capacity of the mutual guarantee societies of the autonomous communities; deferral of payments on certain loans granted by the Institute for the Diversification and Saving of Energy (IDAE);  adoption of a mechanism for renegotiation and deferment of business premises rent; reduced notary fees for novation of non-mortgage loans; ban of short-selling Spanish shares in the stock market from March 16-May 18; authorization for special government screening of FDI in strategic sectors; adoption of a new macroprudential liquidity tool empowering the National Securities Market Commission to modify requirements applicable to management companies of Collective Investment Schemes; empowering the Consorcio de Compensación de Seguros to act as a reinsurer of credit insurance risks; and time-bound changes to corporate resolution frameworks in order to reduce insolvency cases. Furthermore, the Bank of Spain will apply to the banks it supervises the flexibility provided by the legal system in relation to the setting of transition periods and the intermediate minimum requirements for own funds and eligible liabilities (MREL) targets.

Exchange rate and balance of payments
  • No measures.


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Sri Lanka

Sri Lanka has reported 1045 cases of COVID-19 as of May 21, with 9 deaths. The authorities suspended all arriving international flights and ships, while imposing a nation-wide curfew since March 20, which is being gradually relaxed from May 11.

As of May 20, there have been net capital outflows of around US$460 million (0.5 percent of GDP) since mid February, mostly from the domestic treasury securities market. The Sri Lankan currency has also depreciated by around 3.1 percent against the US dollar since that time. Sri Lanka’s EMBIG spread has more than doubled since mid-February.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government has allocated up to 0.1 percent of GDP for containment measures, as well as US$5 million (0.01 percent of GDP) to the SAARC COVID-19 Emergency Fund. The President has announced that cash payments totaling around 0.25 percent of GDP will be made to vulnerable groups. The 2020 Q1 payment deadlines for income tax, VAT and certain other taxes were extended until end-April. Other measures announced include tax exemptions for masks and disinfectant, price ceilings on essential food items, as well as concessional loans and food allowances for the poor. The President has also established a Task Force on Economic Revival and Poverty Eradication and a special fund for containment, mitigation and social welfare spending, inviting local and foreign tax-free donations. In late April, import duties on gasoline and diesel were increased to mitigate weak revenue collections.

Monetary and macro-financial
  • The Central Bank of Sri Lanka (CBSL) has reduced monetary policy rates by 100 basis points since March. The required reserve ratio on domestic currency deposits of commercial banks has been lowered by one percentage point, the liquidity coverage ratio and net stable funding ratios have been reduced to 90 percent and the rate at which CBSL grants advances to commercial banks has been lowered by 500 basis points. Commercial banks cannot declare dividends, share buy backs or increase payments to directors until end-2020. The President announced a debt repayment moratorium, which includes a six month moratorium on bank loans for the tourism, garment, plantation and IT sectors, and small & medium industries, with reduced rate working capital loans and investment-purpose loans for these sectors. There will also be a three-month moratorium on small-value personal banking and leasing loans. The interest rate on credit cards will be capped, for transactions up to a certain amount, with a reduction in the minimum monthly repayment. Financial institutions are also requested to reschedule non-performing loans. Lower capital conservation buffer requirements and a relaxation of loan classification rules have been announced. In addition, state-owned institutions will invest in treasury securities to stabilize the money market rate at 7 percent.

Exchange rate and balance of payments
  • The Sri Lankan authorities have introduced measures for a period of three months, aimed at restricting capital outflows, through suspension of outward investment payments, and a prohibition on commercial banks purchasing Sri Lankan sovereign bonds. There are also some current account restrictions, suspending imports of non-essential goods except raw materials, pharmaceutical products and fuel, as well as prohibiting commercial banks facilitating imports of vehicles and non-essential goods, and suspension of outward remittances. Inward remittances will be exempted from certain regulations and taxes.


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Sudan

Background. The trend of steep rise in COVID-19 cases continued last week with 2728 confirmed cases, up from 1818 cases a weak earlier, while the number of deaths were 111, increasing from 90 deaths during the span of previous week. There were also reports of mysterious illness and deaths of about 100 people, mostly of old age, in the State of North Darfur. The already week health system is facing challenges, as medical staff is also getting infected due to lack of preventive equipment, resulting in hospitals partially disrupting operations due to isolation and absence of medical staff. The government has established a high-level emergency committee to oversee the operations to deal with COVID-19. It has imposed containment measures, including shutting-down borders and closing airports for passenger travels and imposing daily curfew varying from 12 to 18 hours in different states, while the State of Khartoum had already extended the initially planned three week lockdown announced on April 19, 2020 until May 19, 2020. Other social distancing measures that were adopted included closure of schools, prohibition of mass gatherings and suspension of prayer gatherings inside mosques in Khartoum state. People returning from abroad were encouraged to keep themselves in a one-month quarantine. The Economic impact from COVID-19 include increased price of basic foods, rising unemployment and falling exports. Even though containment measures are severely hampering supply chains and constraining consumption, there is no clear indication of plans on opening up the State.


Key Policy Responses as of May 21, 2020

Fiscal
  • Already facing financing constraints amid large macro-economic imbalances, the outbreak of COVID-19 puts further pressure on an already tight fiscal position. Nevertheless, the authorities have prepared a Multi-hazard Emergency Health Preparedness Plan guided by the WHO, which has identified priority areas to tackle the outbreak of COVID-19. According to the plan, the financing needs to cope with COVID-19 related health care is about $150 million. So far, domestic private sector has pledged to contribute $ 2 million to help the government, the government reallocated $3 million and UN and international partners are expected to donate $9 million. The US government has also announced a donation of $8 million, while the European Union announced a support package of EUR 70 Million. On April 9, the Islamic Development Bank was also reported to provide $35 million to Sudan, while the World Bank has also announced a package of US$ 35 Million from its Headquarters based trust funds.

    The Minister of Finance also announced other measures to provide support to people affected by the pandemic. 

    To mitigate the negative impact on households and enterprises, the government is considering boosting social safety net by increasing direct cash transfer, providing unemployment benefits and delivering basic food baskets to poor families at discounted prices.

    The cash transfer alone will cost US$ 498.7 million in 2020 alone.

    On April 15, the government also announced significant increase in the salaries of public sector employees, which will cost an additional SDG 75.7 billion.

    In addition,  30 billion SDG have been allocated to prevent the collapse of the Sudanese health system,  while 8.5 billion SDG will be spent to support the informal sector and families affected by the lockdown measures in Khartoum. Ministry of Trade and industry will also spend SDG 10 Billion to deliver essential commodities to local cooperatives, while SDG 4.5 billion have been allocated for unemployment benefits for employees previously working in the informal sector.

Monetary and macro-financial
  • The government is preparing to freeze loan repayment and services for three months to ease the pressure on private sector.

Exchange rate and balance of payments
  • No specific measures are taken to deal with COVID-19.


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Suriname

Background. Suriname reported 10 cases of COVID-19 and 1 death as of May 15, 2020, but now has zero active COVID cases. In response, Suriname is loosening measures which included closing the borders on March 14, stopping all travel to/from the interior of the country as of March 25, closing of schools, (as of March 14), businesses, and markets (have had rolling closures by sector and locality). A nighttime curfew was enacted beginning March 29, public entertainment has been halted as of March 20, and the government is recommending social distancing. New expanded measures for sealing the border were announced April 29, 2020 due to outbreaks in French Guiana along the eastern border of Suriname. Most government offices have limited hours or have closed completely.

Reopening of the economy. On May 9, the lockdown measures began to be relaxed but the borders remain closed. The lockdown on the border rivers continues until May 17 and will be converted into a partial lockdown and will continue to be closed from 6pm to 6am. Movement will still be restricted between the coastal plain and other districts. The curfew in the rest of Suriname in effect on May 10, will apply from 11 a.m. to 5 a.m. Public health measures remain in full force including keeping 2 meters apart. Public gatherings may be a maximum of 50 people. Day cares remain closed. Buses are not allowed to drive. Senior citizens will be allowed to receive limited family visits from 17 May. Suriname has received aid from Cuba in the form of medicine and 50 health professionals who are in the country to assist. Pan-American Health Organization (PAHO) and Brazil have also provided resources.


Key Policy Responses as of May 15, 2020

Fiscal
  • SRD 5 million has been promised to a provisional COVID-19-related budget for health services. There are also funds being made available for Surinamese stranded abroad who cannot repatriate because of the ban on incoming flights.

    On April 8, the government passed the COVID-19 Exceptional Condition Act that is in force for 3 months and may be extended for another 3 months. The Act supersedes all prior law and consists of the following measures: provides 400 million SRD for health-related spending, converts all current government debt to the Central Bank to long-term debt and removes barriers to further monetary financing, removes the law on the public debt limit, allows the government to exceed the budget without having to inform the parliament, gives the government control over all media with regard to the crisis and allows the government to prosecute media for any news it deems as fake, grants the government power to take any unused private land or building for use to address the crisis.

    On May 11, the Minister of Finance announced two funds: one of SRD400 million to support unemployment, pensions, and assistance for children and one of SRD 300 million to support local production.

Monetary and macro-financial
  • On May 20, the central bank announced that it would lower the domestic currency reserve requirement from 35% to 27.5%. The central bank has also instructed banks to provide loans to persons or businesses affected by COVID at an interest rate of 7.5%, below market lending rates. On the regulatory side, commercial banks may now grant 3 to 6 months deferral of payments to companies, institutions and individuals who are affected by COVID. If necessary, specific measures will be taken for each institution aimed at temporarily alleviating the solvency and liquidity requirements, but also tightening up the governance. In cases where an institution has temporarily deviated from the generally applicable guidelines, additional actions and reporting obligations will be imposed.

Exchange rate and balance of payments
  • No measures.


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Sweden

Background. COVID-19 has been spreading rapidly across Sweden like in many other countries with more than 31,500 confirmed cases claiming more than 3,800 lives as of May 20, 2020. The government has implemented a range of measures to mitigate the spread of coronavirus including travel restrictions and social distancing measures. In addition, many secondary schools and universities have switched to distance learning. There are no plans to ease any restrictions in place as of now.

Key Policy Responses as of May 20, 2020
Fiscal
  • Based on the authorities’ estimates, the announced fiscal package amounts to SEK 523 billion to SEK 811 billion (10.4 to 16.1 percent of 2019 GDP, respectively) depending on uptake (the debt and deficit impact may deviate from these amounts). Measures include (i) additional expenditures on wage subsidies for short-term leave, increase in transfers to relevant agencies to deal with the coronavirus outbreak and its repercussions, temporary payment of sick leave (also for sole traders), loans to SMEs, more funding to the media, cultural and sports sectors and for education and training, temporary rent subsidies to vulnerable sectors, temporarily more generous unemployment benefits, expanded active labor market policies, expansion of education seats, temporary reduction of employers’ social security contributions, increased testing for COVID-19, additional general grants to municipalities and regions, temporary grants to businesses based on their loss of turnover to cover their fixed costs, more funding to train health workers, supplementary housing allowances to families with children, infrastructure investment, extra support to public transport, measures to prevent Covid-19 fraud (SEK 246.5 billion); (ii) deferral of a maximum of three month worth of payments of companies’ social contributions, VAT and payroll taxes for a period of up to 12 months (SEK 27 billion if uptake similar to GFC, and SEK 315 billion if fully used by all firms), deferral of annual VAT for 2019 (SEK 7 billion) and deferral of SME taxes (SEK 13 billion); and (iii) credit guarantees for Swedish airlines, expansion of the Export Credit Agency’s credit guarantee framework and the Export Credit Corporation, state credit guarantees for loans to companies and expansion of the National Board of Health and Welfare’s credit framework (in total SEK 235 billion). To support the international response, Sweden will contribute SEK 40 million to the WHO’s Contingency Fund for Emergencies.

Monetary and macro-financial
  • Key monetary measures include: (i) reduction of the lending rate for overnight loans by 55 basis points to 0.2 percent (while leaving the repo rate unchanged at 0 percent); (ii) lending of up to SEK 500 billion to companies via banks; (iii) introduction of a new lending facility whereby banks can borrow unlimited amounts (given adequate collateral) with 3-month maturity; (iv) increase of purchases of securities of up to SEK 300 billion this year (where securities may include government and municipal bonds, covered bonds and securities issued by non-financial corporations); (v) the establishment of a swap facility of USD 60 billion between the Riksbank and the US Federal Reserve (mutual currency arrangement); (vi) the possibility for banks to borrow in US dollars against collateral of up to USD 60 billion (vii) easing rules for the use of covered bonds as collateral; and (viii) temporarily recognizing all credit institutions under the supervision of the Swedish FSA as counterparties, enabling them to access the new lending facility.

    Key macro-financial policies include (i) easing of countercyclical capital buffer by 2.5 percentage points; (ii) the possibility for banks to temporarily breach the liquidity coverage ratio (LCR) for individual currencies and for total currencies; (iii) suspension of amortization requirement through August 31, 2021 (banks and borrowers may agree to reduce or suspend amortization payments temporarily); and (iv) extension of the phase-in period for the banks to comply with the new minimum requirements for own funds and eligible liabilities (MREL) until 2024 (from 2022). Furthermore, the Swedish FSA has urged supervised banks and credit institutions to refrain from paying dividends or buying back shares.

Exchange rate and balance of payments
  • No measures.


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Switzerland

Background. With over 30,000 confirmed cases and 1,638 deaths as of May 21, Switzerland is one of the countries in Europe hardest hit by COVID-19. On March 16, the Federal Council declared a national state of emergency, closing all shops, restaurants, bars and entertainment facilities and schools (with exceptions for food stores and pharmacies), prohibiting public gatherings of 5 people or more, and recommending that all citizens stay home. Some heavily-affected cantons, such as Ticino, adjacent to Italy in southern Switzerland, imposed tighter restrictions on activities. The government also reintroduced controls at all its borders, with entry restrictions in place for citizens of Schengen and non-Schengen countries. The drag from the containment and mitigation measures, exacerbated by external spillovers but partially mitigated by the authorities’ supportive policies, led to a 2 to 3 percent quarter-on-quarter contraction of the economy in 2020Q1, worsening in Q2.

Reopening of the economy. Based on the evolvement of the Covid-19 situation, the authorities have begun to gradually reopen the economy following a well-articulated 3-phase plan, with occasional adjustments depending on the latest developments (e.g. religious services, originally scheduled to resume on June 8, will now be allowed from May 28). Activities and businesses such as medical and dental practices and hair salons resumed operations from April 27. A further easing on May 11 reopened primary and secondary schools, shops and markets, travel agencies, museums and libraries, and restaurants, bars and pubs, and allowed activities such as exams at educational institutions and some sports. On May 27, the Federal Council will assess prospects for the third phase of the reopening plan, which will start on June 8. Activities such as upper secondary and higher education, theaters and cinemas, and gatherings of more than 5 but less than 1,000 people are expected to be permitted. Events for 1,000 people or more will remain prohibited until the end of August. Border restrictions have also been gradually, but cautiously, loosened starting on May 11 and in consultations with neighboring countries.

Key Policy Responses as of May 21, 2020

Fiscal (federal level)
  • The Federal Council (FC) has announced a series of supportive fiscal packages at the federal level, amounting to around CHF73 billion (10.4 percent of 2019 GDP). A March 13 package (CHF10 billion includes up to CHF8 billion for partial unemployment compensation, CHF1 billion for financial aid to particularly-affected firms, CHF580 million for loan guarantees for SMEs, and the rest for loss compensation for cancelled events. A second package ( March 20, CHF32 billion includes the following key measures: (i) extension of short-time work allowances and simplification of the application process; (ii) a guarantee program up to CHF20 billion to support bridging loans to SMEs ( details ); (iii) temporary, interest-free deferral of social-security contribution payments for affected companies; (iv) extended payment periods for taxes and payables to federal suppliers without having to incur interest on arrears; and (v) compensation for loss of earnings for self-employed people and for some employees affected by official measures to combat the coronavirus (e.g., parents who need to take care of children with closing of schools).On March 25, additional measures of around CHF600 million per month were introduced. An April 3 package doubled the size of the loan guarantee program from CHF20 billion to CHF40 billion. On April 8 and 16, the short-time work program was twice expanded to cover on-call workers and more self-employed people, respectively. On April 22, the FC extended the loss compensation for self-employed to May 16, even if they had reopened their businesses on an earlier date; and expanded the loan guarantee program for startups to support the economic recovery. On April 29, the FC announced CHF1.9 billion credit support to airlines and aviation-related businesses. While targeted supportive and relief measures continue to be rolled out or amended currently, the authorities also started to review and allow some temporary supports to expire, as the economy gradually reopens.

Monetary and macro-financial
  • To address liquidity bottlenecks, the FC on March 18 ordered a debt enforcement standstill from March 19 to April 4. The Swiss National Bank (SNB) activated a U.S. dollar liquidity swap line with the U.S. Federal Reserve, lowered the interest rate, offered a new 84-day maturity , and increased the frequency of the 7-day maturity operations from weekly to daily . In addition, the SNB announced on March 19 that starting April 1, the threshold factor for exempting sight deposits from negative interest rates would be raised from 25 to 30. On March 25, the SNB introduced a new COVID-19 refinancing facility that would operate in conjunction with the federal government’s guarantees for corporate loans, allowing banks to obtain liquidity from the SNB. The SNB’s request for deactivation of the countercyclical capital buffer was approved by the FC on March 27. On the supervisory front, the Swiss Financial Market Supervisory Authority (FINMA) introduced a temporary exclusion of deposits held at central banks from the calculation of banks’ leverage ratio ( extended on May 19, 2020 to until January 1, 2021). FINMA emphasized that the capital released from this relaxation should be used to support liquidity provision and is not to be distributed as dividends or other similar distributions related to 2019.

Exchange rate and balance of payments
  • The SNB has increased its interventions in the FX market to limit appreciation of the Swiss franc. Sight deposits held at the SNB have increased by around CHF85 billion (or 12.1 percent of 2019 GDP) since early February, a proxy for the total amount of Swiss franc liquidity injected through FX interventions, repo operations, and the Covid-19 refinancing facility.


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Tajikistan

Background. Tajikistan has reported 2140 positive COVID-19 cases as of May 20, 2020. 41 people died and arround 36000 people are placed in quarantine. The authorities have instituted a high-level task force and taken a range of measures to contain the spread of the virus, including border closures, travel restrictions, and suspending prayers at mosques. All schools will remain close until May 10, 2020. The task force is preparing for potential outbreak by arranging testing labs, medical equipment, supplies and personnel across the country. On May 1, World Health Organization mission arrived in Tajikistan to support the government in strengthening COVID-19 response operation. The mission issued a concluding statement on May 12.

The COVID-19 pandemic has had a severe human and economic impact in Tajikistan. Trade and transportation disruptions have led to a sharp drop in remittances and government revenues and created urgent balance of payments and fiscal financing needs.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities are seeing a decline in revenues and higher spending. Prime Minister briefed the donor community, including Development Coordination Council members and diplomatic corps about the economic impact of COVID-19 pandemic on Tajikistan. The authorities have requested disbursement under IMF Rapid Credit Facility instrument. On May 6, The IMF Executive Board approved a disbursement of US$189.5 million for budget support to help Tajikistan. Discussions with other development partners, including the World Bank and Asian Development Bank are ongoing on financial support to Tajikistan. The authorities are concerned about debt sustainability and are preparing consolidation measures that can be implemented over the medium term.

Monetary and macro-financial
  • Prices of staple goods have pushed headline inflation around outside of the NBT’s target range in March, reaching 9.3 percent. The National Bank of Tajikistan (NBT) cut the policy rate by 100 basis points to 11.75 percent on April 27 to ease monetary conditions. Earlier, the NBT lowered reserve requirement for local currency and foreign exchange deposits to boost liquidity in the system.

Exchange rate and balance of payments
  • The NBT allowed a one-off 5 percent depreciation of somoni to adjust the official exchange rate with cash market rate. Foreign exchange liquidity has been provided to banks.


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Tanzania

Background. Tanzania has reported 509 positive cases, and 21 deaths of COVID-19 as of May 21, 2020. The authorities have banned large gatherings (except for worship), suspended attendance to schools and educational institutions, cancelled international flights, and mandated the wearing of face masks in Dar Es Salaam.

Government operations continue as normal, while some private enterprises have closed or adopted measures to fight the spread of the virus. The authorities are assessing the economic impact of COVID-19 and policy responses.

Reopening of the economy. Effective on May 18, 2020, the authorities lifted the suspension of international flights into and out of Tanzania. On May 21, 2020, the authorities announced the plans to reopen schools and resume sport activities on June 1, 2020.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government released US$302 million for health spending. The funds come from cancelling and postponing some budgeted spending such as foreign travel and training; national ceremonies; and procurement of vehicles.

    To support the private sector the government has indicated that it expedited the payment of verified expenditure arrears with priority given to the affected SMEs, paying US$376 as of March 2020.

    The government has granted VAT and customs exemptions to additional medical items requested by the Ministry of Health.

Monetary and macro-financial
  • The BoT reduced the discount rate from 7 percent to 5 percent on May 12, 2020.

    The BoT reduced collateral haircuts requirements on government securities; from 10 percent to 5 percent for Treasury bills and from 40 percent to 20 percent for Treasury bonds effective on May 12, 2020.

    The Bank of Tanzania (BoT) lowered the Statutory Minimum Reserves requirements from 7 percent to 6 percent effective on June 8, 2020.

    The BoT will provide regulatory flexibility to banks and other financial institutions that will carry out loan restructuring operations on a case-by-case basis.

    The daily transactions limit for mobile money operators was raised from about US$1,300 to US$2,170 and the daily balance limit was raised from US$2,170 to US$4,340.

Exchange rate and balance of payments
  • No measures.


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Thailand

Background. As of May 21, 2020, there were 3,037 confirmed cases of Covid-19 infection (with 3 new cases over the last day) and 56 deaths. A state of emergency, instituted on March 26 through May 31, is likely to be extended through June 30 as per the National Security Council’s recommendation. Under this decree, foreigners are banned from entering the country except for shippers, diplomats, drivers, pilots, foreigners with work permits, and others permitted by the Prime Minister. A ban on inbound and outbound commercial flights will prolong to end-June. A 14 day state quarantine has been implemented for travelers entering Thailand from abroad and a nationwide curfew from 23:00 and 04:00 is effective until further notice. Covid-19 led to a 1.8 percent contraction, year-on-year, in Q1-2020 GDP growth.

Reopening of the economy. Easing of Covid-19 containment measures started on May 3, by opening low-risk businesses including markets, small eateries, and small retail outlets. The second easing phase started on May 17 with gradual opening of moderate-risk businesses, including shopping malls and large retail shops. Subsequent easing phases will depend on the evolution of Covid-19 infection.


Key Policy Responses as of May 21, 2020

Fiscal
  • In response to Covid-19, Cabinet has approved a fiscal package with phases I, II, and III amounting to at least 9.6 percent of GDP or THB 1.5 trillion including: i) health-related spending; ii) assistance for workers, farmers, and entrepreneurs affected by Covid-19 (includes THB 5,000 per month per person for three months to about 14 million non-farm workers outside the social security system and 10 million farmers); iii) support for individuals and businesses through soft loans from SFIs and the Social Security Office, and tax relief; and (iv) lower water and electricity bills, and social security contributions. While part of this would be financed within the original FY 2020 budget or by reallocating funds from other financial assets to soft loans, 5.3 percent of GDP or THB 1 trillion in additional borrowing has been authorized.

Monetary and macro-financial
  • The policy rate has been reduced by 75 bps from 1.25 to 0.50 percent during 2020 and the contribution from financial institutions to the FIDF was reduced from 0.46 to 0.23 percent of the deposit base to provide space for future decreases in lending rates. In addition, measures to help businesses include: (i) soft loans by the Bank of Thailand (BOT) to financial institutions amounting to THB 500 billion for on-lending at 2 percent interest to SMEs with outstanding loans not classed as NPLs; the government covers the first 6 months of interest and guarantees up to 60-70 percent of these loans; (ii) relaxation of repayment conditions for businesses (accompanied by temporary relaxation in financial sector liquidity-related regulations) including a loan payment holiday of 6 months for SMEs; and suspension of principal and reduction of interest on the debts to SFIs.

    Measures have also been taken to support stability in the financial sector: (i) the Corporate Bond Stabilization Fund (BSF) was established for the BOT to provide bridge financing of up to THB 400 billion to high-quality firms with bonds maturing during 2020-2021, at higher-than-market ‘penalty’ rates; (ii) the BOT purchased government bonds in excess of THB 100 billion in March to ensure the normal functioning of the government bond market; (iii) BOT bond issuances were reduced or cancelled; and (iv) a special facility was set up to provide liquidity for mutual funds through banks.

Exchange rate and balance of payments
  • The BOT has provided some liquidity in the FX market thereby avoiding disorderly market conditions while also allowing the exchange rate to adjust.


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Timor-Leste

Background. The Democratic Republic of Timor-Leste has 24 confirmed case of COVID-19 as of May 20, 2020. On March 27, the President declared  a State of Emergency, effective from March 28 to April 26. On April 27 the government extended it until end-May. Containment and mitigation measures include: (i) suspending collective passenger transport and obligating all individuals to wear a protective mask covering mouth and nose, wash their hands before entering commercial or service establishments, and maintain a safe distance of at least one meter from other people; (ii) closing all schools and training facilities; (iii) restricting international travel, including the prohibition of entry of foreigners into national territory; (iv) imposing compulsory isolation to all those infected with the new Coronavirus; (v) prohibiting meetings or demonstrations involving the agglomeration of more than five people and any social, cultural and sporting events; (vi) limiting public administration to essential public services; and (vii) extending validity of licenses, authorizations, visas and residence permits, and other administrative acts and documents.

 

Reopening of the economy. The Timorese authorities have started to lift some of the measures, including restarting domestic public transportation. 


Key Policy Responses as of May 20, 2020

Fiscal
  • On April 20, the government approved a stimulus package (US$150 million, about 10.5 percent of GDP) to manage economic and financial risks from the COVID-19 including: (i) cash transfers with a monthly basic income to over 214,000 households, worth US$100 per month per household, lasting for 3 months; wage subsidies (60 percent of the wage cost) for formal sector employees (for 30,000 workers); (ii) the purchase of three months emergency supply of rice; (iii) maintaining transportation channels for movement of essential goods and medical/emergency goods; (iv) waiving for three months (for low-income households) the payment of electricity (up to US$15 per month), water bills, property rental payments owned by the government and social security contributions;(v) provide stipends to over 4,200 Timorese students studying overseas; and (vi) deferral of tax payments for two months.

Monetary and macro-financial
  • On April 29, the authorities decided to extend access to the Credit Guarantee System to micro-enterprises, increasing the type of economic activities eligible for the program. On May 11, the authorities introduced a moratorium on the fulfillment of capital and interest obligations arising from credit agreements, which delayed maturity by three months and reduced debtors’ interest payment obligation to 40% of the original amount with the remaining 60% financed by the government.

Exchange rate and balance of payments
  • No measures.


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Togo

Background. As of May 19, 2020, the number of official COVID-19 cases reached 338, of which 219 active cases and 12 deaths. Given its position as a regional transportation hub (serving as a base of a pan-African airline company) and strong trade ties with Asia, Togo is particularly exposed to the COVID-19. In order to contain the outbreak, Togo has taken a series of measures including closing land borders and airspace to flights from countries with high infection rates. Entries for non-citizens from countries with high infection rates are banned. Nationals and permanent residents are subject to a mandatory quarantine for 14 days upon entry. Official travels to risky countries and gatherings of more than 100 people are banned until further notice. Furthermore, all sport or cultural events have been adjourned.


Key Policy Responses as of May 21, 2020

Fiscal
  • The National Assembly has authorized the Government to rule by decrees for a period of 6 months to accelerate the decision-making process. Togo was one of the first African countries to respond to the crisis, developing and quickly implementing the most urgent components of a comprehensive, multi-year response plan that aims to protect lives, livelihoods, and future growth prospects. This comprehensive economic and social resilience plan seeks to upgrade the health system, contain the economic fallout of the crisis, and provide targeted support to vulnerable households and firms. It is comprised of measures targeting:

    Health: To prevent the spread of the virus, the President declared a health state of emergency on April 1, which triggered the implementation of a set of containment and mitigation measures, including strengthening laboratory diagnostic capacity, equipping treatment centers, improving drug availability, and the launch of a vast program to rehabilitate hospitals and to provide health centers with standard infrastructure to screen and treat people with COVID-19. Imports of medical equipment and other products used exclusively in the fight against COVID-19 have been exonerated from taxes and duties. The estimated costs of the total multi-phase health plan are CFAF 110 billion ($187 million; 3.3 percent of GDP), of which CFAF 20.8 billion ($34 million; 0.6 percent of GDP) for the immediate COVID-19 response and the remainder for the strengthening of the health system.

    Social objectives: A new mobile cash-transfer program, NOVISSI, aiming to support informal workers directly through mobile enrollment to receive a state grant of at least 30 percent of the minimum wage, with payouts from CFAF 10,500 ($18) to CFAF 20,000 ($34). As of May 5, 2020, 1.3 million individuals had registered, of whom 500,000 received a NOVISSI payment. Based on program data, 65 percent of the beneficiaries are women. The cash transfer program is expected to last 3 months at a cost of CFAF 36 billion (US$61 million; 1.1 percent of GDP). The Government is also subsidizing water and electricity use for groups paying social tariffs for 3 months. The subsidy paid by the central government per month is CFAF 1.7 billion ($2.9 million) for the electricity utility and CFAF 481 million ($0.8 million) for the water utility.

    Economic recovery: The Government has adopted a series of tax policy and administrative measures to prepare the country for the future economic recovery. The standard VAT rate of 18 percent has been reduced to 10 percent for firms in the hospitality and catering sectors. Tax audits and penalties for the late payment of taxes due in the second quarter of 2020 have been suspended. For companies already audited, penalties will be reviewed considering the impact of COVID-19. Businesses that cannot submit their tax declarations on time will be supported by new submission deadlines. Small and medium enterprises will benefit from special procedures that allow them to pay taxes in tranches and enjoy more flexibility regarding outstanding taxes due. The Government is also preparing an agriculture response plan to ensure food security, increase the income of farmers, and support growth in the sector.

    Financing for the response is severely constrained. Revenue collections are expected to fall by possibly up to 40 percent relative to the original budget. The significant decline is attributed to both slower economic growth and the tax measures in response to the pandemic. The Government estimates that expenditures under the multi-year COVID-19 response program could be as high as CFAF 400 billion ($680 million; 11.8 percent of GDP). To meet these needs, the Government has established a national solidarity fund, to include contributions from the state budget, development partners, and voluntary donations from the private sector and the Togolese diaspora. The IMF has already provided significant financing, approving an ECF disbursement (with an augmented quota) of US$131 million, while bilateral donors have focused on providing project support. The solidarity fund is still underfinanced.

    Security measures: (i) Implementation of a curfew as of April 2, 2020 from 8 pm to 6 am; and (ii) Creation of a special anti-pandemic force of 5,000 men.Heads of states of the West-Africa Economic and Monetary Union (WAEMU) have declared a temporary suspension of the WAEMU growth and stability pact (setting six convergence criteria, including the 3 percent of GDP fiscal deficit limit) to help member-countries cope with the fallout of the Covid-19 pandemic. As a result, member countries are allowed to raise their overall fiscal deficit temporarily and use any additional external support provided by donors in response to the Covid-19 crisis. The declaration by the heads of states sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted of a full allotment strategy at a fixed rate of 2.5 percent (the minimum policy rate) thereby allowing banks to satisfy their liquidity needs fully at rate about 25 basis points lower than before the crisis. The BCEAO has also announced: (i) an extension of the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "Covid-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Togo amounted to 3.2 percent of GDP.

Exchange rate and balance of payments
  • No measures.


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Tonga

Background. As of May 21, 2020, there have been no reported COVID-19 cases in Tonga. Nevertheless, the economy is expected to be hit hard by a sharp slowdown in partner countries, which are an important source of remittances and tourism for the economy, and the containment measures that have been imposed. The Government of Tonga has been introducing increasingly restrictive containment measures since January 2020. In March 2020, it declared a state of National Emergency and toughened measures for incoming travelers (including international cruise ships and yachts passengers) before prohibiting all flights into the country. Other preventive measures include a national lockdown, a national curfew, the closure of non-essential businesses and public facilities, movement restrictions and the prohibition of public gatherings.

Reopening of the economy. The authorities started easing restrictions on April 12, 2020, by lifting the national lockdown, and domestic restrictions were further eased on May 15 for example, by reducing curfew hours and relaxing restrictions on the size of permissible gatherings. The state of National Emergency and the border closure, however, have been extended until June 11 and June 12, respectively.


Key Policy Responses as of May 21, 2020

Fiscal
  • Based on an initial assessment of the overall impact of COVID-19 on the economy, the Government of Tonga announced an Economic and Social Stimulus Package of 60 million Tongan pa’anga (5.3 percent of GDP) for FY2020 on April 2, 2020. This package is intended to provide short-term assistance to all affected sectors in response to the COVID-19 pandemic. Over a third of the funds will be directed to the health sector, while the rest will support the other sectors, including tourism, transport, agriculture, education and security. In addition, the Government of Tonga announced a 3-month moratorium on Government Development Loans & TC Gita Recovery Loan Fund, deferral of retirement contributions and hardship allowances for laid-off employees (up to 3 months), needs-based financial assistance, tax and duty relief during the pandemic, and assistance with the payment of utility bills by public enterprises. The new package will be re-evaluated as the situation evolves.

Monetary and macro-financial
  • On March 19, 2020, the National Reserve Bank of Tonga (NRBT) Board approved the provision of liquidity support to the banking system. It also committed to easing exchange control requirements if needed. Monetary policy, which has been accommodative given low inflation and slow economic recovery, remained on hold. The NRBT is also meeting weekly with banks to ensure there is clear communication, enhanced preparedness and best practices. It is supporting banks in their effort to mitigate the negative impact of the COVID-19 virus on the economy as well as provide essential financial services to households and businesses. Commercial banks are assisting their customers affected by the COVID-19 virus on a case by case basis and depending on individual customers’ circumstances by: (i) reducing or suspending the principal loan repayments to interest only loan repayments; (ii) restructuring loans to businesses that have reduced business hours, in affected sectors such as tourism and related industries like transportation and to individuals who have been laid off; (iii) extending the terms of loans to reduce repayments; (iv) reducing loan interest rates on a case by case basis; and (v) providing access to short-term funding, if required. The NRBT is also building awareness and expectations through press releases.

Exchange rate and balance of payments
  • The exchange rate remains pegged against a basket of currencies (within a ±5 percent monthly adjustment limit). No new exchange restrictions have been announced. International reserves declined from 7.1 months of imports at end-February 2020 to 6.9 months of imports at end-April 2020.


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Trinidad and Tobago

Background. Trinidad and Tobago is being hit by two shocks, the spread of COVID-19 and the sharp decline in oil prices. As of May 28, Trinidad and Tobago has 116 confirmed cases and 8 deaths. The government has adopted containment measures, including border closures, travel restrictions, school and university closures, and limits on social gatherings.

Reopening of the economy. On May 9, the authorities announced a six-phase reopening plan. In phase 1 (May 11-20), while the stay-at home order for non-essential workers will remain in effect, some businesses will be allowed such as food establishments, restaurants, vendors, and hardware stores, with restricted operating hours and social distancing rules. In phase 2 (May 21-June 6), construction and manufacturing activity can restart. Mechanics, tire shops, laundries, and dry cleaners are also allowed to resume operations. During phase 2 public transportation will continue to operate at 50 percent capacity. In phase 3 (June 7-20), all public servants will return to work with flexible schedule where possible, and private sector construction can recommence. In phase 4, malls and beaches will be reopened, and cinemas will be reopened in phase 5. In phase 6, the country’s borders are expected to be reopened. Schools will remain closed until September.


Key Policy Responses as of May 28, 2020
Fiscal
  • The fiscal package of March 23 includes (i) salary relief for up to 3 months to workers who are temporarily unemployed or have reduced income; (ii) VAT and income tax refunds to individuals and SMEs; (iii) liquidity support to individuals and small businesses via credit union loans at reduced interest rates and long repayment periods; (iv) grants to hoteliers to upgrade of their facilities; (v) food, rental and income support for low-income vulnerable groups; and (vi) import duty and VAT waivers on imports of certain medical and emergency supplies. On March 26, the Prime Minister announced that the Ministry of Health will receive additional funding to deal with COVID-19, including spending on medical equipment and supplies, human resources, and infrastructure.

Monetary and macro-financial
  • On March 17, the central bank reduced the policy rate by 150 bps to 3.5 percent, and the reserve requirement on commercial bank deposits by 300 bps to 14 percent. As a result, commercial banks have reduced the prime lending rate to an average of 7½ percent, from 9¼ percent previously. Additionally, commercial banks agreed to provide a 1-month moratorium on mortgages and installment loan payments, without any penalty; and to waive penalty interest on overdraft facilities. Several banks have offered automatic deferrals for a period of up to 6 months on loans or credit card payments due. Other government housing institutions have provided similar relief to their customers with 2 to 6 months payment deferrals. Money lenders allowed deferred payments and reduced interest rates. Credit cards have reduced interest rates and increased credit limits

Exchange rate and balance of payments
  • The government has established a special foreign exchange window, through the Exim Bank to ensure the uninterrupted supply of basic items such as food and pharmaceuticals for 3 months.


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Tunisia

Background. Tunisia has reported 1068 confirmed cases and 48 deaths as of May 27, 2020. Thanks to a proactive action from Tunisian authorities in taking the necessary sanitary steps by declaring national state of emergency and adopting confinement measures, the pandemic has been contained and the number of daily contaminated cases has started to drop since several days. A national strategy of progressive deconfinement beginning in May 4, 2020 has been put in place. The COVID-19 shock comes at a time when Tunisia is already facing persistent macroeconomic imbalances.

Reopening of the economy. On April 29, the national security council announced several measures to ease economic restrictions by adopting a three phases plan depending on the activity sector. The first is from May 4 and concerns the most affected sectors, i.e individuals and craftsmen, manufacturers especially export firms, with the condition of adopting some sanitary measures. The second step will begin May 24 and concerns hypermarkets, cafes and other individuals for which the social distancing would be hard to establish, and the third phase is from June 4 would be the total deconfinement. During this transition period, only 50 percent of the public sector will get back to business.


Key Policy Responses as of May 27, 2020

Fiscal
  • A 2.5 billion TND emergency plan ($0.71 billion or 1.8 percent of GDP) was announced on March 21. The package includes the postponement of CIT payments, other taxes and social contributions, VAT exemptions, VAT refund procedures and reimbursement acceleration, rescheduling taxes and custom arrears, and others in order to provide liquidity to the private sector, limiting layoffs and protecting the most vulnerable population especially in the informal sector. The plan also includes an expansion of the budget allocation for health expenses as well as the creation of a 100 TND Million fund for the acquisition of equipment for public hospitals. From the social side, this also includes cash transfers for low income households, disabled and homeless people (450 TND million for three months). The plan also includes a support for those who will be on temporary unemployment because of the COVID19 shock (300 TND million).

Monetary and macro-financial
  • The CBT has reduced its policy rate in March by 100 bps. On March 20, the CBT announced a package to support the private sector, by asking banks to defer payments on existing loans and suspend any fees for electronic payments and withdrawals. The central bank has also asked banks to postpone credit reimbursement by employees for a period of 3 or 6 months, depending on the net revenue level. Besides, the government announced a set of financial measures including the creation of investment funds (600 million TND), a state guarantee for new credits (500 million TND), the activation of a mechanism for the state to cover the difference between the policy rate and the effective interest rate on investment loans within a cap of 3 percent.

Exchange rate and balance of payments
  • No measures.


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Turkey

Background. Turkey has reported 159,797 Covid-19 cases and 4432 deaths as of May 27 2020, with over 1,894,650 tests completed. The government adopted multiple containment measures to address the pandemic including: social distancing, curfews, travel bans along with quarantines for returning nationals, and the closures of schools/universities, stores, and entertainment venues. Industrial production remained broadly flat in quarter-on-quarter seasonally and working day adjusted terms during the first quarter of 2020, with a fall of 7.1 month-on-month in March.

Reopening of the economy. On May 4, following reported improvements in Covid-19 statistics, the government announced a phased approach to lifting lockdown measures from May to July. In the first phase, certain retail shops opened from May 11, universities and the judiciary will resume their activities from June 15, while domestic and limited international, flights will resume operation in June, among other measures. Furthermore, mobility restrictions on specific groups (youth and old-aged citizens) are being lifted in a phased way.


Key Policy Responses as of May 27, 2020
Fiscal
Monetary and macro-financial
  • The CBRT has lowered the policy rate by a cumulative 250bps to 8.25 percent as of May 21.  A package of financial measures was introduced at the onset of the Covid-19 pandemic. Specifically, liquidity facilities were augmented, including with longer-term instruments and at discounted rates. The reserve requirements on foreign currency deposits were reduced by 500 bps for banks meeting lending growth targets. A new TL lending facility for SMEs in the export sector was set up. Exporters’ inventory financing is being supported by extending maturities for existing and new export rediscount credits. A second package of CBRT measures (March 31) allowed for an increase in outright purchases of sovereign bonds, and broadened the pool of assets for use as collateral in CBRT transactions. A third package of measures of CBRT increased the upper limit for CBRT’s funding through Open Market Operations and regulated the primary dealer banks outright sovereign bond sales to the CBRT to maintain market depth, strengthen the monetary policy transmission mechanism and support the Primary Dealership system. The bank regulator announced forbearance measures, primarily to limit the accounting impact of TL depreciation and fall in securities’ prices. The LTV limit on mortgages was raised from 80 to 90 percent. The minimum payment for individual credit cards was reduced to 20 percent, and banks postponed repayments on credit card loans for housing, consumer and vehicle purchases. Bank regulator implemented a new regulatory ratio incentivizing banks support for the real economy and government financing Public banks granted firms affected by the crisis a 3-month moratorium on bank loan repayments (principal and interest). Debt enforcement and bankruptcy proceedings (except in alimony cases) have been suspended. Firms’ dividend payments limited to 25 percent of 2019 profits. Exporters will be provided with inventory financing, and reimbursement of rediscount credits have been extended by 90 days. On May 20, the CBRT announced that the overall limit of the bilateral swap agreement between Turkey and Qatar was increased from US$ 5 billion to US$ 15 billion equivalent.

Exchange rate and balance of payments
  • No measures.


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Turkmenistan

Background. According to official media, there have been no diagnosed cases of Covid-19 as of May 28, 2020. In January, the Extraordinary Commission on combatting the spread of disease was set up. The authorities have adopted a wide range of measures to prevent a COVID-19 outbreak in the country, including closure of borders, flight cancellations and rerouting, and mandatory COVID-19 testing for arriving travelers. Starting from March 19, Turkmen citizens and citizens of other states are not allowed to enter Turkmenistan without a certificate of absence of COVID-19. From March 20 to April 20, foreign nationals are barred from crossing the state border of Turkmenistan. Starting from March, 24, 2020 all sports events and athletes’ training have been cancelled in Turkmenistan, and gyms and sports clubs have been shut down in Ashgabat, although the latter measure was reversed on April 1. The authorities have imposed restrictions on internal movement, closed roads between some provinces, and restricted rail transportation. School holidays have been extended by one week till April 6.

In consultation with the WHO, the authorities have issued guidelines for protection against the spread of COVID-19. According to the official press, medical institutions are being supplied with supplies and protective equipment. The authorities are running a respiratory virus awareness campaign and have launched a COVID-19 hotline. A special regime has been established for the implementation of essential and high-priority imports and projects, which covers foreign currency rationing and transportation arrangements. The authorities have stepped up efforts to digitalize government services, expand e-commerce, and facilitate online and phone payments by SMEs and SOEs through banks.


Key Policy Responses as of May 28, 2020

Fiscal
  • State budget spending is being revised, including to increase health spending for preventing an outbreak of COVID-19 and to provide support to businesses (possibly through tax relief, bank loans, and assistance in providing raw materials) affected by the containment measures.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • Exchange restrictions on current international payments and transactions reportedly have been tightened. The President has approved the list of goods subject to customs duties and the magnitude of such duties. Custom duties on selected goods have been raised to protect domestic suppliers. In addition, starting from March 24, 2020, only Turkmen freight carriers are allowed to transport cargo in Turkmenistan. From May 15, Turkmen companies engaged in exports are required to surrender 100 percent of their foreign currency income at the official exchange rate to the Stabilization Fund, instead of 50 percent previously. A commission has been set up for the purchase of essential supplies, medicines, construction equipment, etc. The commission has also been authorized to screen and ration requests to convert local currency into foreign currency for imports.


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Tuvalu

Background. As of May 28, Tuvalu has no reported cases of COVID-19 within its borders. Tuvalu has established a COVID-19 National Taskforce that will act as an Advisory body to Cabinet and provide updates on a regular basis. The Taskforce has recommended, and Cabinet approved, a 14 days quarantine period for anyone traveling into the country that has transited or originated their travel in a high-risk country. Quarantine is being observed in Fiji, or if someone was to slip through the net, they would be isolated in Tuvalu for 14 days to observe the same 14 days quarantine period. The State of Public Health Emergency, which was first declared on March 20, 2020, was extended for six months on March 26, 2020.


Key Policy Responses as of May 28, 2020

Fiscal
  • The Government has released Tuvalu’s strategic COVID-19 Economic and Financial Relief Package on May 6, 2020. The document lays out measures to respond to the health and other risks and serves as a reference to mobilizing external support for accessing the COVID-19 facilities. The document includes the Talaaliki Plan, which forms a worse-case scenarios of (i) food, fuel and other essential imported goods become unavailable; and (ii) an outbreak (i.e., one confirmed case) of COVID-19 in the country.

    The Government has approved AUD 189,000 under the first supplementary appropriation as a Coronavirus contingency fund on March 24, 2020. These budgets are allocated for COVID-19 responses such as specialized medical equipment, enhanced laboratory capabilities, upgrading of health facilities and increased surveillance measures to address the coronavirus threat, and for a support the private sector and lifelines of the capital and outer islands.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Uganda

Background. Uganda has 264 confirmed cases of COVID-19 as of May 19, 2020, with 65 patients having already recovered and no deaths reported. The recent spike in covid-19 cases is attributed to imported cases from cross border cargo truck drivers, which led to a new directive only allowing drivers that test negative for covid-19 to enter the country (with the exception for those from South Sudan). The measures that were earlier adopted to manage cross border drivers remain in force: (i) increased covid-19 testing at the border points; (ii) strengthened security to manage the porous border points, (iii) designated stop areas for trucks with a maximum of three per route with no diversions allowed; (iv) having each transit truck to be manned by only one driver; (v) increased use of the regional electronic cargo tracking system; and (vi) encouraging rail and water transport for fuel and other dry cargo.

The Consultative Meeting of the East African Community (EAC) heads of state held on May 12th agreed on a harmonized regional response to the Covid-19 pandemic that includes: (i) adopting a harmonized system for certification and sharing of covid-19 test results; (ii) establishing a regional mechanism for testing and certifying truck drivers and the adoption of an EAC digital surveillance and tracking system for drivers and crew; and (iii) supporting agro-processing and value chains and establishing ‘special purpose financing schemes’ for small and medium enterprises to cushion them from the negative effects of the covid-19 pandemic.

The covid-19 pandemic has resulted in volatility in the domestic foreign exchange market. The shilling depreciated by 6.2 percent between mid-February and late March 2020, leading BoU to intervene in the market, although the situation has stabilized more recently. Increased capital outflows and the decline in international trade, tourism receipts, remittances and foreign direct investment worsened the external position. Annual headline and core inflation increased to 3.2 and 3.4 percent in April 2020 from 3 and 2.5 percent in March 2020 because of higher food prices linked to panic buying at the start of the lockdown.

Reopening of the economy. On May 18th, the President announced some measures to ease the ongoing lockdown while most measures will be maintained for another 21 days. The easing measures take effect on May 26th and others on June 4th. The June 4th easing measures are dependent on government providing free face masks to all Ugandans above the age of 6. Measures to be eased on May 26th include: (i) allowing movement of private cars to a maximum of 3 people, including the driver; (ii) opening up of general merchandise shops that are not in shopping malls and arcades or food markets. Measures to be eased on June 4th include: (i) opening up public transport with strict regulation on reduced passenger capacity to half; (ii) reopening of education for students in their final year of study across all institutions. The measures that have been maintained for the 21 days include: (i) closure of international borders and the airport to passengers; (ii) bars, night-clubs, gyms, saunas, swimming pools and hair-salons will also stay closed; (iii) curfew from 1900hours until 0630 hours, remains in place; (iv) motorcycles will not carry passengers yet and will continue to carry only cargo; (v) public and private transport will remain prohibited in the 40 border districts to minimise spread from the neighbouring countries.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities have used part of their Contingency Fund in the FY2019/20 budget to finance approximately $1.3million from the Ministry of Health Preparedness and Response Plan from January to June 2020. In addition, the government has passed a supplementary budget of about US$80 million to support critical sectors such as health and security as well as the vulnerable population. The government has increased health spending and announced a package of measures to mitigate the social impact of the pandemic. It is also finalizing the details of the stimulus package expected to cushion the impact of the crisis in the private sector.

    Key measures adopted and under consideration include: (i) a food distribution campaign to the vulnerable in the urban areas; (ii) expedited repayment of domestic government arrears to the private sector suppliers; (iii) boosting the lending capacity of the state-owned Uganda Development Bank (UDB) to provide affordable credit to support private sector companies to reorient their production towards covid-19 response related items; (iv) the deferment of tax payment obligations for the most affected sectors; (v) the introduction of tax exemptions for items used for medical use(vi) the support with water and electricity utilities; and (vii) the expansion of labor-intensive public works programs. Close collaboration and contributions to the crisis response both in cash and kind are being provided the private sector, intergovernmental agencies, individuals and other stakeholders.

Monetary and macro-financial
  • Bank of Uganda (BoU) issued a statement on March 20th listing the following measures: (i) BoU’s commitment to provide exceptional liquidity assistance for a period of up to one year to financial institutions that might need it; (ii) ensuring that the contingency plans of the supervised financial institutions guarantee the safety of customers and staff; (iii) putting in place a mechanism to minimize the likelihood of sound business going into insolvency due to lack of credit; (iv) waiving limitations on restructuring of credit facilities at financial institutions that may be at risk of going into distress. BoU has also worked with mobile money providers and commercial banks to ensure they reduce charges on mobile money transactions and other digital payment charges.

    During its April 2020 MPC meeting, BoU reduced its Central Bank Rate (CBR) by 1 percentage point to 8 percent to counter the deteriorating economy, provide adequate access to credit and ensure the smooth functioning of financial markets. Other concrete measures introduced include: (i) directing all Supervised Financial Institutions (SFIs) to defer the payments of dividends and bonuses for at least 90 days effective March 2020 to ensure adequate capital buffers are maintained; (ii) providing liquidity to commercial banks for a longer period through issuance of reverse Repurchase Agreements (REPOs) of up to 60 days at the CBR, with opportunity to roll over; (iii) purchasing Treasury Bonds held by Microfinance Deposit taking Institutions (MDIs) and Credit Institutions (CIs) in order to ease their liquidity distress; and (iv) granting exceptional permission to SFIs to restructure loans of corporate and individual customers that have been affected by the pandemic, on a case by case basis effective April 2020.

    On April 17th, Bank of Uganda provided more guidelines to be followed by SFIs to safeguard financial sector stability. These include: (i) loan repayment holidays for a maximum of 12 months; (ii) granting credit reliefs only within the 12 month period with effect from April 01, 2020 –these should be in the best interest of customers and with full disclosure; (iii) the credit status at the time of granting a repayment holiday shall remain unchanged for the duration of the said repayment holiday; (iv) prepayment of arrears as a condition for restructuring a credit facility is suspended for 12 months with effect from April 01, 2020; (v) credit status at the time of granting a repayment holiday shall remain unchanged for the duration of the said repayment holiday; and (vi) borrowers are encouraged to request, and SFIs may offer, credit relief.

Exchange rate and balance of payments
  • Bank of Uganda has announced that it stands ready to intervene in the foreign exchange market to smooth out excess volatility of the exchange rate.

    Uganda secured US$491.5 million in emergency financing from the IMF on May 6, 2020 under the Rapid Credit Facility.


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Ukraine

Background. As of May 28, there were 22,382 verified COVID-19 cases (out of 322,746 tested), with 669 deaths. Starting in mid-March, daycare, schools and universities have closed, and domestic and international travel restrictions have been imposed. Subsequently, restrictions were expanded to cover virtually all establishments with interactions with clients. On April 29th the government allowed food markets to open. Citizens are required to carry identification papers and wear facial masks when outside. All people coming from abroad should go through a mandatory observation for 14 days. People over 60 are required to self-isolate. The government has also banned export of certain medical essentials, such as facial masks, personal protective equipment and ethyl alcohol, as well as some essential food stuffs.

Reopening of the economy. The government extended the quarantine until June 22nd, but part of the restrictive measures have been softened starting May 11th. On May 11th beauty salons, most shops, museums, and outdoor terraces in restaurants were allowed to reopen, provided that certain sanitary norms are observed. Subways in large cities were opened on May 25th. The national railway operator was allowed to resume certain domestic and international routes. Regions with better epidemiological situations will be eligible for more relaxations, such as domestic bus and railway transportation, opening of daycare, certain education facilities, hotels and fitness centers, and allowing religious gatherings (all with prescribed sanitary norms). More relaxations, such as opening of restaurants and allowing cultural events are set to be implemented in mid-June. Entertainment and sport facilities remain closed, and gatherings of more than eight persons in public are banned. Earlier the government presented its official 5-stage plan on lifting the quarantine. Its implementation, which started on May 11th, will be reversed if there is a large surge in cases. The relaxations will be different in each region, depending on the epidemiological situation.

https://covid19.com.ua/


Key Policy Responses as of May 28, 2020
Fiscal
  • Several measures have been introduced to support business. (i) Penalties for certain tax legislation violations have been canceled for the period March 1 until the last day of the lockdown, except for activities related to excisable goods. (ii) There is a moratorium on tax audits and inspections. (iii) The deadline for filing annual income and asset declarations has been extended to July 1, 2020. (iv) Rent on land has not been accrued and paid for the month of March, 2020. (v) Non-residential real estate owned by individuals or legal persons is not subject to real estate tax for the month of March, 2020. (vi) Penalties for late or incomplete payment and late filing has been abolished for the period March 1 – May 31, 2020.

    Parliament has adopted legislation increasing the thresholds for the simplified taxation regime, and has adopted a holiday for these taxpayers for the payment of social security contributions until May 31, 2020 (which does not impact the length of their pensionable service). Parliament has also approved a top-up of 300 percent of the salary for medical personnel working with COVID-19 patients (while personal income tax is withheld, the state will compensate the amount of the tax in full for the top-up). To support households, parliament has adopted legislation that allows households to deduct the expense of COVID-19 medicine from the calculation of personal income tax. The government has introduced a one-off pension increase to low-income pensioners of UAH1,000 in April and a regular monthly UAH500 pension top-up for retirees aged 80 years or more. The authorities’ policies also include an earlier-than-planned indexation adjustment of pensions in 2020, as well as a moratorium on penalties and disconnection of consumers who are late on utility payments.

    Medicines, medical devices and other equipment used to prevent or combat COVID-19 have been exempt from import duties and VAT. The government has created a temporary stand-alone budgetary program under the Finance Ministry to fight the pandemic. This program allows for a greater flexibility in the reallocation of funds to quickly accommodate changing priorities. The Accounting Chamber is monitoring COVID-related health expenditures from all tiers of the government https://public.tableau.com/profile/ua.gov.covid19#!/vizhome/COVID-19UKRAINE/COVID_19.

    Parliament has introduced a state insurance for medical professionals who become disabled as a result of COVID-19-related sickness. This insurance also covers the families of doctors and nurses who die as a result of COVID-19. To meet these and other associated claims, the government has replenished the Social Insurance Fund with UAH 2,279 billion from the COVID-19 Fund, of which UAH 1,807 billion should be paid back to the budget.

    The authorities have softened access to a number of social support programs, such as household utilities subsidies and aid to families with children. The changes include (a) increasing norms (by 50 percent) for energy consumption used to determine the amount of subsidy; (b) stopping the disqualification from the household utilities subsidies program of a person that breaches qualification criteria; (c) automatic re-enrollment into the program for the heating season 2020-2021; (d) extending existing social entitlements for the period of the quarantine without the need to reapply; and (e) making private entrepreneurs eligible for the state support for children younger than 10.

    The floor for an unemployment benefit has been increased from UAH 650 to UAH 1,000 for applicants whose employment history does not qualify them for a full benefit. For those with sufficient records of participation in labor market and contributions to pension system, this minimum amount is increased from UAH 1,630 to 1,800. The law governing unemployment benefits has been amended to introduce a new type of entitlement, so called temporary unemployment benefit related to a quarantine. The Cabinet of Ministers has been granted the right to determine its amount and set it at 2/3 of the basic wage, but not exceeding the minimum wage which is UAH 4,723. According the Ministry of Economy, 1.4 to 1.7 million people will benefit from this measure. Employers are compensated for wages paid to partially furloughed employees, under the provision that pension contributions were paid in the six months prior to the quarantine. The first disbursement of UAH 6 billion for this purpose from the COVID fund in the budget has been executed.

    The Cabinet of Ministers introduced price regulation for the period of the quarantine for 10 socially important food products, 20 categories of personal protective equipment and medicines and more than 10 types of antiseptics. After the decision of the Cabinet of Ministers comes into force, it will be necessary to declare a price increase 30 days in advance if the price rises by 15 percent or more,15 days in advance if it increases by 10-15 percent, and three days in advance if it increases by 5-10 percent. The declaration should be filed on the change in the retail prices of each individual type of product.

Monetary and macro-financial
  • In order to support the economy during the quarantine, the National Bank of Ukraine (NBU) eased monetary policy by cutting the key policy rate by 200bps down to 8 percent starting April 24th, 2020.

    The NBU has modified the operational design of monetary policy implementation to provide banks with more liquidity management flexibility: the frequency of liquidity tenders has been doubled (from bi-weekly to weekly), two-week certificates of deposit have become one-week certificates, and short-term refinancing loans (which previously had a maximum maturity of 14 days) are now issued for a period of up to three months.

    The NBU has modified the calculation of reserve requirements (effective April 11) so as to free up some more domestic currency liquidity.

    The introduction of additional capital buffers—including the capital conservation buffer and the systemic buffer—will be delayed. However, banks are suggested to refrain from distributing dividend until at least October 2020, ensuring that financial institutions have an additional margin of safety. Onsite inspections and stress testing of the banks have been postponed. NBU has adopted a regulation that facilitates restructuring of loans to borrowers facing financial difficulties due to impact of the COVID-19. Penalties on clients not servicing loans during the period March 1 to June 30 should not apply if there are reasonable grounds. In credit risk classification, the loans that were serviced as of March 1, 2020 and restructured as of September 2020, will not be considered to have indications of default.

    Parliament approved a decision to maintain the current minimum statutory capital of banks, and the NBU will adopt regulation abolishing the requirements for minimum statutory capital to increase from UAH 200 million up to UAH 300 million by end-2020 with further increase up to UAH 500 million by July 2024.

    The law on simplified procedures for banks’ restructuring and recapitalization was extended for 4 more years (until Aug 1, 2024).

    In order to alleviate compliance burdens on banks during the COVID-crisis, the NBU has extended by six months the deadlines for banks to submit their problem asset resolution plans (for assets that were performing as of March 1, 2020), with full implementation of the problem assets resolution postponed until November 30, 2020. The NBU has also extended the deadline for banks to submit their risk tolerance declarations by four months, as well as the business recovery plans for non-systemic banks by two and a half months (by December 20, 2020). Business recovery plans can be based on one (the most severe) stress-test only. The NBU eliminated the tariffs for banks using its electronic payments system (SEP) and provided banks with guidance to ensure and promote their remote/cashless services.

    The NBU has postponed the deadlines for banks to publish their financial statements: annual 2019 audited statements can be published 5 business days after the general shareholders meeting and 2020Q1 interim financial statements can be published by June 30 (both postponed from April 30); and 2020Q1 consolidated financial statements can be published by July 30 (postponed from May 30).

    The NBU recommended to the Financial Services Regulator to transfer the regulation of insurance companies to the NBU starting July 1st. It also recommended to introduce measures to enable the remote and smooth work of the insurance companies that exempt insurance companies from the sanctions and fines in certain cases and prolong the deadline for submission of the 2019 financial statements.

    In order to further support bank liquidity and lending, on April 23rd, the NBU announced the following measures: in late April the NBU extended the term of the refinancing loans that are granted through weekly tenders, from 30 to 90 days, and expanded its list of eligible collateral that banks can use to obtain financing using standard liquidity support instruments , incorporating municipal bonds and government-guaranteed corporate bonds into the pool of eligible collateral; the NBU also introduced an interest rate swap tool that banks can rely on to minimize interest rate risk, which is expected to become available in the second quarter; and auctions under long-term refinancing instrument (up to 5 years), the first auction took place on May 8th.

Exchange rate and balance of payments
  • The NBU and EBRD have agreed to set up a US$500 million FX swap facility to support the real economy and strengthen Ukraine’s macrofinancial stability.


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United Arab Emirates

Background. The UAE economy is being affected by the spread of COVID-19 as well as the sharp decline in oil prices. As of May 21, 2020, the number of COVID-19 cases stood at 26,898 with 237 deaths. The authorities have enacted several measures to limit the spread of the virus, including closure of schools, nurseries, shopping malls, parks, dine-in restaurants, and various tourist attractions. As part of their National Epidemic Control Plan, they have also imposed wide-ranging travel restrictions (including grounding of flights and halting visa issuance), suspended prayers at mosques and other large gatherings, and enacted teleworking arrangements in government offices. Alongside, the authorities have increased testing and scaled up disinfection efforts, established a dedicated task force to ensure uninterrupted supply of consumer goods and prevent manipulative pricing practices, and launched remote learning initiative to ensure continuity of education.

Reopening of the economy. Starting April 24, the authorities have begun gradual reopening of shopping centers and other businesses, subject to social distancing requirements, and began facilitating repatriation of expatriate workers wishing to return to their home countries.


Key Policy Responses as of May 21, 2020

Fiscal
  • The authorities have so far announced about AED 26.5 billion ($ 7.2 billion or 2 percent of GDP) in various fiscal measures. These include: (i.) AED 16 ($4.4 billion) approved by the federal government to support the private sector by reducing various government fees and accelerating existing infrastructure projects; (ii.) AED 1.5 billion ($0.4 billion) in measures by the government of Dubai to reduce government fees, provide additional water and electricity subsidies, and simplify business procedures; and (iii.) AED 9 billion ($2.5 billion) announced by the government of Abu Dhabi as part of the ongoing “Ghadan-21” fiscal stimulus program. The new initiatives provide for water and electricity subsidies as well as credit guarantees and liquidity support to small- and medium-sized enterprises. In addition, the government of Abu Dhabi has announced a reduction or suspension of various government fees and penalties, as well as a rebate on commercial lease payments in the tourism and hospitality sectors.

Monetary and macro-financial
  • The Central Bank of the UAE (CBUAE) has reduced its policy interest rate twice by a combined 125 basis points so far this year. Furthermore, CBUAE has announced an AED256 billion ($70 billion or 20% of GDP) package of measures comprising: i) halving of banks’ required reserve requirements from 14% to 7%; ii) zero-interest rate collateralized loans to banks (AED 50 billion); iii) allowing the use of banks’ excess capital buffers (AED 50 billion); iv) 15-25 percent reduction in provisioning for SME loans; v) increase of loan-to-value ratio for first-time home buyers by 5 percentage points; vi) limiting bank fees for SMEs; vii) waiver of all payment service fees charged by CBUAE for six months; viii) raising the limit on banks' exposure to the real estate sector from to 30% of risk-weighted assets, subject to adequate provisioning; ix) allowing banks to defer loan repayments till end-2020.

Exchange rate and balance of payments
  • No measures.




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United Kingdom

The pace of infections and deaths associated with COVID-19 has eased from its peak. Confirmed cases are close to 270,000, claiming over 37,800 lives. In response to the outbreak, the government implemented a range of measures including travel restrictions, social distancing measures, closures of entertainment, hospitality, non-essential shops and indoor premises, and increased testing. In the first quarter of 2020 the economy contracted by 2 percent relative to the previous quarter, with a 5.8 percent month-on-month contraction in March.

Reopening of the economy. On May 10, the government set out a roadmap to ease the lockdown in England (Scotland, Wales and Northern Ireland have separate rules). Moving ahead with easing steps will be conditional on meeting five conditions related to the evolution of infections and deaths and the capacity to provide adequate care and prevent a new peak of infections. In the first step, May 13-31, people who can are requested to work from home, while those working in the manufacturing and construction sectors are encouraged to go back to work minimizing the use of public transportation. Unlimited outdoor exercise will be allowed. In step 2, starting on June 1, some schools as well as outdoor markets and car showrooms will be allowed to reopen, while all other non-essential retail will reopen on June 15. In step 3, no earlier than July 4, part of the hospitality and personal care industries will reopen while enforcing social distancing. The government has published “COVID-19 Secure” guidelines for employers to help protect their workforce and customers from coronavirus that must be met as a condition for reopening.


Key Policy Responses as of May 28, 2020

Fiscal
  • Tax and spending measures include: (i) additional funding for the NHS, public services and charities (£14.7 billion); (ii) measures to support businesses (£27 billion), including property tax holidays, direct grants for small firms and firms in the most-affected sectors, and compensation for sick pay leave; and (iii) strengthening the social safety net to support vulnerable people (by nearly £7 billion) by increasing payments under the Universal Credit scheme as well as expanding other benefits. The government has launched three separate loans schemes to facilitate business’ access to credit. Together with the British Business Bank the Coronavirus Business Interruption Loan Scheme to support SMEs and the Coronavirus Large Business Interruption Loans Scheme to support bigger firms, which carry an 80 percent guarantee for loans up to £5 million for the former and up to £200 million for the latter. In addition, the government has put in place the Bounce Bank loan scheme for SMEs with 100 percent guarantee for loan amounts up to £50,000. It is also deferring VAT payments for the second quarter of 2020 until the end of the financial year and income tax payments of the self-employed by six months. The government will pay 80 percent of the earnings of self-employed workers and furloughed employees (to a maximum of £2,500 per employee per month) initially for the period March-May. For furloughed employees, the scheme has been extended until end-October, although starting in August employers will be allowed to furlough employees for part of the daily working hours while being required to contribute to the 80 percent of earnings. The government has put in place a £1bn package to support firms driving innovation and development through grants and convertible loans. To support the international response, the government has made available £150 million to the IMF’s Catastrophe Containment and Relief Trust . See also: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

Monetary and macro-financial
  • Key measures include: (i) reducing Bank Rate by 65 basis points to 0.1 percent; (ii) expanding the central bank’s holding of UK government bonds and non-financial corporate bonds by £200 billion; (iii) introducing a new Term Funding Scheme to reinforce the transmission of the rate cut, with additional incentives for lending to the real economy, and especially SMEs; (iv) HM Treasury and the BoE have agreed to extend temporarily the use of the government’s overdraft account at the BoE to provide a short-term source of additional liquidity to the government if needed ;(v) launching the joint HM Treasury—Bank of England Covid Corporate Financing Facility which, together with the Coronavirus Business Interruption Schemes, makes £330bn of loans and guarantees available to businesses (15 percent of GDP); (vi) activating a Contingent Term Repo Facility to complement the Bank’s existing sterling liquidity facilities; (vii) together with central banks from Canada, Japan, Euro Area, U.S., and Switzerland, further enhancing the provision of liquidity via the standing US dollar liquidity swap line arrangements; and (viii) reducing the UK countercyclical buffer rate to 0 percent from a pre-existing path toward 2 percent by December 2020, with guidance that it will remain at 0 for at least 12 months. See also: https://www.bankofengland.co.uk/coronavirus.

    The Prudential Regulatory Authority (PRA) set out supervisory expectation that banks should suspend dividends and buybacks until end-2020, cancel outstanding 2019 dividends and pay no cash bonuses to senior staff. The PRA indicated all Pillar 2A requirements will be set as a nominal amount, instead of a percentage of total Risk Weighted Assets (RWAs) and to mitigate the possibility of procyclical market risk capital requirements, the PRA will temporarily allow firms to offset the increase in risk-weighted assets due to the automatic application of a higher VaR multiplier through a commensurate reduction in risks-not-in-VAR (RNIV) capital requirements (See https://www.bankofengland.co.uk/coronavirus/information-for-firms target="_blank" ). The Financial Conduct Authority (FCA) introduced a package of targeted temporary measures to support customers affected by coronavirus, including by setting the expectation for firms to offer a payment freeze on loans and credit cards for up to three months.

Exchange rate and balance of payments
  • No measures.


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United States of America

Background. The US is facing a widening outbreak of COVID-19 that has claimed the lives of about 99,000 Americans and infected more than 1,678,000 persons across all 50 states. In response, the U.S. has implemented a range of measures including travel restrictions, social distancing, declaration of states of emergency, closure of schools, non-essential businesses, and increased testing. Reflecting the impact of the containment measures, the U.S. economy contracted at an annualized rate of 5 percent in the first quarter. Up to April, the economy has lost 16 percent of all jobs as a result of Covid-19 and the unemployment rate reached 14.7 percent.

Reopening of the economy. Due to heterogenous developments of the Covid-19 outbreak across states, progress on reopening the economy are varying across states. As of May 28, some states are yet to lift the “stay-at-home” orders. Nevertheless, all states have begun the reopening process, albeit with meaningful restrictions expected to remain in place at least through the end of the second quarter. The first sectors that were opened generally include elective surgeries and outdoor recreations. For restaurants and retail stores, states tend to open curbside pickup before allowing for limited indoor activities. In many states, indoor entertainment and close-contact services remain closed or opened with limited capacity. Most states announced school closure through the end of the academic year.


Key Policy Responses as of May 28, 2020

Fiscal
    • US$483 billion Paycheck Protection Program and Health Care Enhancement Act. The legislation includes (i) US$321 billion for additional forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (ii) US$62 billion for the Small Business Administration to provide grants and loans to assist small businesses; (iii) US$75 billion for hospitals; and (iv) US$25 billion for expanding virus testing.

    • An estimated US$2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act (“CARES Act”). The Act includes (i) US$293 billion to provide one-time tax rebates to individuals; (ii) US$268 billion to expand unemployment benefits; (iii) US$25 billion to provide a food safety net for the most vulnerable; (iv) US$510 billion to prevent corporate bankruptcy by providing loans, guarantees, and backstopping Federal Reserve 13(3) program; (v) US$349 billion in forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (vi) US$100 billion for hospitals, (vii) US$150 billion in transfers to state and local governments and (viii) US$49.9 billion for international assistance (including SDR28 billion for the IMF’s New Arrangement to Borrow).

    • US$8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US$192 billion Families First Coronavirus Response Act. They together provide around 1% of GDP for: (i) Virus testing; transfers to states for Medicaid funding; development of vaccines, therapeutics, and diagnostics; support for the Centers for Disease Control and Prevention responses. (ii) 2 weeks paid sick leave; up to 3 months emergency leave for those infected (at 2/3 pay); food assistance; transfers to states to fund expanded unemployment insurance. (iii) Expansion of Small Business Administration loan subsidies. And (iv) US$1.25 billion in international assistance. In addition, federal student loan obligations have been suspended for 60 days.

Monetary and macro-financial
  • Federal funds rate were lowered by 150bp in March to 0-0.25bp. Purchase of Treasury and agency securities in the amount as needed. Expanded overnight and term repos. Lowered cost of discount window lending. Reduced existing cost of swap lines with major central banks and extended the maturity of FX operations; broadened U.S. dollar swap lines to more central banks; offered temporary repo facility for foreign and international monetary authorities.

  • Federal Reserve also introduced facilities to support the flow of credit, in some cases backed by the Treasury using funds appropriated under the CARES Act. The facilities are: (i) Commercial Paper Funding Facility to facilitate the issuance of commercial paper by companies and municipal issuers; (ii) Primary Dealer Credit Facility to provide financing to the Fed’s 24 primary dealers collateralized by a wide range of investment grade securities; (iii) Money Market Mutual Fund Liquidity Facility (MMLF) to provide loans to depository institutions to purchase assets from prime money market funds (covering highly rated asset backed commercial paper and municipal debt); (iv) Primary Market Corporate Credit Facility to purchase new bonds and loans from companies; (v) Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds; (vi) Term Asset-Backed Securities Loan Facility to enable the issuance of asset-backed securities backed by student loans, auto loans, credit-card loans, loans guaranteed by the Small Business Administration, and certain other assets; (vii) Paycheck Protection Program Liquidity Facility (PPPLF) to provide liquidity to financial institutions that originate loans under the Small Business Administration’s Paycheck Protection Program (PPP) which provides a direct incentive to small businesses to keep their workers on the payroll; (viii) Main Street Lending Program to purchase new or expanded loans to small and mid-sized businesses; and (ix) Municipal Liquidity Facility to purchases short term notes directly from state and eligible local governments.

  • Supervisory action. Federal banking supervisors encouraged depository institutions to use their capital and liquidity buffers to lend, to work constructively with borrowers affected by COVID-19, and indicated COVID-19 related loan modifications would not be classified as troubled debt restructurings. Holdings of U.S. Treasury Securities and deposits at the Federal Reserve Banks could be temporarily excluded from the calculation of the supplementary leverage ratio for holding companies. Other actions include offering regulatory reporting relief and adjusting supervisory approach to temporarily reduce scope and frequency of examinations and give additional time to resolve non-critical, existing supervisory findings.

  • Regulatory action. Lower the community bank leverage ratio to 8 percent. Provide extension transition for the Current Expected Credit Loss accounting standard. PPP covered loans will receive a zero percent risk weight, and assets acquired and subsequently pledged as collateral to the MMLF and PPPLF facilities will not lead to additional regulatory capital requirements. Allow early adoption of "the standardized approach for measuring counterparty credit risk". And there will be a gradual phase-in of restrictions on distributions when a firm's capital buffer declines.

  • Fannie Mae and Freddie Mac have announced assistance to borrowers, including providing mortgage forbearance for 12 months and waiving related late fees, suspending reporting to credit bureaus of delinquency related to the forbearance, suspending foreclosure sales and evictions of borrowers for 60 days, and offering loan modification options.

Exchange rate and balance of payments
  • No measures.


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Uruguay

Background. The first cases of COVID-19 were reported on March 13. There were 746 confirmed cases (20 deaths) as of May 21. The government introduced a series of public health measures, such as school closures, cancellation of public events, and active discouragement of large gatherings. Starting April 22, customers must wear face masks while shopping in supermarkets; this rule is currently being expanded to other establishments. International travel has been severely restricted. Daily infections have declined to about one third of their late-March peak.

Reopening of the economy. The Office of Planning and Budget—which reports to the President—is developing a roadmap for re-opening the economy in consultation with experts and private sector representatives. Some containment measures have already been relaxed: construction activity was allowed to restart in mid-April, some rural schools resumed instruction in late April, and government offices re-opened in early May, all with appropriate sanitary precautions.


Key Policy Responses as of May 21, 2020

Fiscal
  • Additional resources to address the public health emergency have been mobilized, including by resorting to contingent credit lines from other international financial institutions. Furthermore, some tax and pension obligations will be postponed or reduced, rules for claiming the unemployment insurance are being made more flexible, older workers will be subsidized so they do not have to leave home, and assistance to the most vulnerable groups (cash and direct provision of food) will be expanded. The cost of expanding the unemployment insurance, of assisting older workers, and of cash transfers is estimated at $400 million (0.7 percent of GDP), and the fiscal overall cost of the pandemic, including some additional measures and decline in tax revenues, is currently estimated to be roughly double that amount. As a solidarity measure, the salaries of better-paid public officials are being reduced by up to 20 percent, with the savings directed to the newly-established Coronavirus Fund. Other sources for the Coronavirus Fund include the additional Social Security Assistance Tax, the 2019 profits of Banco República and the National Development Corporation, and donations. Currently, this fund finances the cash subsidies and food assistance for the most vulnerable, together with the cash subsidies for the employees in the construction industry affected by the pandemic-related work stoppages.

Monetary and macro-financial
  • The central bank has temporarily reduced the reserve requirements that apply to the nominal peso and the inflation-adjusted peso deposits in the commercial banks. This measure is expected to inject about US$300 million of additional liquidity into the financial system.

    The central bank has temporarily relaxed the regulations in the securities and payments markets and extended the deadlines for data submission.

    Loan payments for households and businesses that may be affected by the public health measures are to be deferred for up to 180 days.

    The fund that guarantees loans for SMEs will be expanded from US$50 million to US$500 million (utilizing financing from international organizations). That will allow to guarantee the SME loans totaling US$2.5 billion. In addition, the rate of commission charged by the fund will be reduced substantially.

    BROU (the country’s largest commercial bank, which is government-owned) will extend soft loans to enterprises. The financing available currently is US$50 million, which may be augmented—also with financing from international organizations—to US$120 million. In addition, direct credit program for micro and small enterprises will extend working capital loans of up to 18 months to the affected businesses at subsidized rates. Loan repayments for these enterprises are being suspended for at least 30 days. 

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust, with the central bank intervening to limit undue volatility in the market.


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Uzbekistan

Background. Uzbekistan has reported 2,880 cases of COVID-19 (13 deaths) as of May 20, 2020. The economy is facing lower commodity prices, weaker trading partner demand, and the risk of weaker remittances from Uzbekistan citizens abroad. The authorities have implemented extensive measures to prevent the spread of the virus including: restricting travel (including international flights, domestic public transportation, and movement by car), closing borders (except for trade), closing schools and universities and all stores except grocery stores and pharmacies, and cancelling public events and religious gatherings. Government employees have been asked to telework or to stay home.


Key Policy Responses as of May 20, 2020

Fiscal
  • (i) expand funding for healthcare, including for medicines, the costs of quarantines, and a salary supplement for medical employees; (ii) increase the number of low-income families receiving social benefits; (iii) provide assistance to affected businesses via interest subsidies; and (iv) finance public works in different regions to improve infrastructure and support employment. The authorities also announced the temporary reduction of social contributions for individual entrepreneurs, postponing surcharges on tourism, property tax, and land tax, extending the moratorium on tax audits, and delaying tax declarations for 2019 income taxes (until August). The central government also asked local governments to reduce taxes by 30 percent and provide a 6-month grace period on paying property tax.

Monetary and macro-financial
  • The central bank suggested banks defer loan payments for firms in sectors affected by COVID-19. Consequently, state-owned banks are extending maturities of loan repayments for the affected sectors, including for the national air carrier. The central bank is monitoring financial conditions but has not changed the policy rate nor requirements for regulatory capital or liquidity. In addition in April 15, the central bank reduced the policy rate from 16 to 15 percent.

Exchange rate and balance of payments
  • The exchange rate depreciated by 6½ percent between April 15 and February 28.


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Vanuatu

Background. There are no confirmed cases or deaths from COVID-19 as of May 21, 2020. The government’s response is being coordinated by the National Disaster Management Office (NDMO), the National Disaster Committee, and the COVID-19 advisory committee of 14 Directors from various government ministries. A national State of Emergency (SOE) was declared on March 26 for a two-week period. The SOE was extended for a 30-day period on April 11 and then again on May 11, for the dual purposes of continuing COVID-19 prevention and containment measures as well as responding to Tropical Cyclone (TC) Harold which impacted Vanuatu on April 6-7. The government: closed all ports of entry for international flights and cruise ships; suspended all domestic flights and ferries; suspended departures for seasonal worker programs to Australia and New Zealand (with optional repatriation of workers already abroad); closed all schools; established curfews for businesses and transport (excludes essential medical and communication services); banned gatherings of more than 5 people (suspended temporarily as of April 5 to allow for group sheltering caused by TC Harold and its aftermath) and been encouraging social distancing. Tourism, which contributes 24.6 percent of Vanuatu’s GDP, has effectively ceased.

Reopening of the economy. Domestic flights and ferries resumed on April 11, also in response to the aftermath of TC Harold. From May 12, international flights and vessels carrying international relief supplies or cargo can enter, provided they comply with Vanuatu’s COVID-19 prevention and containment measures. All public schools reopened on May 18.


Key Policy Responses as of May 21, 2020

Fiscal
  • The government, using its existing budget envelope and with help from Australia, China, New Zealand, UNICEF, WHO, other NGOs/CSOs and some local businesses, is: expanding health facilities, restocking personal protective equipment and supplies, and further training healthcare workers, especially in Port Vila; and spending on community education and awareness. With the assistance of Australia, France and New Zealand, COVID-19 tests are analyzed in the French special collectivity of New Caledonia as needed. The government provided flights and covered arrival and short-term quarantine costs in Port Vila for repatriated ni-Vanuatu. The Vanuatu National Provident Fund (VNPF) provided Hardship Loans, an interest-free withdrawal from a member’s account for 6 months of up to 100,000 vatu, after which the member either choses a repayment plan with interest or permanently withdraws the funds with a penalty. When the loan facility closed on May 1, the VNPF had paid out about 1.5 billion vatu (US$12.5 million). On March 31, a first-stage fiscal package worth 4.4 billion vatu (roughly 4.5 percent of GDP) was announced. It includes: deferred and cancelled taxes, license fees and charges for businesses in 2020; backdating to start of 2020 some reductions resulting from forthcoming business license reforms; the Employment Stabilization Payment (reimbursing employers up to 30,000 vatu per employee per month for four months; plus an additional 15 percent to the employer); SMEs (turnover of less than 200 million vatu) will also receive the value of their business license fees; price-based subsidies if needed to support producers of copra, kava, cocoa and other commodities; support to the transport sector to facilitate farmers’ access to major market centres such as Port Vila and Luganville; secondary school tuition fees are suspended for 2020. The package is financed by the government’s cash reserves, reprioritization of expenditures, some debt, and development partner assistance.

Monetary and macro-financial
  • On March 27, the Reserve Bank of Vanuatu cut its policy rate from 2.9 percent to 2.25 percent. In its March 31 press release, it also noted that it undertook other measures at its March 27 and 30 meetings, that along with its policy rate cut, were consistent with its twin policy objectives to maintain inflation within a target range of 0-4 percent and official foreign exchange reserves above a minimum threshold of 4 months of import cover.

Exchange rate and balance of payments
  • No specific measures have been undertaken at this time.


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Vietnam

Vietnam has reported 324 positive cases (no deaths) as of May 20, 2020, with most recent cases being imported from overseas and no new community transmission in the last five weeks. 275,000 tests have been conducted across Vietnam, which the country has the highest number of tests per confirmed case in the world. Approximately ,7000 people are currently quarantined in centralized facilities or in self-isolation. Mobile apps are available (installed by around 60 percent of population) to provide alerts on positive cases and potential exposures in big cities. GDP growth slowed to 3.8 percent in Q1 2020 from 7 percent in 2019, mainly reflecting contraction in the transport, tourism and hospitality industries.

Reopening of the economy. The nation-wide lockdown was removed on April 23 and social distancing rules have been eased. The Prime Minister recently declared that Vietnam has basically contained covid-19, so the country can resume domestic travel and economic activities, including domestic tourism, and exporting rice and medical face masks without quota. Most schools and universities and non- essential services (except dancing clubs and karaoke) have reopened since May 7. International travel/arrivals, however, continue to be banned.

Key Policy Responses as of May 21, 2020
Fiscal
  • The government introduced a fiscal support package valued VND 266 trillion (3.5 percent of GDP) to support the economy. Measures include deferring payment of VAT and CIT tax obligations and land rental fees by 5 months, deferring PIT payment to year-end (the estimated amount of payments deferred is VND 180 trillion, or 2.4 percent of GDP); and cutting various fees by 20-50 percent. MOF’s proposals to raise PIT deduction, cutt CIT rates for SMEs and micro firms, and delay base salary increases for civil servants are currently being discussed at the National Assembly Plenum this month.

    Other implemented measures include: tax exemptions for medical equipment; lower business registration fee effective from February 25 (one-year exemption of business registration tax for newly established household business; first 3-year exemption of business registration tax for SMEs); streamlined tax and custom audit and inspection at firms; and allowing firms and workers to defer (up to 12 months) contributions to the pension fund and survivorship fund without interest penalty (total delayed contribution is estimated at VND 9.5 trillion or 0.1 percent of GDP). The government also approved a cash transfer package worth VND 36 trillion (0.5 percent of GDP) for affected workers and households with monthly cash transfers provided for no more than 3 months, from April to June. More than 10 percent of the population is estimated to benefit from this program.

    The government is also targeting a100 percent disbursement of public investment capital valued VND 686 trillion or nearly 9 percent of GDP (of which VND 225 trillion is carried-over from previous years).

Monetary and macro-financial
  • Effective May 13, the State Bank of Vietnam (SBV) cut its benchmark policy rates by 50 bps, the second time in the year, after the first cut by 50-100 bps in March 17. zthe short-term deposit rates cap was cut further by 30-50 bps, while the short term lending rate cap for priority sectors is trimmed further by 50 bps.

  • The SBV has also issued guidelines to commercial banks to reschedule loans, reduce/exempt interest, and provide loan forbearance. As of May 8, banks have registered a credit package totaling VND 300 trillion (about 3.8 percent of GDP) at lower interest rates, and supported more than 660,000 customers( with outstanding loans of about VND 1,520 trillion), by rescheduling repayment, exempting, and reducing interest on existing debts, and extending new loans. Financial institutions are also exempting and reducing fees.

  • Affected firms are eligible to concessional loans from Vietnam Social Policy Bank (VSPB) with no interest for making salary payment to their workers who temporarily stopped working. The total loan value is estimated at VND 16.2 trillion (0.2 percent of GDP).

  • Effective March 31, SBV instructed Credit Institutions (CIs) to actively reduce bonus and salary, cut other operating costs, adjust business plans in a timely manner (including not paying dividend in cash), and use the saved resources to reduce interest. The SBV stated that it is ready to inject liquidity, including through refinancing windows, for VSPB and other CIs to implement the government’s programs and help CIs address NPLs. The SBV has issued a circular on refinancing the VSPB up to VND 16 trillion at zero percent interest rate.

Exchange rate and balance of payments
  • With depreciation pressures rising, the SBV announced on Mar. 23 that it would intervene in the currency market as needed to smooth excessive exchange rate volatility.


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West Bank and Gaza

Background. As of May 19, West Bank and Gaza has reported 570 COVID-19 cases, of which four fatalities and 464 recoveries (WHO). The authorities have implemented several measures to limit the spread of the virus including: restricting movement of all residents from homes; closing public places, including schools, universities, tourist attractions, coffee shops, and stores except for drug stores, bakeries, and supermarkets; limiting bank services and hours of operation; restricting travel within West Bank (among governorates and villages); limiting employee attendance at government and private workplaces (except for critical staff); and imposing mandatory quarantines for those returning from abroad. On April 2 President Abbas issued a decree extending the state of emergency, initially issued on March 5, for another 30 days. On May 4, President Abbas issued a new decree declaring a new state of emergency until June 5, 2020.

Reopening of the economy. On April 20, PM Mohammad Shtayyeh announced several measures to ease economic restrictions depending on prevailing conditions in individual governorates. Small businesses with 3 workers or less will be allowed to operate between 10am-5pm; clothes and shoes stores will open twice a week; taxis will operate subject to passenger restrictions; pharmaceutical factories will operate at 50 percent capacity; and sweets shops can resume delivery services. On May 5, PM Shtayyeh announced a partial ease of the lockdown and gradual and phased exit from COVID-19. The public would be allowed to go around during daytime, but not at nighttime. Construction sites will reopen in all governorates. Hair salons will reopen in all governorates on Saturdays and Sundays (two customers by prior reservation) except in governorates infected with COVID-19. Clothing, footwear and home appliance stores will reopen throughout the week except in governorates infected with the virus where they will open for three days. Banks will open except in infected areas where they will continue to operate according to emergency procedures. Public transport will return in non-infected governorates, and private transportation among non-infected governorates will also resume. Wearing masks, gloves and social distancing will be mandatory.

Key Policy Responses as of May 20, 2020
Fiscal
  • The Palestinian Authority (PA) is planning to spend NIS 410 million (0.7 percent of GDP) to cover short-term (1-3 months) critical gaps related to COVID-19. Among other things, the PA is recruiting 51 doctors, medical specialists and general practitioners and plans to purchase of testing toolkits, quarantine facilities, respirators, masks, medicines, and disinfectants. In addition, it plans to allocate additional resources to support poor families and those in need. The authorities plan to spend NIS 20 million (0.1 percent of GDP) to support workers and for unemployment benefits. On the tax side, the PA is cancelling penalties for late submission of tax returns, extending the tax filing deadline to June, and the period of quittance issued by the value added tax from March 1 to April 15, 2020.

    On May 5, PM Shtayyeh said that following an earlier understanding with a Palestinian labor union, private sector employees have been paid half of their salaries by their employers. The government also distributed some 98,000 food baskets and paid financial assistance to about 125,000 households.

    The government started on May 17 the disbursement of aid to 40,202 laborers affected by the Corona pandemic. Laborers in eligible sectors (e.g., construction, tourism, services, transport) would receive text messages to go to the bank and receive NIS 700. The process would take place over five days.

Monetary and macro-financial
  • The Palestine Monetary Authority has postponed monthly/periodic loan repayments to all borrowers for the next four months, and for the tourism and hotel sectors for the next six months. It has also prohibited the collection of fees, commissions or additional interest on deferred payments. These measures are subject to extension.

    The PMA launched an SME fund to provide soft loans to SMEs impacted by the crisis. Loans will be at 3% interest rate over 36 months. The size of the SME fund will be USD 300 million of which USD 210 comes from the PMA (they have yet to raise USD 90 million). The PMA is expected to start accepting applications on May 10.

Exchange rate and balance of payments
  • No measures.


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Yemen

Background. As of May 28, Yemeni authorities reported 278 confirmed cases of COVID-19 and 57 deaths in areas under its control. The de facto administration has reported only two cases and one death in Sana’a. The UN expressed concerns on large undetected spreading of the disease in Yemen. The ongoing spread of COVID-19 could be devastating for Yemen as the possibility of rapid spread of the virus will be confronted with a poor health system that has already collapsed. After five years of conflict, the country is facing a humanitarian crisis already, with severely damaged health and general infrastructure. UN estimates that only half of the health centers in Yemen are fully functional, and there are limited testing facilities in a collapsed health system. The Saudi-led coalition government has extended a cease fire, in effect since Thursday, April 9, to allow the UN to focus on the COVID-19 crisis. Mosques have been closed and shops and restaurants in Aden were closed following the news of the first outbreak in Aden, but quickly reopened on fears of food shortages.

Reopening of the economy. Yemen started to see the number of COVID-19 cases to increase significantly in the past three weeks with a growing number of governorates reporting new cases. The government efforts and measures are still focus on the early containment phase.


Key Policy Responses as of May 28, 2020

Fiscal
  • Government created a commission to deal with COVID-19 issues. Ministry of Health has provided medical equipment to quarantine centers in some governorates. The ministry of Health has received some respirators and medical safety tools from the World Bank, through the World Health Organization. The government has allocated some limited budget resources to respond to the COVID-19 crisis.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures. The Saudi government has offered to contribute with US$ 500 million to the UN for the humanitarian response, and US$ 25 million to fight the spread of the coronavirus. The United States announced it will provide $225 million in emergency aid through the UN World Food Program.


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Zambia

Background. Zambia has reported 866 confirmed COVID-19 cases (7 deaths, 307 recoveries) as of May 21, 2020. Early actions to contain the spread of the virus included: (i) the closures of schools and universities; (ii) suspension of non-essential foreign travel; (iii) mandatory quarantine for all foreign travelers; (iv) closure of bars, cinemas, and casinos; (v) delivery and take-out regime for restaurants; (vi) restrictions of public gatherings to at most 50 people; (vii) restrictions on sports activities; (viii) a temporary lockdown of the towns of Kafue and Nakonde, and (ix) a partial closure of border with Tanzania. In addition, the Zambian economy will be adversely impacted by the large decline in copper prices, sharp depreciation of local currency, increase in yields on public debt, and economic disruptions due to lockdowns in trading partners.

Reopening of the economy. Starting from April 24, the government is slowly lifting restrictions, subject to social distancing, including on churches, some non-contact sports, and barber shops and salons, as well as the lifting of lockdowns and the border closure. On May 8 cinemas, gyms, casinos, tourist spots, and restaurants were allowed to open adhering to strict social distancing and sanitary guidelines. Primary and secondary school examination classes are set to reopen on June 1.


Key Policy Responses as of May 21, 2020

Fiscal
  • The Zambian government has announced a release of 2.64 billion-kwacha (0.75 percent of GDP) to clear arrears and pay contractors. Import duties on mineral concentrate and export duties on precious metals were suspended to support the mining sector. The government has waived tax penalties and fees on the outstanding tax liabilities resulting from CoVID-19, suspended customs duties and VAT on some medical supplies and medical related commodities, removed provisions relating to claim of VAT on imported spare parts, lubricants and stationery to ease pressure on companies. The government had set up an Epidemic Preparedness Fund amounting to 57 million kwacha (0.02% of GDP) and had approved a COVID-19 Contingency and Response Plan with a budget of 659 million kwacha (0.2% of GDP). Furthermore, 400 doctors and 3000 paramedics were recruited to fight the COVID-19 pandemic.

Monetary and macro-financial
  • The Monetary Policy Committee lowered the policy rate by 225 bps to 9.25% on May 19 to mitigate the adverse impact of the pandemic. The Bank of Zambia (BoZ) plans to provide 10 billion kwacha (3% of GDP) of medium-term liquidity support to eligible financial services providers and scale up open-market operations to provide short-term liquidity support to commercial banks. In addition, BoZ implemented several measures to stimulate the use of e-money and reduce the use of cash, revised the rules governing the operations of the interbank foreign exchange market to support its smooth functioning, strengthening market discipline and providing a mechanism to address heightened volatility, revised loan classification and provisioning rules, and extended the transitional arrangement to IFRS9.

Exchange rate and balance of payments
  • No measures.


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Zimbabwe

Background. Zimbabwe is being hit by two shocks—the spread of COVID-19 and erratic rains in 2019/20 that affected agricultural output and caused widespread electricity outages. About 7.7 million (nearly half of the population) need urgent food assistance, and 1.7 million require social protection. As of May 20, 2020, Zimbabwe has undertaken 32,862 tests for COVID-19 and has 48 confirmed cases, with 4 deaths and 18 recoveries. A Covid-19 National Preparedness and Response Plan was launched on March 19, 2020 with President Mnangagwa declaring the pandemic a State of National Disaster.

Reopening of the economy. The authorities have opened the formal economy following a 35-day lockdown initiated on March 30, 2020. Colleges, universities and schools remain closed and gatherings of more than 50 people, services at churches and mosques remain suspended.

The authorities launched on April 2, 2020 a US$2.2 billion domestic and international humanitarian appeal covering the period April 2020 to April 2021. Of this, US$220 million is targeted at fighting COVID-19, US$37 million for other critical health spending, and US$34 million for water, sanitation and hygiene (WASH). Other critical needs include US$956 million for food insecurity, and US$20,8 million for social protection.


Key Policy Responses as of May 20, 2020

Fiscal
  • The authorities’ requirements to fight Covid-19, as per the humanitarian appeal stood at US$220 million targeting prevention and control of the disease including awareness campaigns. To date, the authorities have availed over ZWL$100 million and US$2 million to fight against COVID-19. On March 30, 2020 the authorities announced a  ZWL$600 million cash transfer program that targets 1 million vulnerable households over the next 3 months. On May 4, 2020, the authorities announced a larger COVID-19 economic recovery and stimulus package including measures to: (i) provide liquidity support to several sectors, including agriculture (ZWL$6 billion), mining (ZWL$1 billion), tourism (ZWL$0.5 billion), SMEs (ZWL$0.5 billion), and arts (ZWL$0.02 billion); (ii) expand social safety nets and food grants (ZWL$3.9 billion); (iii) set up a health sector support fund (ZWL$1 billion); and (iv)  upscale investments in social and economic infrastructure in Cyclone Idai affected communities (ZWL$18 billion).

    In addition, the freeze on government hiring has been lifted for the health sector, targeting 4000 additional medical personnel (about 20 percent increase); companies have been allowed to extend the payment of corporate taxes (waiving interest and penalties); and duties and taxes on various goods and services related to COVID-19 have been suspended, including on testing, protection, sterilization, and other medical consumables and procurement regulations have been relaxed to facilitate speedy procurement of essential goods and services. The authorities are also offering corporate tax credits of up to 50 percent for COVID-19 donations.

Monetary and macro-financial
  • The authorities returned the multicurrency system allowing both Zimbabwean dollar and US dollar to be legal tender. They reduced bank policy rate from 35 percent to 15 percent per annum, and reduced the statutory reserve ratio on bank deposits from 5 percent to 4.5 percent. The central bank introduced a ZW$5 billion medium-term bank accommodation lending facility at 10 percent per annum and also increased private sector lending facility by the central bank from ZW$1 billion to ZW$2.5 billion.

Exchange rate and balance of payments
  • The central bank moved from managed floating exchange rate system to a fixed exchange rate management system. The bank also revised the FX allocation priority list to improve allocation efficiency in light of the prioritize COVID-19 pandemic.