Policy Responses to COVID-19

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 197 economies. Last updated on July 2, 2021.

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. Afghanistan reported its first COVID-19 case on February 24, 2020. As the infection spread, the government tightened containment measures, including introducing screening at ports of entry, quarantine for infected people, and closure of public places for gathering. It imposed countrywide lockdown in late March 2020, which was subsequently extended twice. Afghanistan experienced a relatively moderate second wave of infections during November-December 2020 with infections declining since early 2021. Schools reopened on February 28, and universities resumed in person instruction in early March 2021.

Afghanistan is currently going through a severe third wave of infections, with the number of cases and deaths topping the peaks of the first wave a year ago. Almost a third of the individuals tested recently had the infection. In response, the authorities have closed schools until further notice and are trying to speed up vaccinations. In consultation with the neighboring countries, they have also halted the movement of people across borders while keeping them open to trade and cargo transit.

The authorities aim to vaccinate 60 percent of the population. Essential workers and groups prioritized by the National Technical Committee based on their vulnerability to COVID-19 will be vaccinated first. Inoculations using 500,000 doses of the AstraZeneca vaccine donated by India started in February. The COVAX facility aims to provide vaccines covering 20 percent of the population, with the first shipments of 468,000 doses delivered in early March. Vaccination of another 28 percent of population is expected to be funded by World Bank and ADB grants. That said, less than one percent of the population has been fully vaccinated so far, and Afghanistan is facing a vaccine shortage after a large shipment has been delayed significantly. In response, China donated 700,000 doses, and the U.S. is delivering 3 million doses of the single-dose Johnson & Johnson COVID vaccine this week. In addition to the vaccine shortage, the inoculation campaign is also facing administrative challenges and vaccine hesitancy in rural areas.

The pandemic and containment measures introduced at the onset of the pandemic disrupted domestic activity and trade. Border closures and panic-buying led to a temporary spike in prices of foodstuffs in April 2020, which has abated with the re-opening of borders in early June. Income and job losses in the formal and informal sectors pushed thousands of Afghan families into poverty, threatening to reverse social development gains of the past decade. Oxfam estimates that the number of people on the brink of famine in Afghanistan has risen to 3.5 million in 2020 from 2.5 million in September 2019.

Reopening of the economy.

• The government progressively eased the lockdown from late May 2020, with most containment restrictions removed and businesses re-opened by end-August.
• Borders points were reopened over the summer of 2020, and cross-border traffic was nearly back to pre-crisis levels before the recent closing. Many domestic and international flights, including for exports via air corridors, have resumed.
• In early August, working hours for government and non-government organizations were normalized to their pre-pandemic level. This was a change from alternating between odd and even weekdays from 7 am until 1 pm (and later 8am to 4 pm) instituted in June-July.
• Famine Early Warning Systems Network reported that the May easing of containment led to increased labor availability in urban areas and, in combination with assistance and Zakat, allowed some improvement in consumption. Still, many Afghans remain in a crisis phase of food insecurity.

Key Policy Responses as of July 1, 2021

Fiscal

The government initially used contingency funds for emergency pandemic response, including for urgent health needs, such as establishing testing labs; setting up special wards to boost hospitalization and care capacity; and procuring critical medical supplies.

In April-June 2020, the government provided free bread to the poor in Kabul, later extended to other cities. In May, it waived electricity bills of less than Af 1,000 (US$13) for a family residence in Kabul for two months and paid utility bills of the past two months for 50 percent of households in Kabul. The decision benefited more than 1.5 million Kabul residents.

The authorities rolled out about 0.8 percent of GDP social assistance under the World Bank-funded REACH program in 2020, with the remaining 0.6 percent of GDP continuing in 2021. The program targets Afghan households with incomes of $2 per day or lower (twice the national poverty line), with households in rural areas receiving an equivalent of $50 in essential food staples and hygiene products, while those in urban areas a combination of cash and in-kind equivalent to $100, in two tranches. .

Altogether, the authorities spent about 2.2 percent of GDP to fight COVID in 2020, including:

• Health package of around Af 10.9 billion, of which Af 2.6 billion on building hospitals and provincial clinics;
• The social package of around Af 14.7 billion, of which Af 2 billion on the bread distribution program and Af 12.7 billion on the World Bank supported social distribution program
• Transfers to provinces to finance Covid-19 response of about Af 1.3 billion;
• Support to agriculture and short-term jobs of about Af 5.2 billion and Af 1.0 billion.

Similarly, the 2021 budget includes the following COVID-related spending:

• Health package of Af 2.4 billion;
• Social package of Af 8.9 billion;
• Other Af 3.3 billion.

Recognizing that taxpayers were facing liquidity strains, the government extended the tax filing deadline for the first quarter of 2020 by 45 days. No further extensions have been provided. In late 2020, the government offered to waive tax and customs payment penalties if taxpayers clear their due taxes before the end of the first quarter 2021.

Monetary and Macro-financial

There have been no liquidity pressures in part thanks to Da Afghanistan Bank (DAB)’s actions to maintain confidence in the Afghani and high liquidity in the banking sector. 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. DAB postponed the IFRS 9 implementation to June 2021, subsequently by another year to June 2022, and froze loan classifications at the pre-pandemic cutoff of end-February. It also suspended administrative penalties and fees, with no retrospective applications for breaches/noncompliance.

DAB phased out emergency pandemic measures in July 2020. It ended the freeze on loan classifications and recommenced the enforcement of all prudential requirements in August with flexible application of penalties and prudential triggers in recognition of persisting risks. The emergency measures for the nonbank sector were also allowed to expire in July 2020.

Exchange rate and balance of payments

DAB remains focused on achieving price stability in the context of a flexible exchange rate regime. With domestic demand subdued the Afghani has remained broadly stable against the US$. DAB has engaged money-service providers, who play a systemic role in financial intermediation, to ensure uninterrupted services.

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Albania

Background. Albania was mildly affected in the first wave of the pandemic in the spring of 2020. Due to its proximity and close links to Italy, Albania adopted some of the toughest lockdown measures in Europe in March 2020 as soon as it detected the first confirmed COVID-19 case. The government proclaimed a state of natural catastrophe which enabled it to use extended powers for its three months duration until it ended on June 23, 2020.

Reopening the economy and additional containment efforts. Albania removed all domestic restrictions in the summer of 2020 and re-opened its borders. As the second, more aggressive wave hit the country in the fall, some restrictions domestic restrictions were reintroduced (night curfew, ban on assembly of more than 10 people), but the authorities stopped short of a full lockdown. The epidemiological situation has improved consistently since spring, placing the country in good position to relax restrictions further in the summer. Albania imposes no quarantine or testing requirements to visitors from abroad.

Vaccination of medical staff started on January 11th, while mass vaccination started in April. As of July 1st , Albania has administered over 968,000 vaccines or 34 per 100 people.

Key Policy Responses as of July 1st, 2021

Fiscal

• The government adopted two support packages in 2020 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 19, 2020 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 2.5 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 which were not used, (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. The second package adopted on April 15 2020, 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 percent of the loans, and interest are capped at 5 percent. As of November 3, almost 98 percent of the overall budgeted direct support measures had been paid out while the take up for the first guarantee scheme was 59 percent and for the second scheme 42 percent. A third smaller support package was adopted on August 13, providing an additional minimum wage to public transport workers who resumed work one month later than the rest. The measure costing Lk135m is accommodated within the existing transport budget.

  The government has also adopted tax deferral measures allowing all large companies (except banks, telecommunication, public enterprises and other essential businesses) to defer payment of profit tax for the second and third quarter of 2020 in 2021. Tourism, active processing and call centers can defer payments for the rest of 2020 to 2021. Small businesses with turnover below Lk14m will not pay profit tax for the remainder of 2021.

  In September, the government launched an employment promotion program, that aims to cover part of reemployment costs of those who lost their jobs during the lockdown. For formal sector employees the government will cover half of the wages (at the legal minimum level) and the full employers’ share of social contributions for the duration of the program (4 or 8 months). Informal sector employees who lost their jobs during the lockdown, will have the full cost of social contributions (employees and employers share) covered for one year if they formalize.

  The 2021 budget The 2021 budget adopted by parliament on Nov 16th, allocated Lk14.2bn (0.8 percent of GDP) in COVID-19 related spending. These include Lk7.2bn for COVID-19 treatment, Lk4.5bn for wage increases for doctors and nurses, and Lk2.5bn for a temporary increase in the payments for social assistance (until June 2021) and unemployment benefits. In successive budget amendments in March and April the government allocated additional Lk3bn to the purchase of Covid 19 vaccines. This brings the total of Covid-related spending in the 2021 budget to Lk17.2bn (1 percent of GDP).

Monetary and macro-financial

• To address the liquidity bottlenecks of companies and individuals, the Bank of Albania extended a temporary suspension of requirements for loan classifications and provisioning to August 31, 2020, enabling clients to ask banks to defer loan installments without penalties. On May 28, the BoA also adopted regulations to allow banks to restructure loans within 2020 without additional provisioning or downgrades for borrowers’ status. Entry in force of more stringent classification and provisioning measures for reclassified loans was postponed by one year to 2022. Out of court restructuring for distressed borrowers under a special regulation will be possible for an additional year until 2022. 

  On March 25, 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. This policy was further extended until at least the third quarter of 2021.

  The Bank of Albania suspended dividend distribution for banks until the end 2020 in order to boost capital and support lending during this period. On January 13, 2021, the central bank lifted the suspension on the distribution of 2019 dividends, but instituted a suspension on the distribution of 2020 and 2021 dividends until end 2021.

  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.

  On July 17, 2020, the Bank of Albania announced it had set up a €400 million repo line with the ECB. On February 4, the ECB announced a nine-month extension until March 2022.

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. On June 30, the Bank of Albania announced it had intervened in the market in end-March 2020 to smooth temporary excessive volatility caused by initial disruptions of lockdown measures.

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Algeria

Algeria has been hit by two shocks in 2020—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both shocks.

The first case of COVID-19 in Algeria was reported on February 25, 2020. The authorities responded to the pandemic by implementing containment measures since early February 2020 (e.g., cancelling flights, and imposing quarantines to repatriated Algerians). Confinement measures included 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 were cancelled, a lockdown of affected areas was ordered and a curfew was put in place in several cities including Algiers.

A gradual easing of containment measured started in early June 2020. The authorities have continued to monitor and adapt the lockdown measures as needed, including during the second wave of the pandemic in Algeria in late 2020. International borders partially reopened in June 2021. The number of daily new cases, which had fallen sharply through late March 2021 following a peak during the second wave, is ticking up again. Algeria started the vaccination campaign in late-January 2021 and has since received additional doses through the COVAX Facility and other sources for a total of 2.7 million doses as at end-May 2021. Domestic production of the Sputnik V vaccine is expected to start in September, according to an official government announcement.

Key Policy Responses as of June 28, 2021

Fiscal

• In terms of tax measures, in response to the economic impact on households and enterprises of the lockdown measures in 2020, the authorities postponed the declaration and payments of income taxes for individuals and enterprises. Further contractual deadlines were relaxed and penalties for companies that experience delays in completing public contracts were suspended. Imports of pharmaceutical products and medical equipment used in the fight against Covid-19 were temporarily exonerated from VAT and custom duties.

• The 2021 budget law introduced a permanent tax holiday for foreign-currency-generating export activities and suspended VAT and custom duties for imported or domestically purchased inputs used in the production of goods. It also extended the repayment period of overdue tax claims to 60 months from 36 months previously,

• In terms of spending measures, a supplementary finance law (SFL) enacted on June 4, 2020 included provisions amounting to DZD 70 bn dinars to mitigate the health and economic impacts of the COVID-19 crisis. For the health sector, this included DZD 3.7 bn for medical supplies, DZD 16.5 bn for bonus payments to health workers, and DZD 8.9 bn for the health sector's development. For the economic impact, the law included DZD 20 bn for allowances to the unemployed and DZD 11.5 bn for transfers to poor households. Overall, in order to adjust to the new low oil price environment, the SFL envisaged 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.

• The government estimates the total budget cost of spending measures taken in response to the pandemic at DZD 238 bn for 2020 and the first four months of 2021. Of this amount, DZD 99.1bn were in exceptional bonuses to civil servants contributing to the fight against the pandemic, mostly health workers, DZD73bn were in social support measures to low-income households and DZD 22.5bn for vaccine procurement.

• In terms of economic reforms, a national socio-economic recovery plan was discussed at a conference in August 2020. The authorities published a 2020-2024 Economic Revival plan in June 2021. Among other things the plan aims at diversifying the economy, fostering high value-added sectors and international trade and promoting a favorable business climate and FDI.

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.

  On September 14, the Bank of Algeria announced a reduction in the reserve requirement ratio from 6 percent to 3 percent and the activation of 1-month open market operations.

  On October 14, 2020, the Bank of Algeria announced that the easing of prudential requirements for banks, announced in April 2020, would be extended through the end of the year.

  On January 6, 2021, the Bank of Algeria announced that the easing of prudential requirements for banks, first announced in April 2020, would be extended through March 31, 2021. On February 8 2021, the Bank of Algeria announced a reduction in the reserve requirement ratio from 3 percent to 2 percent effective February 15, 2021.

  On April 1, 2021, the Bank of Algeria announced that the easing of prudential requirements for banks, first announced in April 2020, would be extended through June 30, 2021.

Exchange rate and balance of payments

• The 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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Andorra

Background. Andorra has been heavily impacted by the COVID-19 outbreak, with the first confirmed case reported on March 2, 2020. To cope with the outbreak, which affected 1 percent of the population in the first wave, the economy was in full lockdown for a month until April 17. A phased reopening, coupled with mandatory use of masks and antibody testing for the entire population, started in May 18 and extended through the summer season. The decline in tourism due to travel restrictions, together with the domestic effect of lockdowns and social distancing measures, have severely impacted the Andorran economy, which shrank by about 12 percent in 2020.

Reopening of the Economy. With the economy's re-opening and the start of the 2020 summer season, activity picked up but there was a resurgence of cases, with daily new infections almost tripling those of the first wave. To cope with the health crisis the government adopted more stringent social distancing measures in September 2020, which remained in place throughout October and were only partially relaxed in November and December in lieu of the improvement in COVID statistics. Despite the efforts to minimize the risk of transmission of COVID-19 during the holiday season, including by providing free antigen tests to all Andorran residents, active cases, deaths and hospitalizations increased significantly in January 2021. The health situation improved in February, which allowed for partial relaxation of some containment measures, but this reverted in March for various reasons: the spread of other variants of the virus, the higher social interaction due to the carnival holidays, and the impact of large outbreaks in two villages. Since then, new cases have sharply declined and there have not been any new deaths in the past two months. This has allowed the authorities to significantly relax containment measures, including ending the mandatory use of masks outdoors (except when social distancing cannot be maintained), increasing the maximum allowed capacity for indoor activities and social/cultural events, and authorizing bars and restaurants to extend their operating hours until 1am. Regarding mobility at the borders, the travel restrictions have been completely lifted by Spain in March 31st and only partially by France in May 3rd, the latter still requiring negative COVID tests for trips longer than 24 hours or that go beyond the neighboring French regions. The vaccination campaign started in January 20th. So far, the pace of vaccination has been comparable to that of EU countries facing similar problems of supply, and doses for more than half the population have arrived. About 55 percent of the population had received at least one dose, and 35 percent were fully vaccinated, by the end of June.

Key Policy Responses as of July 1, 2021

Fiscal

• Key above-the-line measures in 2020, amounting to 2.7 percent of 2020 GDP (€68 million), include: (i) additional healthcare-related spending (€18.2 million); (ii) payment of 75 percent of the salary to workers under the schemes of temporary suspension of contract and reduction of working time (€24.6 million); (iii) social security contributions for workers who were temporarily laid off due to the pandemic (€3.5 million); (iv) extraordinary benefit for self-employed workers affected by economic activity suspension and other support measures to households (€11.7 million); (v) rent/mortgage payment support to the sectors most affected by the pandemic (€0.5 million); (vi) 30-percent reduction in the advance payment of the corporate tax and deferment or installment payments of tax debts without generating late payment interest (€9.1 million). The government also relaxed the requirements to access unemployment benefits and rental housing aid for individuals whose economic and social situation worsened due to the health crisis.

  In 2020, the telecommunications and electricity public enterprises provided discounts on the monthly bills of firms that had to completely suspend activities or that experienced a significant decline in their business (€5.1 million, 0.2 percent of 2020 GDP), as well as the possibility of paying the bills in up to 12 monthly installments. In November, the government approved subsidies on electricity and telecommunication services to the businesses most affected by the pandemic that had already received the government’s support for rent/mortgage payments as well as those businesses whose workers are under either temporal suspension of work contracts or short-time work arrangements.

  Expecting a protracted crisis, on December 4th, 2020, the authorities approved a new package of measures, which came into force on January 1st, 2021, aimed at supporting the reactivation of the economy. This package extended for up to six months—until June 30th, 2021—many of the support measures for households and businesses already in place, and in some cases, it refined the conditions under which the measures were applicable to adapt to the health and economic circumstances. In addition, on December 16th, the government created a new temporary and exceptional involuntary unemployment benefit to support Andorran workers directly affected by the delayed opening of the ski stations To further help the ski sector to cope with the disappointing winter season, at the end of March, the authorities approved an extraordinary program of rental and mortgage support, retroactive to January 1st, and targeted to companies exclusively dedicated to the rental and sale of ski equipment.

  At the end of May 2021, the authorities announced a new package of extraordinary measures, in force starting from July 1st, upon expiration of the previous package, and in place until December 31st, 2021 (or 90 days after the declaration of the end of the health crisis, if earlier). The new package extends existing measures, particularly those related to short-time work schemes (STW) and benefits to self-employed, but made conditions for applicability more restrictive, only to cases in which businesses activity continues to be severely affected by the pandemic. The government also approved a new program of rent/mortgage payment support for travel agencies and nightclubs, in place only during July.

  Compared to 2020, the authorities are planning to maintain the healthcare spending to finance the purchase of vaccines and tests, and the operation of the COVID Office. They are also keeping in place most support measures to households (including the benefits to the self-employed), while those to firms—particularly ERTO—are being rolled back as the economy is projected to recover. The cost of COVID-related measures in 2021 is estimated to be 1.4 percent of GDP (€38 million).

Monetary and macro-financial

• In 2020, the government provided two packages of government guarantees for new bank loans to businesses, in which the government also takes on the interest payments. The first package, amounting €130 million (5 percent of GDP), to cover operating costs (€60 million) or to service existing debts with Andorran banks (€70 million). The second package, amounting €100 million (4 percent of GDP), to cover: (i) the service of existing debts with Andorran banks; (ii) the payment of the share of benefits associated with the temporary suspension of contracts; and (iii) investments needed to abide with the new health and social distancing protocols. The take up in 2020 was of €135.8 million (5.5 percent of GDP). Most of the second package is still available to use in 2021 and the government has relaxed the conditions to access it, incorporating additional purposes for requesting the guaranteed loans, which now include: the payment of rent and utility bills, leasing operations, fuel expenses for transportation, and the corporate contributions to job retention schemes. In addition, to facilitate repayment of the loans, the authorities approved a six-month extension of the maturity date of all the loans formalized in 2020 under the guarantee program, counting from the maturity date stated in the contract.

  The Andorran government approved a legislative moratoria on April 18th, 2020, to provide repayment relief—and also extension of the repayment period in the case of mortgages—until December 31st, 2020, to households and businesses affected by the pandemic, which meet the requirements established by the law. This moratoria applied to mortgages and personal loans to finance housing or vehicles in the case of individuals and commercial property in the case of businesses.

  On June 11th, 2020, the Andorran Banking Association (ABA) adopted non-legislative sector-wide moratoria to provide repayment relief to households and businesses, for 6-12 months depending upon the types of loan and borrower. This private moratoria scheme complemented the one approved by the government, and could not be applied simultaneously. In mid-December 2020, ABA extended until March 31st, 2021, the application deadline for the moratoria.

  Supervisory and regulatory action. The financial supervisor, Andorran Financial Authority (AFA), adopted as its own the European Banking Authority guidelines on legislative and non-legislative moratoria. Furthermore, AFA adopted a set of measures, in line with the recommendations by the European Banking Authority and the European Central Bank, including: (i) limiting in situ examinations to only those strictly necessary and postpone the non-priority ones to 2021; (ii) postpone stress tests, which are supposed to be done at least every three years for supervisory purposes, to 2021 if conditions allow; (iii) postponing beyond the 2020 exercise the requirement of establishing a capital buffer for systemic risks, which was supposed to be introduced in January 2020; (iv) recommending banks to not distribute dividends from the 2019 exercise. The government also extended the deadline for banks to report on their audited balance sheets to AFA from March 31, 2020 to April 30, 2020.

Exchange rate and balance of payments

• No measures.

Links

https://www.govern.ad/coronavirus

https://www.afa.ad/en/press-room/covid-19

https://www.andorranbanking.ad/en/covid-19/

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Angola

Background. The first COVID-19 case was reported on March 21, 2020, while community transmission started on April 27. In June 2021, the authorities kept the existing flight restrictions, limited the operating workforce of governmental and private institutions up to 50 percent, shortened the school year and approved co-payment of Covid-19 tests for international and domestic business trips. By end-June, average daily cases reduced to 120 cases (7-days moving average) from the peak of 300 daily cases in end-May. Angola received 624,000 doses of the AstraZeneca vaccine and over 100,000 doses of the Pfizer-BioNTech vaccine delivered through the COVAX system, a donation of 200,000 doses of the Sinopharm vaccine from the Beijing Institute of Biological Products. As of end-June, about 1 million people had received the first dose and over 540,000 people had received the second dose. However, due to the shortage of doses, authorities have stop administering the first dose vaccination until the first half of July. The vaccination plan is estimated to cost US$ 217 million and aims to cover 20 percent of the population in the first phase. The Angolan government has authorized the purchase of additional 6 million doses of the Sputnik V vaccine, of which 40,000 were received. The World Bank, United Nations, European Union, African Development Bank and European Investment Bank are providing financial support and resources in several ways. In June 2021, the IMF approved the Fifth Review of the ongoing EFF program and disbursed US$ 772 million in budget support, accommodating Covid-19 vaccine procurement.

Key Policy Responses as of July 1st, 2021

Fiscal

• The National Assembly approved revenue and expenditure measures to fight the COVID-19 outbreak and minimize its negative economic impact. About US$40 million on additional health care spending was announced and about US$80 million are being spent on 250 Cuban doctors who arrived in Angola to help. Tax exemptions on humanitarian aid and donations and some delays on filing taxes for selected imports were granted. On July 28, 2020, the National Assembly adopted a conservative supplementary budget, aiming at securing space for additional health expenditure, while balancing the need to keep debt on a sustainable path. The 2021 budget consolidated the nonoil revenue gains and expenditure restraint of the 2020 budget, while protecting priority health and social spending. On May 17, 2021, additional US$ 33 million were approved for purchase of 4 million vaccine doses through the African Union.

Monetary and macro-financial

• In March 2020, the central bank (BNA) reduced the rate on its 7-day permanent liquidity absorption facility and expanded its credit-stimulus program to selected sectors. Financial institutions were requested to grant their clients a moratorium of 60 days for servicing debt. In April 3, the BNA increased the minimum bank credit allocation to producers of priority products and instructed banks to provide credit in local currency to assist importers of essential goods. In May 7, 2020, the BNA reinstated its Permanent Overnight Liquidity Provision facility to provide liquidity support to banks (Kz 100 billion), and extended access to large non-financial corporations on a discount line created for the purchasing of government securities. However, with inflation steadily rising and the worst of the shock seemingly passing, the BNA shifted to a gradual tightening in the second half of 2020. Actions included the enhanced use of open market operations to drain excess liquidity from the system and an increase in the reserve requirement on banks' foreign exchange deposits (to be settled in domestic currency) in September. In March 2021, the BNA implemented additional measures to control inflation, including increasing the 7-day permanent liquidity absorption facility (reversing the cut in the same rate made in March 2020) and, in May 2021, again increased the reserve requirement on banks' foreign exchange deposits. In June 2021, BNA requested the financial institutions to grant companies of the mostly impacted sectors by the pandemic (transport, tourism and sports), a moratorium of up to 6 months for servicing debt.

Exchange rate and balance of payments

• On April 1, 2020, the central bank introduced an electronic platform for foreign exchange transactions. By May 2021, the transactions between the largest players, including Oil, diamond, Treasury and BNA, were carried out in the platform. Exchange rate futures were also traded in the platform.

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Argentina

Background. The first confirmed COVID-19 case was reported on March 3, 2020. The authorities 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. The pandemic and the containment measures had a significant economic impact, with a GDP contraction of around 10 percent of GDP in 2020. In May 2020, the government first announced a gradual reopening aimed at raising regional mobilization, excluding the Buenos Aires metropolitan area. However, restrictions were subsequently tightened in response to an acceleration in infections and, in early June 2020, the mandatory lockdown was extended to other selected large cities. Another phased reopening of activities was announced in July 2020, but rising infections led to an extension of the mandatory lockdown until November 2020. As cases levelled off in the Buenos Aires metropolitan area, the government announced a move to a stage of social distancing in November 2020. In January, after a rise in new cases, restrictions were once again tightened in some inland districts of Buenos Aires and other inland provinces. The number of new cases moderated in January and February, with 16 provinces returning to in-school learning. However, as in other countries in the region, new cases picked up again, prompting the re-imposition of mobility and travel restrictions to limit the spread of new virus variants. The gradual vaccination rollout has accelerated since May, mainly reflecting the easing of supply constraints.

Key Policy Responses as of July 1, 2021

Fiscal

• Announced measures (totaling about 6.5 percent of 2020 GDP, 4.5 percent in the budget and 2 percent off-budget, based on the authorities’ estimates) have focused on providing: (i) increased health spending, including for improvements in virus diagnostics, purchases of vaccines and 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 reduced 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 helped limit outflows in the wake of the pandemic. The exchange rate has depreciated by over 50 percent vis-à-vis the US dollar since early March 2020.

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Armenia

Background. The first confirmed case was reported on March 1, 2020. The pace of new COVID-19 cases has slowed down further in December, after its peak in October. The government extended a national state of emergency to September 11, 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 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. Since May 2020, the movement restrictions were removed, and containment measures were eased, allowing for resumption of public transport, retail businesses, and restaurants. In September 2020, airspace was reopened, and the government lifted the state of emergency, and established quarantine in effect until July 11, 2021, requiring incoming travelers to have negative PCR tests taken within 72 hours prior to crossing border. As of mid-February, all restrictions on holding public events are removed.

On March 29, 2021, Armenia received the first batch of 24 thousand doses of AstraZeneca vaccine․ Since then, the second batch of 50 thousand doses of AstraZeneca, more than 15000 doses of Sputnik V and 100 thousand doses of Chinese CoronaVac arrived. Yet, as of May 23, 2021, only about 27 thousand people have been vaccinated, which is less than one percent of Armenia's population.

Starting June 1, 2021, the Ministry of Health stated that wearing masks in open-air public places is no longer compulsory and as of July 1, 2021, fully vaccinated citizens don't have to wear masks indoors.

On June 19, a new batch of 60,000 doses of Sputnik V vaccine has arrived to Yerevan which covers 30,000 people.

As of June 22, 65,719 people are vaccinated in Armenia, comprising nearly 2% of the population and 80% out of them have received their first vaccine dose.

Key Policy Responses as of July 1, 2021

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 businesses to help maintain their employees; (iii) grants to entrepreneurs and firms; (iv) 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. As of end-October, the authorities have adopted 24 support packages and, together with bank supports, allocated around 192.3billion AMD ($367m) to those. Some measures were adapted to support corporate investment. The government also allocated parts of the budget for investment to support post-crisis recovery.

Monetary and macro-financial

• Initially, in the context of low inflation and weakening domestic demand, the Central Bank of Armenia (CBA) implemented four policy rate cuts, by cumulative 125 basis points, since the beginning of 2020 to support economic activity adversely affected by the pandemic. However, rising inflation prompted the CBA to start increasing the rate. It was raised 4 times by 225 bps cumulatively to 6 percent between December 2020 and May 2021. The interbank market has been active, and the central bank has met liquidity needs and provided a few FX swap operations to assure sufficient liquidity in dram and in FX. The volumes of weekly repos have been increasing. The CBA has been undertaking foreign exchange interventions to support the normal functioning of the market which is critical to the effective implementation of monetary and financial stability policies.

  The CBA has not used macroprudential policies actively, except asking banks to consider voluntary prudent loan restructuring and payment holiday period from March to June. 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 depreciated against the US$ since the military conflict in the fall of 2020 . No balance of payment or capital control measures have been adopted.

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Aruba

Background. Aruba has already undergone four waves of COVID-19. The first wave peaked on April 9, 2020, with 69 active cases. Coronavirus cases have resurged significantly following the reopening of borders on June 15, and the second wave tipped on September 9, with 1,630 active infections. The third and fourth waves peaked on January 13, 2021 and April 3, respectively with 624 and 706 active cases. The total number of confirmed infections as of June 30, 2021 stood at 11,135 with 29 active cases and 107 total deaths. The pandemic is affecting Aruba through the disruption to domestic activity from voluntary and mandatory social distancing and a sharp decline in tourism. Soon after recording the first case of coronavirus on March 13, 2020, the authorities have adopted containment measures, including a shelter-in place, a compulsory dusk-to-dawn curfew, travel restrictions, suspension of non-vital government services, closures of schools and non-essential business activities, and limits on social gatherings.

Reopening of the economy. The reopening stage has suffered setbacks. Initially, the government developed a phased reopening plan starting on May 4, 2020 and all economic activities had resumed by end-June. However, due to the resurgence of new cases, on August 3rd, the government re-instated some measures, including procedures to facilitate testing. On October 22 the government began to relax measures aimed at curbing the second wave, however, these relaxations were cut back on January 7, 2021, to fight the third and fourth waves. On May 25, the government started relaxing measures again, including curfew and beach restrictions. The country's borders reopened gradually, and as of December 1, 2020 all travel restrictions were lifted and commercial air traffic resumed subject to strict health and safety protocols. However, borders with Brazil have closed again on January 25, 2021, and air flights with Canada were suspended from January 29 until April 30, 2021 by the Canadian government. Since March 18, 2021, South African and Venezuelan residents are not permitted until further notice. Travelers must either take a PCR test upon arrival at the airport in Aruba or provide a certified negative test result before travel, and need to be insured for medical expenses should they test positive during their stay. On June 1, 2021, the government announced that vaccinated Aruba residents no longer need PCR test upon entry the country. On June 9, Aruba welcomed the first cruise ship. The authorities continue promoting Aruba as an alternative destination for foreigners to work remotely.

A COVID-19 vaccination program began on February 17, 2021 with vaccines provided by the Netherlands. As of June 30, about 68 percent of Aruba's population received at least one dose and more than 59 percent is fully vaccinated.

Key Policy Responses as of June 30, 2021

Fiscal

• On March 26, the parliament approved the amended 2020 budget, containing a higher spending related to the healthcare sector and three supporting programs: i) a relief package for employees who lose their jobs due to the virus outbreak; ii) a package to support social security; iii) and a package to support small and medium-sized enterprises. The government also introduced a 3-month payroll subsidy for businesses that have seen a drop of over 25% in their monthly revenues. The authorities reduced government expenditures, including the wage bill and goods and services, to contain the anticipated large deficit in the budget.

  On October 4, the authorities extended salary subsidies and financial aid to medium and small businesses for 3 more months, until December 2020.

  On the revenue side, tax relief measures were introduced in April-May to allow the postponement of tax payments without penalties. On October 26, the authorities announced a second emergency fiscal plan which consists of 11 initiatives, including indirect tax relief for small business and the abolition of special taxes on rental cars and motorcycles as well as training and education allowances. Starting January 1, 2021, income and payroll taxes were lowered although this was a previously planned reform in the context of the simplification of the tax system started in 2019.

Monetary and macro-financial

• On March 17, 2020, 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)On May 5, the CBA further lowered reserve requirement to 7 percent. On June 30, the CBA published the results of its yearly stress test on the commercial banking sector concluding that the existing ample capital and liquidity buffers provide banks with sufficient room to withstand significant external shocks, including the COVID-19 pandemic, provided that the recovery starts in the second half of 2020 (see: https://www.cbaruba.org/cba/readBlob.do?id=6655).

Exchange rate and balance of payments

• On March 17, 2020, the CBA announced that it would not grant any new foreign exchange licenses related to selected outgoing transactions, and that it stands ready to take further measures to preserve the peg. On June 1, the CBA started a gradual relaxation of the foreign exchange rate restrictions.

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Australia

Background. The first COVID-19 case in Australia was confirmed on January 25, 2020. Social distancing measures were increasingly tightened in late March/early April 2020, including banning public gatherings of more than two people and shutting down non-essential businesses. After the National Cabinet announced a three-step plan on May 8, 2020 to relax COVID-19 restrictions, States and Territories eased regional containment measures.

From July to early November 2020, a regional COVID-19 resurgence triggered a renewed lockdown in metropolitan Melbourne and tightening of restrictions for the State of Victoria (outside of Melbourne). Since then, there have been temporary local lockdowns in South Australia (November 2020), Sydney's Northern Beaches (December 2020/January 2021), Perth and adjacent areas in Western Australia (January/February 2021 and April 2021), Brisbane (March 2021), and Victoria (May/June 2021). In mid-June, Greater Sydney started reporting a few new cases of the highly infectious Delta variant, followed by locally transmitted outbreaks in late June and a two-week lockdown (ending July 9). On June 27, the Northern Territory was also placed under lockdown, initially for two days, subsequently extended through July 2. Similarly, Queensland imposed a snap lockdown from June 29 until July 2, and Greater Perth and the Peel region were put under lockdown from June 29 until July 3. The new lockdowns are impacting nearly a half of Australia's population.

Across the country, state-level restrictions on public gatherings and social distancing rules remain. Overseas travel remains banned, and any arrivals in Australia are quarantined for 14 days, with the exception that travelers from New Zealand have been able to enter quarantine-free since October 16, 2020. A reciprocal travel bubble with New Zealand started on April 19, 2021, although it has been disrupted by local outbreaks, mostly recently in New South Wales, the Northern Territory, Queensland, and Western Australia. Travel is expected to resume from July 5, with some restrictions. COVID-19 vaccinations in Australia started from February 22, 2021.

The economy has continued to recover with real GDP increasing by 1.8 percent q/q in the first quarter of 2021, following the 3.2 percent q/q rise in the fourth quarter of 2020.

Key Policy Responses as of July 1, 2021

Fiscal

• At the Commonwealth level, fiscal stimulus, consisting of expenditure and revenue measures worth A$312 billion (15¾ percent of 2020 GDP), has been put in place through FY2025. Nearly two-thirds of the stimulus is set to expire by end-FY2021 (June 2021), including a flagship JobKeeper wage subsidy program which disbursed estimated payments of A$89 billion (4.5 percent of 2020 GDP) through end-March 2021. The stimulus includes the health response package, amounting to A$20 billion (1.0 percent of GDP), to secure access to COVID-19 vaccines, roll out a national Vaccination Program, strengthen the health system, protect vulnerable people, including those in aged care, from the outbreak of COVID-19, and provide financial support to the States and the Territories. Major developments at the Commonwealth level include:

  • On May 11, 2021, the Commonwealth government revealed the FY2022 budget, with additional stimulus measures of A$48.4 billion (2.5 percent of GDP) through FY2025, including additional tax reliefs for low-and middle-income earners, extending temporary full expensing and loss carry-backs for businesses, and adding spending on infrastructure investment and training programs. Separately, the new budget adds significant social spending over FY2022-25, including for aged-care (0.9 percent of GDP) and disability programs (0.7 percent of GDP), as well as various programs to support women, including for their safety, education, health, and retirement. It also invests A$1.6 billion to fund priority low emissions technologies.
  • On December 17,2020, the government released its Mid-Year Economic and Fiscal Outlook (MYEFO), and introduced additional funding (A$7 billion, 0.4 percent of GDP) to strengthen the national vaccination program and extend the Coronavirus Supplement and other income support measures for another three months through end-March 2021.
  • On October 6, 2020, the FY2021 Budget unveiled an additional stimulus package (A$98.2 billion, or 5 percent of GDP). It included a new JobMaker program (A$73 billion), comprising new measures (such as loss carry-backs and a personal income tax cut), as well as the extension of existing measures (the temporary Coronavirus Supplement, other income support measures, full expensing, and infrastructure investment, among others). Separately, the budget showed the government's commitment to invest in green technologies (A$1.9 billion) to lower emissions.
  • On July 23, 2020, the government released an update to Australia's Economic and Fiscal Outlook. The July update revised the cost estimate of the JobKeeper wage subsidy program to A$85.7 billion (down from A$130 billion), including an extension of the program at a tapered level for six months through end-March 2021. The July update introduced a new JobTrainer Skills package (a training program for job seekers), and additional health support to boost the testing capacity.
  • In March 2020, the government unveiled a series of economic and health packages, amounting to A$217.1 billion (11 percent of GDP) through FY2024. The first round of stimulus measures, announced on March 12, amounted to A$17.6 billion and included a one-off stimulus payment to welfare recipients, accelerated depreciation deductions, expansion of applicable eligibility criteria for instant asset write-offs, cash flow assistance for businesses, and financial support (including tax and fee waivers) to sectors, regions, and communities disproportionately affected by the pandemic. On March 22, a second rescue package (A$66 billion) was announced, including the Coronavirus Supplement (a top-up payment to JobSeeker unemployment benefits and welfare recipients) and additional economic support for households and businesses. On March 30, a landmark JobKeeper wage subsidy program (A$130 billion) was introduced to help Australians maintain their jobs.

  Other measures include an allocation of up to A$15 billion to invest in asset backed securities to help funding for small banks and non-bank financial institutions, and A$20 billion for loan guarantees between the Commonwealth government and participating banks to cover the immediate cash flow needs of SMEs. The latter scheme has been extended twice (initially through June 2021 and then through end-December 2021). In March 2021, the government renamed it the SME Recovery Loan Scheme, under which the government guarantees 80 percent (previously: 50 percent) of new SME loan amounts (starting April 2021), with the maximum loan size raised to A$5 million and the maximum maturity extended to ten years. The scheme also offers up to 24 months of repayment holidays.

  State and Territory governments also announced fiscal stimulus packages, together amounting to A$50 billion (2.5 percent of GDP), including payroll tax relief for businesses and relief for households, such as discount utility bills, cash payments to vulnerable households, support for health spending, construction, infrastructure packages, and green investment (renewable energy and technologies).

Monetary and macro-financial

• Since the onset of the pandemic, the Reserve Bank of Australia (RBA) has announced a comprehensive package of monetary easing, including policy rate cuts, yield curve target, term funding facilities, and government bond purchases. The Overnight Cash Rate target was cut to 0.25 percent in March 2020 and further reduced to 0.1 percent in November 2020. The interest rate on commercial banks' exchange settlement balances at the RBA was reduced to zero. The RBA also introduced yield targeting on 3-year government bonds through purchases of government bonds in the secondary market, with the target rate set at the level of the overnight cash rate. During the initial phase of the pandemic, to ensure market liquidity, the RBA conducted longer-term repos and broadened the range of eligible collateral for open market operations to include investment-grade securities issued by non-bank corporations. It has also established a swap line with US Fed for the provision of US dollar liquidity up to US$60 billion. To support the provision of credit, especially to SMEs, the RBA established the A$90 billion Term Funding Facility (TFF) in March 2020 for banks to access three-year funding at 25 basis points until September 2020. The facility was subsequently expanded to A$200 billion at a rate of 10 basis points, with access extended through June 2021.

  In addition, the RBA announced secondary market purchases of A$100 billion of 5 to 10-year government bonds issued by the Australian Government and the states and territories in November 2020. The purchase program was expanded to A$200 billion and extended through September 2021. The RBA also stepped up its forward guidance by stating that it would not increase the cash rate until actual inflation is sustainably back in the 2 to 3 percent target range and that it is not expecting to increase the cash rate until 2024 at the earliest.

  On June 1, 2021, the RBA kept the cash rate target (0.1 percent) and the 3-year government bond yield target (0.1 percent) as well as the parameters of the Term Funding Facility unchanged. The RBA also reiterated that the conditions required for a cash rate hike are not expected to be met until 2024 at the earliest. The Term Funding Facility, which is set to expire on June 30, 2021, will not be extended.

  The Australian Prudential Regulation Authority (APRA) has provided temporary relief from its capital requirement, allowing banks to utilize some of their large buffers to facilitate ongoing lending to the economy provided minimum capital requirements are met. The scheduled implementation of the Basel III reforms in Australia was postponed by one year to January 2023. In March 2020, APRA granted a regulatory concession for six months, allowing banks to not treat deferred loan payment due to COVID as impaired and hence avoiding higher capital charges. The concession was later extended to March 31, 2021. APRA also suspended the issuing of new licenses in response to the large economic uncertainty. Dividend payment restrictions were put in place for banks and insurers in April 2020 to build capital buffers, then relaxed in July and fully lifted from January 2021.

  Insolvency relief measures for businesses were put in place by the Commonwealth government from March 2020 for six months, extended through December 2020 and have since expired. In January 2021, the government also introduced permanent changes to the insolvency law to streamline the liquidation and restructuring of small businesses

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. The pandemic began to spread in Austria since March, 2020 and the country was under the first lockdown during March 16- April 12. A gradual re-opening of the economy 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. Some re-opening process was accelerated due to low infection rates, such as the reopening of the borders with Germany, Switzerland, Lichtenstein, Czech Republic, Slovakia, and Hungary from June 5. On 16 June, traveling restrictions were lifted for most European countries. Adhering to EU policies, Austria lifted a travel ban with 15 countries, with the notable exceptions of US, Brazil, India, and Russia.

Subsequent lockdowns. Since reopening, daily new cases significantly rose and, in October, surpassed the previous peak in March with the effective reproductive rate of above 1. A pickup in the infection rate prompted the authorities to reintroduce containment measures, including reintroducing mandatory mask since July. The authorities eventually announced a partial second lockdown between November 3 and December 6. This lockdown was subsequently tightened from November 17 and new cases have begun to decline again. The second lockdown has been less strict than the first. Industry and manufacturing remain open while restaurants, bars, non-essential shops, hairdressers, and schools are closed. Another lockdown was implemented during December 26 to January 18 and has been extended to February 8. From January 25, a higher-grade face masks (FFP2) are mandated in certain public areas, including air transportation. During April 1-May 17, some provinces (Vienna, Burgenland) have been under the light lockdown.

Vaccination. Austria had a slow start on vaccine administration but recently outpaced many other EA countries. As of May 5, 27 percent of population received at least one vaccine dose. Nonetheless, the process could slowdown from the supply disruption.

Key Policy Responses as of June 3, 2021

Fiscal

• In 2020, the government announced one of the largest multi-year fiscal package in Europe, totaling 49.6 billion euros (12.6 percent of 2019 GDP) to support the economy. Financing includes support to the health care system, short-term work arrangement, liquidity support for firms (fixed cost subsidy, and loss compensation), and public loan guarantees. On the revenue side, the government announced deferral of personal and corporate income taxes, social security contributions (3 months), and VAT payments, as well as VAT reduction in some categories. In tandem with emergency support, the multi-year package also includes measures to jump start the economy, including investment in climate protection, affordable housing, health, and digitalization, innovation and research. The reduction of the lowest income tax rate from 25 to 20 percent, planned for 2021, was brought forward and made retroactive to January 2020. In 2020, majority of the spending was related to emergency support and these extraordinary measures resulted in the budget deficit of 8.9 percent of GDP.
  In 2021, several emergency support measures have been extended in light of renewed lockdowns. They include a new phase of short-term work arrangement (June 2021), fixed cost subsidy, hardship fund for small businesses, revenue replacement, and unemployment assistance. At the same time, the budget envisages a significant amount of public investment as well as incentives for private investment to jump start the economy. Measures to reallocate labor including upskilling and retraining are also included. The latest 2021 stability program envisages a deficit of over 8 percent of GDP.

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 reported the first confirmed COVID-19 case on February 29, 2020.

The COVID-19 Operational Headquarters has been created under the Cabinet, Ministers and working groups within various ministries and at the CBA have been tasked with developing specific response measures. To contain the spread of COVID-19, the authorities introduced a special quarantine regime (state of emergency) starting March 24. It included border closures, mandatory quarantine of citizens returning from abroad, prohibition of mass gatherings, restriction of domestic movements; closure of retail outlets, airports, and transportation hubs; social distancing, and disinfection of public spaces.

Reopening of the economy. Starting May 4, 2020, the authorities began a staged relaxation of restrictions, enabling many businesses, facilities, and public areas to reopen and reestablishing freedom of private vehicular travel between cities and districts. On June 19, as new COVID-19 cases rose with the reopening (with cases doubling between June 1-18), the authorities announced retightening of the quarantine regime (including the closure of borders until August 1, closure of establishments such as shopping malls, cinemas, and museums in the capital and big cities, and requiring permits for people to leave their homes in these cities). On July 17, the special quarantine regime was extended in 13 cities and districts until August 31, with tighter provisions in place until August 5. With new inflections starting to decline in early August, the authorities relaxed some of the lockdown restrictions. On August 29, the special quarantine regime was extended until September 30. On September 28, in response to a rise in the number of new coronavirus cases, Azerbaijan has extended some of its lockdown restrictions until November 2 and decided to keep its borders closed. On November 19, following further rise in covid infections, Azerbaijan extend lockdown restrictions until December 28, 2020. On December 14, 2020, the new quarantine measures became effective and the special quarantine regime was extended until January 31, 2021. In January 2021, COVID vaccination started. As of end June, 1.3 million residents ( 12.9 percent of the population) have been fully vaccinated. Starting on June 10, Azerbaijan has eased air travel restrictions on visitors of Turkey and Russia. Baku metro and inter-city public transport resumed operations, and large shopping centers, places of worship, gyms and health centers have reopened, though with certain restrictions on the number of visitors.

Key Policy Responses as of July 1, 2021

Fiscal

• In 2020, the authorities have increased budget spending on public health by AzN 0.37 bn (0.5 percent of GDP). This includes scaling up medical facilities (AzN 0.25 bn) with ten modular hospitals to be built adding 2,000 beds; purchase medical supplies & equipment, payment of allowances/benefits to medical workers (AzN 0.1 bn); and creation of a COVID Response Fund for public health needs with public and private sector contributions (total AzN 114 million or 0.14 percent of GDP, with government transfer of AzN 20 million (.02 percent of GDP). Azerbaijan's government has also provided AzN 8.5 million ($5 million) to the COVID-19 Fund as part of the WHO’s Strategic Preparedness and Response Plan.

  On April 4, the authorities announced support to the affected businesses and individuals in the amount of AzN 3.3 billion (4.85 percent of GDP).  Measures aimed at redressing damage to entrepreneurs and supporting incomes include: partial coverage of salaries (AzN 215 million); support to microentrepreneurs (AzN 80 million); temporary public jobs (AzN 54 million); subsistence and unemployment payments (AzN 230 million); pensions (AzN 200 million); targeted social assistance (AzN 4.5 million); energy and education subsidies (AzN 20 million); allocation of additional funds to the Entrepreneurship Development Fund (AzN 50 million).

  On June 2, the President approved amendments to the Tax Code, providing tax benefits to businesses affected by the COVID pandemic(AzN 0.12 bn or 0.2 percent of GDP). The amendments grant a one-year exemption from land and property tax to selected sectors, including tourism, passenger road transportation, and cultural facilities. Income taxpayers will also receive a 75 percent exemption and taxpayers filing under simplified procedures a 50 percent exemption. Moreover, the rental property tax in the COVID-affected areas is reduced from 14 percent to 7 percent.

  On June 23, the Cabinet of Ministers announced a one-time extension of social assistance announced as part of the April 4 relief package for the unemployed and low-income people who lost earnings because of the special quarantine regime. An additional lump-sum payment of AzN 190 was paid once to the individuals who received social assistance under the April 4 relief package.

  On August 6, the parliament passed a revised 2020 budget which reflected a lower oil price ($35 a barrel) and growth assumptions (-5 percent). The transfer from the Oil Fund was increased by AzN 850 million to offset lower state budget (SB) revenues, while SB expenditures were increased by some AzN 600 million. Overall, the projected 2020 SB deficit has increased from AzN 2.8 billion to AzN 3.4 billion (4.8 percent of GDP), while the consolidated government deficit increases from AzN 1.9 billion to AzN 8.4 billion (11.9 percent of GDP). However, mainly reflecting higher oil price and spending control, actual deficit for 2020 turned out to be lower than projected,, with state budget deficit reaching 1.74 billion (2.4 percent of GDP) and consolidated budget deficit AzN 4.8 billion (9.2 percent of GDP).

  The 2021 budget assumes a consolidated budget deficit of AzN 7.35 billion (8.6 percent of GDP). The budget has allocated another AzN 261 million (0.3 percent of GDP) for fighting the pandemic.

Monetary and macro-financial

• On March 19, 2020, 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 June 19, the CBA lowered the refinancing rate by 25 bps to 7 percent, lowered the ceiling of the interest rate corridor to 7½ percent, and lowered the floor of the corridor by 25 bps to 6½ percent.

  On July 30, the CBA lowered the refinancing rate by 25 bps to 6¾ percent, and similarly shifted the floor and ceiling of the corridor downwards to 6¼ and 7¼, respectively. 

  On September 18, the CBA lowered the refinancing rate by 25 bps to 6½ percent, and similarly adjusted the ceiling and floor rates to maintain a +/- 50 bps interest rate corridor.

  On December 18, the CBA lowered the refinancing rate by 25 bp to 6 ¼ percent. The floor of the interest rate corridor was set as 5.75%, and the ceiling as 6.75%.

  On April 23, 2020, the CBA undertook several measures to assist the financial sector. This included: (I) a relaxation 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, aimed at improving the flow of financial resources to the real sector. The swap enables the EBRD to provide domestic currency credit support to local companies, including for short-term liquidity needs, working capital, and restructuring of exposure for existing clients, as well as trade finance and emergency support to key infrastructure providers.

  In January 2021, the CBA has lifted some measures: inspections at credit institutions that were suspended in 2020 resumed, and additional capital requirements for consumer loans were reinstated. Blanket deposit guarantee was replaced with limited guarantee program.

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.

Links

• Ministry of Health of the Azerbaijan Republic

• Ministry of Emergency Situations of the Republic of Azerbaijan

• Koronavirus.az

• Cabinet of Ministers News Updates

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The Bahamas

Background. The Bahamas has so far reported 11,849 confirmed cases of COVID-19, with 230 deaths (as of May 30 2021). After successfully suppressing the initial spread, the reopening of international borders in July 2020 coincided with a sharp and prolonged rise in infections. Weekend lockdown measures, initiated in October, in worst hit islands curtailed the prolonged rise in new cases, as testing capacity and tracing also improved. As cases fell, travel and lockdown restrictions were gradually rolled back. Fully vaccinated international and domestic travelers are now exempt from testing requirements and allowed to resume indoor dining. The Bahamas received 20,000 doses of the Oxford-AstraZeneca vaccine as a donation from the Indian government on March 10, and 67,200 doses thus far of the 100,000 purchased through COVAX . The Bahamas is currently experiencing a third wave, averaging above 40 new cases per day – roughly one-third that of pandemic highs. Since March, hospitalizations have also been rising again (55 persons on May 30).

Key Policy Responses as of June 1, 2021

Fiscal

• The government is implementing various support measures totaling B$436 million (3.9 percent of GDP), including (i) B$25 million for health care, (ii) B$5 million for food programs, (iii) B$145 million for income support for job loss workers and self-employed , (iv) B$54 million to support business loans to SMEs with an additional B$5 million allocated to grants to assist with payroll expenses, (v) B$141 million to provide tax deferrals and credits to companies with a minimum of 25 employees and annual sales of B$3 million that retain at least 80 percent of staff, and (vi) B$1.8 million to support to Family Islands (specifically to be used for any COVID-19 related expenditure). So far , B$101 million (0.8 percent of GDP) of these measures were executed in FY2019/20, and B$195 million (1.7 percent of GDP) during FY2021Q1 – Q3.

Monetary and macro-financial

• Starting in March 2020, the Central Bank of The Bahamas (CBOB) 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. Some financial institutions announced credit support extending well beyond the 3-month period.

Exchange rate and balance of payments

• For commercial banks, the ceiling on the Bahamian open position on foreign exchange transactions has been relaxed to the maximum of 5 percent of Tier-11 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 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 implemented a swift and well-coordinated policy response, which limited the spread of the virus, delivered rapid and widespread access to vaccinations, and extended targeted income and liquidity support to those in most need. The vaccination campaign began in December 2020 and are being administered at a rate of 119.2 doses per 100 people at end-June 2021, placing Bahrain among the best performing countries in delivering vaccinations. Despite the rapid vaccine rollout, a second wave of cases hit the country starting in early 2021. Bahrain has avoided strict lockdowns during the pandemic, but the authorities reintroduced a range of health containment measures to curb recent infection waves in the first half of 2021. Measures include closure of all non-essential retail businesses and limiting indoor activities in various high-contact sectors to vaccinated customers, halting in-person education, banning of social gatherings, and re-instating remote work schedules for public administration employees. In addition, in May 2021 Bahrain limited entry to travelers from some countries where COVID cases have recently increased.

Key Policy Responses as of June 29, 2021

Fiscal

• A fiscal package was first introduced on March 17, 2020 with measures totaling about 6 percent of GDP, including a budget appropriation to cover urgent health-related needs. The initial package was for three months, but throughout 2020 was subsequently extended and increasingly targeted to support sectors and individuals hit hardest by the crisis.

  Measures in the 2020 fiscal package included: (i) payment of salaries for Bahrainis working in the private sector (financed by the unemployment fund); (ii) subsidizing of electricity and water bills for individuals and companies; (iii) redirecting Tamkeen (a semi-autonomous government agency that finances SMEs) programs to support adversely affected micro and small enterprises; (iv) doubling of the size of the liquidity fund to support SMEs; (v) excepting industrial and commercial entities from paying government fees; (vi) exempting tourist facilities from tourism fees; and (vii) extending support to workers in the transportation and education sectors.

  During 2021, parts of the fiscal support package have been extended through August 2021, including: (i) payment of salaries of Bahrainis in the private sector (financed by Tamkeen and the Unemployment Fund); (ii) financial support to SMEs through Tamkeen; (iii) fees exemptions for tourist facilities; (iv) municipality fees exemptions for affected commercial entities; (v) waivers on commercial registration fees; (vi) rent exemptions for tenants of government-owned companies and properties; and (vii) fees exemption to set up and operate e-stores. In addition, the authorities launched a national employment program aimed at creating private sector jobs and training the workforce.

Monetary and macro-financial

• On March 17, 2020, the Central Bank of Bahrain (CBB) temporarily expanded its zero-interest lending facility to banks by up to BD3.7 billion (US$10 billion or 29 percent of GDP) to facilitate deferred loan repayments and extension of additional credit. The CBB also cut its one-week deposit facility rate (in line with the US FED) from 2.25 to 1.0 percent, the overnight deposit rate from 2.0 to 0.75 percent, and the overnight lending rate from 4.0 to 2.45 percent.

  Other key financial sector measures included: (i) reducing the cash reserve ratio for retail banks from 5 to 3 percent; (ii) relaxing loan-to-value ratios for new residential mortgages; (iii) capping fees on debit card payments; (iv) extending the number of past due days for stage 1 expected credit loss (ECL) classification to 74 days, excluding the six-months loan moratorium; (v) reducing the cooling off period for reclassifying restructured facilities from Stage 3 to Stage 2 from 12 months to 3 months; (vi) reducing the risk weight of loans to SMEs from 75 to 25 percent; and (vii) reducing the minimum liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) requirements for all locally incorporated banks from 100 to 80 percent.

  Finally, the CBB implemented blanket deferrals on private sector loan repayments (both principal and interest) from March to August 2020, which were subsequently extended several times, with the latest deferral phase in place until December 2021.

Exchange rate and balance of payments

• No measures.

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Bangladesh

Background. Bangladesh reported the first confirmed cases of COVID-19 on March 8, 2020. Several measures such as general holidays, restricted movement, closures, mandatory wearing of masks etc. were put in place to contain the spread. In August 2020, Bangladesh witnessed its first wave under the pandemic. Daily new infection cases had been on the decline since end-November 2020, however, new cases rapidly increased starting March 2021 through the first week of April 2021 reflecting the second wave. A country-wide lockdown has been in place since April 14, 2021. This lockdown has been less strict allowing for public and private offices, and some industries to remain operational although transportation has been limited along with border control measures in place. Bangladesh is now at the onset of the third wave. The positivity rate has reached 25 percent which is higher than the peaks in April 2021 (23 percent) and in August last year (24 percent). The infection rate, in districts bordering India, is much higher than the rest of the country and testing remains limited. The government has announced a seven-day strict lockdown from July 1 through July 7 during which all government, semi-government, autonomous, and private offices will remain closed, excepting those that provide emergency services. All transportation, except emergency service providers, will remain suspended. However, industries are expected to remain operational, maintaining health protocols. As of June 30, 5.9 million persons had received their first vaccine dose while 4.3 million had received their second. New registrations have remained suspended since May 7. The third wave could dampen the recent pick up in exports. Remittances had initially declined around the onset of the pandemic but have steadily increased during FY21 partly reflecting the central bank's incentives to repatriate funds through official channels.

Key Policy Responses as of July 1, 2021

Fiscal

• At end-March 2020, the Ministry of Finance issued a revised budget for FY20, including Tk. 2.5 billion in additional resources, to fund the Ministry of Health's COVID-19 Preparedness and Response Plan and expand the existing transfer programs that benefit the poor. Increased allocation was made to the Open Market Sale program to facilitate the purchase of rice at one-third the market price. On March 31, the Ministry of Finance announced a Tk. 50 billion (about US$ 588 million) stimulus package for exporting industries to be channeled through Bangladesh Bank (BB) and distributed by the commercial banks at a 2 percent service charge. This special fund, for worker's salary support, was disbursed through mobile financial services and bank accounts benefitting close to 4 million workers over a four-month period. The Ministry of Finance is also subsidizing interest payments on working capital loans of up to Tk. 600 billion (about US$ 7.1 billion) provided by scheduled banks to businesses. On April 15 2020, the Prime Minister announced the allocation of Tk. 21.3 billion (about US$ 250.9 million) under a housing scheme for the homeless, Tk.15 billion (about US$ 176.7 million) for the poor who faced job losses from the pandemic, Tk.7.5 billion (about US$ 88.3 million) to provide health insurance for government employees most at risk, and Tk. 1 billion (about US$ 11.8 million) in bonus payments for public health workers treating COVID-19 patients. The Prime Minister has also announced that Tk. 20 billion (about US$ 235.6 million) in interest payments on behalf of 13.8 million loan recipients negatively impacted by the national shutdown will be covered by the government. In January 2021, the government increased the COVID-19 Emergency Response and Pandemic Preparedness Project costs by Tk 56.6 billion (about US$ 666.7 million) mostly reflecting the procurement, preservation, and distribution of vaccines. The government has announced two additional stimulus packages - Tk. 15 billion for the micro credit and marginal people's lifestyle development program, and Tk. 12 billion for the old age and widow allowance expansion program. In the first week of May 2021, the government announced its second-round cash assistance program of Tk. 9.3 billion for the targeted population who lost their jobs from the ongoing lockdown. Thus far, Tk. 390.7 billion (about US$ 4.6 billion) of fiscal stimulus has been announced, of which Tk.186 billion (about US$ 2.2 billion) has been disbursed as of end-April, 2021. In addition, the National Board of Revenue has suspended duties and taxes on imports of medical supplies, including protective equipment and test kits. The FY22 Budget includes higher allocations (in Taka) for health, agriculture, and social safety net programs, although effective targeting remains a challenge. As a precautionary measure, the government has decided that 25 percent of budgetary allocations for development projects will be placed on hold, affecting low-priority projects. It has approached donors seeking budget support.

Monetary and macro-financial

• To ensure adequate liquidity in the financial system, in March 2020, BB announced the purchase of treasury bonds and bills from banks. The repo rate was successively cut from 6 percent to 4.75 percent over three cuts from March to July. The cash reserve ratio (CRR) for banks was reduced on both a daily (from 5 to 3.5 percent) and a bi-weekly basis (from 5.5 to 4 percent). The CRR was also cut for offshore banking operations, effective July 1, and for Non-Bank Financial Institutions (NBFIs), effective June 1. The advance-deposit ratio and investment-deposit ratio was raised by 2 percent to facilitate credit to the private sector and improve liquidity. The Export Development Fund was raised from US$ 3.5 billion to US$ 5 billion, with the interest rate slashed to 1.75 percent and the refinancing limit increased. BB has created several refinancing schemes totaling Tk 415 billion (about US$ 4.9 billion), a 360-day tenor special repo facility, and a credit guarantee scheme for exporters, farmers, and SMEs to facilitate the implementation of the government's stimulus packages. In addition, BB has taken measures to delay non-performing loan classification, relax loan rescheduling policies, waive credit card fees and interests, suspend loan interest payments, relax credit risk rating rules for banks, extend tenures of trade instruments, lower farm loan interest rate and allow short-term farm loan rescheduling, and ensure access to financial services. BB imposed an additional 1.0 percent general provision against loans that have enjoyed deferral/time extension facilities.

Exchange rate and balance of payments

• Foreign exchange rules were eased by BB to: (i) provide foreign currency to Bangladeshi nationals facing problems while returning home due to travel disruptions; and (ii) 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 wages and salaries. International factoring was introduced to accelerate exports. BB has been intervening in the foreign exchange market to keep the exchange rate relatively stable following the COVID-19 outbreak.

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Barbados

Background. The government took swift actions to contain the spread of the virus. Within days of the first confirmed case (March 16, 2020), measures to activate isolation and treatment centers, impose limits on public gatherings, and establish supplementary medical facilities were taken. 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 but the mandatory 14-day quarantine for all travelers arriving in Barbados has been replaced with a testing program to facilitate the resumption of tourism. Spillovers from the global pandemic to the critical tourism sector have been significant with the shut-down of commercial airlift at end-March 2021, which resulted in widespread labor furloughs and temporary hotel closures. Commercial airlift resumed on a limited basis in July but prospects for the recovery of tourism remain highly uncertain. The virtual collapse in tourism during the global pandemic—which accounts for 40 percent of economic activity—resulted in a 18 percent collapse in economic activity in 2020. The outlook for 2021 is highly uncertain following a resurgence of COVID-19 cases that necessitated the imposition of a second national lockdown in February.

Reopening of the Economy. The authorities adopted a four-phase approach to reopen the economy following the national lockdown in March 2020. The strategy ranges from a complete lockdown (Phase 1) to a phased removal of social and economic restrictions (during Phase 2 and3) ending with a resumption of life as normal once the population has been adequately vaccinated (Phase 4). The implementation of the National Vaccination strategy got underway in the second half of February 2021 with roughly 35 percent of Barbados' adult population fully (double) vaccinated to date (47 percent with a single dose). The rollout of the national vaccination program will continue as swiftly as access to vaccine supplies allows.

Key Policy Responses as of July 1, 2021

Fiscal

• The Government of Barbados (GoB) has pursued a targeted fiscal response to the COVID-19 health crisis aimed at protecting lives and livelihoods. The response to the pandemic has been phased and tailored to the evolution of the health crisis and magnitude of the economic fallout. Initial investments in health equipment and quarantine facilities in early 2020 were followed by expanded welfare payments to protect vulnerable households through the introduction of the Household Survival Program. Liquidity support was extended to the National Insurance Scheme (NIS) via the repurchase of government bonds to ensure adequate resources were available to accommodate a surge in unemployment benefit and severance claims. To support the tourism sector, which has been dealt a particularly heavy blow by the pandemic, the authorities created the Barbados Employment and Sustainable Transformation (BEST) plan. A 12-month COVID relief jobs program was also rolled out to generate contractual employment opportunities that promote health safety and boost food production, while targeted cash transfers frameworks were extended to small businesses and vendors affected by the second national pause in February 2021.

  While the Government of Barbados remains firmly committed to its long-term debt reduction goals that underpin the ongoing financial arrangement with the IMF, the unprecedented economic impact of the health crisis has required a flexible approach in the setting of fiscal policy and reform priorities. On balance, the pandemic response prompted the government to lower its primary balance target to minus 1 percent of GDP for FY2020/21 (compared to a surplus of 6 percent of GDP envisaged prior to the pandemic, and a surplus of 3 percent target announced during the March 2020 budget presentation). The FY2021/22 budget targets a primary surplus of about ¼ percent of GDP reflecting still weak economic conditions and ongoing expenditure needs as the fallout from the COVID-19 shock persists.

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 (expired end-September). Banks are now working with individual borrowers as needed on further repayment extensions.

Exchange rate and balance of payments

• No measures.

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Belarus

Background. The first confirmed case of COVID-19 was reported on February 28, 2020. It unfolded the first wave until July 2020. Belarus' second wave of infections started in October 2020, and it peaked in December 2020–January 2021 at around 2,000 cases per day. It has proven hard to curb with new cases hovering around 1,200 per day until May. Since late May new cases are declining with a 7-day average of around 650 cases as of June 28, 2021. 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, social distancing, and recommendations for schools, education, and workplaces. The Ministry of Health issued enhanced recommendations to businesses and non-profit organizations on social distancing, limiting any meeting with more than 5 participants and encouraging video conferencing. In some regions such as Minsk, there has also been a cancelation of public events and compulsory use of facial masks was introduced. In December 2020, Belarus decided to close its land border partially. Belarusian citizens and residents are temporarily prohibited from leaving the countries, except for a limited number of cases.

The National COVID-19 Vaccination Plan for 2021-2022 was approved in February 2021. Belarus has started vaccination with people working in health, education and social sector and plan to expand the plan to people most likely to develop a severe form of the disease, people in high-contact jobs, and the general public. On February 26, 2021, Belarus started producing Russian vaccines Sputnik on its soil, expecting to produce sufficient vaccines to start mass vaccination beginning in April 2021. As of June 26, 2021, 11.3 percent of the population has received one vaccination dose, and 7.5 percent are fully vaccinated. Belarus also aims at developing its own vaccine.
In addition to the impact of the Covid pandemic, Belarus faces headwinds due to a gradual loss of oil price subsidies from Russia through the “tax maneuver” till 2024 and the political stalemate following the presidential election of August 9, 2020. Economic relations with Western countries are being curtailed through sanctions and retaliatory actions by the Belarusian government.

Key Policy Responses as of July 1, 2021

Fiscal

• The government has extended the package of fiscal measures started in 2020 until end-2021, 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. The possible total fiscal impact of these measures has not yet been published. In addition, public sector salaries are being kept at least at the legislated minimum and subsidies are being granted to public sector organizations forced into part-time employment or to stand idle for a specified time.

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 twice during the Covid pandemic period to 7.75 percent (from July 1). With inflation at 8.5 percent in March 2021, the central bank increased the policy rate to 8.5 percent on April 21, 2021.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. Belgium registered the first confirmed COVID-19 case on February 4, 2020. The government at the time implemented a range of measures to contain the pandemic, including closures of schools and non-essential businesses, limiting movement to essential needs, as well as banning all gatherings and non-essential travel abroad. The economy contracted by 6.4 percent in 2020 as private consumption and investment slumped. A strong rebound in Q3 was brought to a halt by a renewed lockdown to stem a second wave of infections in Q4. Activity picked-up again in 2021Q1, with growth at 1.0 percent (q/q), primarily driven by robust business and residential investment as well as a positive contribution from net exports.

Reopening of the economy. Since early May, a reopening plan conditional on health outcomes has seen the reopening in four phases of sectors and activities according to their degree of contact intensity. Following an uptick in cases from mid-July, the fifth phase of the reopening plan was put on hold, with some restrictions tightened. Despite a partial easing from late August, strict social-distancing rules remained in place. Amidst a sharp resurgence of cases and hospitalizations since early October, wide-ranging restrictions on activity and mobility were imposed on October 19, followed by a new lockdown from November 2, albeit shorter and less stringent than in spring, with non-essential shops allowed to reopen from December 1. In response to a stagnation in the decline in infection rates and the emergence of new, more contagious strains of the virus, travel and telework rules and controls have been progressively tightened (Consultative Committee decisions of December 18, December 30 and January 22) and containment measures were extended by ministerial decree from January 15 to March 1, 2021 following the Consultative Committee’s meeting on January 8 and to April 1, 2021 in the meeting on February 5. Some contact-intensive businesses reopened in steps from February 8 but the further opening of the economy decided on March 5 was partially reversed or suspended by the Consultative Committee meetings on March 19 and March 24. On April 14, the Consultative Committee announced a gradual lifting of containment measures starting with the end of the Easter holiday period on April 19. On May 11, the Consultative Committee laid out a path for a stepwise removal of restrictions on businesses and social gatherings over the summer, subject to vaccination progress and hospital capacity. With milestones continuing to be met, the relaxation of containment polices has proceeded apace (see Consultative Committee decisions of 4 June and 18 June), allowing for a fuller reopening of the hospitality industry and larger social gatherings. Despite initial supply side constraints, the vaccination campaign, launched on January 5, 2021, has made impressive inroads, with nearly two thirds of the population having received at least one dose of the vaccine.

Key Policy Responses as of June 30, 2021

Fiscal

• The government put in place a package of fiscal measures to address the crisis (detailed in its 2021 Draft Budgetary Plan, March 2021 Monitoring Committee report, and April 2021 High Council of Finance report), with an estimated budget impact of €22.3 bn and €10.8 bn (5.0 and 2.3 percent of GDP) in 2020-21, complemented by some €52 bn (about 11 percent of GDP) of loan guarantees. Key measures include: (i) boosting health expenditure and hospital funding; (ii) increasing support for those in temporary unemployment and self-employed; (iii) liquidity support through postponements of social security and tax payments for companies and self-employed; (iv) solvency support through various tax and “below-the-line” measures; and (v) additional support to affected firms and households provided by subnational governments. A reinsurance scheme for short-term trade credit insurance, and other socio-economic measures have further supported these efforts. Following a first extension of key existing schemes in June, though more targeted at hard-hit sectors and vulnerable groups, the federal and regional governments have announced additional support in response to the re-imposition of restrictions from mid-October. These are mostly in the form of a further extension or expansion of existing, temporary measures. Additional extensions and new measures have been announced in February and April ,and May 2021 that are set to expire end-September 2021.

Monetary and macro-financial

• For monetary policy at the currency union level, please see Euro Area section.

  Other measures taken by the Belgian authorities include: (i) a reduction in the counter-cyclical bank capital buffer to 0 percent, retracting an increase to 0.5 percent that was supposed to become effective in June, while providing forward guidance of no change until at least through the first quarter of 2022; (ii) a ban on the short-selling of stocks between March 18 and May 18; and (iii) a suspension of debt servicing to banks and insurers by households and companies affected by the crisis until end-June 2021 with the possibility to extend the maximum payment holiday period of 9 months by a further 5 months on a case-by-case basis.

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 international airport and 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. The national state of emergency was later extended until end-June, although with less stringent regulations. These measures we effective to contain the pandemic until early June. However, there have been a second wave of infections since then, with the number of cases increasing to around 5000 and the number of deaths to about 100 as of November 20.

The COVID-19 pandemic hit 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 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 only a gradual recovery as the pandemic wanes.

Reopening of the economy. The national state of emergency ended in June, allowing more businesses to reopen. The international airport reopened on October 1 with appropriate protocols for testing and tracing. However, the number of international flights to Belize is only a fraction of its pre-pandemic levels and tourism activity has been slow to recover.

Key Policy Responses as of November 20, 2020

Fiscal

• In March, Belize announced fiscal stimulus amounting to BZ$25 million (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. Additional support to the healthcare sector and the unemployed has been financed with loans from bilateral and multilateral creditors.

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. After peaking in June 2020, the total number of active cases and fatalities subsided in the second half of 2020. New cases and deaths related to Covid-19 have seen another sharp increase in the first quarter of 2021, but have since subsided significantly. Benin launched its vaccination campaign on March 29, 2021. The vaccination rollout has been slow—slightly more than 24,000 persons have received the first dose of available vaccine, and more than 6000 were fully vaccinated by mid-June 2021—reflecting significant deployment challenges.

Following the initial outbreak of the virus, the authorities have swiftly implemented strong containment and social distancing measures, 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.

Economic activity was mostly affected during the second quarter of 2020, due to containment and mitigation measures in Benin and the global economic slowdown, while some signs of recovery appeared in June 2020. Agriculture, commerce and trade, transport, and the hospitality industry were among the most affected sectors. Inflation has been on the rise, driven by higher food and transport prices. Import and value chains disruptions, lower travel and tourism receipts in addition to diminished inflow of remittances have resulted in widening of current account deficit. After having soared about 550 points following the outbreak of Covid-19 pandemic in March 2020, spreads on Benin's Eurobond continued to compress and, since January 2021, have fallen below SSA average. The fiscal position has deteriorated as a result of the implementation of the authorities' COVID-19 response plan (see section on fiscal response below).

In addition to Covid-19 shock, Benin continues to be impacted by the impeded trade with Nigeria. On 20 August 2019, Nigeria decided unilaterally to close the border with some neighboring countries, including Benin. The Nigerian authorities motivated their decision by the need to curb smuggling and spur local agricultural production. Following a 16-month border closure, the Nigerian authorities announced in December 2020 the immediate reopening of Nigerian land border-crossing point with Benin. Nonetheless, traffic remains limited to private vehicles and pedestrians, thus impeding the cross-border trade. Following the meeting of the presidents of two countries in January 2021, a working group has been set up with objective of resuming the land trade by second half of 2021.

Reopening of the economy. The authorities have announced measures to gradually start reopening the economy, with the cordon sanitaire lifted on May 6, 2020. Middle schools, high schools and universities resumed their activities on May 11, 2020. Public transportation, places of worship and bars resumed their activities on June 2, 2020. International flights resumed on July 15th, 2020, accompanied by strict protocols for testing and quarantine for new arrivals. The gradual reopening is subject to continued social distancing guidelines and mandatory use of masks, among other measures.

Key Policy Responses as of July 1, 2021

Fiscal

• The authorities acted swiftly to contain the spread and mitigate the economic impact of the virus. Cognizant that the impact of the virus will spill over into 2021, they have adopted a set of measures in 2020 amounting to CFAF 323 billion or 3.7 percent of GDP, and extending over 2020-22, with the majority of the plan already having been executed in 2020 (2 percent of GDP, or CFAF 178 billion). These measures comprise (i) a health preparedness and response plan for 2020 (0.9 percent of GDP) and 2021 (0.7 percent of GDP), and (ii) a socio-economic response plan to support formal sector companies (0.9 percent of GDP) and vulnerable households—for the latter, through cash transfers, electricity and water bills subsidies, and urgent social projects (0.2 percent of GDP). In addition, a public guarantee plan (1.0 percent of GDP) and credit lines and refinancing measures (0.7 percent of GDP) were established to foster access to finance for micro, small, and medium enterprises.

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. In April 2020, 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. In June 2020, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. 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 solvent customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 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 in April 2020 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 initially issued initially by Benin amounted to 1.5 percent of GDP, with some rollover possibility through such special T-bills benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. The BCEAO has launched in February 2021 a special 6-month refinancing window at the floor of the interest rate corridor to help WAEMU governments meet Covid recovery funding needs. Through this special window banks shall be able to refinance all bonds with maturity of 3 years or more governments currently plan to issue on the regional financial market in 2021. The amount of bonds eligible to the new refinancing window for Benin is equivalent to 5.3 percent of projected 2021 GDP. The new refinancing window is expected to remain in place for the term of the eligible bonds issued in 2021. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks’ credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

• No measures.

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Bhutan

Background. Bhutan confirmed its first case of COVID-19 on March 6, 2020. Active cases have increased since December 2020, following the outbreak in Thimpu. On December 23, 2020, Bhutan announced a second lockdown following a local transmission detected in Thimpu (the first lockdown was in August 2020). Under the lockdown, only designated shops within the zones and essential services were available but all schools, institutions, offices and business establishments were closed; targeted lockdown continues in select areas. Since the start of the pandemic, the economic impact of COVID-19 has been substantial, driven by the adverse impact on the tourism and related services sector.

Reopening of the economy. An Air Travel Bubble Arrangement has been agreed between the Royal Government of Bhutan and the Government of India, subject to standard quarantine and testing procedures. On January 7, 2021, the lockdown in the border town of Phuentsholing was eased. From February 1, 2021, following the conclusion of mass testing, the lockdown in Paro and Thimpu has been eased, allowing economic activities, schools, offices and business to resume.

Key Policy Responses as of June 3, 2021

Fiscal

• Linked to the Build Bhutan initiative, the government has launched the Specialized Firms initiatives to boost youth employment in various construction schemes. The government announced a National Resilience Fund for mitigating COVID-19 linked to job losses and salary cuts. The support included grant for individuals directly affected by the pandemic (now extended until June 2022) and full interest waiver on loans contracted since April 10, 2020 until June 2020. These measures were extended until September 2020, and partial (50 percent) interest waiver will continue until June 2022. In addition, fiscal stimulus in the FY 2020-21 budget includes the implementation of an Economic Contingency Plan (ECP) aimed at helping different sectors, including tourism resilience, agriculture, Build Bhutan (BB) and improvement of farm roads over and above annual budget (Nu 4 billion) and allocating higher level of capital outlay to frontload and accelerate activities from the 12th Five Year Plan. Current expenditure has been rationalized in response to expected fall in revenues and to ensure that it is covered by the domestic revenue. A budget of Nu.1.3 billion has been re-appropriated for health, essential food and fuel, quarantine and related initiatives. Support will be provided to FCB to stock essential food and non-food items. It is deepening fiscal decentralization with upscaling of national grants. Other measures: 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 for the income year 2019 was deferred until June 30, 2020 and tax payments, for tourism and related sectors (hotel, airlines and tour operators) are deferred until December 31, 2020, while for other sectors until September 30, 2020; deferred payment of sales tax and customs duty on essential items (March to June 2020); waiver of payment of rent and other charges (April-December 2020) by tourism-related business entities leasing government properties, deferral of electricity charges payment for industry (till December 2020), free electricity and wi-fi services to hotels serving as quarantine facility (July-September 2020). As of May 25, the government will be refunding the 5 percent sales tax collected on telecom services collected on or after January 16, 2020. The government is mobilizing additional resources such as grants and concessional borrowing as well as bilateral and in-kind financing to support capital spending. Investments in GovTech is allowing Bhutan to reap benefits during COVID-19 including fast disbursement of cash relief funds. In late September 2020, the first sovereign offering of a 3-year domestic bond of US$ 41 million (or Nu. 3 billion) at 6.5 per cent was issued to support increasing fiscal needs. In late April 2021, the government extended the income and interest rate support till March 2022.

Monetary and macro-financial

• On October 5, 2020, the government launched the National Credit Guarantee Scheme (NCGS), to boost investments of both small and medium enterprise, by providing collateral requirement relief and a substantial credit guarantee. Effective April 14, 2020, Phase I monetary relief measures were introduced by the RMA. Many of these measures were extended under Phase II (July 8), including the waiver of interest on loans (until September 2020) and partial waiver (until March 2021), extension of deferred monthly loan instalment repayment (until June 2021), granting financial institutions the provision of bridging loans as concessional term-based loan (5% interest rate for the tenure of the loan) for CIT and BIT filing business agencies, conversion of concessional working capital soft loans to tourism, manufacturing and wholesale business (April-June 2020) to term loans for 4 years at 5% rate, extension of soft 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) by 12 months to June 2021. The government and the RMA will conduct an in-depth assessment of NPLs from July 2020 to facilitate rehabilitation and/or foreclosures of NPLs. To facilitate the implementation of Phase I measures, RMA further reduced the Cash Reserve Ratio (CRR) by 200 basis point to 7 percent. RMA will open a liquidity window for FSPs (inter-bank borrowing system) and will release liquidity through reduction of CRR only if the liquidity crunch is of a systemic nature. The RMA is further promoting the use of digital banking platforms during the current lockdown situation. On November 2, the RMA announced a forward-looking web-based domestic liquidity management system (DLMS) to improve systemwide liquidity management and to facilitate the development of a reference rate. On December 25, 2020, in response to the second lockdown, the RMA activated the 24/7 Command Call Centre to ensure uninterrupted financial services and have notified financial institutions to make their digital financial services available round-the-lock. On February 11, 2021, the RMA has announced a NPL resolution framework recommended by the National High Level NPL Committee to support new credit supply in the economy.

Exchange rate and balance of payments

• On March 24, 2020, ban on select food product (e.g., betel leaf, betel nut) import from India has been imposed to curb the spread of COVID-19. As of June 29, 2020, import of luxury motor vehicles and bikes have been suspended. The pandemic is presenting opportunities for increasing regional bilateral co-operation including recently agreed Preferential Trade Agreement with Bangladesh, Small Development Project Committee (SDPC) from Bhutan and India supporting frontloading of projects under the 12 th FYP as well as continuing support from development partners.

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Bolivia

Background. The first confirmed case was reported on March 10, 2020. While Bolivia was initially spared from the full force of the pandemic, it suffered a peak in new cases during July and August, after which the situation gradually improved until the start of December. Cases started increasing again in early-2021, peaking at end-January, and with cases increasing during May and June reaching a new historical peak. As of June 30, there are 439,624 confirmed cases, and 16,767 deaths have been reported. At late-June total cases reached about 37,000 per million inhabitants, compared with 62,000 for Peru and 102,000 for the United States. The mortality rate, the number of deaths within the entire population, is about 0.14 percent in Bolivia, 0.58 percent in Peru and 0.18 percent in the United States. The previous government took a series of measures to prevent the spread of the virus, including a generalized lockdown, entailing the temporary closure of many businesses, border closure, suspension of schools, and postponed the general elections scheduled initially on May 3 2020. On March 25 2020, the previous authorities announced the state of health emergency until April 15 2020 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. The national quarantine has been extended several times and the country is now in a stage of post-confinement with reopening modifications (see below). Wearing a facemask in public places is mandatory, certification of a negative COVID-19 test is required to enter the country and public events have reopened but must comply with biosecurity measures regulated by municipalities and local government. During 2020, the former interim President, several members of her cabinet, and the ex-president of the central bank tested positive for COVID-19. National elections, which occurred on October 18, were delayed twice owing to the pandemic.

Reopening of the economy. By decree the post-confinement phase started on September 1 and has been extended by the new government. However, owing to a recent spike in cases, 5 regions went back into lockdown at end-May. On September 1 entry into Bolivia by air on commercial flights was permitted. As of December 1, entry by air, land and water was permitted provided that nationals and foreigners entering the country present a negative test result for COVID-19, with the time allowed between test and arrival dependent on country of departure. Cultural, sporting, social, religious and electoral activities are permitted subject to biosecurity measures to avoid the generation of crowds. Restrictions on working hours have been lifted and commercial activities are permitted to operate on a continuous basis, however, workplaces must try to avoid crowded workspaces through alternating schedules, and teleworking as a preferred option where possible. To protect the health of the older population, their family members can be authorized to collect benefits on their behalf, such as Renta Dignidad, among other social transfers. Schools returned after their summer break on February 1 in a virtual capacity, with some municipalities starting to have semi-presential classes. Departmental and municipal governments will determine commercial activity and other services not governed by the national decree and may add restrictions as needed by local conditions. The free virus testing was significantly increased since January. The government has agreements to receive the Russian Sputnik-V vaccine, the Chinese Sinopharm, and also AstraZeneca-Oxford, Pfizer and Johnson & Johnson vaccines through the international agreement Covax. January 29 marked the first vaccination in Bolivia using the Sputnik-V vaccine, with the first batch of 20,000 doses of this vaccine (of 5.2 million committed). By end-June, about 1.9 million first doses have been administered and 700,000 second doses. On June 30, the government announced the purchase of six million Sinopharm vaccines, and that the entire Bolivian population over 18 years of age will be eligible for vaccination from July 1st.

Key Policy Responses as of July 1, 2021

Fiscal

• The authorities have provided direct relief payments of about $US 73 per child to households with children in public schools, a measure calculated to provide most of its benefits to poorer households. This payment was extended to students in private schools from May 18. In addition, the government instituted a program (Canasta Familiar) to make direct payments for food to 1.5 million families ($US 58 per family), pay the electric bills for three months for the consumers with lower consumption, and pay 50 percent of the potable water and gas for all households. From April 30, the government provided $US 73 to citizens who do not receive any other benefits or draw a salary from the public or 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 was deferred and independent workers can claim tax deductions against their expenses on health, schooling, food and related expenditures. The government created a $US 219 million fund to support the operations of micro, small and medium businesses. This fund will provide soft loans to companies to pay wage bills without layoffs for two months (companies can withdraw $US 1230 per employee, repayable in 18 months). Imports of $US 200 million worth of respiratory equipment are under way, while ICU capacity is being doubled.

  The latest transfer to households (Bono Contra el Hambre) became available starting on December 1st and finishing on May 31st. It provides a one-off transfer of about $146 for all eligible individuals, such as those who receive the universal transfer, mothers who are already recipients of targeted cash transfers, people with disabilities and citizens over the age of 18 who do not receive any type of public or private salary. On December 28 the government announced RE-VAT, a measure to refund VAT equivalent to up to 5% of an individual's purchase for those with an average monthly income equal to or less than about $1,311.

Monetary and macro-financial

• The Central Bank of Bolivia (BCB) injected 3.5 billion bolivianos (more than $500 million) into the financial system 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. Liquidity has also been increased by reducing reserve requirements in both local and foreign currency. The authorities announced that were suspending borrowers’ loan repayments in the financial system up to the end of 2020, with the delayed installments to be paid at the end of the loan closure date. Starting in January 2021, the Financial System Authority (ASFI) has instructed banks to establish a "grace" period up to end-June, during which time borrowers will not pay interest nor capital on the already suspended loans.

Exchange rate and balance of payments

• No measures.

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Bosnia and Herzegovina

Background. The first confirmed COVID-19 case was reported on March 5, 2020. In March, the government declared a country-wide state of emergency, closed schools and universities, shuttered restaurants and shops, suspended public transportation, banned public gatherings, and imposed severe restrictions on the movement of people. Borders were closed to non-Bosnia and Herzegovina (BiH) citizens. Incoming BiH citizens were quarantined for 14 days.

Reopening of the economy. Both entities—the Federation of Bosnia and Herzegovina (FBIH) and the Republic of Srpska (RS)—eased mobility restrictions gradually during the second half of 2020 with the end of the first pandemic wave. They ended curfews for individuals but maintained limitations on most public events and gatherings. While grocery stores, pharmacies, restaurants, and cafes remained open throughout the pandemic, social distancing restrictions were imposed in public places—particularly restaurants and bars—and included limits on the number of people and the requirement to wear masks indoors, on public transportation, and in public areas when social distancing is not possible. Sarajevo airport was reopened for traffic of BiH citizens and residents, and the citizens of Croatia, Serbia, and Montenegro were allowed to enter the country. Starting July 16, 2020 BiH borders were further reopened for citizens and residents of EU and Schengen countries with a negative PCR test not older than 48 hours. A new nighttime curfew was, however, reinstated on November 11, 2020 on most businesses as part of new measures to contain a second surge in the coronavirus.

At the beginning of 2021, the BiH continued to see a high number—although declining—of daily COVID-19 cases, and vaccination had not started. Restrictions remained in place and included a curfew on most businesses from 11:00 pm to 5:00 am, limitations on the number of people attending public gatherings, and requirements to wear masks in outdoor and indoor public spaces and on public transportation.

A third wave of the pandemic hit the BiH in March-April before receding in May-June 2021. At end-March curfew restrictions were extended only in FBIH from 9:00 pm to 5:00 am, while the requirement to wear masks outdoors was lifted (except in cases where a two-meter distance could not be achieved) at end-April. The number of confirmed cases surged to a 7-day moving average of about 74 per 100,000 at end-March falling to less than 10 per 100,000 beginning the second half of April. The 7-day moving average of new deaths has declined to less than 1 per 100,000 in mid-May from a peak of around 3.7 per 100,000 the first week of April. On June 28, 2021, for the first time in months, the BiH recorded no COVID-related deaths, a sign of continued improvement. However, the BiH continues to lead Europe by having the highest fatality rate (ratio of cumulative COVID-19 deaths to cumulative new cases) at around 4.7 percent at end-June.

Travel restrictions have been relaxed further since mid-June 2021, allowing people to enter the country with only a negative antigen test (not requiring a negative PCR as in the past), or proof of being fully vaccinated or of having contracted/recovered from COVID-19 within a 14 days—6 months window prior to entry. Restrictions on outdoor and indoor public gatherings have been also eased further since early June in FBIH (June 21 in RS). Requirements to wear masks in indoor public spaces and public transportation remain in place, while lifted outdoors since end-April. Operation of restaurants, clubs, and cafes is still prohibited from midnight to 6 am.

COVID vaccination has improved recently, although lagging the rest of Europe. By mid-June 2021, about nine percent of the population received a first dose of the vaccine and around 5 percent was fully vaccinated through the COVAX, the EU, and direct procurement programs. In addition, a portion of the population received the vaccine in neighboring countries.

Key Policy Responses as of July 1, 2021

Fiscal

• The BiH deployed substantial resources in 2020 to mitigate the adverse effects of COVID-19 and support the economy and the households. These included strong support to the health sector and severely affected firms. The health-sector support packages amounting to KM 223 million (0.7 percent of GDP) covered funding for medical supplies and equipment. Total support to households amounted to KM 603 million (1.8 percent of GDP). Both entities used compensation/solidarity funds to help firms subsidize social security contributions and provide minimum wages to workers in affected sectors. At the entity level, the FBIH provided KM 55 million support to the health sector, KM 180 million support to firms, and KM 256 million support to subnational governments and civil protection. In contrast, RS provided KM 148 million support to the health sector, KM 94 million support to firms, and KM 36 million support to lower level of governments and other public entities. In addition, the FBIH and RS governments established guarantee funds: the FBIH fund amounting to KM100 million and with no expiration date, and the RS fund amounting to KM50 million and set to expire by end-December 2021.

  Fiscal support in response to the pandemic during 2021 is expected to continue, focusing more on supporting the economic recovery and strengthening social protection. COVID-related spending allocations are estimated at KM 625 million (about 1.8 percent of GDP)—of which around KM 252 (about 40 percent) support to firms, KM 50 million (8 percent) support to households, KM 230 million (about 37 percent) transfers to subnational governments, and KM 22 million (4 percent) support from IBIH to entity governments. The pandemic-related budget allocations to the health sector are estimated at only KM 72 million (about 12 percent) during 2021, but these are likely to be revised up because of the third wave and prolonged COVID pandemic crisis.

Monetary and macro-financial

• At the onset of the pandemic, banking agencies have adopted a six-month loan repayment moratoria for restructuring credit arrangements for individuals and legal entities that were severely affected by the COVID-19 pandemic. The application of the aforementioned moratoria—which was initially set to expire on December 31, 2020—has been extended by six months to June 2021. Banking Agencies asked banks to closely monitor portfolio exposures, in particular to clients affected by COVID-19. Banks have been also required to consider additional customer relief, including reviewing current fees for services and avoiding charging fees to handle exposure modifications. Further, a temporarily suspension of dividends or bonuses was applied to all banks, although the restriction on bonuses was relaxed at end-2020.

Exchange rate and balance of payments

• No measures.

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Botswana

Background. Botswana recorded its first case on March 31, 2020. The government declared a state of emergency on April 2, 2020, and has adopted a list of containment measures, including social distancing and travel bans. The government has lifted some restrictions on May 22 after 7 weeks of lockdown. In June 2020, the country has recorded a spike in cases, resulting in a partial 2-weeks lockdown of the capital city starting from June 30. Many of the restrictions have been relaxed gradually. However, the state of emergency is further extended from March 31, 2021 to September 30, 2021, along with an extension on curfew and localized lockdowns. On the economic front, diamond sales, and tourism and travel activities have fallen sharply, and lockdowns in neighboring countries have disrupted both regional supply and demand. The parliament has approved the mid-term review of NDP 11 including a 14.5 billion stimulus to support the recovery and facilitate structural transformation. Botswana has made an upfront payment to COVAX, the World Health Organization's vaccine arrangement, to acquire 940,800 vaccines under a two-dose regime, enough to cover about 20 percent of the population. In addition, Botswana has paid US$7.1 million to the African Vaccine Acquisition Task Team (AVATT) to secure more vaccine doses. Botswana started its vaccination campaign on March 26, 2021 after receiving 30,000 vaccine doses donated by India. It has received 102,180,000 doses from the COVAX facility in two consignments ( March and June 2021), and 200,000 Sinopharm vaccines donated by China. The government has secured nearly 2 million doses, including pending shipments of 1.1 million doses of Johnson & Johnson vaccines and 250,000 doses from Moderna, enough to cover the entire 1.6 million adult population.

Key Policy Responses as of June 28, 2021

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. The bank rate was further reduced by 50 basis points on October 8.

  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, collateral constraints for bank borrowing from the BoB extended to include corporate bonds and traded stocks, and electronic payments transaction limits have been raised.

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. The first confirmed case was reported on February 26, 2020, and 18.5 million people have been infected (9 percent of the population). The case fatality rate is 2.8 percent. The pandemic reached a first peak in mid-August and had steadily receded through early November. However, an acute second wave led the number of daily cases and deaths to new highs in April 2021. ICU vacancies fell below 20 percent in nearly all states during March-April, prompting renewed lockdown measures. Case numbers remain close to peak but fatalities are steadily declining as vaccination advances. There are no barriers to entry in Brazil by air travel but a negative PCR test is required. Vaccination has started in mid-January and has reached nearly half of the adult population (16 percent fully vaccinated).

Key Policy Responses as of June 30, 2021

Fiscal

• To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures in 2020 adding up to 12 percent of GDP, of which the direct impact on the primary deficit stood 7.2 percent of GDP. Congress declared a state of “public calamity” at the onset of the pandemic, 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 were 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 included the expansion of heath spending, temporary income support to vulnerable households – cash transfers to informal and low-income workers (Emergency Aid program), bringing forward the 13th pension payment to retirees, expanding the Bolsa Familia program with the inclusion of over 1 million more beneficiaries, and advance payments of salary bonuses to low income workers –, employment support (partial compensation to furloughed workers, as well as temporary tax breaks), 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. Public banks expanded credit lines for businesses and households, with a focus on supporting working capital (credit lines add up to 4.5 percent of GDP), and the government has backed over 1 percent of GDP in credit lines to SMEs and micro-businesses to cover payroll costs, working capital and investment. Most measures have expired in end 2020, but the Emergency Aid, employment support program, and credit support to SMEs were renewed in the second quarter of 2021.

Monetary and macro-financial

• The central bank lowered the policy rate (SELIC) by 225bps from mid-February to August 2020, to the historical low of 2 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) were also implemented. The reserve requirement was reduced from 25 to 17, on top of a reduction of 6 bps in early March 2020, and the remuneration on reserve requirements on savings accounts was lowered to encourage lending. The central bank also opened a facility to provide loans to financial institutions backed by private corporate bonds as collateral, changed capital requirements for small financial institutions, and allowed banks to reduce provisions for contingent liabilities provided the funds are lent to SMEs. In addition, the Fed has arranged to provide up to US$60 billion to the central bank through a swap facility that remains in place. Most liquidity support measures were withdrawn in 2021, and the SELIC rate hiked to 4.25% by June.

Exchange rate and balance of payments

• The BRL/USD exchange rate depreciated by about 40 percent between mid-February and end 2020, and has remained volatile since. The central bank intervened various times in the foreign exchange market through the crisis (both with spot and derivative contracts sales), by a total of 44.5 USD billion (about 12 percent of gross reserves) until end-2020. Since then, intervention amounted to 20 USD billion in net terms. The central bank also resumed repo operations of Brazilian sovereign bonds denominated in US dollars in 2020, having released US$9 billion into the money market.

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Brunei Darussalam

Background. Brunei Darussalam reported its first confirmed case of COVID-19 on March 9, 2020. Since the outbreak, the authorities have prioritized policy measures to contain the pandemic, while rolling out economic relief packages to mitigate the impact on vulnerable sectors and support economic activities. Continuing testing/tracking of cases has enabled early isolation and treatment, with significant resources being channeled to the health sector. To meet the increasing needs of COVID-19 tests, an auxiliary virology laboratory has been constructed, which commenced operations on April 1. By early May, the number of confirmed cases has stabilized, allowing the authorities to gradually implement COVID-19 de-escalation measures. A contact-tracing app (“BruHealth”) has also been widely implemented, which is a necessary pre-condition for re-opening, in order to minimize the risk of a “second wave”. Despite the impact of containment measures on domestic demand in the first half of the year, the economy showed good performance with real GDP growth of positive 1.2 percent in 2020 due to an exceptional pickup in downstream activities.

Reopening of the economy. With the pandemic broadly under control, Brunei started relaxing COVID-19 restrictions since May 16, in phases. Since the re-opening, the total number of cases have remained largely stable. Confirmed new infections are limited to imported cases, with no local transmissions. Travel restrictions have also been gradually relaxed, where Brunei has established a reciprocal green lane with Singapore for short-term business and official trips effective September 1—marking the country's first steps to re-establishing international travel. From September 15, foreigners are allowed to enter Brunei for essential travels (official business, education and health purposes). All inbound visitors will be required to undergo a minimum 2-14 days self-isolation period, depending on risk categories of the countries the travelers are from. The ministry of health prepared the National Vaccination Program with 3 phases (phase 1: front liners, students studying abroad and seniors aged 60 and above, phase 2: teachers, staff at child care centers and adults at high risks, phase 3: the public aged 18 and above) and commenced phase 1 on April 3, 2021. 52,775 people (12.7 percent of total population) have been vaccinated by May 29.

Key Policy Responses as of June 3, 2021

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 (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 (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). The deferment measures are effective from date of application approval until March 31, 2021.Coupled with the earlier fiscal assistance, the value of Brunei's Economic Stimulus Package amounted to a total of BND450 million (or 2.7 percent of GDP).

Exchange rate and balance of payments

• No measures.

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Bulgaria

Background. After a mild and well contained first wave of the epidemic Bulgaria has experienced severe second and third waves of infections. The "extraordinary epidemic situation", which replaced the state of emergency introduced in mid-March, has been extended until July 31. Most containment measures have been relaxed. The extraordinary epidemic situation preserves the right of the Health Minister to implement promptly new anti-epidemic measures, if necessary.

The pandemic resulted in a 4.2 percent GDP decline in Bulgaria in 2020, but NSI preliminary data report an increase by 2.5% q/q in Q1 2021. Both consumption (+2.1 percent q/q) and export (+6.7 percent q/q) rebounded in the first three months of the year. Registered unemployment stood at 5.7% in April, dropping by 3.3 percentage points y/y.
As a result of measures to address the health crisis and support the economy, the ESA fiscal deficit increased to 3.4 percent of GDP in 2020. In the first five months of 2021, the budget is expected to record a BGN 0.173 bn deficit on a cash basis compared to a BGN 1.3 bn surplus a year ago. Public finances are positively affected by the gradual recovery in the major tax revenues and a one-off initial concessional payment for Sofia Airport of BGN 660 mn, which offset higher expenditures for employment subsidies, pension supplements, pension increases and miscellaneous expenses in the healthcare sector (for vaccines, personal protection equipment, etc.).

Key Policy Responses as of June 30, 2021

Fiscal

• The key fiscal policy responses cumulative for 2020 and planned for 2021 include:

  Revenue measures: (i) tax relief for households with children with disabilities (BGN 143 mn); (ii) reduced VAT rate of 9 percent for restaurant services, books, baby food, wine, beer, tour operators and tourist trips, gyms and sports facilities and food delivery until end-2021 (BGN 343 mn) and (iii) VAT and customs duties relief for import of key medical supplies (BGN 3 mn).

  Expenditures for household support: (i) bonuses to pensions and minimum pension increase (BGN 1743 mn); (ii) parental support – BGN (180 mn); (iii) active labor market policies (BGN 14 mn); (iv) purchase of vaccines and medicines (BGN 199 mn); (v) tourism vouchers of BGN 210 for the people of the frontline (BGN 10 mn); (vi) increased unemployment benefits and other social support (BGN 344 mn); (vii) BGN 30 mn for remote education; (viii) additional BGN 25 million under "Keep Me" program; (ix) additional BGN 50 million for "Employment for you" program; (x) BGN 23 million under "Parents in Employment" program and BGN 22 million for support with BGN 290 each workplace in the hotel and restaurant sector.

  Expenditures for business support: (i) 60/40 wage subsidy scheme (BGN 1136 mn); (ii) support for artists, who have been hit by the lockdown (BGN 5 mn); (iii) tourism support (BGN 62 mn) and (iv) agricultural producers support (BGN 85 mn).

  Expenditures in the healthcare sector and public administration: (i) provision of PPA and other equipment to the state administration (BGN 35 mn); (ii) support of personnel on the frontline of the fight with COVID-19 (BGN 192 mn); (iii) additional financing of medical activities (BGN 748 mn); (iv) provision of PPA and other equipment to the medical establishments (BGN 130 mn); (v) subsidies and capital transfers to medical establishments (BGN 70 mn); (vi) COVID-related expenditures in education (BGN 38 mn) and (vii) additional remuneration in healthcare (BGN 287 mn).

  National co-financing of EU-funded measures at the amount of BGN 168 mn.

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) and capitalization of 2020 profit (about 0.68 percent of 2020 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 no later than December 2021 with deadline for requests set at end-March 2021; (v) 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 has put forward liquidity support measures, utilizing national and EU resources. 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, self-employed, and seasonal workers (up to BGN 6900, with extended deadline for applications up to end-June 2021). The latter have recently been redesigned in order to increase access to the measure; (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. The first confirmed COVID-19 case was reported in early March 2020. The public health impact has been limited, with over 13,000 cases and total deaths at 167 as of June 2. The authorities maintain most public health containment and mitigation measures, following the second wave of the outbreak between December 2020 and February 2021. Since then, the 7-day average of new daily cases has declined to 2 as of June 2.

Reopening of the economy. Most restrictions enforced during the first wave of the outbreak have been lifted. Following the second wave between December and February, the authorities continue to enforce some measures, including social distancing guidelines and mandatory use of masks, among other basic measures. A national vaccination plan has been adopted which aims to immunize at least 20 percent of the population under the COVAX initiative.

Key Policy Responses as of June 3, 2021

Fiscal

• The Parliament on July 9, 2020 approved the revised 2020 budget which seeks to address the socio-economic impacts of COVID-19. Several measures have been taken under the revised budget, including: (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.

  The emergency response plan, initially prepared for March – June 2020, was updated to cover both health-related measures and measures to support the social and economic recovery. This includes a partial guarantee fund, which the government expects to leverage to help the financial sector inject fresh credit into the economy during 2020-2021 in support of private businesses in hard-hit sectors.

  The revised 2020 budget widens the overall fiscal deficit to 5.3 percent of GDP, reflecting the impact of Covid19 especially on revenue collection, which is now projected to be 2.6 percent of GDP lower relative to the original budget. On the expenditure side, the authorities made room for COVID19-related health and transfers expenditures by keeping the wage bill unchanged, cancelling non-priority spending on goods and services and reducing transfers. The widening of the deficit is fully financed by additional external budget support.

  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. In April 2020, 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. In June 2020, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO 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 solvent customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 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 in April 2020 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 initially issued by Burkina Faso was equivalent to 0.8 percent of GDP, with some rollover possibility through such special T-Bills benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. The BCEAO has launched in February 2021 a special 6-month refinancing window at the floor of the interest rate corridor to help WAEMU governments meet Covid-19 recovery funding needs. Through this special window banks shall be able to refinance all bonds with maturity of 3 years or more governments currently plan to issue on the regional financial market in 2021. The amount of bonds eligible to the new refinancing window for Burkina Faso is equivalent to 5.9 percent of projected 2021 GDP. The new refinancing window is expected to remain in place for the term of the eligible bonds issued in 2021. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basel II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) created a CFAF 100 billion window to extend 5 to 7 year refinancing of banks's credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO encouraged WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid19 crisis on asset quality.

Exchange rate and balance of payments

• No measures.

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Burundi

Background. The first confirmed COVID-19 case was reported on April 1, 2020. Two large-scale testing campaigns were conducted during July 6- October 6, 2020 and January 11-February 11, 2021. Testing at the border gives rise to Covid-19 certificates, which costs US$ 100 for foreign incoming travelers, US 30 for nationals and BIF 60,000 (about US$ 30) for all outgoing travelers. The authorities have not yet announced any vaccination strategy but are allowing international organizations and diplomatic representations to vaccinate their staff.

Measures taken to minimize the risk of the pandemic spreading 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. The authorities subsidized the price of soap during June-September 2020 at a cost of BIF 4.7 billion (about US$ 2.4 million) and are subsidizing water for standpipes, up to 50 percent. Covid-19 certificates are required for travelers entering or leaving the country. The Melchior Ndadaye International Airport was reopened on November 8, 2020 with some restrictions. Quarantine is no longer required for incoming travelers at any open entry point. However, Covid-19 tests are mandatory for all incoming and outgoing travelers. Results are sent to the traveler within 12 to 24 hours. Land and sea borders have been reopened at selected entry points. They remained open for merchandise.

Burundi’s health care system is extremely weak. The authorities’ pandemic response plan aims to strengthen the health care system, the social safety net, and parts of the road network to facilitate access to sick people. To strengthen the health system, the authorities intend to intensify the communication on the risks of COVID-19 and enhancing the screening capacity, the equipment of hospitals and health centers, and the stock of drugs. They have also recruited at least one doctor and one nurse in each of the 116 municipalities other than the capital Bujumbura. IMF staff estimates that the cost of the response plan could reach at least US$150 million (4.9 percent of GDP) cumulatively over 2020 and 2021. With the exception of the US$5 million from the World Bank, the authorities currently do not have cash buffers or credit sources that allow them to make these expenditures. They have already contacted and will continue to contact their development partners to request additional support for their pandemic response plan. A technical committee for the response to the COVID-19 pandemic has been set up by decree. A single fiduciary fund to respond to the Covid-19 pandemic has also been set up for any partner who wishes to support the Government. For this purpose, a related account has been opened at the Bank of the Republic of Burundi.

Key Policy Responses as of July 1, 2021

Fiscal

• In addition to spending on the pandemic response plan, the authorities are providing support to hard-hit sectors such as the transport and hotel sectors. The cost of this plan will depend on the evolution of the pandemic, and they intend to meet it largely by reprioritizing the existing budget, mobilizing donor support and borrowing.

  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 government services such as those provided at the Melchior Ndadaye International Airport continue to be paid by the government.

Monetary and macro-financial

• The authorities continue to monitor the impact of the COVID-19 shock on loan performance as part of their efforts to protect financial stability. In particular, they are working with banks to encourage, on a targeted and time-bound basis, an extension of loan maturities to borrowers in hard-hit sectors, applying existing regulation in a flexible manner. They have also asked commercial banks to reduce bank fees for electronic transfers, and mobile money transfers in order to reduce the need to go to banks.

Exchange rate and balance of payments

• No measure has been officially announced. Though illegal, there is a parallel foreign exchange market with a parallel market exchange rate that is substantially more depreciated than the official exchange rate.

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Cabo Verde

Background. The first confirmed COVID-19 case was reported on March 20, 2020. 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. Commercial air and passenger traffic resumed on October 12.

Reopening of the economy. On May 29, 2020, the government lifted the State of Emergency for all islands. In line with it, the Prime Minister announced a deconfinement plan that includes : (i) resumption of inter-island air travel on July 15, (ii) resumption of maritime connections for passenger transport, originating and destinating to Boa Vista island on June 1 and to Santiago island on July 15, (iv) restarting of cultural and sport events on October 1, (v) reopening of restaurants with regular hours on June 1, (vi) increased rapid tests in Praia’s laboratories, (vii) creation of an incentive framework to support companies to adapt their activity to the new requirements and standards of the deconfinement plan, and (viii) implementation of a digital platform for tracking positive cases of COVID-19. Commercial air and passenger traffic resumed on October 12, 2020. In response to the recent surge in cases the authorities on April 30, 2021 declared a state of emergency for 30 days in all the islands except Brava along with the reinforcement of existing measures and protocols.

Key Policy Responses as of June 30, 2021

Fiscal

• The authorities have reprioritized spending through a revised budget, which is currently in parliament. 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 2020, 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, 2020, 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 moratorium on loan repayment was extended to December 31, 2020 and will now remain in place until the end of the third quarter of 2021.

  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 first confirmed COVID-19 case was reported on January 27, 2020. All foreign arrivals into Cambodia need to obtain a visa at a Cambodian diplomatic mission abroad, a health certificate before departure to Cambodia, and a deposit of USD2000 (to cover potential health care costs). All arrivals are required to be tested and quarantined. Returning migrant workers are to self-isolate for 14 days. On April 27, 2021, the government implemented temporarily ban on Indian nationals and all inbound passengers traveling through India from entering Cambodia due to B1617 variant of COVID-19. Domestic travel restrictions were lifted on April 16, 2020. Massage parlors, sports arenas, fitness centers, and public transports have been closed since last March. Public events and gathering (including religious gathering and concerts) have been banned. Since June, casinos, cinemas, museums and theaters varyingly reopened. Entertainment venues (e.g. karaoke and clubs) reopened as restaurants since July; schools reopened in phases starting from last September. Cambodia was hit by the first large-scale local transmission late February this year (so called “Feb 20 incident”) and schools/cinemas/museums/art shows/gyms/internet cafes in Phnom Penh and Takhmao city of Kandal province have been closed. Localized movement restrictions and mask mandate have been imposed. Phnom Penh and surrounding area has been placed under lockdown since mid-April (to be lifted on May 6). As of May 5, 2021, the number of confirmed cases stood at 16,971 and 110 deaths. Vaccination has been underway since early February, with more than 1.5 mil people vaccinated so far.

Key Policy Responses as of May 5, 2021

Fiscal

• A package worth USD 60 mn has been allocated for virus testing, containment, and treatment. Social assistance of more than USD 760 mn is being implemented, including USD 502 mn for a new monthly cash transfer program for poor and vulnerable households and USD 260 mn cash for a work program. Measures to target poorer households are being scaled up with more frequent updates of IDPoor, especially because of the extent of informal work and returned migrant workers. USD 123 mn has been allocated for wage subsidies and skill training program for suspended workers/employees in the garments and tourism industries.

  Other spending rationalized in FY2020, yielding savings of roughly USD 900 mn, of which around USD 500 mn was from capital spending. Several tax-relief measures, worth around USD 120 mn, were introduced, plus other foregone revenue of almost USD 13 mn. The government allocated USD 200 mn to provide credit guarantee for business under the Business Recovery Guarantee Scheme, , in addition to packages issued to SMEs in manufacturing sector (USD 50mn) and SMEs in agricultural sector (USD 80mn). USD 270 mn has been reserved as additional financing facility for these financing schemes. In March 2021, the government has extended until the end of June this year for: i) allowance subsidy for garment and tourism sectors; ii) tax exemption for tourism and aviation sector; and iii) cash relief program for poor and vulnerable families.

Monetary and macro-financial

• The National Bank of Cambodia (NBC) implemented four measures to improve liquidity in the banking system early in the crisis: (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 NBC both for local (Riel) and foreign currency (USD). In February 2021, NBC announced to keep the reserve requirement on hold at 7 percent both for Riel and USD until the end of June 2021.

  NBC has also issued guidelines to allow financial institutions for loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics) temporarily by the end of this year. In November 2020, NBC announced to extend the forbearance by another 6 months to the end-June 2021, taking account of the adverse impacts from the recent nation-wide flooding in addition to the COVID-19 shock. In February 2021, NBC called for banks and financial institutions to suspend dividend payments for 2020.

Exchange rate and balance of payments

• Cambodia continues to maintain managed floating system. Suspension of white rice, paddy and fish exports have been lifted.

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Cameroon

Background. The first cases were reported on March 6. Cameroon continues to record daily increases in the number of COVID-19. Following a reduction in the infection rate from end-July to end-September 2020, CMR is experienced a resurgence from late 2020 to end March 2021. While the rate of infection remains high, it seems to be abating.

In response to the first wave, on March 17, 2020, the government announced a package of 13 containment measures 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, and compliance with hygiene measures recommended by the WHO.

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 an awareness campaign, among others. In October 2020, the Ministry of Public Health reinforced COVID-19 screenings for all travelers landing in Cameroon, after a network of fake negative COVID-19 tests sold to travelers was dismantled.

Since July 2020, the authorities have been following a decentralized approach, based on Cameroon's health districts and regions, and aimed at strengthening the monitoring of cases and strengthening the continuity of the health services and systems. The country has developed a national vaccine readiness and deployment plan. The authorities have avoided imposing new confinement measures in response to the recent spike in infection rates and have instead intensified calls for stricter respect of sanitary barrier measures and stepped up testing. As of May 31, 2021, a total of 75,215 vaccine doses had been administered.

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. Primary and secondary school students returned to school on June 1, 2020. Currently, the economy is relatively open, with government offices, businesses, and schools operating normally.

Key Policy Responses as of June 3, 2021

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 installments 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.

  The authorities’ three-year preparedness and response plan presents a total financing cost close to US$ 825 million, of which about US$750 million have been identified or made available. The plan includes five pillars, namely: (i) health strategy to prevent the spread of the pandemic and take care of infected persons (US$101 million); (ii) mitigation of economic and financial repercussions of the pandemic (US$646 million); (iii) supply of essential products (US$9.5 million); (iv) local development of innovative solutions (US$16.5 million); and (v) social resilience to alleviate the repercussions of the COVID-19 pandemic on vulnerable people and households (US$52 million). These pillars include tax relief to affected businesses estimated at about US$200 million. In addition, the government has continued efforts to extend the Unified Social Register, which covers socially vulnerable persons.

  A special COVID-19 account, dedicated to financing the national response plan to the pandemic, has been created and is governed by a circular issued by the Minister of Finance. The circular specifies the modalities of organization, operation, and monitoring-evaluation mechanisms of the account. For 2020, the Revised Finance Law enacted in June 2020 allocates about US$310 million to the special COVID-19 account financed at 76 percent by resources released by debt service suspension and external budgetary support. The 2021 Finance Law enacted in December 2020 allocates close to US$185 million to the special COVID-19 account.

  Cameroon has adopted a national vaccine readiness and deployment plan, prepared under the guidance of the UN country team. The total cost for the implementation of the plan is estimated at $138 million in 2021, to cover around 5 million people (20 percent of Cameroon's population). A local vaccine deployment team has been set up and in-country logistic arrangements are in place. The country has received 200,000 doses of the SINOPHARM vaccine and has received around half of the expected 864,000 doses of the AstraZeneca/Oxford (SIII) vaccine. Around 104,000 doses of the vaccine have been administered, around 0.2% of the country's population. The authorities intend to strengthen communication to promote community support for COVID-19 vaccination in the coming weeks.

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 BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter, which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.

  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. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

• No measures.

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Canada

Background. Canada has experienced more than 1.4 million COVID-19 cases and more than 26,200 deaths as of end-June 2021. Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus. The rate of new cases during the first wave peaked in early May 2020. The second wave of the pandemic peaked in early January 2021. The third wave started in early March but is subsiding, in part due to increased vaccination and re-instated mobility restrictions. These restrictions had been mostly lifted by early June in response to a decline in COVID-19 infections.

Reopening of the economy. On April 28, 2020, Prime Minister Trudeau released a joint statement with premiers across Canada on their shared public health approach to support restarting the economy; all provinces began to implement detailed, data-driven plans to reopen in May 2020. The surge in new virus cases that began in September 2020 prompted a tightening of restrictions in many parts of the country. Since end-February 2021, the pandemic restrictions have been gradually unrolled, again, only to be tightened in some regions due to the third wave. After an initially slow pace of vaccination mainly due to supply bottlenecks, Canada has been making impressive progress in vaccinating the population. As of mid-June, over 65 percent of Canadians received at least one dose of a COVID-19 vaccine.

Key Policy Responses as of July 1, 2021

Fiscal

• Key spending and tax measures (19.7 percent of GDP, $435.2 billion CAD) include: i) $60.3 billion (2.7 percent of GDP) to the health system to support increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities; ii) about $290 billion (13.2 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 (3.9 percent of GDP) in liquidity support through tax deferrals. More information here.

  On April 19, 2021 the Federal government introduced its 2021 budget, outlining the details of the "build back better" plan. Details available :

Monetary and macro-financial

• Key measures adopted by the Bank of Canada include: i) reducing the overnight policy rate by 150 bps in March 2020 (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. Bank of Canada put out "forward guidance", communicating that it would not increase the policy interest rate until the recovery is well on the way and inflation is sustainably at the Bank's target level.

  Other measures in the financial sector include: i) the Office of Superintendent of Financial Institutions (OSFI) 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 $95 billion in credit facilities (including $13.8 billion in forgivable loans) to lend to firms under stress, with ; and iv) Farm Credit Canada will receive support from the federal government that will allow for an additional $5.2 billion in lending capacity to producers, agribusinesses, and food processors.

  In October 2020, Bank of Canada rolled back some of the liquidity measures (Bankers' Acceptance Purchase Facility, Canada Mortgage Bond Purchase Program, and Provincial Money Market Purchase Program), deeming them no longer necessary. On March 23, 2021, reflecting the improved general functioning of Canadian financial markets, the Bank of Canada announced discontinuation of the Commercial Paper Purchase Program (CPPP), the Provincial Bond Purchase Program (PBPP), and the Corporate Bond Purchase Program (CBPP), effective in April and late May 2021. Further, the bi-weekly Term Repo operations and the Contingent Term Repo Facility (CTRF) were suspended effective May 10, 2021, and April 6, 2021, respectively.

  In April 2021, the Bank of Canada decided to adjust its purchases of Government of Canada bonds to a target of $3 billion weekly net, down from a minimum of $4 billion per week, in response to the faster-than-expected pace of the recovery.

  Housing prices in Canada have been growing rapidly in 2020 and in 2021. To ensure that households do not borrow in excess of their debt service capacity, OSFI introduced a "mortgage stress test". Effective June 1, 2021, the minimum qualifying rate for uninsured mortgages is the greater of: (i) the mortgage contract rate + 2%, or (ii) 5.25%. Qualifying households then sign mortgage contracts at the rate offered by the lender.

  In addition, on June 17, 2021, OSFI announced that, effective October 31, 2021, the Domestic Stability Buffer would be increased to 2.5 percent of total risk-weighted assets, from its current level of 1 percent.

Exchange rate and balance of payments

• No measures.

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Central African Republic

Background. The first case has been identified in mid-March 2020. After being contained during the second half of 2020, the incidence of the pandemic has increased rapidly since the beginning of the year. To help contain the pandemic, the authorities 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. They have also been working on a more exhaustive plan, which, in addition to the strengthening of the health sector, would provide financial support to the most vulnerable households and companies.

Reopening of the Economy. As the number of new cases has been declining, the president has announced some reopening measures to enable the restart of the economic activity in July 2020. Restaurants, bars and places of worship have been allowed to re-open. Moreover, international travels have resumed gradually, and most travel restrictions have been lifted, and the quarantine for people arriving from abroad has been reduced from 21 to 14 days. This reopening is conditional on following some measures such as frequent hand washing and social distancing. However, self-quarantine for confirmed cases remain in place.

Vaccination strategy. 360 000 AstraZeneca doses of vaccines, enough to cover 180 000 people, have been allocated to CAR under the COVAX program. They will be given to health workers and elderly in priority.

Key Policy Responses as of July 01, 2021

Fiscal

• The response plan for the health sector was prepared in strong collaboration with the WHO, with an estimated cost of 27 billion of FCFA (1.9 percent of GDP). It 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. In addition to the health sector plan, the authorities are envisaging providing financial support to the most vulnerable households and companies, while increasing access to water. Other specific fiscal measures to help the private sector, such as tax relief or suspension and easing of public procurement procedures, are also being considered. The government has requested the help of its development partners to finance this plan, through grants and loans. A draft supplementary budget law has been adopted and includes around 44 billion of CFAF of donors additional support related to Covid-19. The additional spending related to Covid-19 amounts for about 15 billion of CFAF, mainly broken down as 12 billion for prevention and management of the pandemic, 0.5 billion as support to vulnerable household and 2.6 billion for the support to the private sector. Preliminary data indicate that about 11.5 were actually spent in 2020.

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 BEAC had also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-June 2021. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase of the program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. This program will expire at end-August 2021.The BEAC also decided to resume liquidity injections with longer maturity, of up to one year. At its June 2021 MPC meeting, BEAC decided to adapt liquidity management and start offering long term liquidity absorption operations (one-month maturity) to over liquid banks to help improve monetary policy transmission and the development of the interbank market

  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. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

• No measures.

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Chad

Background. The first confirmed COVID-19 case was reported on March 19, 2020. As of June 30th, 2021, the total number of COVID-cases is 4,951 (of which 4,777 recoveries, 174 deaths and 3 patients under treatment). The number of new cases started declining in May 2021, and no new death cases recorded since June 4, 2021. The initial surge in December prompted the authorities to temporarily reinstate some of the preventive measures that were relaxed in May 2020. As the number of new COVID cases dropped since mid-January, the authorities decided to relax these measures on January 20, 2021 (mentioned below), on gradual basis and considering the compliance of the remaining preventive measures. The state of medical emergency continues since its extension on October 17, 2020, for six months. Wearing a face mask remains mandatory in public places starting May 7, 2020. For the vaccination against COVID-19, the authorities adopted a national plan which aims to vaccinate about one third of the population in four phases. The first three phases, covered by the COVAX facility, are expected to be completed in 2021.

Reopening of the economy and additional containment measures. On January 20, 2021, the authorities decided to re-open gradually: (i) travel flights were allowed to resumed from January 14, 2021; (ii) land borders reopened for authorized missions; (iii) schools and universities reopened; (iv) worship places opened for Friday prayers and Sunday masses; (v) public transportation is allowed; (vi) markets and shops were allowed to reopen; (vii) reopening of bars and restaurants for carry out; and (viii) no limit on gatherings (previously set at 50), however, preventive and social distancing measures remain mandatory. The curfew (9:00 PM to 5:00 AM), which was imposed and renewed (every two weeks) since April 2020, has been discontinued on March 9, 2021.

Key Policy Responses as of July 1, 2021

Fiscal

• Financing for COVID-19 health-related expenditures are estimated at CFAF 42 billion (0.8 percent of non-oil GDP), which are being implemented under a national contingency plan. 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 and the hiring of additional health workers is in process. The authorities have also decided on a package of fiscal measures to help businesses weather the shock: (i) for SMEs, the authorities will, among other things, reduce by 50 percent the business license fees and the presumptive tax for 2020, (ii) tax breaks such as carryforward losses and delays in tax payments will also be examined on a case-by-case basis, (iii) clearance of domestic arears of about CFAF 110 billion owed to suppliers, (iv) a subsidy planned to the agricultural sector (0.3 percent of non-oil GDP), and (v) the simplification of the import process for food and necessity items, including health equipment, and tax exemptions for these items. Measures were also taken to alleviate the hardship on households, including (i) temporary suspension of payments of electricity and water bills for the lifeline consumption, as well as (ii) Replenishment of the national food distribution program (Office National de Sécurité Alimentaire, ONASA) (0.5 percent of non-oil GDP), (iii) the National Assembly adopted a new law on May 11, 2020, that establishes a Youth Entrepreneurship Fund (0.6 percent of non-oil GDP), (iv) payment of 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), and (v) the national assembly adopted the law on September 26, 2020, that establishes the solidarity fund for the vulnerable population amounting to CFAF 100 billion. The 2020 supplementary budget, which includes the COVID-19 measures, was enacted by the Parliament in August 2020. The 2021 budget introduced other measures to help companies overcome COVID-19 repercussions including exonerations of employer's charges for the recruitment of young graduates, exemption from VAT on many items, particularly on equipment and other agricultural related ingredients, and reduction of charges for enterprises that work in the hotels' business.

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. BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end- June 2021. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. This program will expire at end-August 2021. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year. At its June 2021 MPC meeting, BEAC decided to adapt liquidity management and start offering long term liquidity absorption operations (one-month maturity) to over liquid banks to help improve monetary policy transmission and the development of the interbank market.

  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 regards to dividend distribution. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

• No measures.

Links

• Launching of the Youth Entrepreneurship Fund

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Chile

Chile reported its first confirmed COVID-19 case on March 3, 2020. In response to COVID-19, the authorities have implemented a range of measures, including declaration of state of catastrophe (extended through June 2021), 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 came only a few months after the social unrest that started in mid-October 2019.

Reopening the economy. The government has implemented a step-by-step plan for reopening the economy and phasing out quarantine measures. There are 5 steps, from quarantine to advanced opening, which municipalities will transition through in accordance to several criteria, such as the reproduction rate of the virus, hospital bed occupancy and projected rate of regional active cases. Chile remains under a State of Emergency through September 2021 and is under a daily nationwide curfew from 10:00 pm to 5:00 am. The government has received doses of vaccines from Pfizer-BioNTech, Sinovac, AstraZeneca-Oxford and CanSino to vaccinate its population. Vaccinations started end-December, and as of end-June 2021, about 10 million people have received the second dose, over 60 percent of the target population.

Key Policy Responses as of June 28, 2021

Fiscal

• On March 19,2020 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 2020, 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. On May 17, they announced a program to distribute 2.5 million food baskets to those in need, with an expected fiscal cost of US$100 million. On June 14, the authorities announced an additional fiscal package in the total amount of US$12 billion over the next 24 months, which encompasses: (i) new tax measures to stimulate the economy and boost the liquidity of SMEs, including a temporary reduction of the CIT rate and allowing for instantaneous investment depreciation (announced on July 2); (ii) a program of about US$1.5 billion to support the middle class suffering severe income losses, including via soft loans from the treasury, mortgage payment delays and subsidies for rentals (announced on July 5); and (iii) a proposal to strengthen the middle-class protection plan, with direct transfers of about US$635 to middle-class workers with severe income losses (announced on July 14). On July 23, Congress approved legislation that allowed the first withdrawal of pension funds, with a second withdrawal approved on December 3 and a third withdrawal approved at end-April 2021. On March 22, 2021 existing measures for the middle class and the most vulnerable were expanded by 2 percent of GDP, to alleviate the fallout from tightened mobility restrictions to curb rapidly rising infections. On May 27, 2021 the middle-class bonus was extended until August and more vulnerable households became eligible (with a cost of 3.3 percent of GDP). A one-time bonus for small SMEs was also introduced (with a cost of 0.7 percent of GDP).

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). On June 16, the Central Bank announced additional measures to support liquidity and credit through: (i) an additional funding-for-lending facility in the total amount of US$16 billion effective for eight months; and (ii) a special asset purchase program in the total amount of US$8 billion over a six-month period. 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 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). On May 29, the IMF approved a two-year Flexible Credit Line (FCL) Arrangement for Chile in an amount equivalent to SDR 17.443 billion (about US$ 23.93 billion). On June 24, the Central Bank of Chile announced that it obtained access to the Temporary Foreign and International Monetary Authorities (FIMA) Repo Facility.

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The Kingdom of the Netherlands—Curaçao

Background. Following the first COVID-19 case in March 2020, Prime Minister Rhuggenaath declared the state of health emergency and announced travel restrictions, quickly followed by a border closure. As the number of cases increased, the government introduced a curfew followed by a full lockdown in late March 2020. These measures helped to contain the spread of COVID-19 during the first half of 2020, although the economic activity came to a halt. Following a gradual phasing out of the domestic restrictions, the number of COVID-19 infections increased sharply between late August and mid-December 2020, necessitating tightening of restrictions including a curfew, capping gatherings in various establishments at 50 percent of capacity and banning of alcohol in bars and restaurants. On December 11, the government has declared a state of emergency for 90 days. These measures reduced the number of active COVID-19 cases substantially by end-January. Nevertheless, in March-April 2021, Curaçao faced another wave of new COVID-19 cases, partly due to the rapid spread of the more contagious British variant, which raised COVID-19 fatalities to 126. The new COVID-19 cases subsided by late April due to the measures and the vaccination program.

Reopening of the economy. The authorities have gradually reopened the borders by allowing travel from several low and medium risk countries since mid-June 2020. Stayover tourist arrivals showed a robust recovery in July-November 2020. However, new waves of COVID-19 reversed the recovery. In the first 5 months of 2021, stayover arrivals were 82 percent lower than in the same period of 2019. The domestic restrictions have been adjusted multiple times in response to COVID-19 developments. Following a spike of COVID-19 cases in March/April 2021, the government announced various mobility restrictions including a longer curfew (7 pm to 4:30 am). On May 4, the curfew hours were shortened to 9 pm-4:30 am together with partial easing of other restrictions.

Vaccinations started on February 25, 2021 using Pfizer/BioNTech vaccine supplied by the Netherlands. As of late May 2021, about 89 thousand (57 percent of population) received at least their first dose, and 78 thousand (50 percent of population) have been fully vaccinated.
The success of the vaccination campaign has led to a sharp decline in the number of active cases. As a result, the Netherlands has changed Curaçao's risk classification from orange to yellow which should help the recovery of the tourism sector.

Key Policy Responses as of July 1, 2021

Fiscal

• The first package (Alivio 1) was introduced in March. It included tax measures of NAf 33 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. The Netherlands provided financing of NAf 381 million (8½ percent of GDP) to support Alivio 2 in the second quarter. Given available financing, measures implemented during April-September period included the payroll subsidies, support for the self-employed, job loss benefits and food vouchers. On November 2, Curaçao and the Netherlands reached an agreement on the establishment of the Caribbean Entity for Reform and Development and a landspakket (country package) of reform measures necessary to improve Curaçao’s financial, economic and administrative resilience. On November 24, Curaçao received an additional tranche of liquidity support in the amount of NAf 181 million (4.1 percent of GDP), increasing total financing in 2020 to 15.1 percent of GDP. The agreement also envisages targeted support for several areas such as education and border control.

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. On early January 2020, Chinese authorities determined that a pneumonia outbreak in Wuhan was caused by a novel coronavirus. 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 2020 Q1.

Reopening of the economy. Starting in mid-February 2020, 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 new hotspots, but have been lifted subsequently. Testing and individualized health QR codes are used to gauge the path of the virus and contain outbreaks. The authorities encouraged less inter-city travel during the 2021 lunar new year holiday, while imposing strict testing and quarantine requirements. Following the early-2020 lockdown, the economy embarked on a V-shaped recovery yielding positive annual growth of 2.3 percent in 2020. The first quarter 2021 saw lower sequential growth more in line with China's pre-crisis pace, with the strong year-on-year growth number of 18.3 percent mostly reflecting the base effect from the large contraction in 2020 Q1.

Vaccine. China has granted conditional market approvals for four COVID-19 vaccines, including three inactivated vaccines requiring 2 shots and an adenoviral vector vaccine requiring 1 shot. China also approved three vaccines for emergency use, including one recombinant protein subunit vaccine requiring 3 shots and two inactivated vaccines requiring 2 shots. As of June 29, China had reportedly administered 1,225.73 million doses of COVID-19 vaccines and has achieve the goal of vaccinating 40 percent of China's population by the end of June. China aims to vaccinate 70-80 percent of its population by end-2021/beginning 2022 as it continues to make its vaccines available to other countries.

Key Policy Responses as of July 1, 2021

Fiscal

• An estimated RMB 4.9 trillion (or 4.7 percent of GDP) of discretionary fiscal measures were announced, of which RMB 4.2 trillion is estimated to have been implemented in 2020. 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, and (v) additional public investment. Automatic stabilizers further increase on budget support. The overall public sector support is expected to be higher. For example, support outside the budget includes additional guarantees for SMEs of RMB 400 billion (0.4 percent of GDP) and fee and tariff cuts of over RMB 900 billion (0.9 percent of GDP) for usage of such items as roads, ports, and electricity.

Monetary and macro-financial

• The PBC provided monetary policy support and acted to safeguard financial market stability. Key measures include: (i) liquidity injection 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 (phased out at end-2020) and reduction of their interest rates by 50 bps (re-lending facilities) and 25 bps (re-discounting facility), (iii) reduction of the 7-day and 14-day reverse repo rates by 30 bps, 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 micro- and small-sized enterprises (MSEs), an additional 100 bps for eligible joint-stock banks, and 100 bps for small- and medium-sized banks to support SMEs, (v) reduction of the interest on excess reserves from 72 to 35 bps, (vi) expansion of policy banks' credit line to private firms and MSEs (RMB 350 billion), and (vii) introduction of new instruments to support lending to MSEs, including a zero-interest "funding-for-lending" scheme (RMB 400 billion) to finance 40 percent of local banks' new unsecured loans and incentivizing them to further extend payment holidays for eligible loans by subsidizing 1 percent of loan principles (RMB 40 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 supporting uncollateralized SME loans from local banks, raising the target for large banks’ lending growth to MSEs from 30 percent to 40 percent, and establishing an evaluation system for banks’ lending to MSEs, (ii) delay of loan payments, with the deadline extended to the end of 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. The counter-cyclical adjustment factor in the daily trading band's central parity formation was phased out. The reserve requirement on FX forward was reduced to zero. A ceiling on cross-border financing under the macroprudential assessment framework for financial institutions and enterprises was raised by 25 percent in March, but lowered to the original level for financial institutions in December and for enterprises in January 2021. Restrictions on the investment quota of foreign institutional investors (QFII and RQFII) were removed and new quota for domestic institutional investors were granted. The macroprudential adjustment coefficient for overseas lending by domestic enterprises was increased by two-thirds in January 2021, leading to a higher ceiling. The FX reserve requirement ratio for financial institutions will be raised to 7 percent from 5 percent, effective on June 15.

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Hong Kong Special Administrative Region

Background. Hong Kong SAR reported its first confirmed COVID-19 case on January 23, 2020. Various containment measures remain in place, including (i) requiring mask-wearing in all public places including on public transport with certain exemptions; (ii) implementing a temporary entry ban on Hong Kong SAR non-residents from overseas countries; (iii) reducing and partially suspending cross-border transport and border control point services; (iv) requiring passengers flying from "high-risk" countries to have negative COVID-19 testing results before arriving in Hong Kong SAR; (v) requiring restaurants to apply for a "Leave Home Safe" venue QR code and facilitate the public in recording their visits; (vi) empowering registered doctors to require any person who is clinically suspected to contract COVID-19 to undergo a test; (vii) designating hotels as quarantine-only facilities for inbound travelers and (viii) requiring "high-risk" groups, including everyone in the residential or office units that have a new infection case, to undergo mandatory COVID-19 testing.

Reopening of the economy. As the COVID-19 situation has improved, some social distancing measures have been gradually relaxed after the Lunar New Year in 2021: (i) allowing public gathering up to 4 persons, with an exception to religious gathering subject to certain social distancing requirements; (ii) re-opening sports premises, cinemas, beauty parlors, fitness centers and public entertainment places, subject to certain social distancing requirements; and (iii) allowing schools to fully resume half-day face-to-face classes. The government also introduced the 'vaccine bubble' concept, which (i) provided greater flexibility for dine-in hours and seating requirements, (ii) relaxed restrictions on activities with high exposure to COVID-19 transmission (e.g. bars and pubs, party rooms, nightclubs, etc.), and (iii) allowed lager public gatherings for organized tours, wedding ceremonies and business meetings provided that staffs at the premises, customers, and participants meet the vaccination requirement.
Under the Return2hk scheme, Hong Kong SAR residents returning from the Mainland and Macau SAR can apply for the exemption of the 14-day compulsory quarantine requirement. Amid a stabilizing local epidemic situation and a relatively satisfactory vaccination rate, (i) the quarantine period for those from "low-risk" countries are reduced to 14 days, (ii) quarantine period for fully vaccinated persons with a positive result of serology testing for antibodies is shortened to 7 days for travelers from non-high-risk countries, and (iii) vaccinated senior executives in financial services sector are exempted from the compulsory quarantine arrangements in Hong Kong SAR subject to certain conditions.
However, given growing concerns about new variants of the virus appearing in different countries, the government also adopted a more risk-based approach to the quarantine of travelers arriving in Hong Kong SAR: (i) a designation of several countries (i.e., Brazil, India, Indonesia, Pakistan, the Philippines, Nepal, South Africa, and the United Kingdom) as "extremely high-risk" with a continued suspension of entry for travelers from such locations; and (ii) a suspension of the Return2hk scheme for travelers from some parts of Guangdong Province.

Vaccination progress. The Hong Kong SAR government has procured sufficient COVID-19 vaccines to cover the total population of 7.5 million within 2021. The vaccination program has started and all residents aged 12 or above are now eligible to get vaccine of their choices. As of end-June, about 2.2 million people have received a first shot and about 1.5 million people have completed the vaccination. Accordingly, real GDP rebounded by 5.4 percent (qoq, sa) in 2021Q1 following a contraction of 6.1 percent in 2020.

Key Policy Responses as of July 1, 2021

Fiscal

• Amid the economic recession during the pandemic, the government has announced and implemented fiscal stimulus of 12.2 percent of GDP, with the key measures including (i) heath-related spending to enhance anti-epidemic efforts (HK$28 billion), (ii) cash payout to eligible residents (HK$71 billion), (iii) employment support scheme (HK$91 billion), and (iv) other one-off relief measures through the Anti-epidemic Fund (HK$53 billion). In the FY2021/22 budget announcement, the government plans to provide additional countercyclical support of 3.7 percent of GDP. Key measures include: (i) providing one-off relief measures to households and enterprises (HK$38 billion), (ii) issuing digital consumption vouchers worth of HK$5,000 for each eligible resident in installments (HK$36 billion), and (iii) creating 30,000 temporary jobs (HK$6.6 billion).

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 in 2020, respectively, according to a pre-set formula following the downward shifts in the target range for the US federal funds rate, and has remained at 0.5 percent since July 2020. The jurisdictional countercyclical capital buffer for Hong Kong SAR was reduced further from 2.0 to 1.0 percent on March 16, 2020 and the level of regulatory reserves was cut by half in April 2020 to increase banks' lending capacity. The Hong Kong Monetary Authority (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. The HKMA also eased countercyclical macroprudential measures for mortgage loans on non-residential properties by raising the LTV cap to 50 percent from 40 percent for general cases, effective on August 20, 2020.

  Key measures to provide financial relief include (i) the introduction of low-interest loans for SMEs with 100-percent government guarantee, with a total commitment of HK$70 billion, which was enhanced by increased maximum loan amount and extended repayment period, (ii) enhancing the 80- and 90-percent government guarantee products by raising the maximum loan amount, providing interest subsidy, and extending the eligibility coverage to listed firms, (iii) the introduction of a 100-percent personal loan guarantee scheme for unemployed and self-employed individuals, with a total commitment of HK$15 billion, (iv) pre-approved principal payment holiday for corporates, and (v) 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 54 confirmed COVID-19 cases and no deaths as of June 30, 2021.The government imposed strict containment measures soon after the first case was registered on January 21, 2020, including (i) closure of schools, (ii) 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, 2020, travel restrictions included a temporary entry ban on foreign visitors and foreign non-resident workers, and from March 25, 2020, entry restrictions to visitors from Mainland China, Hong Kong SAR and Taiwan POC, who had traveled overseas in the previous 14 days. Starting on July 15, 2020, all guests entering casino premises must undergo a temperature check and show their green Macao Health Code and a negative COVID-19 nucleic acid tests (NAT) obtained within the last 7 days. For details about current entry restrictions to Macao SAR, please visit
https://www.ssm.gov.mo/apps1/PreventCOVID-19/en.aspx#clg17044.

Reopening of the economy. (i) Eased border restrictions: on May 8, 2020, 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, 2020; starting on May 11, 2020, non-resident workers from Zhuhai are eligible for an exemption from the 14-day medical observation period with certain requirements; starting on August 12, 2020, the 14-day quarantine on Macao SAR residents travelling to Mainland China was lifted as long as the traveler has a negative NAT certificate obtained within the last 7 days and does not have a history of travelling to foreign countries, Hong Kong SAR or Taiwan POC within the last 14 days, excluding foreign nationals living in Macao SAR. (ii) Schools: senior and junior secondary schools resumed classes on May 4 and 11, 2020, respectively; primary school classes resumed on May 25, 2020 (for year levels four to six) and on June 1, 2020 (for year levels one to three). (iii) Businesses: casinos reopened on February 20, 2020. On March 3, 2021, the requirement for a negative COVID-19 NAT certificate to enter Macao casinos was lifted. (iv) Resumption of visit permit application: the issuance of Individual Visit Scheme (IVS) permits and group permits to Macao SAR has been resumed for residents of Zhuhai, Guangdong Province and the rest of Mainland China since August 12, August 26 and September 23, 2020, respectively. Nevertheless, a negative NAT certificate obtained within the last 7 days and a Guangdong Health Code must be presented when entering Macao SAR. (v) Vaccines: On February 9, 2021, Macao launched its priority group vaccination program, with a capacity of 5,000 vaccinations per day, which was opened to the general population on February 22. As of March 3, 2021, 600,000 doses, representing about 40% of a total supply of 1.5 million doses, have arrived in Macao SAR. As of June 18, 2021, a further 10,000 doses arrived in Macao SAR. COVID-19 vaccination is provided free of charge to local residents, non-resident workers, and non-resident students. Vaccination is on a voluntary basis and priority was initially given to vulnerable sectors of the population – frontline workers, workers with high risk of exposure (public transport drivers/workers, handlers of frozen products) and residents who need to travel overseas. As of June 30, 2021, around 235,018 persons (about 34.4 percent of the total population), had been vaccinated, of which 107,030 (about 15.7 percent of the total population), have completed the vaccination with two shots.

Key Policy Responses as of June 30, 2021

Fiscal

• Key fiscal measures in 2021 include (i) an early distribution of cash handouts through the Wealth Partaking Scheme in April to all residents amounting to 7.2 billion patacas, or 3.7 percent of 2020 GDP (with 10,000 patacas per permanent resident, and 6,000 patacas per non-permanent resident) (ii) electronic vouchers to all residents amounting to 5.9 billion patacas, or 3.0 percent of GDP to boost local consumption (each resident would be entitled to a start-up fund of MOP5,000 and a discount grant of MOP3,000), (iii) support to local tourism amounting to 120 million patacas or 0.1 percent of GDP with eligible Macao residents receiving a subsidy of 280 patacas on local tours and 200 patacas on hotel accommodation, (iv) tax-relief and tax-exemption measures amounting to 1.1 billion patacas, or 0.5 percent of GDP (v) upgraded paid occupational training totaling 334 million patacas, or 0.2 percent of GDP (vi) free vaccines, amounting to 420 million patacas, or 0.2 percent of GDP. The 2021 budget provides for an extraordinary injection of 35.7 billion patacas, or 18.4 percent of GDP, from the Fiscal Reserve to counter the government budget deficit.

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, 2020 and 16, by 50 and 64 basis points respectively, reaching 0.86 percent on March 16, 2020. 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 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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Health quarantine requirements and measures for inbound travelers

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Colombia

Background. Colombia confirmed its first COVID-19 case on March 6, 2020. The government declared a state of emergency on March 17, and a quarantine began on March 25. On August 25 the end of the quarantine was announced effective September 1 with some restrictions (consistent with the extension of the health emergency) including gatherings of more than 50 individuals, the operation of bars and land and sea borders will remain close. On Jan 7, 2021, curfews were announced on selected cities where ICU utilization is high. Limited international air travel resumed on September 19. Land and sea borders will remain closed until June 1,2021.

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. Other services, including selected retail segments, were allowed to reopen on June 1, although local jurisdictions (including Bogota) have been slower to ease restrictions.

Key Policy Responses as of July 1, 2021

Fiscal

• A state of emergency decree created a National Emergency Mitigation Fund (FOME), 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 allowed the government to temporarily suspend the fiscal rule in 2020 and 2021. The government now projects headline deficits of 7.8 and 8.6 percent of GDP for 2020 and 2021 respectively. Additional budgetary support for health was announced including part payment for Covid-19 tests and vaccines, along with faster direct contracting for services associated with the emergency response, payments to health providers for ICU availability and the creation of a National Tracking and Contact Center, a one-off bonus for health workers, new credit lines providing liquidity support to the coffee sector, the education sector, public transportation sector, technology sector, health and public sector providers, and all tourism-related companies, new credit lines for payroll and loan payments for SMES, for working capital for large corporates, and for corporates in the sectors most affected by the pandemic 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, expanded transfers for vulnerable groups, and additional benefits for recently unemployed workers. In addition, the government announced a payroll subsidy equivalent to 50 percent of the minimum wage per worker for businesses with a fall of over 20 percent in revenues for a period of three months. The 2021 government budget includes measures to reactivate the economy, with extensions to the programs supporting households and firms and increases in infrastructure investment. Unspent emergency resources from 2020 can be used for 2021.

Monetary and macro-financial

• The Central Bank has cut the policy rate by 250 bp and has implemented several measures to boost liquidity in both domestic and foreign currency. These include: (i) an expansion of their liquidity overnight and term facilities in terms of amounts, applicable securities and eligible counterparts, (ii) purchase of debt 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 and the PAD (Program to Support Debtors) to support viable borrowers, which was due to end in June 30, 2021, has been extended until August 31, 2021. 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 SFC 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), but suspended this program on June 30 due to vacant auctions. 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 (FCL) arrangement with the IMF was renewed for two years on May 1. The existing FCL arrangement was augmented on September 25, and Colombia made a drawing of US$ 5.4 bn on December 3. On April 28, 2021, the IMF Executive Board concluded its review of Colombia’s qualification for the arrangement under the Flexible Credit Line (FCL) and reaffirmed Colombia’s continued qualification to access FCL resources.

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Comoros

Background. The pandemic in Comoros did not initially turn into a deep health crisis with only seven deaths being officially reported between the reporting of the first on May 1 and the end of 2020. A new wave began in December 2020 and cases rapidly increased during January 2021. The presence of the new and more transmissible strain originally found in South Africa was confirmed in Comoros. A peak in cases was reached on January 20, before quite rapidly decreasing in response to the government response. As of July 1, there were 55 cases and 0 deaths in the past month. The COVID-19 shock came less than a year after Cyclone Kenneth, which necessitated emergency Fund financial support. Remittances through exchange houses increased throughout the months of lockdown.

Reopening of the economy. Following the second wave, the economy had gradually started to reopen. There continues to be a prohibition on wedding ceremonies, as well as all religious and cultural gatherings, and mosques remain closer. There is a curfew from 8pm-5am, markets close every day after 4pm. However, schools and universities are now reopened and the airport is open to visitors with a negative test within the last 72 hours. 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 country has received 100,000 doses of the Chinese vaccine and distribution has begun. They are also likely to receive 20% vaccine coverage by the end of 2021 through the COVAX initiative, but may also receive vaccines through other channels (to be confirmed). The World Bank is in the process of mobilizing approximately $20 million to support the purchase and distribution of vaccines in the country. The WHO ranks the health system’s preparedness at the lowest level in international comparison.

Key Policy Responses as of July 1, 2021

Fiscal

• The authorities are implementing their pandemic preparedness plan. Their top priority is to expand spending on health care as needed to address pandemic-related needs, and overcome to the greatest extent possible the health care system’s capacity constraints. The government granted a delay in the payment of taxes for the formal sector businesses. Import taxes on food, medicines, and items related to hygiene were reduced by 30 percent during 2020 but returned to previous levels from the beginning of 2021. The government announced a program to support agriculture and tourism with US$25 million financing from the World Bank. A supplementary budget with additional budgetary allocations for addressing COVID is in process of approval by the parliament. Budget support of $20 million has also been provided by the African Development Bank (half loan – half grant).

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 (DRC) declared its first case of COVID-19 on March 10, 2020, and the virus continues to spread across the country with tens of thousands of confirmed cases and hundreds of deaths. During the first COVID-19 wave in March 2020, the government declared a state of emergency and imposed the confinement of the capital, Kinshasa, which included 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 were not allowed and border posts were closed to non-cargo shipments. Additional restrictions included the closure of all education centers, suspension of all religious and sporting events, and closure of bars and restaurants. A 9-month multi sectoral response plan against the pandemic (PMUAIC-19) was launched in May 2020, which included actions to strengthen the health system, stabilize the economy, and reinforce security and social protection. In late June 2020, the government announced the deconfinement of the Gombe business district in Kinshasa and the gradual deconfinement of workers in mining sites. Entry restrictions in airports, ports and borders were also lifted.

New restrictions. As a result of a second COVID-19 wave, the government announced new restrictions, effective December 18, 2020, establishing a curfew, the obligation of wearing a mask, and compulsory COVID testing for domestic and external travelers. In early June 2021, the health authorities announced a third wave of COVID-19, with Kinshasa as its epicenter. While the government was alarmed by the increase in cases and announced new restrictive measures, certain restrictions had to be cancelled in the face of the population's reaction.

Effects on the economy.In 2020, the effects of the COVID-19 pandemic reduced real GDP growth, increased consumer prices (particularly of imported products), reduced fiscal revenues, and increased fiscal spending through the implementation of a COVID-19 response plan which included the opening of new COVID-19 test centers in Lubumbashi and other cities. By contrast, no major mine closed owing to the limited spread of COVID-19 to the mining regions and copper and cobalt prices reached record levels, leading to higher production than originally forecasted.

Vaccination. In early March 2021, a first shipment of 1.7 million doses of the COVID-19 vaccine arrived at Kinshasa. This was part of the first wave of supplies sent to the country by COVAX, an alliance comprising the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi (the Vaccine Alliance), UNICEF and the World Health Organization, that aims at equitable access to the COVID-19 vaccine. Medical authorities decided to use the Astra Zeneca vaccine because its convenient storage conditions, but fear of side effects and mistrust of the population have delayed the launch of the vaccination campaign. 1.3 million doses were sent to other countries to ensure usage before the expiry date. The goal of the first stage of the vaccination plan is to cover 20% of the population, including health workers, people aged over 55, and people suffering from serious health conditions. Financing of the deployment of the vaccine would be on grant or highly concessional terms.

Key Policy Responses as of July 1, 2021

Fiscal

• A preparedness and response national plan to deal with the pandemic was designed with support from development partners and was coordinated by Dr. Jean-Jacques Muyembe. The plan mainly focused 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 was estimated at US$135 million (0.3 percent of GDP).

  The following measures were approved the week of April 12, 2020, 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, 2020, 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.

  In the context of sustained increases in inflation and exchange rate depreciation, on August 18, 2020, the central bank (BCC), the Ministry of Finance, and the Ministry of Budget formally signed a Stability Pact, which sets a number of policy and operational commitments by those institutions that would contribute to maintaining “macroeconomic stability, as a prerequisite for strong and sustained growth”.

  In May 2021, the Ministry of Health created a website with detailed information on COVID-19 related spending, including detailed reports by spending category, individual procurement contracts with the names of the health suppliers, and other supporting documentation. During the last year, DRC has received financial support from the IMF and other donors that has been used to fight the pandemic.

Monetary and macro-financial

• On March 24, 2020, the 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 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.

  In order to re-anchor inflation expectations and maintain a positive in real terms policy rate, on August 10, 2020, the BCC increased its policy rate to 18.5 percent, but it has been recently reverted to pre- pandemic levels, in line with subdued inflation expectations.

Exchange rate and balance of payments

• On August 5, 2020, the BCC undertook a limited US$25 million foreign exchange intervention to help stem depreciation pressures.

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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 fluctuations in oil prices. The first confirmed COVID-19 case was reported on March 15, 2020. As of end-June 2021, there were over 12695 cumulative cases, with a fatality rate of about 1.3 percent, and 133262 doses of the COVID vaccine have been administered. 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. During 2020, a lock-down was established in the country from April 1 to mid-May, and extended through end July but with a reduced time interval of 10PM to 5AM. In late July, in response to the surge in cases, the authorities have increased the time interval for the lockdown to 8PM-5AM in the two major cities of Brazzaville and Pointe Noir. Since September 2020, the curfew period is from 11PM to5AM from Monday to Friday and from 8PM to 5AM on weekends.

Reopening of the economy. On May 18, 2020, the lockdown was eased with opening up of public transportation, primary schools final year class and graduation class. As of late June 2020, restaurants, hotels, and most private services have opened in the two main cities, while the rest of the country had opened up completely previously. Since May 30, 2020, a large scale screening for teachers and administrative staff has been occurring. The flight space reopened fully as of August 24, 2020 with the requirement that each arrival is equipped with a negative COVID-19 test result dating from at most 3 days. The official school opening date on campus was to October 12, 2020 but since early December a number of private schools have returned to online schooling. As of early February, 2021, schools have returned to face-to-face learning.

Key Policy Responses as of July 1, 2021

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. The EU, WFP, France are coordinating support for the poorest segments of the population with combined support amounting to about 3 billion XAF as of now. Other UN agencies have provided about 7 billion XAF to support COVID-19 efforts. Up to mid-November, the total amount of funding provided for COVID-19 expenses is about 75 billion XAF. In early February, the Chinese government offered 35 billion XAF to support the Congolese and promised to provide vaccines to cover 100,000 people.

  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, although these measures will apply in 2021.

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 BEAC had also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-June 2021. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. This program will expire at end-August 2021. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year. At its June 2021 MPC meeting, BEAC decided to adapt liquidity management and start offering long term liquidity absorption operations (one-month maturity) to over liquid banks to help improve monetary policy transmission and the development of the interbank market.

  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. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

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, 2020 and as of June 28, 2021 the country has registered 364,304 confirmed cases and 4,648 deaths. The recent resurge has abated since reaching the peak in mid-May but the number of new cases has remained around 1,500 daily in June. The government 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. The economy contracted by 4.1 percent in 2020, with a projected gradual recovery of 2.6 percent this year.

Reopening of the economy. Costa Rica began easing some coronavirus measures starting May 1, 2020. A further loosening of restrictions was implemented in four phases over 80 days. Phase 1 started on May 16 when some national parks and hotels re-opened at limited capacity and contact sports were permitted without spectators, among other easing measures. Phase 2 began on June 1 when restaurants, gyms, museums, and remaining hotels re-opened at 50 percent capacity. Phase 3 started on June 26 with extended hours for shops, cinemas, museums, theaters, and beaches. Houses of worship could open at limited capacity and under social distancing rules. The authorities subsequently slowed down the reopening of the economy in districts that have a high number of new infections and reintroduced localized vehicle circulation restrictions and business closures. Restrictions were relaxed further in the entire country starting August 31, with a focus on increasing economic activity, and starting September 9, hotels could operate at 100 percent capacity, among other measures (a mandatory face mask order for public enclosed places was introduced at the same time). The border opened to international tourists from countries/regions that have controlled the pandemic on August 1 and to visitors from all countries by November 1. The land border was opened on April 5, 2021. In response to the new wave in 2021, the government ordered closure of non-essential establishments (during the week of May 3-9) and further vehicle restrictions (during May) in cantons of the central region. Existing vehicle circulation restrictions and limited capacity requirements remain in place.

Key Policy Responses as of June 3, 2021

Fiscal

• The government implemented a package of revenue and expenditure measures to protect workers and companies against the impact of COVID-19, including (i) an interest-free 3-month moratorium on the payment of value-added taxes, business income taxes, and customs duties; (ii) a temporary adjustment to social security contributions by making them proportional to the time worked for a period of 6 months (including a deferral of the payment until the end of 2020) in 2020, as well as for one month during the May-June travel restrictions in 2021; (iii) a deferral of the roll-out of the VAT on construction and tourism services; (iv) a one-off tax relief on car registration tax in 2020; (v) a 4-month moratorium on taxes to be paid to the Costa Rican Tourism Institute for firms in the tourism sector facing liquidity constraints; (vi) a monthly subsidy of ¢125,000 (≈US$205) for three months to about 375 thousand households economically affected by the crisis with a monthly income of less than CRC 750,000 (≈US$1,230) prior to COVID-19; and (vii) an increase in public health spending, including construction of a specialized hospital for COVID-19 treatment and purchase of COVID-19 vaccines. In addition, wage for public employees (except for the police and healthcare workers) 4953 public vacancies were frozen in 2020 and 2194 positions were eliminated to direct more resources to the attention of COVID-19.

Monetary and macro-financial

• The Central Bank cut its policy rate by a full percentage point to a record low of 0.75 percent (and has stayed at this level since June 2020) to soften the economic damage caused by the pandemic and to improve credit conditions for households and businesses. In addition, the Central Bank has been authorized to purchase government securities (up to a maximum of ¢250,000 million) in the secondary market to provide liquidity during systemic distress. Further measures that aim at protecting workers and companies included (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; (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; (vi) authorization for complementary pension operators to provide partial funds to employees affected by COVID-19; and (vii) ¢700,000 million medium-term repo facilities that the Central Bank is offering to financial intermediates expanded by ¢142,887 million in January 2021. In December 2020, the authorities started to rebalance some of the measures, including by (i) requiring banks to update the credit ratings of borrowers for new restructured loans; (ii) allowing already accumulated countercyclical provisions to be used for specific provisions; (iii) extending the suspension of a requirement for banks to stress test individual borrowers.

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. The first confirmed case was reported on March 12, 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, theaters 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. On January 21, 2021, the authorities declared national health emergency until end-June and strengthened controls at the airports and borders.

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 occurred on May 25. The isolation of the Grand Abidjan has been ended from July 15. The recreational centers will be opened on July 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 was lifted on July 30. Domestic flights resumed on June 26 and international flights on July 1. Vaccination started on March 1, 2021.

Key Policy Responses as of July 1, 2021

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. In April 2020, 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 points lower than before the crisis. In June 2020, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up until endd-2020 a framework inviting banks and microfinance institutions to accommodate demands from solvent customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced in April and May 2020 measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 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 initially issued by Cote d'Ivoire was equivalent to 1.5 percent of GDP, with some rollover possibility through such special T-bills benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. The BCEAO has launched in February 2021 a special 6-month refinancing window at the floor of the interest rate corridor to help WAEMU governments meet Covid recovery funding needs. Through this special window banks shall be able to refinance all bonds with maturity of 3 years or more governments currently plan to issue on the regional financial market in 2021. The amount of bonds eligible to the new refinancing window for Côte d'Ivoire is equivalent to 1.9 percent of projected 2021 GDP. The new refinancing window is expected to remain in place for the term of the eligible bonds issued in 2021.    Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5- to 7- year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO encouraged WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

• No measures.

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Croatia

Background: The Croatian economy has been 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) could reopen. Public and private health systems became fully operational except for special cases decided by epidemiologists. Playgrounds and sports fields reopened. 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 have reopened. Inter-county public transportation and domestic air traffic have resumed. Shopping centers have begun to operate. Public gatherings for cultural and sport events are permitted as of June 15.

As of July 1, 2020, all EU/EEA nationals and individuals holding permanent residence in the EU/EEA countries can enter Croatia freely, without restrictions. As of July 1, 2020, all EU/EEA nationals and individuals holding permanent residence in the EU/EEA countries could enter Croatia freely, without restrictions, while all other foreign nationals could enter Croatia for business, tourism, or other pressing personal reasons, if they provided relevant proof. The mandatory self-isolation and quarantine restrictions for individuals entering Croatia were lifted. Upon entry, individuals were given a Pamphlet with Recommendations and Instructions from the Croatian Institute of Public Health that they must follow for 14 days.

Parliamentary elections were held on July 5.

As of July 10, several restrictions have been reintroduced following a spike in infections. Wearing protective masks is now mandatory throughout the country in public transportation, medical facilities, shops, and malls, employees and clients where face to face contact is required, services that require close contact, drivers and all other employees in public transportation vehicles, as well as passengers, employees of all hospitality services who serve and prepare beverages and food, all health care workers and visitors to hospitals, etc. All travelers arriving to Croatia for tourism, business, urgent personal reasons, or educational purposes must present a negative PCR test not older than 48 hours. Travelers with a test older than 48 hours can enter Croatia but will be issued a self-isolation order and will have to be tested again locally, at their own expense Those who do not provide a negative PCR test will be ordered to quarantine/self-isolate for 14 days. As of July 30, the government has lifted the extraordinary price control over food, cosmetic products; the law continues to apply nevertheless to drugs, medicinal products, protective masks, protective gear and disinfectants. In July and August, several countries (The Netherlands, Finland, Italy, Austria, France, and Germany) have introduced mandatory coronavirus testing and/or self-isolation requirement for people coming from Croatia. Following a sharp rise in new COVID-19 cases recently, wearing a mask is mandatory as of October 19 in all closed indoors settings (including in bars and restaurants) where a minimal two-meter distance cannot be maintained. Protective masks are also recommended outdoors when it not possible to keep a distance of two meters. Gatherings involving more than 50 people require prior approval. As of October 26, public gatherings are limited to 50 persons and can only last until 10:00 pm; private gatherings are limited to 15 persons; sport events are to be held without spectators. As of November 28, a soft lockdown as introduced, through December 21, then extended to January 10, 2021, with several restrictions, among which social distancing, the closure of all hospitality services (restaurants, cafes, and bars), closure of gyms, sports and recreation facilities, nightclubs, interdiction of cultural events, amateur sporting or tourist events and gatherings. Hotels and camps may remain open but only for their guests. Since December 1, 2020, the Croatian Government has prohibited all border crossings, with some exceptions (for EU citizens under certain conditions, or for countries currently covered by Annex I to EU Council Recommendation 2020/912). The vaccination against COVID-19 has started on December 27, 2020. The current restrictions are in place until March 15, 2021 and include a limited number of people gathering, restrictions at border crossings, special working conditions in stores and in public transport.

Key Policy Responses as of April 2, 2021

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. Applications to the EU Solidarity Fund and SURE (temporary support to mitigate unemployment risks in an emergency) are being considered as additional sources of financing/budget support.

  On June 25 the government announced the possibility of introducing a short time work program, financed from EU SURE, to safeguard jobs thereby employers who need to introduce shorter working hours due to a decline in business activities would be entitled to aid for the payment of a part of their workers' wages. The measure is intended for all sectors and for all businesses with more than 10 employees. On September 7, the measures designed to help the economic sectors hit by the coronavirus crisis, including those designed to keep jobs and ensure liquidity and COVID-19 loans, were extended until the end of the year. For all sectors, the government will co-finance a shorter working week with a maximum HRK 2,000 per worker plus contributions, as well as provide assistance to micro businesses until end December, also in the amount of HRK 2,000 per worker, if the employer has suffered a drop in turnover of more than 50 percent. For activities that are particularly at risk (transport of passengers, hospitality, travel agencies and recreation-related businesses, as well as cultural, business and sports events), support is provided in the amount of HRK 4,000 per employee until end-December, if their drop in turnover exceeds 60 percent. On September 24, the deadline for SOEs to pay profit into budget was extended until January 15. Since end-November, the government finances the costs of entrepreneurs whose work was suspended by the Decision of the Civil Protection Headquarters. The overhead costs are reimbursed to entrepreneurs with a drop in income of at least 60% compared to the same month last year or compared to the previous month of the current year, if the entrepreneur started working in 2020. Entrepreneurs with a decline in income / receipts of 40-60% or HRK 2,000 - 3,500, respectively, are also entitled to support within the work scheme.

  On December 17, 2020 the government announced the continuation of the measure of HRK 4,000 per employee in January and February 2021 to protect jobs in businesses forced to close down as part of efforts to curb the spread of the coronavirus pandemic. At end-February 2021, the job retention grants were extended by another month. The existing active labor market measures were expanded, for instance, the job skills training programs for the currently unemployed persons to work in professions experiencing labor force shortages of workers.

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 bought government securities in the secondary market (five times since March 13, in total HRK 17.9 billion). The European Central Bank and the CNB have agreed on a €2 billion swap line. The agreement is in place until end-June 2021.

  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 installments 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. In mid-June, HBOR announced it would extend its export loan insurance program (to € 150,000 from the current € 50,000) and will take on 95 percent of the risk of non-payments by foreign buyers, thus protecting liquidity for SMEs. The program can insure short-term export claims by SMEs with an annual export revenue of up to € 2 million. Entrepreneurs just starting a business can also benefit from this program. The European Commission has approved several subsidized loan programs. On October 1, the European Investment Bank (EIB) and HBOR agreed on a financial package that could enable up to € 200 million in loans for faster recovery of Croatian SMEs from the COVID-19 pandemic. On October 5, it was proposed that banks will be encouraged (by means of profit tax breaks) to write off their NPLs instead of selling them to collection agencies.

  in January 2021, the European Commission (EC) approved Croatia’s HRK 1.53 billion state aid program for companies in the field of tourism and sports, which will be implemented in cooperation with the Croatian Ministry of Tourism and Sports, the Croatian Bank for Reconstruction and Development (HBOR), the Croatian Agency for SMEs, Innovations and Investments (HAMAG-BICRO) and commercial banks. The program provides for the issuance of a state guarantee in the amount of 100% of the loan principal for micro, small and medium-sized enterprises and up to 90% for large enterprises. The supports in the amount up to EUR 800,000 per entrepreneur will be granted by 30 June this year at the latest, but only to companies that were not in difficulties on 31 December 2019, with the exception of micro and small enterprises which are eligible even if they had business problem on that date. The new loans are intended for working capital and investments, as well as interest rate subsidies.

Exchange rate and balance of payments

• The CNB has intervened to mitigate depreciation pressures by selling forex.

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Cyprus

Background. After the first case was reported on March 9, 2020, COVID-19 spread has been brought under control since April 29, before a second wave since October. 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, closure of schools, hotels and businesses, and mandatory mask-wearing in large indoor spaces. New cases surged rapidly from October to January 2021. To deal with the second wave, localized containment measures were introduced and were incrementally tightened, including a temporary strict lockdown in January 2021. New cases increased again from March 2021, and the government announced new restrictive measures until end May, including a curfew in effect from 9:00pm to 5:00am.

Reopening of the economy. With low daily new infections since end-April 2020, 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 started on June 9 allowing reopening of airports, shopping malls, ports facilitating cruise ships, the interior areas of restaurants and hotels, theaters and open-air cinemas. International travel restrictions remain in place for all but 35 countries. From June 24, the maximum number of persons at gathering has been increased gradually. Some of the reopening measures were partially reversed since August to control the surge in daily new cases. Following the national lockdown in January 2021, the restrictive measures for the second wave have been gradually lifted from February. However, to cope with the increase in new cases, the government introduced new lockdown measures at end-April and early-May.

Key Policy Responses as of July 1, 2021

Fiscal

• Cyprus has implemented an economic support package that is estimated to amount to around €800 million (3.9 percent of GDP) in 2020 for the health sector, households and businesses. The package includes: (i) a €40 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; (iii) wage subsidy for affected businesses to maintain jobs, grants to small businesses and self-employed, support for the tourism sector, a two-month deferral of VAT payments, and a temporary VAT cut to stimulate tourism/hospitality sector, and (iv) three-month suspension of a scheduled increase in the contribution to the General Healthcare System and interest subsidy for new business and housing loans for four years, which benefit both businesses and households. This package also includes guarantees on or financing of credit facilities up to €1.7 billion through participation in the Pan-European Guarantee Fund, increased state guarantees to expand existing European Investment Bank (EIB)-supported loans to SMEs, and increased government borrowing from EIB to expand existing funding scheme for SMEs. In face of the second and third waves, Cyprus has extended some of the support measures , including the wage subsidy schemes and unemployment benefits, allowed longer repayment period for the deferred VAT and introduced one-off grants to defray operational costs. The size of the support measures for 2021 is estimated to be around 3.6% of GDP. In April, Cyprus approved a loan guarantee scheme (€1 billion) to support business lending. In June, the government adopted the second supplementary budget, which includes special support plans for businesses and employees to deal with the effects of the pandemic Covid-19 (€ 20 million).

  http://mof.gov.cy/en/press-office/minister-s-press-releases/685/?ctype=ar

  http://mof.gov.cy/en/press-office/minister-s-press-releases/692/?ctype=ar

  https://www.pio.gov.cy/coronavirus/eng

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, 2020, providing a general moratorium on loan repayments for all creditworthy borrowers until end-December 2020. This moratorium was further extended to June 2021 for a subset of performing borrowers mostly hit by the lockdown in January and by the crisis.

  The Central Bank announced additional capital release measure on April 10 2020, 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 first case of COVID-19 was reported on March 1, 2020. The government 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 5.6 percent in 2020.

Reopening of the economy. Due to a strong resurgence in new infections marking the second wave of the pandemic, restrictions had to be reintroduced in late summer/early autumn 2020. The previously reinstituted state of emergency ended on April 11, 2021. Some government containment measures are still in place. Among other things, obligatory testing applies to schools and workplaces and the wearing of FFP2 or equivalent masks in public transport and at retailers is mandatory. The government is gradually introducing reopening measures depending on the improvement of the pandemic situation.

Vaccinations against the virus are underway, so far, about 3,100,000 people, or 29.0 percent of the population have been vaccinated (with two doses). Initially, certain groups were prioritized, starting with healthcare professionals and people over the age of 80, followed by professionals in the area of education, people over the age of 70 and 60 and patients suffering from chronic diseases. As of July 1, also children of 12–15 years of age can be vaccinated (this age group solely with the Pfizer/BioNTech vaccine).

Key Policy Responses as of June 30, 2021

Fiscal

• The government implemented a fiscal package (expressed in ESA2010 methodology) of CZK 228.6bn (€8.6bn, 4 percent of GDP) in 2020 and other fiscal package of CZK 332.1bn (incl. a new tax package, new compensatory bonus, selected support to companies and other healthcare expenditure etc.) in 2021. Until the end of October 2021, the government contributes 80 percent of wages (incl. SSC) to employers if employees are sent into quarantine. Until the end of May, the government also contributed 100 percent of wages (incl. SSC) if employers' businesses have been closed or reduced as a result of the crisis management or emergency measures taken by the Government and the government also contributed 60 percent of wages (incl. SSC) 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. The government also approved a lump sum of CZK 370 per day for quarantined or isolated employees between March and end-June 2021. The government also approved a tax package, which includes, among other things, the introduction of extraordinary accelerated depreciation of assets (in the 1st and 2nd depreciation class), acquired in 2020 and 2021 and effective reduction in the personal income tax rate since 2021. The government approved a new compensatory bonus for self-employed persons and small Ltd in amount of CZK 1000 per day (for contractors in amount of CZK 500 per day) between February and end- May 2021. For 2021, the government also approved two new comprehensive support programs ("COVID 2021" program and "COVID-uncovered costs" program) based on the criterion of a 50% decrease in turnover of the company. Together with the Antivirus program and the new compensatory bonus, these programs are key support for companies and the self-employed persons in this year. Similarly to 2020, the government approved a bonus for workers in social services and the health-care system of CZK 18.3bn. The government further pledged close to CZK 500bn (EUR 19bn, 8.9 percent of GDP) in potential state guarantees and approved the postponement of the electronic registration of sales for all subjects until the end of 2022. The government also lowered the VAT rate (from 15% to 10%) on selected services (accommodation, culture, sport), decreased road tax for vehicles above 3.5t (by 25%) and introduced a loss carryback measure: in case of a reported tax loss in 2020 due to the state of emergency, taxpayers will be able to reduce their tax bases for this tax period for the tax years 2019 and 2018 by this loss (maximum tax loss is set at CZK 30million).

  Previously implemented measures that expired in 2020. Between June and end-August 2020, the government waived social security contributions paid by employers (24.8%) with a maximum of 50 employees (if certain conditions are met). This support was provided concurrently with the wage compensation, but it was not possible to utilize both programs simultaneously in the same month. Between April and June 2020, the state further covered 50% of rents of all businesses after mandating a reduction of 30%, while tenants covered the remaining 20%. Self-employed were able to apply for a lump sum of CZK 500 and contractors of CZK 350 per day for the period between Mar 12 and Jun 8. The CZK 500 lump sum also applied to very small businesses (Ltd) for the period between Mar 12 and Jun 8. The government also paid out a one-off benefit for pensioners of CZK 5,000 (CZK 15bn in total) as well as a bonus for workers in social services and the health-care system of CZK 15.1bn in total. The government approved grants for tourism (e.g. spas, hotels, etc.) of CZK 8.4bn in total.
  Due to the reinstated lockdown in response to a second wave of COVID-19 infections, the government approved measures to selectively support affected sectors. Self-employed, contractors and small businesses (Ltd) were able to apply for a lump sum of CZK 500 per day for the period between Oct 5 and 15 Feb 2021. The government again approved grants for culture, sport, tourism, agriculture, restaurants, bus transportation and all other enterprises, which had to close because of crisis management or emergency measures taken by the Government, amounting to CZK 20.4bn. Between July and December the state again covered 50% of rents of selected businesses, this time without the necessary reduction of 30%. Advance payments on personal and corporate income tax were suspended for Q2 2020 and again from October until the end of 2020 (for selected businesses) and penalties waived for failing to pay property tax and file income tax returns on time. The government approved a moratorium on bank loans (subject to certain criteria and limitations) of up to six months, which ended at the end of October.

Monetary and macro-financial

• The Czech National Bank (CNB) lowered the policy rate by 50 bps on March 16, 2020, and 75 bps on March 26 and May 7, 2020, , respectively, to 0.25 percent. Until May 27, 2021, the frequency of repo operations had been increased from one to three times a week. The countercyclical capital buffer rate was initially reduced by 75bps to 1 percent, effective April 1, 2020, on June 18, 2020 further to 0.5 percent, effective July 1, 2020 and increased back to 1 percent on May 27, 2021, effective July 2022. Also effective as of 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). On June 18, 2020 the CNB abolished the DSTI ratio. 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. On June 23, 2021, the CNB increased the policy rate by 25 basis points to 0.50 percent.

Exchange rate and balance of payments

• No measures.

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Denmark

Background. Denmark reported its first confirmed cases of COVID-19 on February 27, 2020. In March, the government implemented a range of measures to contain the spread of COVID-19, and to support people, jobs and businesses. These include closure of all borders ; prohibition of events with more than 10 people; closure of schools, universities and daycare centers ; closures of entertainment, hospitality and public leisure facilities ; sending 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 6,2020). In the 1^st Phase primary schools and under, as well as additional health care sectors and liberal professions opened up mid-April,2020. As part of the 2^nd Phase , retailers (May 11,2020), restaurants (May 18,2020), secondary schools (May 18,2020), and cultural activities (May 27,2020) opened. The assembly ban was raised from 10 to 50 people (June 8,2020) and the border to most European Union (EU) countries and the Schengen area was opened June 27 as part of the third Phase. On July 1 the border was opened to selected countries outside the EU and the assembly ban was raised from 50 to 100 people. This phased reopening, was supported by a comprehensive testing and detection strategy and authorities are now offering Covid19 tests for foreign tourist Due to increasing infection rates authorities decided to not raise the assembly ban further (August 6,2020), made adjustments to Phase 4 of the reopening (August 14,2020), introduced new targeted measures against Covid19 (18 September) and lowered the assembly ban to 50 people (September 19). Due to increasing infections rates, authorities imposed targeted lockdowns (closure of restaurants/bars and movie theaters) in 38 of its 98 municipalities(Dec 7) and lowered the assembly to 10 people (Oct 26). The targeted lockdown was extended to all municipalities (Dec 15) while daycares and schools below 5th grade remain open. A full lockdown was announced for Dec 25,2020-Jan 3,2021 and the assembly ban was lowered to 5 people. Subsequently the lockdown was extended till end-January and then end-February 2021. An agreement on significant and responsible reopening starting end March was reached (Feb 24,2021). March 22,2021 the assembly ban was raised to 10 people. Further reopening of schools and higher education facilities was agreed (May 4, 2021) and a new digital corona pass was introduced (May 28, 2021). Denmark implemented one of the fastest vaccination rollouts in the European Union. An agreement was reached (June 10, 2021) to gradually phase out all restrictions introduced as part of COVID-19 by September 2021 (with a few exceptions that will be phased out by October 2021).

Key Policy Responses as of July 1, 2021

Fiscal

• The authorities responded to the ongoing crisis quickly and forcefully through various initiatives. Currently, announced above-the-line discretionary fiscal support amounts to DKK 79.5 billion (3.4 percent of 2020 GDP) and includes increased spending for additional health care needs and extraordinary budgetary measures to support workers and businesses that have been extended in the wake of the second wave.Temporary liquidity measures, including postponement of tax payments. and government guarantees will further support activity in Denmark and have been extended as well. The fiscal budget for 2021 foresees a green, fair and responsible recovery of the Danish economy. In response to the targeted lockdowns the authorities reintroduced the wage compensation scheme to all companies (Dec 9) and other support measures (Dec 11). Many support and liquidity measures where extended in line with the extension of lockdown restrictions (Jan 14 & Feb 9,2021). With the gradual reopening of the economy many discretionary support measures are expected to sunset mid-2021. The government agreed on a summer and business package of DKK 1.65 billion, which will boost the tourism and experience economy among others. At the same time, the general aid packages are being phased out and replaced by targeted schemes that are particularly focused on vulnerable companies (May 19, 2021).

Monetary and macro-financial

• The Danmarks Nationalbank (DN) increased the policy rate by 15bps to -0.6 percent. The standing swap line with ECB was activated and its size was doubled to EUR 24 billion. It will remain in place as long as needed. In addition, the DN reached an agreement with the Federal Reserve to establish a USD 30 billion swap line that will stand for at least 6 months. The DN announced the launch of an ‘ extraordinary lending facility ’ which will make full-allotment, 1-week, collateralized loans available to banks at -0.5 percent interest rate on March 20. The DN on March 19, 2020 expanded this facility to include 3-month variable rate loans which will be available on March 27, 2020 and weekly thereafter. The DN also increased the interest rate on the previously announced 1-week loans to -0.35 percent. On March 24, the DN announced the auction of USD liquidity. The Danish authorities decided on March 12, 2020 to preemptively release the countercyclical capital buffer and cancel the planned increases meant to take effect later. The Danish Financial Stability Authority (DFSA) also announced a case by case relaxation of regulation on the LCR requirement . The DFSA provides guidance to banks and insurance companies on dividend payouts and share buybacks, consistent with ESRB and EBA guidelines, as needed to protect capital buffers.

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 is to preserve the peg.

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Djibouti

Background. Djibouti has had about 11,602 confirmed COVID-19 cases as of June 29, 2021 and has registered 155 deaths. The government maintains various prevention measures, including obligatory mask wearing in public and measures to promote social distancing, but has shifted away from a confinement strategy to vaccination. So far about 23,000 people have been at least partially vaccinated, and the authorities offer both mass vaccination sites and targeted distribution in the regions. As of June 2021, the authorities now mandate vaccination for Djibouti nationals prior to travel abroad. The authorities also require that all international visitors take a COVID-19 test before arrival.

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. The Ministry of Health is strengthening the capacity of the medical facilities, and the government is deploying three different vaccines from various sources.

Reopening of the economy. The government has lifted confinement measures, and transport, retail, services, construction, and public administration have reopened. Wearing a mask is mandatory in public spaces as well as other hygiene measures such as hand washing and regular sanitization of public places. The borders were reopened and international travel permitted in starting in July 2020, but a recent uptick in cases led the authorities to reimpose restrictions for a two-week period ending November 4. The authorities now also require travelers to have a negative COVID-19 test (PCR test) taken 72 hours before departure. The government continues to target those who have potentially been in contact with people who have tested positive.

Key Policy Responses as of July 1, 2021

Fiscal

• The government included measures amounting to 2.6% of GDP in a revised budget for 2020 and included an additional 0.6 percent of GDP of measures in the 2021 budget. Measures include increases in health spending, support to firms impacted by the pandemic, and food vouchers to vulnerable households.

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. The Dominican Republic reported its first confirmed case of COVID-19 on March 2, 2020. Since then, the authorities declared a national emergency, introduced a country-wide curfew, closed schools, borders, and non-essential businesses, suspended public activities and mass gatherings, introduced teleworking arrangements for public servants, and enforced strict social distancing. The state of emergency initially ended on June 30 but was reinstated on July 15 due to the resurgence of COVID-19 in the country. Starting on September 28, the curfew was set to commence from 9pm to 5am Monday through Friday, and 7pm to 5am during weekends. On October 18, the state of emergency was extended for 45 days. On November 10, the curfew was extended for 20 days. On December 1, the curfew was extended for 20 additional days, with the schedule remaining the same. Considering an increase in cases, the government announced on December 15 that curfew on weekdays would start two hours earlier (from 7pm) with a free transit policy until 9pm to allow time for people to return to their homes, (but only in Distrito Nacional and the provinces of Santo Domingo, Santiago, Duarte, La Vega and Puerto Plata) and with a further exemption during the holidays December 24 and 31 when curfew hours would be from 7pm to 5am, with free transit until 1 am of the following day. Based on the worsening in the number of new cases, the curfew was tightened again to run from 5pm to 5am during weekdays and from noon to 5am on weekends until January 10, 2021. The curfew was extended under the same schedule but with an allowance of 3 hours of free transit on weekdays and weekends, from January 11 until January 26. A new curfew was enacted beginning on January 27 and until February 8, running on weekdays from 7pm until 5am, and on weekends from 5pm until 5am, with the 3 hours of free transit remaining in place. Starting from March 8, the curfew was reduced due to an improvement in the epidemiologic profile in recent weeks: the new schedule for the curfew was weekdays from 9 pm to 5am, and weekends from 7pm to 5am, with the 3 hours of free transit remaining in place; the exception was Good Friday, April 2, when the curfew was 7pm. From April 16 until May 26 the curfew remained in place, but with an allowance of free transit until midnight daily. On May 27, due to an increase of cases of COVID-19, the curfew was extended in Santo Domingo, with hours increased from 8pm until 5am, but with three hours of free transit remaining in place. Given the further deterioration in health indicators related to COVID-19, from June 2 to June 9, the curfew will be from 6pm to 5am on weekdays and from 3pm to 5am on weekends in 24 provinces including Santo Domingo, with the usual allowance of three hours of free transit. For the other provinces the curfew will be from 10pm to 5am on weekdays and from 9pm to 5am on weekends, with free transit until midnight. This curfew has been extended, mostly recently on June 29th, until July 7.

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. A unified command center called C5i was created to centralize patient information from various sources 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.

Reopening of the economy. On May 20 2020, a plan to reopen the economy in four phases was implemented with the reopening of most small businesses, including public transportation operating at up to 50 percent capacity.

On June 3 2020, the country entered phase 2 of deconfinement with the reopening of inter-urban transportation services as well as privately-operated transportation in cities, operating at 60-percent capacity. Small businesses of up to 10 employees can resume at full capacity, while businesses between 11 and 50 employees can operate at 75 percent capacity. Large businesses can operate at 50 percent capacity. Also, religious services can take place on Sundays while certain activities such as gambling (but not casinos) are allowed. Social distancing and the use of face masks in public spaces remain mandatory.

Although phase 3 was planned for June 17 2020, the government decided to remain in phase 2 following an increase in new confirmed cases. While each phase is planned to last for 14 days, the start of the next phase will depend crucially on the evolution of the pandemic.

Even though the country has not proceeded with the full reopening of private activities, the Ministry of Public Administration ordered that all public sector agencies resumed their activities at full capacity wherever physical conditions allow. If a public agency cannot accommodate minimum social distancing for its employees, it can operate at 75-percent capacity. Meanwhile, vulnerable employees such as those with medical conditions or above the age of 65 are advised to continue working from home.

Notwithstanding, the tourism sector resumed activity on July 1, 2020 with the reopening of all regions and airports to tourists. The government implemented a tourism recovery plan starting September 15, which includes non-invasive random tests at airports and a traveler assistance plan that covers emergencies in the event of contagion for all short-stay tourists (non-resident foreigners) who arrive between September 15 and December 31. At end 2020, the government announced that the traveler assistance plan would be extended until end-April 2021.

Vaccination plans and implementation: The Dominican Republic has secured 20,907,875 doses of Covishield, Astra Zeneca, Sinovac and Pfizer vaccines, enough to inoculate its population. The objective is to give two doses to the population 18+ years old (7.8 million people). Vaccination started in mid-February 2021 with front line health personnel, 60+ year old, first responders and teachers. As of June 12, vaccination had already reached the population of 12+ years. The government has announced that as of July 1, Pfizer vaccines are to be administered as a booster for all those who have been vaccinated with Sinovac or AstraZeneca. As of June 30, 7.842 million people have been vaccinated, of which 2,892,597 have received both doses.

Key Policy Responses as of July 1, 2021

Fiscal

• The original economic measures announced by the previous administration amounted to RD$32 bn (about US$576 million, or ¾ percent of GDP). These include higher social spending: (i) the Quédate en Casa program (RD$17 bn), 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; 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 bn), which benefits about 754,000 families of formal workers who were laid off with a monthly transfer up to 70 percent of last formal wages (minimum of RD$5,000, RD$8,104 on average); (iii) On May 17, a new program called Pa’ti was introduced to support independent workers, providing RD$5,000 (about US$90) a month to each beneficiary with an additional allowance made available for healthcare workers, the military and police officers, amounting to RD$2.4 bn. The newly elected President Luis Abinader announced the extension of all social aid programs until the end of 2020. 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. On the revenue side, tax relief is provided through extended payment deadlines and some tax benefits.

  On October 8, the government approved a 2020 budget increase for RD$202 bn (4.5 percent of GDP) with the aim of mitigating the crisis generated by the pandemic. To cover the financing gaps, the authorities mobilized 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 raised private donations for healthcare needs. On October 5, the European Union disbursed a budget support grant in the amount of RD$725 million (US$12.4 million). The government also placed domestic debt in the amount of US$0.7 bn (in 4 series), with the maturities of 10-20 years at an interest rate of 10-11 percent. Despite the continuing global uncertainties, the country successfully issued a record US$3.8 bn in sovereign bonds in September, comprising new global bond (US$1.8 bn; maturity 12 years; interest rate of 4.875%); reopening of the 2060 US dollar global bond (US$1.7 bn; interest rate of 6.25%); and reopening of the 2026 peso-denominated bond (US$0.3 bn; interest rate of 10.0%).On December 1, the government announced its plan to reopen its 2032 global bonds to finance a buyback of four different dollar notes maturing between 2021 and 2025, amounting up to US$3.5 bn. On January 23, 2021 the government placed an additional US$2.5 bn, with maturities of 10 and 40 years, and interest rates of 4.5% and 5.875%, respectively.

  On December 7 the Government presented a new bonus that will be distributed for Christmas of RD$1,500 to one million beneficiaries. This bonus will replace the traditional food boxes the Government used to hand during the holidays to the poorest households.

  On December 30, the government announced that the FASE I program (for formal workers with suspended labor contracts) would be extended until April 2021. FASE II (for formal workers with active labor contracts) would be replaced by another program to be announced in January. On January 4, 2021, the President announced the extension until April 2021 of the Quedate en Casa program and its eventual replacement with a new program (Superate), which will double the assistance under the existing Comer es Primero and cover an additional 200 thousand vulnerable households (thus reaching a total of 1 million households). In May, the government announced the reactivation of the National Employment Commission that will promote the recovery and generation of full, formal, and productive employment, with special focus on young people and women.

  QEC and FASE I expired at end of April but the government announced a new program targeted to reach the most heavily affected sectors—it will be a targeted FASE program running from May until July 2021 for workers in the tourism sector.

  In May 2021, the government announced the reactivation of the National Employment Commission that will promote the recovery and generation of full, formal, and productive employment, with special focus on young people and women.

  1. The IMF Rapid Financing Instrument was approved on April 29, 2020, for US$0.65 billion.
  2. US$150 million from a contingent line of credit for disasters and health-related events approved in March and another loan of US$100 million to support the response to the COVID-19 emergency approved on June 20.

Monetary and macro-financial

• On March 16, 2020 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 monetary policy rate cuts (from 4.5 to 3.5 and then to 3.0 percent per annum), reduction of the 1-day REPO facility rate (from 6.0 to 4.5 and then to 3.5 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 bn (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 bn (US$553.7 million; about ⅔ 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, 2020 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 bn 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 bn from the reserve requirement (about 0.5 percent 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.

  • US$150 million from a contingent line of credit for disasters and health-related events approved in March and another loan of US$100 million to support the response to the COVID-19 emergency approved on June 20.

  Liquidity measures include easing other REPO operations for RD$50 bn (about 1 percent of GDP) to provide funds to the financial system, and provisions of U.S. dollar liquidity (US$0.622 bn, 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 bn through short-term repos. 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, 2020 the BCRD announced a new facility to provide financing up to RD$20 bn 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.

  On July 22, 2020, the Monetary Council of the Central Bank announced new expansionary measures: a new Rapid Liquidity Facility (RLF) to provide funds for up to RD$60,000 million for productive sectors, consumption loans and small and medium firms. Admissible collateral to access this facility are private and public debt, as well as loans with ratings A and B. In addition, the maximum amount for REPO operations was increased from RD$50,000 million to RD$60,000 million, providing additional resources to financial institutions, while extending its maturity for up to 360 days. Moreover, the interest rate on REPO operations for up to 90 days was lowered from 5.0% to 4.5%, while the interest rate on operations for up to 180 and 360 days was set to 5.0% and 5.5%, respectively. On August 22, the BCRD announced the further flexibilization of the conditions to access the RLF to allow for the refinancing of loans for businesses regardless of size and households.

  At the August 2020 monetary policy meeting, the BCRD lowered its monetary policy rate by 50 basis points to 3.00 percent, while also reducing its interest rate on the Repo standing facility by 100 basis points to 3.50 percent and left unchanged the rate on the deposit standing facility, thus narrowing the corridor to a ± 50 basis points width. The decision regarding the policy rate and the corridor comes despite a recent uptick in inflation. At the September and October meetings the BCRD kept its MPR unchanged, considering market expectations and internal forecasts point towards inflation remaining within the target range of 4.0 percent ± 1.0 percent in the monetary policy horizon.

  On October 23, 2020 the CBDR announced that RD$40 billion of the resources previously put forth to the financial system on the form of REPOS would be made available through the Rapid Financing Line. These funds were previously used under the REPO facility and were not rolled over at maturity. This decision does not increase the total amount made available so far, which stands at RD$190 billion. On November 25, 2020 the CBDR announced that the resources available through the RLF could be used for loans to all productive sectors, including mortgages.

  On March 1, 2021 the CBDR announced the increase of the RLF by RD$25 bn, with the new resources to be allocated for specific sectors including construction, manufacturing, mortgages for lower-priced housing, commerce, and SMEs. Each sector has been allocated with RD$5 billion

  As of June 1, 2021, of the RD$215.8 billion (almost 5.0 percent of 2020 GDP) made available to financial intermediation entities to provide liquidity to economic agents, approximately RD$195.5 billon have been disbursed, providing financing to sectors such as commerce, manufacturing, exports, agriculture, construction, and tourism.

  The CBDR has kept its MPR unchanged in since August 2020, despite upward trend in annual inflation due to temporary increases in food and fuels prices. While current inflation remains above the target range, it is expected to converge towards it during the second semester of 2021.

Exchange rate and balance of payments

• The BCRD has intervened intervenes in the foreign exchange markets to prevent disorderly market conditions and maintains a relatively strong international reserve position (about US$12.606 billon, over 14 percent of GDP, as of June 30, 2021). In July 2020, the BCRD announced that it would expand its operations with Non-Deliverable Forwards (NDFs) to offer hedging instruments for international investors in local bonds denominated in domestic currency.

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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). The first case was found on March 13, 2020 (in Antigua and Barbuda). During most of 2020, the number of infections was contained at relatively low levels but they rose steeply in the first quarter of 2021, driven by outbreaks in Antigua and Barbuda, St. Lucia and St. Vincent and the Grenadines. The number of COVID-19 cases have since fallen and stabilized in most of the ECCU countries. The global 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.

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

Key Policy Responses as of June 3, 2021

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. Furthermore, details are still being worked on whereby the UK government will provide extra budgetary assistance of EC$100 million - the first time since 1983 when aid to Anguilla was discontinued.

• Antigua and Barbuda. On March 26, 2020 the government announced several measures, including (i) an increase in health spending; (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 the 2020 budget; and (v) expansion of social safety net programs. In June 2020, a further 5 percent reduction in electricity bills was introduced, applicable through September. The government reopened the borders on June 1, 2020. Several regional and international air carriers (from the US and the UK) resumed operations to the island in summer 2020. However, Canada's major airlines have suspended all flights to the Caribbean since February 2021. The government extended the state of emergency to end-September. Fully vaccinated visitors are required to quarantine for 48 hours subject to the negative result of an additional COVID-19 test taken upon arrival. Non-vaccinated visitors are required to quarantine for 14 days at designated accommodations or at home. Entry restrictions are in place for persons who have traveled to Brazil, India and South Africa within 14 days prior to arrival. Rollout of the vaccine to the general public began on March 1. As of end-June, 30 percent of the population has been fully vaccinated, and there were no active COVID-19 cases.

• Dominica. On May 17, 2020 the government 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; (viii) implementation of multiple infrastructure projects-; (ix) pay to small contractors and merchants with amounts owed by the Government of EC$100,000 and less, ; and (x) income support forr heads of families and single persons who are currently unemployed, extended through June 2021. . The country reopened its borders on July 2020 for the arrival of nationals and residents, and on August for all travelers including non-nationals. Under the "Safe in Nature" program, visitors need to show a negative PCR test 72 hours prior to entry and quarantine for 5-7 days if they are not vaccinated and for a minimum of 3 days if they are fully vaccinated. As of June 25, 2021 27% of the local population (19.000 people) has been fully vaccinated. The country has had 193 Covid cases and no deaths.

• Grenada. On March 20, the government announced various fiscal and financial measures, effective for April-June in the first instance, to mitigate the impact of COVID on the economy. These included: (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 July, fiscal support for hotel workers extended for another 3-month period as a result of the continued border closure. In May 2020 the government announced a plan for a gradual re-opening of the economy, with several sectors, most notably construction and real estate, opening immediately. Plans for border reopening in July were pushed back in light of a spike in cases in Southern US and borders were only partially opened in July and August, admitting commercial flights from the Caribbean region, Canada, UK, and the EU. In December 2020, due to the discovery of a new strain of COVID-19, the government banned all flights to Grenada from the United Kingdom, but lifted them at the end of February, 2021. Grenada started its vaccination rollout in February, 2021 after receiving a donation of 1000 doses of AstraZeneca vaccine from the Government of India. The COVAX facility is expected to deliver 45,600 doses to Grenada, and 60 percent of the population is expected to be vaccinated by the end of 2021. As of June 10 (March 2), 9,500 (4,650) people had been fully vaccinated and 18,400 had received the first dose.

• 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 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. 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 and hardware stores. Effective on May 22, the government further eased lockdown measures, including the opening of retail stores and lifting construction restrictions. On May 29, the government announced a one-off grant of EC$10,000 as an assistance package to small and micro businesses impacted by the pandemic to cover business overheads. Restrictions were further eased on June 15 when the government permitted the reopening of bars and restaurants to dine-in customers. On July 1, the curfew was lifted, and businesses were permitted to operate as per their normal schedule with sanitization and distancing measures in place.

• St. Kitts and Nevis. Since May 23 and about a month after the last new case of COVID-19 was reported, the government ended its 24-hour curfew and gradually resume normal activities including in beaches, churches, and bars, as well as some group sports. Borders remain closed until October 31 when international travelers was reopened under standard Covid travel protocols (PCR test and quarantine). Tourist arrivals remained at a small fraction of pre-Covid levels. Only occasional cases were reported until May 2021 when community spread was detected. A new, two-week curfew has been imposed since mid-June. New cases are rapidly declining. A fiscal relief package for 3.7 percent of GDP in 2020 included: (I) an increase in the health budget (0.6 percent of GDP); (ii) an injection of funds to SMEs and the agriculture sector; (iii) waiving of customs duties for essential hygiene and health products imports; (iv) additional support for poverty alleviation program; (v) a temporary 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; (vi) funding for mortgage loans to citizens of St. Kitts and Nevis; and (vii) a moratorium on payments for electricity services for affected businesses and individuals . These measures were extended until June 2021. In addition, the Social Board Security transferred EC$ 1,000 in April, May, June, and September of 2020 to individuals whose employment was affected by the pandemic crisis.

• St. Lucia. On April 8, the government announced the Social Stabilization Plan and a public health response (3 percent of GDP), including temporary income support, suspension of rental fees to enterprises renting from government and a fuel rebate to bus drivers. On July 12, the government announced an Economic Recovery and Resilience Plan (11.5 percent of GDP), including an electricity assistance program (effective over a period of 6 months, from October 2020 to March 2021), an expansion of the public assistance and provision of grants and loans to enterprises. On November 24, the Prime Minister announced that is committed to attaining the 2030 debt target set by the Eastern Caribbean Central Bank and that a properly designed rules-based fiscal framework is fundamental to enhancing fiscal discipline in the furtherance of its long-term fiscal policy objectives. St. Lucia doesn't require COVID-19 vaccines for travel, but there are several restrictions in place for unvaccinated visitors. As of 25 June 2021, there are a total of 5,262 confirmed cases, of which 5,099 have recovered and 84 deaths have occurred.

• St. Vincent and the Grenadines. On April 7, 2020, the government approved a fiscal package (3.6 percent of GDP) in response to the pandemic crisis. The main measures included: (i) increased health spending, including for the construction of an isolation unit and associated facilities and purchase of medicines and supplies, equipment, and hiring of additional medical staff; (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. The recent explosive eruption of the La Soufriere Volcano led to the evacuation of the northern region of St. Vincent and the hosting of the relocated population in temporary lodging. COVID-19 cases rose moderately but a new widespread outbreak was prevented. The EC$ 55 mil. supplementary fiscal package in response to the eruption include extra spending for containment of the pandemic. As of June 09, 2021 the country started Phase 14 of its reopening of international entries, with requirements ranging from no restrictions for low-risk countries to 21-day quarantines for very high-risk ones. Passengers with a negative PCR test and a proof of full vaccination conducted at least two weeks prior to the arrival benefit from a shorter quarantine process of 48 hours. On March 1, 2021, St. Vincent received 40,000 doses of the AztraZeneca vaccine donated by India, which will help to cover about 20 percent of the population. As of June 26, 2021, around 25,000 doses were administered. The authorities also secured 40,000 doses under the COVAX facility of which 24,000 were received in April.

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. On September 24, the ECCB and ECCU Bankers Association announced that (i) banks would consider extending the loan repayment moratorium up to a maximum period of 12 months, in their sole decision; (ii) the loan repayment moratorium would be based on an assessment of the financial condition of customers; and (iii) a waiver of late fees and charges would be applicable to eligible customers during this period.

Exchange rate and balance of payments

• No measures.

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Ecuador

Background. As of May 1, 2021 Ecuador, has reported 384,589 confirmed cases and 18,724 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 shut all its borders on March 18th, 2020. On March 22nd 2020, 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. The National Emergency Operations Committee (COE) defined new parameters for the reopening and the mayor of Quito announced a move to lower confinement requirements starting June 3.

In Quito, starting June 3: Productive activities will be reactivated "as long as they respect biosafety protocols" in person with 50% of the staff. The reopening of commercial premises may operate with 30% of customer capacity. The curfew will apply from 18:00 to 05:00 (instead of 14:00 to 05:00). Public transportation will resume in a gradual and controlled way to avoid crowds. The telework modality will continue in force for public officials. The Municipality of Quito has the power to manage and issue the safe-conducts. A request will be presented so that, in coordination with the Ministry of Health, the Municipality of Quito assumes the management of the epidemiological fence of the city.

In the rest of the country, “yellow confinement level” means: The curfew will apply from 21:00 to 5:00 (instead of 14:00 to 05:00). Private vehicles -including motorcycles- even and odd can circulate from Monday to Saturday. Circulation of taxis and mixed transport even and odd every day. Public transportation will circulate without restriction of plates. Urban transportation will circulate with 50% capacity. Authorized inter-parish transportation. Interprovincial transport between cantons of neighboring provinces. Restaurants and cafes will work with 30% capacity. The prioritization of the working day in telework mode is maintained. Companies are obliged to expand a biosafety protocol, considering the guidelines established in the Guide and General Plan for the progressive return to work activities. The approval by the national, provincial or cantonal COE will not be required. After the request of the cantonal COE in Quito, the presential working day of the public sector will remain suspended until June 15.

In the rest of the country, “green confinement level” means: Curfew from 00:00 to 05:00. 70% of private vehicles will be able to circulate. Taxis and mixed transport may circulate. Public transportation circulates without restriction of plate. Urban transportation will work 50% of its capacity, or all sitting. Inter-cantonal transport may operate between cantons with the same traffic light color. Interprovincial transportation prohibited at the national level. Restaurants may open with 50% capacity. The prioritization of the working day in telework mode is maintained.

The government adopted containment measures, closing public spaces, imposing a curfew, and closing its borders since March 18th through September 13th while the State of Emergency was in effect. Over those six months, decisions on pandemic control were concentrated in the Emergency Operations Committee (COE). On December 21, President Moreno announced a new 30-day state of emergency and two weeks of night curfew to prevent new outbreaks during the holiday season and in response to the new UK strain of the virus. The new restrictions limit the time of traveling by car and reduce capacity at shopping centers restaurants and hotels.

President Lenin Moreno declared a state of emergency from April 23 to May 20, 2021 due to public calamity in 16 provinces of Ecuador. On Fridays, Saturdays and Sundays an absolute mobility restriction will be applied in which the curfew will be uninterrupted and will begin at 20:00 on Friday and will end at 05:00 on Monday.

Key Policy Responses as of May 1, 2021

Fiscal

• The early containment measures focused on limiting the spread of the virus by closing the borders, public spaces and non-critical commercial activities, and imposing a nationwide curfew. These measures seem to have stabilized the pandemic outbreak, as the spread of the virus has slowed lately compared to other countries in the region (chart). Policy measures to protect lives and livelihoods amounting to $1.2 billion in 2020 included exceptional cash transfers to poor families ($250 million), distribution of food baskets, temporary relaxation of eligibility criteria for unemployment insurance ($372 million), and additional spending on health ($550 million). These measures were supplemented with a deferral of payroll contributions, tuition, health insurance, utilities, and housing support as well as temporary price controls for basic food items. Measures to support employment included the possibility of mutually agreed changes in labor contracts and introduction of shorter work week and more flexible work arrangements on a temporary basis.

Monetary and macro-financial

• To address liquidity shortage in the financial system, the authorities reduced the banks’ contribution rate to the Liquidity Fund by three percentage points of deposits (to 5 percent), freeing up about $950 million in liquid assets. This measure helped rebalance internal liquidity while the demand for cash also slowed gradually. In addition, they introduced an extraordinary deferral of private credit obligations on a voluntary basis (recently extended), mandated the revision of ceilings on interest rates, and introduced a working capital facility (Reactivate Ecuador) for enterprises financed by the World Bank. While the deferment measures will help support the real economy, if maintained for a prolonged period, they could weaken balance sheets of the financial institutions and represent downside risks for the financial system, especially during the transition to the post-emergency period.

Exchange rate and balance of payments

• No measures.

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Egypt, Arab Republic of

Background. According to the WHO, the first case of COVID-19 was reported on February 14, 2020. 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 also suspended the export of all types of legumes for a period of 3 months - which has been extended further for 3 more months in June 2020, and they plan to start increasing strategic food reserves to meet domestic demand. Egypt have resumed the export of medical supplies, after a temporary halt in March 2020. Around 77,000 Egyptians have been repatriated since the start of the pandemic. The central bank and the government are actively implementing measures to contain economic implications of the pandemic.

Reopening of the economy. According to a Cabinet statement on April 30, 2020, the government had started to draw up plans to ‘coexist’ with COVID-19 in the long term. Since the last week of April 2020, shopping malls and retail outlets had been allowed to open on weekends until 5 pm, while restaurant customers had been allowed to place takeaway orders in-store. Starting May 4, 2020, hotels were 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. Starting June 1, 2020, nighttime curfew was one hour shorter – from 8pm to 5am instead of 6am. Starting July 2020, a gradual re-opening of the economy – air travel will resumed, restaurants and cafes opened with 25 percent capacity, stores will close at 9 pm while restaurants and cafes will close at 10 pm, beaches will remain closed until further notice, public transportation will operate between 4 am and midnight., All parks and specialized gardens around Cairo will open to the public starting on August 26, 2020, with a maximum capacity of 50 percent. Starting September 21, funeral prayers and wedding ceremonies held in open-air venues have been allowed, for a maximum limit of 300 people. Guidance on risk mitigation measures remains in place, including social distancing and mask wearing. International flights have resumed, and tourists are arriving in small numbers.

Key Policy Responses as July 1, 2021

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 close to 1.6 million beneficiaries. A consumer spending initiative of close to EGP 10 billion has been launched to offer citizens two-year, low-interest loans to pay for consumer goods discounted by up to 10-25 percent and provide ration card subsidies. A new guarantee fund of EGP 2 billion has been formed to guarantee mortgages and consumer loans made by banks and consumer finance companies. To support the healthcare sector, EGP 5 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. A Corona tax of 1 percent on all public and private sector salaries and 0.5 percent on state pensions have been imposed, the proceeds of which are earmarked for sectors and SMEs most affected by the pandemic.

Monetary and macro-financial

• The central bank reduced the policy rate by 300bps in response to the pandemic and has since then reduced the policy rate by 100 bps. The preferential interest rate has been reduced from 10 percent to 8 percent on loans to tourism, industry, agriculture and construction sectors, as well as for housing for low-income and middle-class families. A housing initiative has been announced to provide low cost financing for housing units. A new lending initiative with soft loans at zero-to-low interest rates from banks is aimed at replacing old cars with natural gas-powered vehicles. 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. Microlenders have been advised by the Financial Regulatory Authority to consider delays on a case-by-case basis, of up to 50 percent of the value of monthly installments for struggling clients, and the regulations issued last year requiring banks to obtain detailed information of borrowers have been relaxed. An initiative that suspends credit score blacklists for irregular clients and waives court cases for defaulted customers under certain conditions, has been extended for customers in the tourism sector. The central bank launched an EGP 20 billion stock-purchase program which it has minimally used. The central bank has also extended previously existing initiatives, namely (i) initiatives for the tourism sector and distressed companies with debt below EGP 10 million have been extended for another 6 months, (ii) the share of bank loan portfolios that must be allocated to SMEs has been raised from 20 to 25 percent.

Exchange rate and balance of payments

• At the outset of the pandemic, large capital outflows had resulted in a drawdown of reserves to avoid excessive exchange rate volatility from the severe turbulence in financial markets. Portfolio flows have started recovering since June 2020.

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El Salvador

Background. El Salvador has reported 26,773 positive cases (777 deaths, 17,433 recovered) as of September 11, 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. In 2020, real GDP contracted by 7.9 percent.

Reopening of the economy. On June 2, the government allowed hardware stores and maintenance firms to re-open. The construction sector was granted permission to re-open for works related to the damage from a tropical storm. The government began the gradual reopening of the economy on June 16. The economy will reopen in five phases, each lasting 21 days. About 50 percent of the economy is open during phase 1. On July 19, President Bukele postponed indefinitely the move to phase 2 of reopening, which previously was scheduled for July 5 and moved to July 21. Economy reopened on August 24, following the Supreme Court’s decision rejecting the executive decree on phases of reopening.

Key Policy Responses as of May 6, 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’ statutory reserve requirements for various liabilities by about 12 percent of deposits (to about 9 percent); (iii) amending provisioning for NPLs through freezing credit ratings; (iv) imposing a temporary moratorium on credit risk ratings; (v) temporarily relaxing lending conditions through a grace period for loan repayments; and (vi) establishing a US$650 million trust fund to be operated by the development bank BANDESAL to provide support to workers and SMEs.

Exchange rate and balance of payments

• No measures.

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Equatorial Guinea

Background. The first confirmed COVID-19 case was reported on March 14, 2020 and the government was proactive in implementing substantial preventive measures at an early stage. As of mid-June and early August 2020, preventive measures had been loosened to a large extent, lifting the stay-at-home order and closing of the airspace and allowing businesses to reopen. However, due to a second wave, the authorities gradually reintroduced preventive measures from mid-December. Although the second wave has abated since May, many of these measures remain in place, including limiting the number of international flights to one per airline; requiring foreign visitors to present a negative PCR test and to quarantine for 5 days upon arrival in Equatorial Guinea; requiring local travelers between the continental and insular regions to present a negative PCR test or vaccination card; and restricting social gatherings, including through closure of all pubs/nightclubs and a curfew. Two main measures have been loosened since May: the curfew has been relaxed to 11pm-5am and in-person classes at all public and private schools in the main cities of Bata and Malabo resumed after having been suspended since February 15,. Since April, the government has scaled up its vaccination campaign, which now includes vaccination posts in all districts of the country. As of late June, some 149,000 people (approx. 10 percent of the country's population) have received at least one vaccine dose and some 111,000 are fully vaccinated. After accidental explosions on March 7 in the country's largest city of Bata, which caused humanitarian tragedy and widespread destruction, a Covid lab there could again be operationalized. This has allowed for resumption of a massive testing campaigns also in Bata (in addition to the capital of Malabo).

Key Policy Responses as of June 28, 2021

Fiscal

• Fiscal policy has been facing two large shocks: the Coronavirus and lower oil prices. Regarding the latter, Equatorial Guinea has been facing a large fiscal revenue shock, given that hydrocarbons accounted for more than ¾ of fiscal revenues. To address this shock, the government has been postponing execution of non-priority capital expenditures, identifying savings to non-wage current expenditures and financing sources, urging public enterprises to cut personnel and costs as well as continuing implementation of plans to strengthen the tax administration.
  To address the Coronavirus, the government approved various measures in 2020. The government's emergency health spending package (0.4 percent of GDP) deepened investments focused on the first response system, quarantine facilities for incoming travelers, and laboratory facilities/testing. Furthermore, other spending measures were also taken (0.2 percent of GDP), mainly to ensure continuity of education and a social assistance scheme (0.1 percent of GDP) had been initiated for the most vulnerable. On the revenue side, the authorities have provided in 2020 some targeted and temporary support to the private sector (estimated cost of 0.3 percent of GDP), including halving withholding tax rates and delaying tax payment deadlines for small and medium-sized firms, and reducing electricity bills. Since February 2021, the government has implemented a vaccination campaign and 820,000 vaccines doses have already been received. There are plans for the acquisition of more doses as the campaign aims to vaccinate at least 70 percent of the population.

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 for refinancing operations. The BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-June 2021.. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. This program will expire at end-August 2021. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year. At its June 2021 MPC meeting, BEAC decided to adapt liquidity management and start offering long term liquidity absorption operations (one-month maturity) to over liquid banks to help improve monetary policy transmission and the development of the interbank market.

  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. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

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, and since then, the cases have been increasing. The government imposed a 21-day national lockdown effective from April 2, which was extended on April 22, with restrictions being eased incrementally. However, as the pandemic has been spreading in all the regions including in some rural areas, the government issued new Guidelines to implement vigorous and stringent measures, effective on December 22, 2020.

Under the new Guidelines, movement of all citizens is restricted except in cases of indispensable developmental, service and security tasks. Travel from one village/city to another village/city in the country is banned. The use of private cars and other individual means of transport (excluding trucks) is not allowed without permits. Trade services which are related to the daily livelihood of people may operate but close at 8:00 pm every evening, while all other trading services are closed. Major productive and service sectors (manufacturing, agriculture, food processing, construction, etc.) continue their functions while all government institutions stop routine services and functions to focus on indispensable developmental and security tasks. Any individual who violates these Guidelines will be punished.

The Guidelines will be assessed periodically and relaxed depending on the trajectory and threat of the COVID-19 pandemic.

Reopening of the economy. In April 2021, schools, public transport, and partial flight from and to Asmara resumed operations.

Key Policy Responses as of July 1, 2021

Fiscal

• No measures.

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures. The exchange rate is fixed.

Links

21-day national lockdown

New Guidelines effective on December 22, 2020

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Estonia

Background. The impact of the second wave of COVID-19 infections on Estonia's economy and health situation is gradually easing. Since February 2021, the continued deterioration of the epidemiological situation caused by the second wave of COVID-19 infections has prompted the authorities to reintroduce stricter containment measures. On February 3, 2021 restrictions were harmonized across Estonia and on March 11, 2021 a one-month lockdown extended to end-April was imposed. From May 3, 2021, the Estonian authorities have started to gradually relax restrictions. As of June 22, 2021, the risk of coronavirus spread in Estonia was rated as "low". GDP contracted by 2.9 percent in 2020, among the mildest in the EU, reflecting strong initial conditions and less stringent restrictions in 2020H2. In the first quarter of 2021, GDP grew by 5.4 percent y/y, after four consecutive quarters of decline, reflecting strong activity in domestic trade, ICT, and banking sectors.

Reopening of the economy and additional containment measures. The first wave emergency situation ended on May 18, 2020. 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. Gyms and swimming pools restarted operations on May 18. From June 1, Estonia reopened its borders to international travels and started to ease restrictions on bars, restaurants, and public events. The restrictions on indoor events, however, were strengthened again on September 29 from 1,500 to 750 persons in an effort to mitigate the second wave. Direct flights from Estonia to high-risk countries (experiencing 25 cases or more per 100,000 inhabitants in the past 14 days) were banned until August 31. The travel restrictions are regularly updated on the government website

Second and third COVID-19 waves. Estonia’s relatively good track record in handling the pandemic was tested by the second wave, with the number of cases temporarily reaching the highest level in Europe before falling owing to the tight lockdown imposed in March 2021. As of February 3, 2021, the government first harmonized restrictions to curb the spread of coronavirus nationwide. Containment measures were further tightened from February 22, 2021 including by: (i) requiring students from grade five and above to switch to distance learning for one week; (ii) prohibiting extra-curriculum group activities for at least two weeks; (iii) closing spas and water parks for two weeks; and (iv) tighter limits on the number of people that can attend indoor and outdoor events. A strict one-month lockdown (expected to be extended) was imposed on March 11, 2021 to curb the second wave and was extended to end-April. As of May 3, 2021, the government has started to gradually ease restrictions, including by allowing eating in outdoor dining areas of catering establishments until 9 p.m., and contact learning for children in grades 1–4 to resume.

A strict one-month lockdown (expected to be extended) was imposed on March 11, 2021 to curb the second wave and was extended to end-April. As of May 3, 2021, the government has started to gradually ease restrictions, including by allowing eating in outdoor dining areas of catering establishments until 9 p.m., and contact learning for children in grades 1–4 to resume. The government has gradually relaxed containment measures based on the infection risk level which was rated as "low" as of June 22, 2021. The relaxation of containment measures, included: (i) allowing contact learning, outdoor sports events, outdoor museums visits from May 17; (ii) reopening entertainment venues and indoor dining at 50 percent occupancy capacity from May 24; (iii) relaxing COVID-19 restrictions on movement (2+2 rule) from May 31; (iv) cancelling time restrictions on indoor and outdoor events and activities, as well as on-site eating and drinking establishments from June 11; (v) easing restrictions on travels from a third countries, effective June 21; (vi) removing the occupancy rule as of June 23; (vii) increasing the maximum attendance limits to up to 1000 people (resp. 5000 people) for indoor (resp. outdoor) events and activities from June 28.

The March to April lockdown measures and good progress with vaccine rollout have been effective in bringing down the number of infections. The 14-day cumulative infections per 100,000 inhabitants steadily declined and reached 31 infections on June 29, 2021, after peaking at 1553 cases (as of March 18, 2021). The pressure on the Estonian healthcare system has also eased significantly, with 19 COVID-19 patients being treated in hospitals (of which 6 people in intensive care) as of June 29, 2021, compared to the March average of 670 daily COVID-19 patients. The COVID-19 death toll reached 1,269 people as of June 29, 2021. Estonia has secured enough vaccines orders to cover its population, mainly from Pfizer/BioNTech, Moderna and AstraZeneca. As of June 29, 2021, about 557,478 vaccine shots had been administered, of which 214,406 people received the first dose, while 435,674 people had completed the vaccination cycle. As of June 29, 2021, the number of people vaccinated reached 41.95 percent of Estonia's population.

Key Policy Responses as of June 29, 2021

Fiscal

• The 2020 COVID-19 support package of about €2.3 billion (8.5 percent of GDP) helped support the healthcare system, workers and businesses and included: 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.

  In December 2020, the Government approved new measures to support the areas and sectors most affected by the new restrictions to contain the second wave. A package of €5 million was approved on December 17 to support businesses in Ida-Viru county and more generally culture, sports, and education all over Estonia. On December 30, the government approved a €30-million package to further support businesses in Harju and Ida-Viru counties, which were under the most stringent restrictions.

  A supplementary budget (2.2 percent of GDP), promptly enacted in April 2021, enhances the response to surging virus effects. The package mostly targets healthcare expenditure and support for employees and households. In addition to the 2020 unused measures which were carried over, this new support package brings the total fiscal support for 2021 to 6½ percent of GDP.

  In 2020, the government signed with the Nordic Investment Bank a 15-year loan of €750 million. On June 3, 2020 Government successfully raised €1.5 billion (more than the €1 billion that was originally planned) through a 10-year Eurobond issue that has an interest rate of 0.125 per annum. Government has signed a €200 million loan with the council of Europe Development Bank (CEB) to finance local government’s crisis mitigation measures. The government also 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.

Monetary and macro-financial

• For monetary policy at the currency union level, please see Euro Area page.

  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 the 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 reported its first COVID-19 case on March 14, 2020 and cases rose rapidly afterwards. In response, on March 17, the government 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 was affected by the closure of some ports of entry with South Africa and weak demand, registering a contraction of 9.1 percent (year-on-year) in 2020Q2. Despite a recovery toward the end of the year, output contracted by 2.4 percent in 2020. The exchange rate against the USD which depreciated significantly in early 2020 had largely recovered to the pre-crisis level by the year end. On July 29, the IMF Executive Board approved US$110.4 million in emergency financial assistance under the Rapid Financing Instrument to support authorities' efforts in addressing the severe impact of the COVID-19 pandemic. On November 19, the World Bank has approved a US$40 million loan to support the economic recovery in the country.

Reopening of the economy. Since May 8, 2020, the government began the process of easing the initial partial lockdown by allowing some businesses to operate. The national emergency was further extended until November 19. Schools reopened since July 6 in the completing classes, while other class levels remained closed until March 29, 2021. The government issued guidelines allowing for religious and social gatherings under strict conditions. More businesses were allowed to operate under established WHO and health guidelines since July 13. On September 30, the government lifted restrictions on international travel, requiring international travelers to present a negative COVID-19 certificate taken within 72 hours of travel, and discouraging non-essential travel. The ban on the production and sale of alcohol was initially lifted on October 26 but was again reinstated from January 21 until March 22, 2021. Due to rapidly increasing COVID-19 infections in mid-December 2020, the government implemented a 10-week partial lockdown and curfew starting on January 8, 2021. International travel is allowed only for medical attention, schooling, work, and business purposes and hours of operations for retailers have been restricted. On April 23, 2021, restrictions on serving alcohol were loosened for restaurants, while hours of operation were extended for retailers and restaurants alike. On June 14, in response to a recent rise in COVID cases restrictions lasting two weeks were escalated to Level 2, including limits on gatherings and restrictions on shopping hours and alcohol sale.

Eswatini received 32,000 AstraZeneca vaccine doses in mid-March through the COVAX Facility (12,000 doses) and the Serum Institute of India (SII) (20,000 doses) donated by the Government of India. The COVID-19 vaccination campaign was launched on March 19, 2021, with vaccines administered to essential workers and leading politicians, before expanding it to include the general elderly population starting on March 30, 2021. On June 9, Eswatini received its second delivery of 14,400 doses of AstraZeneca via COVAX and on June 16, commenced phase II of vaccinations including healthcare workers and the elderly. The government has urged all citizens 18 years and above to pre-register in anticipation of expanding vaccine supplies. The next COVAX delivery of 12,000 doses of AstraZeneca vaccines via COVAX is expected within the next two weeks. A 500,000-dose donation from Oxford University/AstraZeneca is also expected in tranches.

Vaccines from the COVAX facility will ultimately cover 20 percent of the population. Government has further ordered 2 million doses from the Serum Institute of India expected to arrive in 2021Q2 – though the status of this delivery is unclear given the Indian Government's current restrictions on vaccine exports due to the COVID-19 outbreak in India – and 237,328 doses of the Pfizer and Johnson & Johnson vaccines from the AU, expected to arrive in 2021Q3. Combined with the supply from the COVAX facility, these vaccines will cover 35 percent of the population, with the rest to be purchased directly from the manufacturers using the Government's E200 million allocation for the procurement of the vaccines, in addition to donations from the Kirsh Foundation ($15.8 million) and the Government of Taiwan ($1.5 million). Moreover, on April 16, 2021, the World Bank Board approved about E72 million (US$5 million) additional financing from the International Development Association (IDA) to provide Eswatini with safe and effective vaccine purchase and deployment. In sum, these should provide enough vaccines to cover the Eswatini population, who have demonstrated substantial demand for the vaccines since the start of the vaccination rollout. The Eswatini National Immunization Technical Advisory Group (ESWANITAG) was appointed to provide scientific recommendations during the introduction of new vaccines and the implementation of immunization strategies.

Key Policy Responses as of June 30, 2021

Fiscal

• In FY21/22 the government has budgeted E200 million to procure vaccines for Eswatini's entire population, which it is planning to use to purchase vaccines through the AU. As the vaccines received thus far have been donated, these funds have not yet been used. In FY19/20 (ending March 31, 2020), a supplementary budget was approved for additional public healthcare of E100 million (0.14 percent of GDP). In addition, the authorities have put in place a response package in FY20/21 of E1 billion (1.5 percent of GDP) to increase healthcare capacity, ramp up food distribution and social protection transfers, and improve access to water and sanitation facilities for the most vulnerable. Food assistance has been provided, benefiting over 360,000 people. 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. The government has set up a revolving fund of E45 million (0.07 percent of GDP) to assist SMEs, and a E25 million (0.04 percent of GDP) relief fund to aid laid off workers, E12.8 million of which has been disbursed to laid off workers thus far. 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. The government is also subsidizing the cost of required COVID-19 tests for informal cross-border traders, many of whom are women whose livelihoods depend on this trading activity. For more information see  http://www.gov.sz/.

Monetary and macro-financial

• The Central Bank of Eswatini (CBE) has: (i) reduced the discount rate by a cumulative 275 basis points to 3.75 percent and has kept it unchanged ; (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. The authorities have also began enhancing their liquidity management framework and tools, and on July 15th, issued a notice outlining new facilities and changes to existing ones. 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. The CBE's regulatory relief measures for banks in response to COVID-19 expired on December 31, 2020. For more information see  https://www.centralbank.org.sz/

Exchange rate and balance of payments

• No measures.

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Ethiopia

Background. The first confirmed case was reported on March 13, 2020. In the early response to the pandemic, the authorities declared a 5-month State of Emergency from April-September 2020 and closed land borders, banned inter-regional public transport and public gatherings, closed schools, ordered the shuttering of nightclubs and entertainment outlets, and announced social distancing measures. The authorities postponed the elections due to the pandemic from August 29, 2020 to the recently announced date of June 5, 2021. As new cases fell steadily from the August peak, the authorities lifted several measures. But, since late January 2021 another surge in infections led to daily new cases eclipsing the previous peak of August 2020. Encouragingly, new cases have declined steadily after peaking in early-April 2021, with the 7-day average of new cases dropping below 100, its lowest levels since June 2020. However, the rate of decline of new cases has slowed and it appears that it may be bottoming out. Ethiopia received 2.2 million vaccine doses in March 2021 and aims to vaccinate 20 percent of the population by the end of 2021. As of end-June more than 2 million people had received the first dose of the vaccine.

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, originally announced the suspension of 80 flight routes, but resumed flights to 40 destinations on July 13. The latest information shows that the airlines is operating flights to 116 international destinations and 23 domestic destinations. Ethiopia’s goods exports were up 21 percent y/y in the first eight months of the current fiscal year (July 2020 – June 2021), supported by gold exports while non-gold exports have gained momentum in recent months but remain below the levels seen for the first eight months a year ago: coffee and manufactured exports have declined while exports of flowers and fruits and vegetables have grown slightly. Services exports, dominated by revenues generated by international air transportation, have bottomed out but also remain below the levels seen a year ago. Finally, Ethiopia benefits from improved terms of trade that arises not only from lower global oil prices for the first half of the current fiscal year, but also from the prices on its main export commodities such as coffee, oil seeds and flowers. 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 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.

Growth in FY 2019/20, while below trend, surprised on the upside as the two largest sectors -agriculture and construction - shrugged off the impact of the pandemic. Growth for FY 2020/21 is expected to be 4 percentage points lower than the pre-crisis baseline.

Reopening of the economy. The state of emergency, declared in April 2020, ended in September, and since then there had been a steady decline in COVID related restrictions. However, the recent rise in cases resulted in the authorities announcing strict enforcement of an October 2020 directive requiring the wearing of masks in public places and no gatherings of more than 50 people. Ethiopia continues to require all people entering Ethiopia from another country have a negative COVID test 120 hours prior to entering the country and undergo a mandatory 7-day quarantine at designated hotels at the traveler's expense. In addition, schools continue to operate on a rotational basis, with students assigned shifts to reduce in-person class size. Ethiopian Airlines resumed flights to about half of previously suspended destinations in July.

Key Policy Responses as of July 1, 2021

Fiscal

• Ethiopia initially announced a Br 300 million package to bolster healthcare spending in early March. On March 23, 2020, 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, 2020, the Prime Minister’s office announced a COVID-19 Multi-Sectoral Preparedness and Response Plan, with prospective costing of interventions of US$1.64 billion (about 1.6 percent of GDP). The funds were 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. Implementation of measures, which began in late-2019/20, have continued in the current fiscal year. For the fiscal year 2019/20, the authorities indicated that the COVID-19 related spending was 52.4 billion birr ($1.6 billion).

  On April 30, 2020, the Council of Ministers approved 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.

  On June 25, 2020, the Prime Minister’s Office released a statement detailing measures intended to support FDI in the country through the crisis and recovery, including: (i) operational facilitation of logistics in export and import process (such as free railway transport of manufacturing goods between Ethiopia and Djibouti); (ii) removal of taxes from the import of raw materials for the production of Covid-19 essential goods, and lifting of the minimum price set by the NBE for horticulture exports.

  For the fiscal year 2020/21, the authorities plan to allocate about 30 bn birr (or $0.8 bn) for COVID-19 related spending, including buying medical equipment; additional payment for health workers; food assistance for quarantines and isolation areas; procurement of hygiene facilities, disinfectants, and personal protection equipment.

  Ethiopian authorities have received 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 the Commercial Bank of Ethiopia (CBE) with an ETB 16 billion 3-year liquidity line and has injected liquidity into hotel and tourism sectors through commercial banks.

Exchange rate and balance of payments

• No measures.

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European Union/Euro Area

Background. Since the first reported cases on January 24, 2020, COVID-19 has spread across the European Union (EU) with a severe impact. The first wave, which peaked in April 2020, resulted in a surge of infections and deaths. Cases and mortality subsided during the summer months, partly thanks to the unprecedented containment measures. Infection rates picked up again in the fall of 2020 and remained elevated during early 2021, requiring the re-introduction of containment measures ranging from lockdowns and travel restrictions to school closures and bans on large gatherings. More recently, however, new cases, deaths, and hospitalizations have steadily declined across the euro area thanks to the pickup in vaccinations. Overall in 2020, real GDP contracted by 6.7 and 6.1 percent in the euro area and the EU, respectively, with output for 2021Q1 showing a further contraction.

On December 2, the European Commission adopted a strategy for managing the pandemic over the winter months, recommending continued vigilance and caution until safe and effective vaccines become available in early 2021. So far, four vaccines (BioNTech/Pfizer, Moderna, AstraZeneca, and Johnson & Johnson/Janssen) have been authorized at the EU level. Three more (Novavax, Curevac and Sputnik V) are under review. The European Commission concluded Advance Purchase Agreements contracts allowing countries to purchase up to 2.8 billion doses, including 1.9 billion doses of the four vaccines already approved. Member states have agreed to abstain from negotiating with vaccine manufacturers with whom the EU has already reached agreements, but vaccine supply and delivery have fallen short of the expectations based on the advance-purchase agreements. As of June 30, 2021, about 50 percent of EU's population have received at least one vaccine dose. The EU has also enacted a vaccine export control mechanism, although the net impact on supply is unclear.

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. On May 3, 2021, the EC proposed to allow entry to the EU for nonessential reasons not only for all persons coming from countries with a good epidemiological situation but also all people who have received the last recommended dose of an EU-authorized vaccine. The EC also proposed a new 'emergency brake' mechanism, to be coordinated at EU level which will allow member states to act quickly and temporarily limit to a strict minimum all travel from affected countries for the time needed to put in place appropriate sanitary measures. EU member states can start issuing and using the EU Digital COVID certificate as of 1 July 2021.

Key Policy Responses as of June 30, 2021

Fiscal

• On December 11, EU leaders finalized the agreement on the EU budget and Next Generation EU (NGEU) recovery package, which will provide additional spending of €750 billion in total, financed by borrowing at the EU level. The funds are split between grants (€390 billion) and loans (€360 billion), which will be channeled through a special Recovery and Resilience Facility (RRF) and a top-up to existing EU budget programs. Most of the money is set to be committed in 2021-23, with 70 percent of grants to be committed in 2021-22. To ensure a frontloading of disbursements, national expenditures undertaken since February 1, 2020 will potentially be eligible for funding. While the exact allocation of some of the funds remains to be determined, high-debt countries hit hard by the pandemic (e.g., Italy and Spain) and Eastern European countries will be the biggest net beneficiaries from the RRF. Overall, 30 percent of the NGEU and the 2021-27 EU budget will be targeted towards climate change-related spending. The RRF entered into force on February 21, 2021. On 31 May 2021, the Own Resources Decision has been ratified by all EU member states and the European Commission can now start borrowing to finance the NGEU package. As of June 30, 2021, 24 EU member states submitted their Recovery and Resilience Plans (RRP) to the European Commission, of which 9 have been recommended for approval by the European Council in July.
  Other key fiscal measures taken by the European institutions in 2020 include:

  • Safety net: A Pandemic Crisis Support (PCS) instrument (based on existing precautionary credit lines) from the European Stability Mechanism (ESM) to provide support up to 2 percent of 2019 GDP for each euro area country (up to €240 billion in total) to finance health-related spending. So far, no country has applied for PCS funding.
  • Protecting workers and jobs: A temporary loan-based instrument (SURE) of up to €100 billion to protect workers and jobs, supported by guarantees from EU member states. €94.3 billion have been committed to EU, out of which €90 billion have been disbursed.
  • Loan guarantees: €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.
  • Fiscal rules flexibility:he European Commission activated the general escape clause in the EU fiscal rules through 2021, which suspends the fiscal adjustment requirements for countries that are not at their medium-term objective. The escape clause is expected to be extended through 2022.

  The European Commission has introduced temporary flexibility in the state aide rules,

  • 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 on a temporary basis through June 2021.
  • On May 8, 2020 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 through September 2021.
  • In January 2021, the temporary framework was extended through end-2021 and the ceilings for state aid have been expanded.

Monetary and macro-financial

• At the onset of the pandemic 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 2022, with interest rates that can go as low as 50 bp below the average deposit facility rate. 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. The ECB also introduced an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP), initially through end-2020 but extended later to March 2022.

  On June 4,2020 the ECB announced further measures including 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 2020. 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 2020, 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” (“BB+” for asset-backed securities). Assets that fall below these minimum credit quality requirements will be subject to haircuts based on their actual ratings. On June 2020, the ECB set up the Eurosystem repo facility for central banks (EUREP) to provide precautionary euro repo lines to central banks outside the euro area, which complements existing bilateral swap and repo lines. The EUREP addresses possible euro liquidity needs in case of market dysfunction that might adversely impact the smooth transmission of ECB monetary policy. After an initial nine-month extension, EUREP was extended to March 2022.

  On December 2020, the ECB Governing Council extended the duration and scale of several monetary policy instruments, reflecting a weaker inflation outlook. The recalibration of the ECB's instruments included: (i) increase in the Pandemic Emergency Purchase Program (PEPP) by €500 billion to €1,850 billion and extension of its duration by nine months to at least the end of March 2022 (from June 2021), (ii) modification of targeted longer-term refinancing operations (TLTRO-III) terms, including by extending the period over which banks can secure favorable terms through June 2022, increasing the borrowing limits, and announcing three additional operations to be conducted between June and December 2021, (iii)extension of the April 2020 collateral easing measures to June 2022, (iv) announcing four additional pandemic emergency longer-term refinancing operations (PELTROs) in 2021 to act as a liquidity backstop. On March 11, 2021, the Governing Council announced that purchases under the PEPP over 2021Q2 would be conducted at a significantly higher pace than during the first months of 2021 to preserve the favorable financial conditions.

  The ECB Banking Supervision allowed significant institutions to use their capital conversation buffer and operate temporarily below the Pillar 2 Guidance (P2G) 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. In addition, the ECB Banking Supervision allowed banks under direct supervision (i.e., the largest banks) to exclude cash holdings and central bank reserves from the calculation of their leverage ratio until end-June 2021, which it extended to March 2022. The 3-percent leverage ratio became a prudential requirement for banks as of end-June, 2021. It 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. The ECB Banking Supervision also provided some temporary capital relief for market risk by adjusting the prudential floor to banks' current minimum capital requirement.

  On December 2020, the ECB Banking Supervision relaxed its recommendation that banks suspend dividend payments and share buybacks. The ECB had asked banks to cease all dividends and share buybacks to conserve €30 billion of capital in March, but with the new recommendation the region's strongest banks can now resume dividend payments until September 30, 2021, within strict limits if their capital buffers are sufficient to absorb expected loan losses. The recommendation will be reviewed in September 2021.

  In June 2020, the European Parliament and the European Counciladopted the "banking package," which was proposed by the European Commission on April 2020. The package provides targeted and exceptional legislative changes to the capital requirements regulation (CRR 2), including greater flexibility in the application of the EU’s accounting and prudential rules, which are aimed at facilitating bank lending to support the economy.

  The European Commission proposed on July 24 a Capital Markets Recovery Package with targeted adjustments to capital market rules, which aim to encourage greater investments in the economy, allow for the rapid re-capitalization of companies, and increase banks' capacity to finance the recovery.

  On September 2020, the European Banking Authority (EBA) announced that its temporary guidance (April) emphasizing flexible provisioning for loans that have been granted debt repayment relief would lapse after end-September. Banks have been asked to reinstate their steady-state risk management and asset valuation processes. On December 2020, EBA reactivated its guidelines until March 31, 2021 to ensure that loans, which had previously not benefitted from moratoria, can now also benefit from them. The guidelines were amended and include two safeguards:(1)a 9-month eligibility limit on loans and the requirement for banks to submit plans that help avoid these exposures from becoming impaired.

  On November 2020, the Eurogroup agreed to proceed with the ESM reform and introduced a common backstop for the SRF by early 2022, pending ratification of the amended ESM treaty by member states.

  The European Commission published an action plan on non-performing loans (NPLs) on December 16, 2020, amid fears of rising NPLs. In its plan, the Commission proposes for instance a systemic risk exception under the current resolution framework (BRRD), which would enable member states to provide public support to otherwise solvent banks and national asset management companies (AMC) without burden sharing.

  On December 2020, the European Securities and Markets Authority set guidelines for mitigating leverage risks of hedge funds. The agency published common criteria for assessing leverage risk as well as the design, calibration and implementation of leverage limits.

Exchange rate and balance of payments

• No measures.

F

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Fiji

Background. The Fijian authorities have been highly effective in controlling the spread of COVID-19. The early imposition of travel restrictions limited imported infections. The authorities 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 halted the spread of cases in the country. There were only few confirmed border cases up until March 2021. In April 2021, the country witnessed its second outbreak of COVID-19 virus, this time with a highly infectious variant. This has increased the total number of confirmed cases to 4418 with 21 deaths. The authorities have re-imposed a strict lockdown to limit the spread of the pandemic. Under the COVAX initiative, the Fijian authorities are in the process of acquiring COVID-19 vaccines for the eligible 20 percent of population and have received 36,000 doses as of May, 2021 and are allocated to safeguard frontline health workers. Moreover, donor countries such as India provided 100,000 doses of vaccine in late March; the New Zealand government announced to provide 250,000 vaccines during 2021. Moreover, additional doses are also expected from the Chinese government. Fiji plans to acquire 1.2 million doses of COVID-19 vaccines for its population of around 0.9 million, out of which 31.3 percent of adult population has received the first dose and 4.9 percent has been fully vaccinated as of June 29, 2021.

Reopening of the economy. The authorities started relaxing containment and mitigation measures at the national level on April 26th. Phase 2 of Fiji’s COVID-safe Economic Recovery Plan, announced on June 21, led to the gradual easing of some restrictions (e.g. national curfew, limitations on public gatherings)and the reopening of schools and certain recreational facilities under strict conditions. The reopening of the economy under Phase 2 has been tied to the launch of CareFIJI, a contact-tracing mobile application. On Oct 15, the tourism ministry launched Care Fiji commitment program to promote tourism and to increase awareness among the visitors about pandemic related safety measures. It also removed mandatory 14 days quarantine requirements for visitors from COVID contained countries. Further, Tourism Fiji announced the first ever virtual Fijian Tourism Expo on November 25, 2020, to promote tourism and business activities in the country. The Expo is aimed at bringing together potential investors from Australia, New Zealand and leading industrialists in Fiji. However, with the second outbreak of the pandemic, the government has enforced strict lockdown in major cities in western and central part of the main island and cancelled all repatriation flights to Fiji.

Key Policy Responses as of July 01, 2021

Fiscal

• The authorities have announced two major fiscal stimulus packages in response to the COVID-19 pandemic, one on March 26 and one on July 17. The first package entailed 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. The second fiscal package was announced as part of the FY2020-21 budget for the fiscal year beginning in August. The stimulus mainly consists of sizeable tax and tariff cuts. Fiscal and import excise duties on over 1,600 items were reduced or eliminated. Similarly, the budget includes cuts to the service turnover tax, environmental tax and departure tax. The budget also entails a total of F$100 million for unemployment assistance and a subsidy to Fiji Airways of F$60 million to incentivize first 150,000 tourists in new fiscal year.

  The government has also implemented several additional measures in between the two stimulus packages, including an Agricultural Response Package to ensure food security was also 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. The government also introduced several additional allocations amounting F$50.9 million for the development of sugar sector. In addition, the government expanded its unemployment assistance, guaranteed the debt of Fiji Airways and announced a concessional loans initiative for MSMEs impacted by COVID-19, approving loans of in the amount of F$ 23.5 million (as of Oct 12, 2020). The government’s initiatives aim to improve the investment ratio, which has fallen to 12.8 percent against an average of 20 percent in the last three years. The authorities also announced a new hiring subsidy program under which the government will pay the minimum wage of F$ 2.68 per hour and the remainder will be paid by the employers.

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, (iii) raised its Natural Disaster and Rehabilitation Facility to FJ$60 million (renaming it the Disaster Rehabilitation and Containment Facility) to provide concessional loans to commercial banks for them to on-lend to businesses affected by COVID-19, and (iv) purchased FJ$280 million of Government bonds in the first half of 2020 to help finance the Government deficit.

Exchange rate and balance of payments

• Fiji's currency is pegged to a basket of currencies amid limited capital mobility. The Fijian dollar depreciated by 9 percent against the U.S. dollar between January 1 and March 20, 2020, before gradually appreciating since then, rising above its end-2019 level. The Reserve Bank of Fiji tightened exchange controls on April 3 and June 11 to ensure that adequate foreign reserves can be maintained. It reported foreign exchange reserves stood at F$3,117 million as of Jun 24, 2021. The reserves increased on account of fresh loans from ADB and World Bank and a grant by the European Union. The ADB has announced to provide US$ 2million to Fiji from its Asia Pacific Disaster Response Fund (APDRF) to respond to pandemic crisis in the country. In late March, the World Bank approved US$145 million (FJ$ 299 million) to support pandemic and cyclone relief. Moreover, the Japanese government provided an emergency loan of F$200 million to strengthen Fiji's public health system against the pandemic. Recently, the Australian government also provided a F$ 96 million grant for budgetary support and COVID-19 relief initiative. The Fijian Government and the United States signed a Trade and Investment Framework Agreement (TIFA) to promote trade and investment ties between the two countries.

Link

https://www.fiji.gov.fj/COVID-19/COVID-19-Updates

https://www.who.int/countries/fji/

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Finland

Background. The first confirmed case was reported in late January 2020. The number and incidence of new coronavirus infections remains small nationally (one of the lowest in Europe) and cases have markedly declined following a third wave.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 (if fully utilized) constitute an impulse of nearly 30 percent of GDP. On March 16, 2020 the government invoked the Emergency Powers Act, which was used to close borders, restrict domestic movements, and expand service obligations of essential personnel.

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. Effective June 16, 2020 the government repealed the use of powers under the Emergency Powers Act, declaring that the country was no longer in a state of emergency. On June 23, the government announced the lifting of internal border control and restrictions on traffic between Finland and countries with similar incidence of COVID-19. On August 13, the government adopted resolutions on recommendations for wearing face coverings and face masks, and for remote work. The government adopted on September 11 a decision to continue internal border checks and restrictions on border traffic, which entered into force on September 19 and continued through October 18. The government also adopted a resolution on a hybrid strategy for cross-border traffic and travel which required a rapid increase in cross-border testing capacity and analysis of 10,000 tests/day. On November 19, the government decided to extend till December 13 the entry restrictions into Finland due to the acceleration of the COVID-19 epidemic elsewhere. On December 10, 2020 the Government adopted a resolution on Finland's COVID-19 vaccine strategy: Vaccination would be offered based on medical risk assessments with priority given to healthcare and social welfare workers caring for COVID-19 patients, homecare workers, elderly persons, and persons at high risk for severe disease due to underlying health conditions. On March 1, 2021, following a third wave of infections, the government declared a state of emergency and proposed the closure of restaurants and bars through March 28. Following a persistent decline in the number of cases, the government on April 27, 2021 repealed the use of powers under the Emergency Powers Act declaring that the situation no longer constituted a state of emergency. Finland is participating in the European Union's joint vaccine procurement. The cumulative number of vaccinations per 100,000 people is roughly 76,354 as of June 28, 2021.

Key Policy Responses as of June 29, 2021

Fiscal

• Key discretionary tax and spending measures (around 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) (€3 billion); (ii) lower pension contributions through the remainder of 2020 (€1.05 billion); (iii) grants to SMEs and self-employed (over €1 billion); 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 contributed €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 €5.5 million. On April 29, the government announced a €500 million recapitalization scheme for Finnair (which is 56% state-owned) and other state-owned companies. On May 8, the government published a third supplementary budget proposal for 2020 which included €700 million (0.3 percent of GDP) for share acquisitions in state ownership steering, €171 million for supporting restaurant and catering businesses, and €16 million for vaccine and drug development research. The supplementary budget proposal also included guarantees for the Employment Fund (€880 million), SURE (€432 million), and the EIB (€372 million). The total increase in guarantees amounted to €1.68 billion (0.7 percent of GDP). On June 3, the government published a fourth supplementary budget proposal for 2020 which included an additional €1.2 billion in support to households and businesses; and increased public investment (€1.2 billion). The supplementary budget also included relief in the form of adjusted VAT payment arrangements (€750 million). The temporary loosening of unemployment insurance benefit eligibility was extended until the end of 2020. On June 23, the government extended the duration until end-2020 of temporary amendments to the unemployment security act aimed at enhancing labor market security and flexibility. On July 9, the government adopted an amendment that allows Business Finland to grant temporary financing to companies with financial difficulties that ordinarily fail to meet eligibility requirements for support from the Decree on Funding for Research, Development, and Innovation Activities. On September 3, the government published a fifth supplementary budget proposal for 2020 which included €60 million to support the most vulnerable in society for which restrictive measure imposed due to the pandemic have generated additional costs. The proposal also included an increase of €1 billion in revenue estimates due to less than anticipated use of flexible tax-related payment arrangement introduced to support liquidity. On September 24, the government submitted to parliament a sixth supplementary budget proposal for 2020 which included €200 million to support the rapid increase in cross-border testing capacity and analysis as part of the hybrid strategy for cross-border traffic and travel. On October 29, the government submitted a seventh supplementary budget. This included EUR 750 million to municipalities for implementing the hybrid testing and tracing strategy and basic public services; the budget also included EUR 200 million to the country's hospital districts for pandemic-related costs and EUR 90 million for the acquisition of COVID-19 vaccines. On November 19, the government submitted a proposal to amend the 2021 budget to include among others EUR 350 million in capital funding for Finavia Corporation; EUR 56 million for unemployment security; and EUR 45 million to increase the health insurance reimbursements for COVID19 tests carried about by private healthcare providers. On January 27, 2021, the government decided to reimburse vaccinations received through private occupational healthcare though the reimbursement amount is yet to be determined. On May 18, 2021, parliament approved the EU's proposed financing of its Recovery and Resilience Facility (RRF). According to the plan, Finland is expected to receive roughly EUR 2.1 billion over 2021-2026. The distribution of the funds is frontloaded to support the recovery from the pandemic. Authorities' estimates indicate that 51 percent of the RRF funding will support the green transition and 24 percent will support digital transformation projects. On June 23, 2021, the government announced that temporary amendments to business development aid will continue till the end of 2021, with a company-specific maximum state aid of 1.8 million euros.

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 supported liquidity by purchasing 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; (iii) Finland's Export Credit Agency expanded its lending and guarantee capacity to SMEs by €10 billion to €12 billion (and the government increased its coverage of the agency's credit and guarantee losses from 50 to 80 percent); (iv) the State Pension Fund purchased 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). The fourth supplementary budget contained financial and liquidity measures including increased capitalization into the national climate fund (€300 million) and capital funding for state-owned enterprises (€770 million). On June 29, 2020 Finland's Financial Supervisory Authority (FIN-FSA) relaxed to 90 percent the macroprudential limit on loan-to-collateral ratios for residential mortgages. On September 30, 2020 the FIN-FSA Board decided not to extend the validity of the 15% risk weight floor on housing loans which expired in January 1, 2021. On February 17, 2021, FIN-FSA amended its regulations and guidelines related to the common reporting framework and EU Capital Requirements Regulation to reflect European Banking Authority (EBA) COVID-19 related guidelines.

Exchange rate and balance of payments

• No measures.

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France

Background. The coronavirus has significantly affected France. The first confirmed COVID-19 case was reported on January 24, 2020. Infection levels remain high with recurrent surges, and a third wave of infections is currently underway. The government has introduced a range of containment measures since mid-March 2020, when the first nationwide lockdown was instated to reduce the spread of COVID-19. The French economy contracted by 8 percent in 2020. In 2021, the economy contracted by 0.1 percent during the first quarter compared to the previous quarter. Covid-19 vaccinations commenced on December 28, 2020, with over 33 million people vaccinated with at least one dose as of end-June 2021.

Reopening of the economy and additional containment efforts. France started to ease the first round of containment measures in mid-May 2020, beginning with the reopening of primary schools, shops, and industry, on a differentiated regional basis. Most major domestic restrictions associated with the first lockdown were lifted as of end-June 2020 (including travel restrictions). The resurgence of infections in August 2020 prompted the government to first apply regional night curfews, and, eventually a (partial) second lockdown at end-October 2020 with schools remaining open. After gradually lifting the second lockdown, keeping curfews and select restrictions in place, a third partial lockdown was introduced in March 2021, first regionally, and then extended nationwide. The reopening of the economy from the third lockdown commenced on May 2021, beginning with the reopening of schools and inter-regional travel, and most restrictions have been relaxed at the end of June 2021. International travel restrictions for select countries are in place.

Key Policy Responses as of June 3, 2021

Fiscal

• The authorities introduced four amending budget laws during March-November 2020 increasing the fiscal envelope devoted to addressing the crisis to about €180 billion (around 8 percent of GDP, including liquidity measures). This adds to a package of public guarantees of €327 ½ billion (close to 15 percent of GDP), including €315 billion in guarantees for bank loans and credit reinsurance schemes. Key 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 short-time work scheme; (v) direct financial support for affected microenterprises, liberal professions, and independent workers, as well as for low-income households; 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; (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; and (xi) support measures for the hardest-hit sectors (e.g. including incentives to purchase greener vehicles and green investment support for the auto and aerospace sectors).

  The 2021 budget included additional funding for emergency programs which was subsequently expanded amid ongoing containment measures (about 3 percent of GDP, including measures in an amendment law currently under discussion).

  The 2021 budget also incorporated key elements of the fiscal package (“Plan de Relance”) announced in September 2020 to support the recovery of the French economy. The recovery plan includes measures amounting to about 100 billion euros over two years and focuses on the ecological transformation of the economy, increasing the competitiveness of French firms, and supporting social and territorial cohesion. About 40 billion of the plan is expected to be covered by grants from the EU Recovery Fund.

Monetary and macro-financial

• For monetary policy at the currency union level, please see Euro Area section.

  Other measures include: (i) reducing the counter-cyclical bank capital buffer to 0 percent (an increase from 0.25 percent to 0.5 percent was to become effective by April); (ii) a temporary ban on short-selling stocks was place until May 18, 2020; and (iii) credit mediation to support renegotiation of SMEs’ bank loans.

Exchange rate and balance of payments

• No measures.

Links

• Coronavirus Support Measures in France

  Coronavirus Recovery Plan in France

  Coronavirus Infection Evolution in France.

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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 decline in oil prices last year. Government policy is responding to both these developments. The first confirmed COVID-19 case was reported on March 12, 2020. 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 April 27 2020, some of these measures were relaxed, including the full lockdown in Libreville. A second reopening wave started on July 1 with the reopening of commercial flights twice per week per company from Libreville and a reduced night curfew from 8pm till 5am. Since mid-August commercial flights were further relaxed to three flights per company per week departing from Gabon. Public schools reopened on November 7, 2020. All passengers arriving in Libreville's airport from abroad must show a negative test performed in the last five days. At arrival, they are once more tested by Gabonese authorities in the airport for posterior tracing. On October 10, a new round of relaxation of the preventive measures was announced, allowing restaurants and religious centers to resume activity and shortening the night curfew from 10pm till 5am. Such gradual reopening of the economy was based on a comprehensive-testing strategy with a capability of around 10,000 tests to be performed per day and with the equivalent of close to thirty percent of the population tested, making the country one with the highest rates of testing per capita of sub-Saharan Africa. The Gabonese parliament also launched at the end of the first semester a Parliamentary Inquire Committee to investigate the quality and transparency of the Covid-19 expenditures by the government. At the same time an aggressive second wave of infections has hit the country since mid-January 2021 and the preventive measures have been strengthened. The night curfew has been re-enlarged from 6 pm until 5am, causing business to close around 3pm. The capital, Libreville, has been put in confinement for domestic travelers and only two international flights per company can land in Gabon per week again. Masks became compulsory for the population above 5 years-old and restaurants and shops must demand a negative test from clients within the last seven days. The social-distancing measures announced in mid-January 2021 have been somewhat relaxed on May 29, 2021, with the recent decline in the number of infections and active cases in the country. With such slowdown of the Covid-19 second wave, the authorities shortened the night curfew to start at 9pm instead of 6pm. All night bars and restaurants can now reopen up to 8:30pm with the requirement of requesting vaccination proofs or PCR tests (within one week) from clients. Finally, passengers coming from abroad will need to show a Covid-19 vaccination card. Otherwise, they will need to quarantine for 48 hours in a hotel indicated by the government. Meanwhile on March 12, 2021, the government received in Libreville the donation of 100,000 doses of the Sinopharm vaccine from Chinese authorities. A second batch with 300,000 doses of Synopharm vaccine donations from Chinese authorities arrived in Libreville on May 9, 2021. On June 9, 2021, Gabon further acquired 10,000 doses of the Russian Sputnik V vaccine. Vaccination started on March 23, 2021 with the Minister of Health announcing a national vaccination strategy in which health workers dealing with Covid-19 and patients with severe comorbidities will be vaccinated first.

Key Policy Responses as of July 1, 2021

Fiscal

• The Amended Budget Law approved in end-June 2020 proposed the control of non-priority expenditure and redirects savings and development partners support of FCFA 73.9 billion (USD 138.1 million or 0.83 percent of GDP) to COVID-19 related spending. The government also plans to allocate additional FCFA 108 billion (USD 194.1 million or 1.2 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. The promulgated 2021 Budget Law allocates FCFA 3 billion (USD 6 million) for additional Covid-19 expenditures.

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. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months. The purchase program is meant as a safety net, to ensure full cover of government securities issuances during the second half of 2020, while being consistent with BEAC Charter which prohibits direct monetary financing. The program will be based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.

  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. The Gambia registered its first COVID-19 case on March 17, 2020, involving a female Gambian returnee from the United Kingdom. The number of cases and the rate of infection increased, albeit at a slow rate, until mid-July. The President declared a state of public health emergency starting from March 27, including closing all non-essential public and private businesses, following an earlier order to close the airspace and land borders. 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 were allowed to carry only up to half of their licensed number of passengers. All public gatherings, including funerals, were limited to a maximum of 10 people. Nevertheless, there was a surge in the number of confirmed COVID-19 cases by mid-July, mainly through community transmission involving many healthcare workers and high-level government officials. The surge strained the already fragile health system and stretched government’s ability to properly respond to the pandemic, especially in terms of testing and management of treatment centers.

The imposition and extension of the state of public health emergency have not been plain sailing. The National Assembly declined to approve a second 45-day extension of the state of public health emergency after the expiration of the first. However, based on the role played by the emergency measures in containing the spread of the disease, the President used executive powers to extend it by 21 days, effective May 19 (which is the maximum allowed under the Constitution, as the National Assembly was then not in session). Since the expiration of the extension, the President used executive powers again (on June 10, July 1, and July 7) to extend the state of public health emergency, mainly for 7 days, which is the maximum permissible period under the constitution when the National Assembly is in session. Concerned by the extensions of the state of public health emergency without parliamentary approval, the Gambia Bar Association, and the National Assembly in particular, questioned the legitimacy of such extensions. The Attorney General and Minister of Justice presented a motion at the National Assembly around July 13 for a 45-day extension of the public health emergency laws, but it failed to proceed after majority of the lawmakers voted against it. The situation led to an announcement by President Barrow of another 7-day extension of the public health emergency to July 22, 2020. At the same time, the presidency urged the public to observe strict social distancing, and imposed a mandatory wearing of facemasks in all public places including inside taxis and other public transports, markets, and schools; while empowering the Minister of Health to take any restrictive measure required to contain the disease. With the mid-July surge in the number of new Covid-19 infections, the presidency announced another 21-day public emergency regulation, effective August 6, 2020. The regulation imposed a night-time curfew between the hours of 10 p.m. and 5 a.m. and re-introduced a ban on all public gatherings and closure of all non-essential businesses, educational institutions, and places of worship. A subsequent extension of the emergency regulation on August 27 eased some of the emergency restrictions, including the opening of places of worship, albeit under strict COVID-19 protocols. It also maintained the ban on public gatherings and the night-time curfew, which was relaxed subsequently on September 17 together with market restrictions. In anticipation of the re-opening of the tourism season in October, and in the bid to attract tourists, the authorities announced, on September 4, an amendment to their guidelines on COVID-19 prevention. They abolished the two-week mandatory quarantine for inbound travelers and required evidence of a negative COVID-19 test result of less than 72 hours from all passengers prior to departure to The Gambia. Those without the required certificate as well as those who are COVID-19 positive will be quarantined. Meanwhile, following the second wave of the surge in Covid-19 cases and the emergence of a new strain of the virus in America, Europe and parts of Africa, the authorities have amended their rules regarding visits to The Gambia. Effective January 9, travelers coming from countries where the new strain of the Covid-19 virus is identified will have to undergo (i) testing for the virus upon arrival, in addition to the requirement to have a valid COVID-19 PCR test result of no more than 72 hours; and (ii) mandatory quarantine at their own cost. The resumption and continued surge in the number of confirmed Covid-19 cases compelled the authorities to announce on February 17 the suspension of issuance of police permits for all forms of political and social events, including music festivals. The new measures came into effect on March 8, 2021. The Ministry of Health (MoH) on May 27, 2021, announced the detection, in The Gambia, of the new variant of Covid-19 identified in India. Consequently, it updated its testing and quarantine protocols and now requires all passengers arriving from India to possess a negative PCR test valid for 72hrs, with an additional measure of quaranting all such passengers for 72hrs at their own expense. Generally, all arriving passengers with positive Rapid Diagnostic Test (RDT) will be quarantined for a maximum of 72hrs at their own expense and will further undergo a free PCR testing.

Tourism, a key driver of trade and foreign exchange inflows, has halted. Interest rates on T-bills increased at the onset of the pandemic but have eased on the back of subdued inflation and measures taken by the Central Bank to support market liquidity. Remittances from official channels have remained exceptionally high, in part, due to a reduction in private transfers through informal channels (which have since migrated to formal channels) and remittances from the Gambian diaspora in response to COVID-19. At the onset of the pandemic, a supplementary appropriation bill was approved by the National Assembly to accommodate spending on the health emergency and social support, and to facilitate the recovery through infrastructure spending and support to the tourism sector and other public entities affected by the pandemic.

Vaccination. The Gambia is part of the African Union's COVAX initiative that is supporting the country with AstraZeneca vaccines to cover about 20 percent of the population. The World Bank approved, on April 19, 2021, US$8 million grant to provide and deploy COVID-19 vaccines to cover 40 percent of the population; while the African Centre for Decease Control (CDC) is providing 12, 000 vaccine doses. The authorities received some 37,000 syringes under the COVAX initiative, ahead of the arrival of 36,000 doses of the AstraZeneca COVID-19 vaccine on March 3. The first tranche of syringes, shipped from the Gavi-funded stockpile at UNICEF's humanitarian warehouse in Dubai, also included 375 safety boxes for the safe disposal of used syringes. The country also received 15,000 doses of Astra Zeneca vaccine through the MTN/AFRICA CDC donation. Senegal also offered 10,000 doses of Sinopharm vaccines to The Gambia. As of May 28, 2021, 33,819 people received Covid-19 vaccines of which 4,671 representing 0.2 percent of the population are now fully vaccinated. The authorities, while reportedly making efforts to secure additional stocks of Covid-19 vaccines have now shifted their priorities to administering the second dose to people who had already taken their first dose due to the low stock of the vaccines in the country.

Reopening of the economy. A government announcement on Wednesday July 22 lifted the state of public health emergency and thus re-opened the economy, which first started with a gradual easing of emergency restrictions that helped a partial re-opening of businesses. Fuel prices were reduced to prevent transport price hikes and help ease the burden on commercial transport operators who were then required to carry 3/4 of their vehicle capacities. The authorities also eased restrictions, including the re-opening of markets up to 6 p.m., the re-opening of Mosques, Churches, and schools for Grades 9 and 12 students who were preparing for their sub-regional junior and senior secondary school leaving certificate exams. The government issued on October 6 a press release announcing the re-opening of all weekly markets dubbed ‘Lumos,’ which are very popular in the rural areas. It also announced a two-thronged resumption of face-to-face learning, which began with the re-opening of all Junior & Senior Secondary schools, and tertiary institutions on October 14; followed by a re-opening of kindergartens and primary schools on October 28. The authorities also announced on October 16, the immediate re-opening of the country’s borders, although the airport remained closed for renovation until it was reopened at end-October. They authorities also relaxed the restrictions on the night clubs and casinos, following an earlier decision to only allow the re-opening of hotels, bars, restaurants, and gymnasia.

Meanwhile, in response to the initial easing of emergency restrictions earlier in Senegal, and the possibility of increases in cross-border infections, The Gambian authorities resolved to protecting the country’s international borders (air, land, and sea) and enhanced cross-border monitoring and control. They have built testing centers across the regions, increased the number of quarantine centers, and converted one of the country’s main referral hospitals into a COVID-19 treatment center. The authorities also announced a plan to embark on a mass country-wide testing campaign. This plan was seriously affected by an overwhelming surge, in mid-July, in the number of COVID-19 cases, with many healthcare workers and high-level government officials testing positive. The WFP’s Passenger Air Service made its inaugural flight to The Gambia on June 8, 2020, with planned two trips per week. SN Brussels Airlines started weekly ad-hoc flights to The Gambia on June 22 and had since the beginning of November, increased the frequency of their flights to three per week. Turkish Airline also resumed its weekly flight to Banjul onOctober 4, while Royal Air Maroc, Asky and Air Senegal resumed their flights to Banjulin late November–early December. The Gambia Experience’s maiden flight for the 2020/2021 first tourists flight landed, on Wednesday December 9, with 147 passengers. The company suspended its flights in early January as the number of COVID-19 cases surged in The Gambia and passengers from England were required to quarantine at own cost.

Key Policy Responses as of July 1, 2021

Fiscal

• In mid-March, the authorities prepared a US$9 million (0.5 percent of GDP) COVID-19 action plan, for which they had already obtained grant financing. The government reallocated GMD 500 million (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 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, 2,000 tons of fertilizer were distributed to support the needs of farmers. These actions benefitted from technical support from the country’s development partners, including WFP and FAO, and are subject to enhanced oversight by the National Assembly.The supplementary appropriation (SAP) approved by the National Assembly in July included GMD 2.3 billion in additional measures. The SAP included a GMD 737-million relief package to various sectors, including the municipal councils, public entities, the tourism sector, the media, and GMD 224.3 million in additional food assistance delivered through WFP for four months starting March 2021. The SAP also provisioned for GMD 250 million in additional health spending and GMB 854.3 million for targeted public investment outlays to fill critical infrastructure gaps and support the economy. RCF and CCRT financing from the IMF (see below) helped to cover some of these costs.The 2021 budget includes GMD 500 million for spending contingencies to address emergencies that could arise from the surge in COVID-19 cases.

  Donor agencies, including the UNDP, WFP, WHO, FAO, UNICEF, UNFP and UNICEF, have focused financial assistance (about US$1.5 million cumulatively, in 2020) 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 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 accelerated the rollout of its Social Safety Net project to help mitigate the impact of COVID-19 on the most vulnerable households. The European Commission provided, at end-April, a 9-million Euro COVID-19 support to The Gambia and intended to provide an additional 5.5million Euro financing in Q42020 but it was eventually postponed to 2021.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 World Bank approved on April 19, 2021, an US$8-million grant to help finance the COVID-19 vaccines supply and rollout in the country.

  The Gambia Revenue Authority extended, by two months that expired in end-May, the filing of the 2019 annual tax return and the payment of final 2019 tax, as well as the filing of the first quarter 2020 declaration and the payment of the first quarter installment.It also revised down its 2020 annual revenue target by about 2.2 percent of GDP. However, revenue performance yielded a much lower revenue loss than anticipated.

Monetary and financial

• Domestic financial conditions tightened in early 2020 but have eased since late May. The average yield on the most utilized 364-day T-bills went above 11.5 percent in late May 2020 and declined thereafter to around 3.97 percent by June 2, 2021, well below its end-2019 and end-December 2020 levels of 7.5 percent and 8.4 percent, respectively. The GMD 600 million 3-year T-bond issuance on December 7, which the Central Bank intends to reopen for GMD 50 million on December 23 with a yield of 9 percent has reduced banks' appetite for short-term T-bills causing the interest rate to rise. Encouraged by the drop in headline inflation from 7.7 percent at end-2019 to 5.6 percent in April 2020, the Central Bank of The Gambia (CBG) during its monetary policy committee meeting of May 28, reduced the monetary policy rate by 2 percentage points to 10 percent, a cumulative 2.5 percentage points reduction since end-2019. The Bank also reduced the reserve requirement from 15 to 13 percent, thus, releasing close to GMD 700 million (US$ 14 million or 0.7 percent of GDP) liquidity to the banks. The CBG maintained the policy rate at 10 percent in its monetary policy committee sittings of August 26-27, and December 2-3, 2020. Meanwhile, the CBG had used GMD 855 million of its retained earnings from 2019 to increase its statutory capital and settle some of the central government's liabilities to the Central Bank, thus providing additional fiscal space to the government. The CBG is also actively monitoring developments in the financial sector. It remains in close contact with the commercial banks and stands ready to respond to the situation as inflationary pressures warrant. Additional measures are available to provide emergency liquidity support if needed, together with increased intensity and frequency of supervision to address any financial stability concerns. As per financial sector indicators at end-December 2020, non-preforming loans of banks edged up relative to end-2019 but capital adequacy and liquidity indicators remained strong. The CBG successfully hosted a remote IMF 2020 safeguards assessment mission, which found good progress since the last assessment in 2018. The 2019 CBG audit is about to be completed with a clean audit opinion. The CBG has also prepared a strategic plan based on the 2019 FSSR recommendations, which it will implement along with the recommendations from the 2020 safeguards assessment.

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. It is committed to maintaining a flexible exchange rate regime to help absorb balance-of-payments (BOP) shocks.

  On April 15, 2020, the Executive Board of the IMF approved a US$ 21.3 million for The Gambia under the Rapid Credit Facility (RCF), which was on-lent to the Treasury. The RCF support supplements earlier financing from the IMF under a 39-month 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 CBG 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, with an expected total relief of US$ 10.8 million, if resources are identified to extend the initiative for 24 months (US$ 8.3 million of the expected relief have already been approved). The amounts already approved were in three tranches. The first tranche of US$ 2.9 million (corresponding to debt service due to the Fund in the first six months covered by the initiative, April 14–October 13, 2020) and the second tranche of US$3 million ( corresponding to the debt service due to the Fund during October 14, 2020–April 13, 2021) have been already approved for delivery, while the Third tranche US$ 2.4 million covering April 14–October 13, 2020 was approved in April. The Gambia is also seeking debt service deferral under the G20 debt service suspension initiative, which provides US$ 4 million (from the creditors that have already endorsed the initiative) in 2020 and could provide up to US$ 3 million in 2021.

  On January 15, 2021 the IMF Executive Board completed the first review of The Gambia’ performance under the program supported under the Extended Credit Facility arrangement and approved a SDR20 million augmentation of access to be disbursed after completion of the first and second reviews of the program to help address the additional balance-of-payments and fiscal (health and social support) needs created by the surge in COVID-19 cases and support the post-pandemic recovery. As a result, the disbursement associated with the first review was augmented from SDR5 million to SDR 20 million (US$28.8 million).

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Georgia

Background. After the number of daily cases spiked toward the end of 2020, reaching about 4,000 in late November 2020, a second lockdown successfully reduced new cases to below 200 in early March. With the easing of the containment measures, active cases started to rise again and have generally been around 1,000 a day since late April 2021 with only a moderate decline since early May. As of June 29, 2021, Georgia has reported 8.6 thousand active positive cases, 351 thousand recovered and, 5.3 thousand deaths. Georgia started vaccination on March 15, 2021. Currently, the vaccine is available for medical personnel and for people above age 45. The government has intensified efforts to increase the availability of the vaccine. The Ministry of Health and Labor created an online registration portal for the population to receive the vaccine. The night curfew that has been in place since late November 2020, will be lifted from July 1, 2021. Regular international flights resumed in February 2021. Starting from March 1, 2021, Georgia accepts travelers from Azerbaijan, Armenia, Ukraine, Kazakhstan, Russia, and Belarus arriving by plane and holding negative COVID-19 tests. Earlier, Georgia opened up air travel for the EU, Israel, Turkey, Switzerland, Norway, the USA, the UK and Northern Ireland, Saudi Arabia, Qatar, UAE, Bahrain. Georgia's land borders with neighboring countries opened on June 1, 2021.

Key Policy Responses as of June 29, 2021

• The government implemented numerous fiscal support measures to mitigate the economic impact of the COVID-19 pandemic. Fiscal support provided to individuals and businesses in response to the pandemic amounted GEL 1.86 billion (3.8 percent of GDP) in 2020. The fiscal support package for 2021 was expected to reach GEL 1.247 million (2.2 percent of 2021 GDP). The government is preparing an amended budget which could incorporate further support measures.

Monetary and 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 their loan portfolios; on-site inspections have been suspended; the use of moratoria on loan repayments has been encouraged; and a moratorium on fines was introduced where a breach emerged due to the crisis. The NBG provided banks with standardized scenarios and methodology to assess credit loss expected from the delayed COVID-19 recovery. Banks have conducted a granular assessment of COVID-19 impact on banks' loan portfolios to determine adequate general and specific provisions. The NBG released capital requirements in March 2020 by more than three percentage points for CET–1. After easing its policy rate by 100 bps between April and August 2020, the NBG has hiked the rate by 150 bps in 2021. The most recent 100 bps hike took place on April 28, bringing the policy rate to 9.5 percent. Inflation remained at 7.7 percent year-on-year in May 2021. The increase in inflation reflects higher energy and input costs as well as the pass-through from exchange rate depreciation.

  The financial sector, including the currency exchange booths and other payment service providers were fully operational during the second lockdown (November 28-January 30). Growth in credit to the private sector has been resilient. The financial sector remained profitable in 2020 and the banking system entered the COVID-19 shock well-capitalized and with higher liquidity buffers, which have helped banks cope with the shock and reflect the effectiveness of the supervisory regime before the crisis.

Exchange rates and balance of payments

• The NBG has sold net USD 916 million foreign exchange in 2020 and USD 252 million so far in 2021 to smooth exchange rate volatility. As of end May 2021, the lari has depreciated by 5 and 3.8 percent (y/y) in nominal and real effective terms, respectively.

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Germany

Background. Germany registered the first confirmed COVID-19 case on January 27, 2020. 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, enforcement of mask-wearing, and a ban on public gatherings. Following a steady decline since early-April, infections are again on the rise, with daily new cases gradually trending up since late July and now exceeding the previous peak. Mortality rates, although rising, remain low to date compared with peer countries.

Reopening of the economy. On April 20, smaller shops re-opened subject to social distancing requirements. Select grades in schools gradually re-opened on May 4, as did cultural and leisure venues. On May 6, 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 16. Quarantine requirement for travelers from EU-countries has been lifted in several states starting May 18. On May 26, 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. The travel warning to all EU countries, Schengen states, the UK and Northern Ireland, has been lifted on June 15 though some “high risk” destinations have been put under travel warning as infections resumed On June 16, the government launches a Corona Warning App that allows users to trace potential contact with COVID-infected individuals on a voluntary and anonymous basis. On July 1, the entry restriction for travelers from 11 non-EU countries is lifted (3 of which conditional on reciprocity).

Renewed lockdowns. In light of the rising number of new infections in Germany since the summer vacation season, a mandatory COVID-19 test requirement, in addition to 14 day quarantine, for people entering from around 130 “high risk” countries upon their arrival came in effect on August 8^th. Mass events remain banned until at least end-2020, and local governments have committed to tightening local containment measures where infections exceed the “emergency brake”. Non-essential travel from and to high-infection hot spots are discouraged. On October 14^th, federal and state governments agreed on common hot-spot strategy: whenever and wherever the threshold of 50 (new cases per 100K inhabitants over 7 days) is exceeded, local governments shall tighten mask-wearing mandates, limit public and private gatherings, and introduce curfews for restaurants and bars.

Against a rising second wave of infection, a nation-wide “lockdown light” was introduced for the month of November: Restaurants/bars, leisure/sports and personal services providers will be closed nationwide, though schools remain open. Private gatherings are limited to maximum 5 persons from two households. Non-essential travel is strictly discouraged, and hotels must not offer accommodation to tourists. These lockdown measures have now been extended until January 10.

Since December 16, the lockdown has been tightened in light of continued high infection rates and rising death rates. All non-essential shops are closed, as are schools and daycares, until at least January 10 2021. Some states have also introduced nightly curfews. On January 5th, the lockdowns have been further tightened and extended until end-January 2021. On January 19th, federal and state governments extend the lockdown to February 14 2021. On January 30th, inbound travel from countries with high incidence of new COVID variants is banned under some exceptions.

On February 10, the German federal and regional governments agreed to prolong the hard lockdown measures until March 7. However, states can proceed to open schools and day cares; hairdressers can start opening March 1. On March 3, lockdowns are further extended until March 28 but with gradual re-opening according to a five-step program, subject to the evolution of regional infection incidence.

On March 22, the government extended the full lockdown measures until April 18 in light of the emerging third wave of COVID infections. Incoming travelers are required to provide a negative COVID test.

Effective April 23rd, amendments to the Infection Protection Law require localities with an infection incidence above 100 (per 100.000 inhabitants over 7 days) to adopt uniform mobility restrictions set out at the federal level. This "emergency brake" amendment expired on June 30th, 2021.

Starting in May, regions with low infection incidence begin to gradually ease lockdown measures and reopen local economies. As of June 30th, over 37 percent of the total population has received both doses and about 55 percent has received at least one dose of COVID vaccine.

Key Policy Responses as of July 1, 2021

Fiscal

• To combat the COVID-19 crisis and subsequently support the recovery, the federal government has adopted three supplementary budgets: €156 billion (4.7 percent of GDP) in March 2020, €130 billion (3.9 percent of GDP) in June 2020, and €60 billion (1.7 percent of GDP) in March 2021. Early measures include(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 and €2bn of venture capital funding for start-ups, (iv) temporarily expanded duration of unemployment insurance and parental leave benefits. The stimulus package in June comprises a temporary VAT reduction, income support for families, grants for hart-hit SME’s, financial support for local governments, expanded credit guarantees for exporters and export-financing banks, and subsidies/investment in green energy and digitalization. In August, the government extended the maximum duration of short-term work benefits from 12 to 24 months.

  At the same time, through the newly created economic stabilization fund (WSF) and the public development bank KfW, the government is expanding the volume of available guarantees and access to public  guarantees for firms of different sizes, credit insurers, and non-profit institutions, some eligible for up to 100 percent guarantees, increasing the total volume by at least €757 billion (24 percent of GDP). The WSF and KfW also offer facilities for public equity injection into firms with strategic importance.

  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 roughly €70bn in state-level loan guarantees.

  Faced with new infection waves and corresponding lockdowns, the government introduced additional fiscal measures to support families and young workers, and enhanced existing ones to support affected businesses, including revenue compensation for November-December 2020 (of up to 75 percent), as well as, extended access to grants,apprenticeship subsidies ,public loan guarantees, and tax loss carryback. Some of these measures have been extended well into 2021. The 2021 supplementary budgetbacks these measures along with additional support for health spending.

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 three-month payment moratorium on consumer loans established before March 15th was granted until June 30, 2020 for households 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. In March 2020, Parliament passed a temporary suspension of the obligation for insolvency filing by over-indebted or illiquid firms. The suspension deadline was extended for over-indebted firms from September 30 to December 31, 2020, and subsequently to April 30, 2021.

  German banks under national supervision were asked not to distribute dividends nor buy back shares until October 2020. Since December 2020, following corresponding ECB recommendation, German banks are subject to restricted dividend payments, share buybacks, and bonus payments. On February 26 2021, the Financial Stability Council Council extends the release of the countercyclical capital buffer until end-2021.

Exchange rate and balance of payments

• No measures.

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Ghana

Background. Ghana registered the first confirmed COVID-19 case on March 14, 2020. 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 was significantly affected by the volatility in oil prices.

Reopening of the economy. The partial lockdown was lifted on April 23 following expansion of treatment and isolation centers, enhanced testing and contact tracing capacity, increased capacity to produce sanitizers and medicines, and the severe impact of the lockdown on the most vulnerable. Phase One of the process of easing restrictions began on June 5. Provided social distancing restrictions were met, religious services for fewer than 100 congregants were allowed, and schools and universities re-opened so that older students could resume classes ahead of exams. Phase Two started on August 1, lifting restrictions on the number of congregants for religious services and opening tourist sites. However, beaches, pubs, cinemas and nightclubs remain closed. International flights resumed from September 1, subject to enhanced COVID-19 protocols.

New restrictions. Due to rising cases during the second wave, some measures were reintroduced on January 31, 2021, including restrictions on large gatherings and sporting events, restaurants operating on take-away basis only, and increasing the number of shifts and telework in workplaces as possible. COVID-19 tests will be free for Ghanaian citizens. Beaches, pubs, cinemas and nightclubs remain shut down, and land and sea borders continue closed for human traffic. The second wave started to abate in March, and by early June confirmed daily cases averaged around 40.

Vaccination. Ghana was the first country in Africa to receive the COVAX vaccines at the end of February 2021. The vaccination campaign started on March 1, 2021 with the President receiving his shot.

Key Policy Responses as of June 3, 2021

Fiscal

• In 2020, the government spent about 2.1 percent of GDP of which 0.3 percent of GDP for healthcare. The bulk of these funds were used under the Coronavirus Alleviation Programme to face the social and economic consequences of the pandemic, including support selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), support SMEs, finance guarantees and first-loss instruments, build or upgrade 100 district and regional hospitals, and address availability of test kits, pharmaceuticals, equipment, and bed capacity. For 2021, the government has budgeted 1 percent of GDP under the COVID-19 Alleviation and Revitalization Enterprise Support (CARES)of which health care spending amounts 0.7 percent of GDP including vaccination campaign of about $205 million.

  In 2020, to compensate for larger spending related to the COVID-19 crisis, the government plans to cut spending in goods and services, transfers, and capital investment (also reflecting the lower absorption capacity due to the pandemic), for a total of at least GHc 1.1 billion (0.3 percent of GDP).In addition, 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). The government has also drawn US$218 million from the stabilization fund, and will borrow up to GHc 10 billion from the Bank of Ghana.

  In 2021, government introduced new taxes measures combined with tax administration of about 0.9 percent of GDP to face the recovery spending while initiating fiscal consolidation. Finally, to meet its large financing needs, the government issued its first post COVID Eurobond of $3 billion at an average rate of 8 percent in March.

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, 2020, 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. A 10-year government bond with a face value of GHc 10 billion (2.6 percent of GDP) has been purchased by the Bank of Ghana.

  The MPC again lowered the policy rate by 100 basis points to 13.5 percent on May 31, 2021, noting that risks to the inflation outlook appeared muted in the near-term.

Exchange rate and balance of payments

• No measures

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Greece

Background. The first confirmed COVID-19 case was reported on February 26, 2020. The government adopted strict containment measures during the second quarter of 2020 to manage the initial wave of the pandemic, including: (i) a national lockdown that restricted 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 and additional containment efforts. The government implemented a gradual re-opening, close to full normalization of economic activity (except for large public events), as of July 1 2020. However, as a result of rising cases, the government announced a new national lockdown starting on November 7, 2020, with some essential businesses open. The authorities lifted the second lockdown in early 2021, keeping curfews and select restrictions in place. However, a third lockdown was re-introduced in March 2021, extended until May 2021. The authorities lifted restriction and reopened its borders for tourism on May14 with certain requirements for overseas travelers.

Key Policy Responses as of June 3, 2021

Fiscal

• The government implemented a fiscal package of measures totaling about 13.7 percent of GDP (€23.5 billion) in 2020, including loan guarantees, financed from national and EU resources (some of the latter involves reprogrammed funds). Key measures included: (i) health spending for hiring doctors and nurses, procurement of medical supplies, and cash bonuses to health sector workers; (ii) temporary 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 for short-term employment, subsidies to households loans tied to their primary residency and paid leave for parents who have children not going to school; (iii) liquidity support to hard hit businesses through loan guarantees, loan and 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. The government extended selected support measures in parallel to the imposition of new movement restrictions in November 2020 and March 2021, increasing the cost of fiscal measures to about 8.5 percent of GDP in 2021.

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. Greece is also eligible for the 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.Further measures by the ECB for which Greece is eligible include an additional €1.350 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until at least June-2021 and the corresponding maturing principal payments will be reinvested until at least end-2022. In addition, Greece is eligible for 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 launched loan moratoria for household and corporate borrowers that expired for most borrowers at end-2020 (in addition to the loan and 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

As of July 1st, Guatemala has reported 293,583 confirmed cases and 9,215 fatalities of COVID-19. After withdrawing the State of Calamity in September, the reopening of the economy has been in effect, allowing the normal operation of activities with due care to physical distancing.

The Phase 1 of the vaccination plan has been nearly completed. The Phase 2 started in May covering population over 60 years and extended into June for population over 50 years, although the process is facing a shortage of vaccines. The authorities' intent to vaccinate 60 percent of the population (or 100 percent of the adult population) through August looks ambitious, given that just over 2½ percent of the population has been vaccinated thus far. The delivery of 16 million doses (for 8 million people) of the Sputnik-V vaccine remains uncertain. In mid-June, the U.S. Vice-President Kamala Harris confirmed that Guatemala would receive half a million doses but delivery has been delayed due to red tape with Congress now fast-tracking the necessary legislation.

Key Policy Responses as of July 1st, 2021

Fiscal

• For COVID-19 prevention and mitigation, Congress approved in 2020 three fiscal packages, totaling around 3.4 percent of last year's GDP. This fiscal stimulus was financed mainly by IFIs loans and the issuance of treasury bonds. The fiscal response was 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). As part of the National Emergency and Economic Recovery Plan, additional targeted measures were enacted: i) streamlining tax refunds to exporters, 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.

Monetary and macro-financial

• Banco de Guatemala  lowered its policy rate to a historic low of 1.75 percent in June 2020. A year later, the Board reaffirmed its policy to maintain its rate at 1.75. The Monetary Board eased credit regulations in April 2020 to facilitate loan restructuring for borrowers facing temporary liquidity constraints, and a gradual phasing out of those relaxation measures started in January; with figures through May, the banking system remains sound.

  Upon Congress’ special authorization, Banco de Guatemala purchased GTM Treasury Bonds for GTQ 10.6 billion (about USD 1.5 billion, 96.8 per cent of the total bond issuance authorized by Congress). The government used the proceeds to finance programs for the COVID-19 emergency last year.

Exchange rate and balance of payments

• No measures.

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Guinea

Background. Guinea reported its first COVID-19 case on March 12, 2020. Since then, the contagion has spread rapidly. The authorities adopted several measures to reduce the risk of contagion. Notably, large public gatherings were banned, the international airport closed to non-essential flights, and public areas (markets, religious facilities) were required to have hand sanitizing equipment. All schools were 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 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. Since then, the state of emergency has been renewed every thirty days with the latest extension announced on September 15. Starting April 18, wearing a face mask is mandatory in public places.

Reopening of the economy. On May 15, 2020, Guinea extended the containment measures 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.

On May 25, Guinea updated its travel advisory, requiring all travelers to provide proof of a COVID-19 test result and upon arrival, to undergo another test and a mandatory 14-day quarantine. In addition, foreign nationals must undergo a 14-day quarantine prior to their travel.

On June 15, Guinea announced further measures to ease lockdown restrictions. Since June 22, worship places in prefectures without new cases for 30 consecutive days were able to resume services. Universities and school-classes preparing for official examination reopened on June 29. To support the reopening, schools, universities and public markets are subject to regular disinfecting. Sanitary kits are distributed to schools, universities and places of worship.

On July 15, Guinea further relaxed the curfew in Conakry and nearby areas to midnight to 4am. International commercial flights resumed gradually starting July 17.

On September 22, the Guinean authorities lifted the capacity restriction on public transportation, announced the reopening of bars, restaurants and motels, and the resumption of cultural and social activities. Mask wearing and social distancing measures remain in effect.

The Republic of Guinea became the second country in Africa to receive the vaccine. Sputnik V was approved by the Ministry of Health under the emergency use authorization procedure. The approval was based on the results of the clinical trials of Sputnik V in Russia. In late December, the authorities received 55 doses of the vaccine. In March, Guinea received 200,000 of the Sinopharm vaccine and an additional 200,000 doses of the Sputnik V. In the first half of 2021, Guinea expects to receive 600,000 doses of the Sinopharm vaccine and more than 1 million doses preliminarily announced by the COVAX initiative. Phase 1 of the vaccination campaign has started focusing on medical staff, people in key government positions, religious practitioners, and the 65-and-older population. More than 50,000 people have been vaccinated as at end March.

On February 26, 2021, in response to an uptick in COVID cases, the government reinstated a number of containment measures. Measures include limiting the number of people permitted to gather in public spaces, compulsory temperature checks and mask wearing, and an 11pm-4am curfew. The daily number of new cases remained high throughout May. The increase in the number of cases have since then moderated, with the 7-day moving average positivity rate falling to 2 percent in June 2021, the lowest this year.

The Republic of Guinea became the second country in Africa to receive the vaccine. Sputnik V was approved by the Ministry of Health under the emergency use authorization procedure. The approval was based on the results of the clinical trials of Sputnik V in Russia. In late December, the authorities received 55 doses of the vaccine. In March, Guinea received 200,000 of the Sinopharm vaccine and an additional 200,000 doses of the Sputnik V. In the first half of 2021, Guinea expects to receive 600,000 doses of the Sinopharm vaccine and more than 1 million doses preliminarily announced by the COVAX initiative. Phase 1 of the vaccination campaign has started focusing on medical staff, people in key government positions, religious practitioners, and the 65-and-older population. Nearly 220,000 people have been vaccinated as at end May. The authorities expect to receive an additional 400,000 doses in the coming months, reaching roughly 2.5m by August, with a goal of vaccinating at least 20 percent of the population by end-year.

Key Policy Responses as of July 1, 2021

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. Although the authorities original estimates of the cost of the Plan was of about US$ 328 million (2.3 percent of GDP), this cost was subsequently estimated at 1.8 percent of GDP in the context of the RCF and the 5th-6th review under the ECF. Key measures included: bolstering the health system; supporting the private sector, through the introduction of temporary exonerations on taxes, social contributions and payment of utilities for firms in the most affected sectors; and supporting the most vulnerable households, through the implementation of labor-intensive public works, provision of cash transfers, and a waiver on the payment of utilities for the most vulnerable.

  On June 23, the authorities announced additional measures, including a three-month extension of some measures initially planned till end-June including: support to the agricultural sector; exemption from the payment of utility bills for businesses in the tourism and hotel sectors; reduction of taxes on health and life insurance contracts; exemption from the payment of the apprenticeship tax as an incentive to retain workers; and import duty exemption on fishing equipment.

  Some selected measures are anticipated to continue in 2021 – additional cash transfers to protect the most vulnerable will be scaled up, together with financial support from the World Bank, as there were some delays in implementing this part of the response plan in 2020.

  The authorities are working on procuring Covid-19 vaccines, with some assistance from development partners, including the COVAX initiative. The cost of vaccine procurement and rollout to reach about 20 percent of the population is estimated at roughly $80 million (0.5 percent of GDP). Development partners are expected to support Guinea's efforts to vaccinate a significant share of its population in 2021, providing grants and concessional loans.

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 2020 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 11.5 and 15 percent respectively. In March 2021, the policy rate was kept unchanged, and the reserve requirement increased back to 16 percent. 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. The first cases were reported on March 25, 2020. A state of emergency was declared on March 28, followed by a state of calamity declared on September 9, and a state of health alert declared on December 10. In response to signs of a second wave, a state of calamity was reestablished by presidential decree on January 23, 2021. Except for the reopening of schools, containment measures remain broadly the same: borders remain open subject to sanitary inspections; all travelers are obliged to present a negative PCR test obtained no more than 72 hours before travelling; social gatherings, public meetings, discos and bars, gyms and cultural events are prohibited; restaurants can only operate on take-away mode. The country is covered by COVAX. The first 12,000 doses of vaccines (AstraZeneca) arrived on March 22 provided by a private donor. The country is also expecting to receive 120,000 AstraZeneca doses from the COVAX facility (28,800 already delivered). According to COVAX schedule, the aim is to protect about 400,000 people (at least 20% of the population) by the end of the year. Guinea-Bissau was amongst the 28 beneficiary countries of the IMF debt service relief through the Catastrophe Containment and Relief Trust (CCRT), approved on April 13, October 2, 2020, and April 1, 2021. It requested to join the Debt Service Suspension Initiative (DSSI) in December 2020. A request for a Rapid Credit Facility (RCF) arrangement of SDR 14.2 million (50 percent of quota) was approved by the Board on January 25, 2021. A staff-monitored program is under discussion to build a sound track record toward a possible Extended Credit Facility (ECF) arrangement possibly in the first quarter of 2022.

Key Policy Responses as of July 1st, 2021

Fiscal

• To mitigate the immediate impact of the pandemic the government made emergency and support allocations (in 2020) of: (i) CFAF 4.7 billion (0.6 percent of GDP) to provide medicine, food, and medical equipment; and (ii) CFAF 0.7 billion (0.1 percent of GDP) for transfers to vulnerable. The government has provided direct support to the agricultural campaign for CFAF 790 million. It has used the BCEAO special refinancing window for "Covid-19 T-Bills" issued by the State for an amount of about US$27 million (CFAF 15 billion or 1.8 percent of GDP) for on-lending by domestic commercial banks to the cashew nut sector. The authorities have been 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. In April 2020, 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. In June 2020, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up until end-2020 a framework inviting banks and microfinance institutions to accommodate demands from solvent customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced in April and May 2020 measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 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 initially issued by Guinea-Bissau was equivalent to 1.9 percent of GDP, with some rollover possibility through such special T-Bills benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. The BCEAO has launched in February 2021 a special 6-month refinancing window at the floor of the interest rate corridor to help WAEMU governments meet Covid recovery funding needs. Through this special window banks shall be able to refinance all bonds with maturity of 3 years or more governments currently plan to issue on the regional financial market in 2021. The amount of bonds eligible to the new refinancing window for Guinea-Bissau is equivalent to 6.9 percent of projected 2021 GDP. The new refinancing window is expected to remain in place for the term of the eligible bonds issued in 2021. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks's credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO encouraged WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the crisis on asset quality.

Exchange rate and balance of payments

• No measures.

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Guyana

Background. Guyana reported its first confirmed COVID-19 case on March 11, 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). Guyana has been one of five countries in the Caribbean including the Dominican Republic, Haiti, Aruba and Curacao, to benefit from pre-manufactured housing units from the United Nations High Commissioner for Refugees (UNHCR). The international organization handed over 48 housing units to the Ministry of Public Health through the Civil Defense Commission (CDC) to boost the regional capacity of the COVID-19 response in the country. On July 21, the Ministry of Education received a donation of 2000 face shields from the United Nations International Children’s Fund (UNICEF) to support measures to contain the spread of the COVID-19 virus in schools, when they open. The new government announced the establishment of a new Covid-19 response unit to replace the previous National COVID-19 Task Force, including G$4.5 billion (US$21.6 million) for the COVID-19 response effort, and started making efforts to mobilize US$60 million from international financial institutions. More recently, the government received US$2 million from India, and announced G$25,000 per household for COVID-19 relief assistance. It is still unclear whether the aid would be in cash or kind, how often this will be provided and whether all or affected households will be getting assistance. In addition, authorities announced packages for essential workers, and under the childcare assistance program, direct payments would be made to licensed childcare facilities for disbursements to parents of children under seven years of age. On November 25, the World Bank approved US$7.5 million for Guyana’s Covid response and strengthening the health system. As at end March 2021, the government has distributed G$7 billion in the first phase of the G$25 000 per household cash grants which began in September 2020. Another G$1 billion is expected to be distributed in the second phase. On June 1, the government received PPEs worth US$4.1 million from Canada through PAHO to boost COVID-19 response.

Reopening of the economy. The government announced a six-phase re-opening of the economy commencing on June 18. During Phases 1 and 2, all food establishments were permitted to operate takeout and delivery services from 6am to 5pm, however; dine-in services were still prohibited. Hardware, plumbing and electrical stores could operate from 6am to 5pm, while public transportation was permitted to continue operating at 50 percent capacity. Ninety minutes of exercise were allowed during the week from 6am to 6pm in open public spaces. Phase 3 began on July 17 and ended on July 31. Social distancing rules and the wearing of face masks continue to be mandatory. Sporting events and gatherings of more than ten persons were prohibited, and stay-at-home orders were in effect except for essential services. During phase 3, the national curfew was from 8pm to 6am except for regions 5 and 6. Food services and restaurants were allowed to open for delivery, drive-thru, and curb-side pick-up service from 6am to midnight daily, while outdoor dining at restaurants was under the previous national curfew regulations from 6am to 6pm. Public transportation services (except in Aranka, Arangoy, and Moruca) were allowed to operate at a 75 percent passenger capacity, and private sector construction, clothing, shoe and bookstores were allowed to resume operations. Phase 4 reopening began on August 1, with further easing of restrictions including opening of places of worship and ceremonies, and gatherings allowed at 25 percent capacity. The airports were opened to commercial travel on October 12 under phase 2 of the reopening of airspace On November 30, the government issued new Covid-19 measures which included restrictions of non-essential services to region 7 and to Suriname. As of January 28, 2021, the authorities have suspended air travel with Brazil to reduce the risk of transmission of new COVID-19 variants. Given the rapid increase in the number of cases, and concerns about new variants, amidst a possible third wave, the curfew measures have been extended until June 30 and the lockdown hours from 10:30 pm to 4am remain in place. Restaurants, bars and food establishments with indoor dining, outdoor dining and curbside pickup, are allowed to operate from 4am to 9:30pm with a 40 percent capacity restriction for indoor dining, and keeping six feet spacing between the tables. Gyms can open at 50 percent capacity, and sporting events are subject to approval from the Ministry of Health under established measures. Cinemas to remain closed. Restrictions remain on social gatherings including private parties, receptions and wakes or vigils, use of public/hotel pools and recreational activities at river, lakes or any internal waterway. While the country’s borders with Brazil and Suriname remain closed, the Lethem crossing is opened once a week to facilitate trade.The ferry service between Guyana and Suriname resumed operations on February 20, after being suspended since March 2020.

Vaccinations. Guyana has received 303 000 doses of vaccines (3000 doses of vaccines from Barbados in February, and 20 000 from China early March, 80 000 from India mid-March, 62 400 through the Covax facility , and 138 000 from Russia). It is expected to receive the remaining 262 000 purchased from Russia, 149 000 from the African Union, 45 600 through the Covax facility, 150 000 purchased from Johnson and Johnson, and more from India. Vaccination is gathering momentum. So far about 204 000 people (26 percent of the population) have received one dose of the vaccine, and about 71 000 (9 percent of the population) have been fully vaccinated.

Key Policy Responses as of June 4, 2021

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 removal of VAT on water and electricity effective from April 01, 2020 to September 30, 2020; domestic air travel effective from April 08, 2020 to September 30, 2020; and the extension of the April 30th deadline for the filing of tax returns to September 30, 2020. The authorities have also expedited the processing of VAT refunds for businesses and pay as you earn refunds to employees. All affected businesses will now be allowed to pay advance taxes on the current year basis for the Year of Assessment 2021 (Year of Income 2020). 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. Most recently, the Ministries of Business and Agriculture began working to assist farmers affected by the pandemic with stimulus grants, and the Department of Tourism in the Ministry of Business has collaborated with the Guyana Tourism Authority, and other bureaus to establish the Tourism Recovery Action Committee (TRAC). On July 1, the government resumed the public assistance program after 2 months pause to facilitate a long-term strategic approach to Covid relief efforts. The assistance includes vouchers and packaged hampers for the coastland and the hinterland respectively. On September 10, the new government presented its G$330 billion emergency budget, which includes various tax measures (selected VAT removals, corporate tax reductions, tax concessions, reversal of land lease fees), funds for combating COVID-19, and revitalizing productive and infrastructure sectors. Most importantly, the allocations for each of the health and education sectors account for approximately fifteen percent of GDP each. On December 14, 2020, the government has launched a childcare subsidy for essential workers. Frontline workers who are providing an essential service or key public services during the COVID-19 pandemic can apply. On December 31, the government announced the disbursement of the grant, valued over GYD 2 billion, which would benefit more than 60,000 people, as a part of the broader effort to bolster the economy

Monetary and macro-financial

• The Bank of Guyana (BoG) has extended the moratorium to allow banks to deter repayments and to classify affected accounts as non-performing, and the waiver on the regulatory treatment or condition for renegotiating loans under the supervisory guidelines to December 2020. The institution also reduced reserve requirements from 12 percent to 10 percent; lowered liquid asset requirements for demand deposits from 25 percent to 20 percent, and savings and time deposits from 20 percent to 15 percent. The commercial banks will provide short term financing for working capital at concessional rates of 5-6 percent and reduce interest rates on consumer loans below G$10 million by 1-2 percent until December 2020. 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, late payments on loans and special treatment on interest accrued during the moratorium period on outstanding balances below G$10 million.

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 reported its first confirmed cases of COVID-19 on March 20, 2020 and the country remains at high risk of rapid contagion given the weak health system and the proximity and porous border with the Dominican Republic. Tourism had already declined sharply in 2018-2019 due to the political instability and social unrest.

Reopening of the economy. The Government of Haiti has communicated many important instructions to minimize the spread of the disease, particularly: closure of schools and factories, closure of airports and ports to passengers, banning of meetings of more than 10 people, nationwide curfew between 20:00 and 5:00 and plea for social distancing guidelines to be respected. Some of these restrictions were lifted or modified by the Haitian government as of 30 June 2020. The state of health emergency that had been declared by the Government over the spread of COVID-19 has been lifted on July 20. The Prime Minister announced the end of restrictive measures and the resumption of business operations across the country, including, among others, the reopening of textile factories at 100% and the resumption of religious services across the country. Public sector workers have been instructed to work on a rotational basis, and remote working has been encouraged as much as possible. 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. From February 9, all arrival by plane will require a negative COVID-19 test of less than 72 hours. The authorities are in negotiation with the WHO to participate in the COVAX initiative. If successful Haiti could immunize about 876000 vulnerable people.

Key Policy Responses as of April 2, 2021

Fiscal

• The authorities launched a public health preparedness plan for containment and treatment; they boosted some social programs, and engaged into additional health care and security spending, as well as transfers to support workers and households, including supporting wage payments temporarily in some sectors. However, as the spread of COVID-19 was much lower than expected, the authorities spent less on COVID-related needs than anticipated. Of the HTG 18.2 billion (1.3 percent of revised GDP) allocated in April for COVID-related spending, actual expenditures amounted to HTG 8.4 Bn (0.6 percent of GDP). Most of this (HTG 5.6 billion) was dedicated to health, while transfers to households, businesses and schools were trimmed to HTG 2.3 billion from HTG 8.3 billion. Nonetheless, the level of spending on health, education, and social protection combined was well above pre-COVID-19 projections―by 0.6 percent of GDP. The authorities have also committed to report monthly on COVID-related expenditures and undertake an ex post financial and operational audit on COVID spending.

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 239,428 (6,403 deaths) as of June 3, 2021. The country went into lockdown on March 16, 2020 with only essential services operating. The government declared a national state of emergency and adopted containment measures, including restrictions on freedom of movement, a nation-wide night-time curfew, and closing of national frontiers. The authorities have taken fiscal and monetary and macro-financial actions to respond to the healthcare and humanitarian crisis, protect employment and mitigate the impact on economic activity.

Reopening of the economy. The government reopened national frontiers in August (subject to presentation of negative Covid test results by inbound travelers), and lifted restrictions on freedom of movement and reduced the duration of the night-time curfew in October. At the same time, the national state of emergency remains in place, and the duration of the night-time curfew was extended again selectively by region following tropical storms Eta and Iota in November, and again after the surge in Covid cases since January.

Key Policy Responses as of June 3, 2021

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 escape clause included in the Fiscal Responsibility Law (FRL), the authorities' initial fiscal response to the pandemic envisaged a deficit of the Non-Financial Public Sector of 4 and 3 percent of GDP in 2020 and 2021—after 1 percent deficit in 2019 in line with the FRL—with additional borrowing by the government of $2.5 bn in 2020-21, about 10 percent of GDP in total. As the impact of the Covid crisis deepened, Congress approved in November a revision in the escape clause, increasing fiscal deficit limits of the NFPS to 5 and 4 percent of GDP in 2020 and 2021. After tropical storms Eta and Iota, Congress initially revised in December the escape clause to 5.6 percent NFPS deficit in 2020, while maintaining the 4 percent for 2021. Following the independent assessment of damages by the UN's Economic Commission for Latin America and the Caribbean, Congress approved in May 2021 a new escape clause, envisaging deficits of up to 5.4 and 2.3 percent of GDP in 2021-22 respectively, before returning to the 1 percent deficit in 2023.

  Efforts in response to the pandemic concentrated on supporting the fragile health system and providing targeted support to families, workers, and firms. Additional related spending needs reached 1.8 percent of GDP in 2020, including emergency healthcare expenditures, temporary unemployment benefits to formal workers, delivery of food supplies to poor families, and cash transfers to informal workers. Immediate storm-related emergency needs added a further 0.2 percent of GDP in spending in the final months of the year. The authorities identified significant nonpriority spending reallocations to partly finance emergency expenditures. Congress approved a decree authorizing expedited purchasing procedures for emergency expenditures related to the crisis.

  On the revenue side, Congress approved reduced advance payments in corporate income tax to provide cash flow relief to companies, as well as a temporary VAT exemptions for medical supplies. There was also a one-off income tax credit (10 percent of salary expenses) for companies maintaining pre-crisis employment levels. Congress also approved deferrals to the second half of 2020 and early 2021 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 temporary freezes in prices of goods in the basic consumption basket was discontinued in January.

Monetary and macro-financial

• Since the start of the pandemic, the central bank has cut the policy rate by 225 bps to 3 percent—following cumulative 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 suspended liquidity absorption operations (resumed in October), and accelerated the implementation of previously announced elimination of obligatory investments in the central bank. In September, the BCH reduced reserve requirements from 12 to 9 percent, while reintroducing temporary mandatory investments of 3 percent to incentivize new credits backed by the guarantee funds.

  Second-tier public development bank Banhprovi committed to 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 also intended to 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 lending schemes are funded with loans from the regional development bank CABEI. A dedicated L4,000 mn (0.7 percent of GDP) rediscount facility funded with accumulated profits at Banhprovi was also created for loans restructured as a result of the pandemic.

  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 was suspended until end-June 2020, without penalties or impact on credit classification; financial institutions were later granted discretion to extend these measures until end-2020 for most affected households and corporates. In October, the government agreed with banks on a scheme to support further restructuring of SME and microcredit loans according to repayment capacity. The scheme was made available to high quality borrowers that were current on their debt obligations before the pandemic and includes: rolling over debt service arrears accumulated during the grace period, without capitalizing interest; extension of loan maturities; and reductions in interest rates. The government also initially introduced a 3-month moratorium on service of bank loans financed by Banhprovi (covering about 5 percent of total bank credit to the private sector), and later reprofiled those loans to borrowers whose payment capacity had been more durably affected by the pandemic.

Exchange rate and balance of payments

• No measures.

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Hungary

First wave. . The first case of COVID-19 was reported on March 4, 2020.The economy was 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. Starting May 4, 2020, the economy gradually reopened. Stores, malls, museums, churches, were allowed to reopen and outdoor seating is permitted in restaurants. Students returned to schools and daycares in June, and summer camps were open. Ordinary health services restarted. Sports could be conducted in closed doors and music and dance events with less than 500 participants could be held. The state of emergency was lifted by June 18 but some of the emergency measures remained in place and the government was allowed to declare a health crisis for a period of up to six months (extendable indefinitely) without parliamentary authorization. Social distance rules were expected to be heeded everywhere and policies and fines regarding wearing masks recently have become stricter

Second and third waves. While the first wave of the pandemic relatively spared Hungary, cases rose rapidly starting the end of August. In response, border restrictions were imposed in early September and the state of emergency reintroduced on November 4, 2020. The government reintroduced a number of containment measures, including a curfew from 8pm-5am, restricted opening hours for shops and other businesses, and restaurants closures, and restriction on hotels guests and gathering, and has been reviewing and adjusting them periodically. The second wave abated by end-November 2020, but cases rose again rapidly in February 2021, including as new, more contagious, variants of the virus reached Hungary. In end of April, Hungary became the country with the highest covid-related deaths per million, and restrictions were re-imposed. Most of the restrictions were eliminated in early July as the country was expected to hit 5.5 million first dose vaccinations.

Vaccination:Vaccinations started in late December. Hungary was the first EU country to authorize vaccines other than collectively procured by the EU, authorizing a total of seven different vaccines. By end-June, 50 percent of population has been fully vaccinated.

Key Policy Responses as of July 1, 2021

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, 2020; (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 September28, 2020, the government rolled out on a tax relief package for the benefit of families and businesses, including a tax relief on fringe benefits for tourism companies have been extended through end-June 2021. On December 8, state support (through wage subsidies, exemption from payroll taxes, etc.) to the tourism (now including travel agencies), art, entertainment and leisure sectors was extended till end March 2021.

  On April 8, 2020, 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, 2020, 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, the 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. Interest-free loans to SMEs will be available from June 12. Half of the program’s budget will be available for investments, while the other 50 percent is intended to finance liquidity and operations. The highest amount available for investments is HUF 150 million, while asset and liquidity financing loans are capped at HUF 300 million. On August 25th, the government announced that it will not be expanding the wage subsidy scheme for all as of end-August, but only for most affected sector till June 2021. Will March 22, wage subsidies and tax relief available to the hospitality sector will be extended to all sectors subject to the new lockdown.

  The government submitted a revised 2021 budget and the 2022 budget to parliament, both with higher deficit targets than initially planned (at 7.5 percent of GDP and 5.9 percent of GDP, respectively) with the objective to continue supporting the economy during the recovery phase. Restaurants will continue to receive wage subsidies (HUF 72.2 billion)in May.

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 1^st, 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. On June 23 and July 21, the MNB reduced the base rate by 15 basis points each time, from 0.90 to 0.60 percent, while the interest rate corridor remained unchanged (-0.05 to 1.85 percent). On 4 May, quantitative easing program was also launched, consisting of buying government securities on the secondary market, and the mortgage bond purchase program re-started. On October 6, the MNB raised the limit on its purchases of certain government bonds from to 33 to 50 percent of the outstanding bond stock while extending the range of assets available for purchase to government-guaranteed debt securities. On September 24, the MNB hiked the 1-week deposit rate by 0.15 percent to 0.75 percent in order to reduce inflationary pressures and currency depreciation. On September 8, the MNB introduced a new forex-liquidity swap facility. The facility seeks to improve the effectiveness of the monetary transmission mechanism and reduce the volatility of yields on the domestic forex swap market.

  On April 7, 2020, a new SME lending program was also announced (FGS GO!) with increased amounts and increase in the interest rate subsidy. On July 2, the MNB relaxed its conditions, including allowing the use of loans for investment abroad and loosening conditions for borrowing working capital loans. On November 18, the NBH expanded program by HUF 1 tn. The corporate bond purchase program (BFGS) remained in place and maturities of eligible bonds were extended and amount per business group was increased. On September 22, MNB raised the amount available under the program to 750 billion forints from HUF 450 bn previously. On November 18, it raised the ceiling to HUF 2 tn (4.3% of GDP) having already purchased HUF 793 bn (1.7% of GDP) of bonds under the program. The MNB intends to sterilize liquidity injected through both the FSG GO! and BFSG programs through a preferential deposit facility bearing tiered interest rates up to 4 percent. Effective June 23, 2021, (1) the policy rate was increased to 0.90 percent; (2) the one-week deposit rate was increased to 0.90 percent; (3) the Funding for Growth Scheme GO is to be phased out, once its envelope is exhausted. The MNB will maintain a presence in the secondary market for government securities.

  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, which was recently extended to those who want to opt in until the June 30, 2022, 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. The extended debt repayment moratorium for select groups is in effect till June 30, 2021.

  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. On September 8, regulatory forbearance for unmet reserve requirements was reversed.

Exchange rate and balance of payments

• The exchange rate has been adjusting flexibly.

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Iceland

Background. With a large tourism sector, Iceland has been highly exposed to health, economic, and financial contagion from the COVID-19 virus. By June 30, 6649 domestic cases COVID-19 have been confirmed, of which 23 are active. Twenty-nine have died. The strategy to contain the disease focused on mass testing, contact tracing, and quarantines. About 60 percent of the population 16 and older has been fully vaccinated. The economic impact of the pandemic is partially being offset by Iceland's use of its available policy space. GDP fell 6.6 percent in the year ending 2021Q1 from 2.6 percent in 2019.

Containment measures. Domestic controls have been eliminated and border controls relaxed. Vaccinated persons face no restrictions, while others must pass two COVID tests five days apart.

Key Policy Responses as of July 1, 2021

Fiscal

• Parliament approved an array of fiscal measures 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, child allowances, quarantine grants, hiring grants, subsidies, state contributions to firms’ dismissal costs to prevent bankruptcies of viable firms and protect workers’ rights; incentives for employment of individuals with more than 12-months in the unemployment roster, early pension withdrawals, and state-guaranteed loans to companies. Key measures to restart the economy include public investment, tax incentives for real estate improvement and innovation, temporary tax relief for the tourism sector, a domestic travel gift, and marketing efforts to encourage tourism in Iceland. Parliament also approved temporary rules for financial restructuring of companies. A number of supporting fiscal measures were extended beyond their original sunset clauses. The 2021 budget and accompanying medium-term fiscal strategy plan envisage continued fiscal support and a gradual reduction in the general government deficit. 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 cut policy rates by 200 basis points to 0.75 percent, but in response to rising inflation expectations increased it to 1 percent in May. The CBI also reduced deposit institutions' average reserve requirements to 1 from 2 percent to ease their liquidity positions. To increase liquidity in circulation, the CBI eliminated its intake of 30-day deposits. The CBI Financial Stability Committee reduced the countercyclical capital buffer to 0 from 2 percent. A voluntary loan moratoria program is being phased out. In June 2021, the CBI lowered the mortgage loan-to-value ratio to 80 from 85 percent and set the net stable funding ratio at 100 percent. See also: Link4 and Link 5.

Exchange rate and balance of payments

• The CBI has allowed the exchange rate to adjust, while preventing disorderly market conditions through discretionary foreign exchange intervention. During September 2020—May 3, 2021, the CBI also conducted a program of regular FX sales. As of May 2021, international reserves stood at US$6.9 billion. This year through June 24, the CBI sold about €280 million (about 230 through regular sales) and, more recently, bought about € 140 million.

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India

Background. The first case of COVID-19 in India was reported on January 30, 2020 and the number of cases continues to rise, in particular, during the ongoing second wave of the pandemic. For the first wave, the strict national lockdown was extended several times, and then followed by a gradual re-opening, with restrictions implemented in select containment zones. For the second wave, localized state-wide lockdowns have been implemented in most states in 2021Q2. The economic impact of COVID-19 has been substantial and broad-based. GDP contracted sharply in 2020Q2 (-24.4 percent year-on-year) due to the unprecedented lockdowns to control the spread of COVID-19. The contraction moderated to -7.4 percent year-on-year in 2020Q3, and growth returned to positive territory in 2020Q4 and 2021Q1, at 0.5 percent and 1.6 percent, respectively. The national statistical office revised up FY2020/21 GDP growth to -7.3% in the latest provisional estimate.

Reopening of the economy. Following the first COVID-19 wave and initial nation-wide lockdown, on April 15, 2020 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, 2020 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 green 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. On July 29, the central government issued 'Unlock 3.0' guidelines further paving the way for a phased re-opening of activities across the country and limiting the lockdown only to containment zones till August 31. On August 29, the government issued ('Unlock 4.0') to further re-open the economy in September, removing restrictions on metro rail in a graded manner from 7 September, and allowing for social, academic, sports, entertainment, and other congregations of up to 100 people. On September 30, the central government issued "Unlock 5.0" guidelines to allow state/union territory governments to decide on reopening schools and coaching institutions after October 15 in a graded manner. Cinemas/theatres/multiplexes will be permitted to open with up to 50% of their seating capacity and entertainment parks will be permitted to open from October 15, 2020. The ceiling on congregations has been extended to 200 people. Following a second COVID-19 wave, most states have announced additional lockdown measures in 2021Q2. On January 3, 2021, India's Central Drugs Standard Control Organization (CDSCO) provided emergency use authorization (EUA) to the AstraZeneca vaccine and the Covaxin (developed by local firm Bharat Biotech). Both are manufactured domestically in India. On January 11, 2021, the Prime Minister announced the start of the world's biggest vaccination campaign from January 16th aiming to vaccinate about 300 million people in the coming months. From May 1, all persons above 18 are eligible for vaccinations; vaccine manufacturers are now permitted to sell 50 percent in the open market.

Key Policy Responses as of June 3, 2021

Fiscal

• India's central government fiscal support measures can be divided into two broad categories: (i) above-the-line measures which include government spending (about 3.5 percent of GDP, of which about 2.2 percent of GDP is estimated have been utilized in the past fiscal year), foregone or deferred revenues (about 0.3 percent of GDP falling due within the past fiscal year) and expedited spending (about 0.3 percent of GDP falling due within the past fiscal year); and (ii) below-the-line measures designed to support businesses and shore up credit provision to several sectors (about 5.3 percent of GDP). In the early stages of the pandemic response, above-the-line expenditure measures focused primarily on social protection and healthcare. These include in-kind (food; cooking gas) and cash transfers to lower-income households (1.2 percent of GDP); wage support and employment provision to low-wage workers (0.5 percent of GDP); insurance coverage for workers in the healthcare sector; and healthcare infrastructure (0.1 percent of GDP). The measures that were announced later in October and November 2020 include additional public investment (higher capital expenditure by the central government and interest-free loans to states, of about 0.2 percent of GDP) and support schemes targeting certain sectors. The latter includes a Production Linked Incentive scheme targeting 13 priority sectors and is expected to cost about 0.8 percent of GDP over 5 years, a higher fertilizer subsidy allocation benefiting the agriculture sector (0.3 percent of GDP) and support for urban housing construction (0.1 percent of GDP). 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, and a reduction in the penalty interest rate for overdue GST filings. Similar measures to ease tax compliance burden during the months of April and May 2021 were re-introduced in response to the recent surge in infections. Measures without an immediate direct bearing on the government's deficit position aim to provide credit support to businesses (1.9 percent of GDP), poor households, especially migrants and farmers (1.6 percent of GDP), distressed electricity distribution companies (0.4 percent of GDP), and targeted support for the agricultural sector (0.7 percent of GDP), as well as some miscellaneous support measures (about 0.3 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, whereas additional support to farmers will mainly be in the form of providing concessional credit to farmers, as well as a credit facility for street vendors. Agricultural sector support is mainly for infrastructure development. On February 1, 2021 the central government budget for FY2021/22 was tabled in the parliament. The budget expanded spending on health and wellbeing, including a provision for the country's COVID-19 vaccination program (350 billion Rs). In April 2021, in response to the recent surge in infections, the central government announced that free food grains will be provided to 800 million individuals in May and June (with a cost of about 260 billion rupees), similar to the additional food rations provided in 2020 (which had expired in November 2020). The central government also extended a scheme for providing interest-free loans to states for capital expenditure to FY2021/22 (150 billion rupees) and expedited the release of Disaster Response Fund to state governments (from June to May). Finally, customs duties and other taxes on vaccines, oxygen and oxygen-related equipment were waived to boost their availability.

Monetary and macro-financial

• Since March 2020, the Reserve Bank of India (RBI) reduced the repo and reverse repo rates by 115 and 155 basis points (bps) to 4.0 and 3.35 percent, respectively, and announced liquidity measures 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) (now further extended to September 30, 2021) and open market operations (including simultaneous purchases and sales of government securities), resulting in cumulative liquidity injections of 5.9 percent of GDP through September. The RBI has provided relief to both borrowers and lenders (through end-August) and the Securities and Exchange Board of India (SEBI) temporarily relaxed the norms related to debt default on rated instruments and reduced the required average market capitalization of public shareholding and minimum period of listing. 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 (the delay was later extended till October 2021). On April 1, the RBI created a facility to help with state government's short-term liquidity needs, and relaxed export repatriation limits. 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 (later extended to loans from NBFCs). 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, along with additional monetary easing, announced: (a) a TLTRO-2.0 (funds to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs); (b) special refinance facilities for rural banks, housing finance companies, and small and medium-sized enterprises; (c) a temporary reduction of the Liquidity Coverage Ratio (LCR) and restriction on banks from making dividend payouts; (d) a standstill on asset classifications during the 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 and now extended till March 2021. The RBI asked financial institutions to assess the impact on their asset quality, liquidity, and other parameters from the COVID-19 shock and take immediate contingency measures. On April 27, the RBI announced a special liquidity facility for mutual funds (SLF-MF) 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, later (April 30) extended to banks’ own deployed resources; and the SEBI reduced broker turnover fees and filing fees on offer documents for public issue, rights issue and buyback of shares. 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. On May 22, the RBI undertook further regulatory easing, including the increase in the large exposure limit, 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. On June 4, the RBI extended the benefit under interest subvention and prompt repayment incentive schemes for short-term agricultural loans until August 31, 2020. On June 12, the GST council announced that it would halve the interest rate charged on overdue filings of small businesses. On June 21, the RBI directed banks to assignment zero percent risk weight on the credit facilities extended under the emergency credit line guarantee scheme. On August 6, RBI permitted banks to restructure existing loans to MSMEs classified as ‘standard” (as of March 1, 2020) without a downgrade in the asset classification. The restructuring of the borrower account is to be implemented by March 31, 2021. Banks are required to maintain additional provision of five percent over and above the provision already held by them for accounts restructured. The RBI also announced a resolution plan for corporate and personal loans that were classified as ‘standard’ as of March 1, 2020 but were stressed due to COVID-19. Resolution needed to be invoked by end-December 2020 and the eligible loans continue to be classified as ‘standard’ until the implementation of the resolution plan. Ten percent provisioning was required following the implementation of the resolution plan. On August 31, banks are allowed to hold fresh acquisitions of SLR securities acquired from September 1, 2020 under held-to-maturity up to an overall limit of 22 per cent through March 31, 2021. On September 22, the Parliament adopted the amendment to the Indian Bankruptcy Code (IBC), with no insolvency cases until December 25,2020. The suspension of the IBC was later extended until end-March 2021. On October 9, the RBI announced that the risk weights for new housing loans sanctioned until March 31, 2022 will not be linked to the size of the loan, while they will remain linked to the LTV ratios; the maximum single counterparty exposure limit for retail loans by banks was eased from 5 to 7.5 crore. The RBI announced OMOs of state government securities on October 16. On-tap TLTROs up to three years tenor for a total amount of up to ₹1,00,000 crore at a floating rate linked to the policy repo rate were announced on October 21. The Government extended the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs first till November 30th, 2020, then March 31, 2021, and now till September 30, 2021 while at the same time relaxing the eligibility criteria. The RBI has extended the Liquidity Adjustment Facility and the Marginal Standing Facility to the regional rural banks to improve their liquidity management since December 2020. On January 8, 2021, the RBI announced a phased resumption of operations under the revised liquidity management framework, including variable rate reverse repo auction. In February 2021, the reductions in cash reserve requirements against MSME loans for banks were extended until December 2021.
  On May 4,2021, the RBI introduced a set of further measures aimed at easing liquidity and financing conditions, including on-tap liquidity support to COVID-related healthcare infrastructure and services and special Long-Term Repo Operations (SLTRO) for small finance banks. The resolution scheme for COVID-related stressed retail and MSME loans was re-introduced (extended for MSMEs)—with lenders allowed to invoke restructuring of loans until end-September 2021. Furthermore, for loans restructured under the previous (August 2020) resolution scheme, lenders can further extend moratoriums on repayments or the loan tenors up to a total of 2 years. Finally, banks were allowed to use the countercyclical provision buffers to make specific provisions for non-performing loans until end-March 2022. In late May, the RBI extended the timeline prescribed for compliance with various payment system requirements and the ECLGS scheme till September 30, 2021.

Exchange rate and balance of payments

• On March 16, 2020, 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 reported its first confirmed COVID 19 case on March 2, 2020. The government adopted various containment measures over time, including temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and other restrictions on public events. On July 1, 2021, the government announced the imposition of stricter social restrictions, particularly across Java and Bali region from July 3 to July 20, in response to a pickup in COVID infections since mid-June.

The government launched its nationwide vaccination program in mid-January 2021, starting with health care workers. As of June 30, about 11 percent of Indonesia population has now received at least one dose of COVID 19 vaccines, with 5 percent being fully vaccinated.

While Indonesia’s GDP in 2021:Q1 declined moderately by about 0.7 percent over a year ago, economic activity continues to recover quarter over quarter since the second half of 2020.External pressures remain moderate, although some volatility remains.

Key Policy Responses as of July 1, 2021

Fiscal

• In 2020, the government disbursed a total of IDR 579.8 trillion (about 3.8 percent of GDP) as part of a national economic recovery program (PEN). The PEN comprises (i) support to the health care sector to boost testing and treatment capacity 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 subsidies; (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. The PEN also includes capital injections into state-owned enterprises and interest subsidies, credit guarantees, and loan restructuring funds for micro, small, and medium enterprises. To support credit creation, the government has placed state funds in selected commercial banks in an effort to enable banks to increase leverage and guaranteed working capital loans for labor-intensive corporations. In 2021, the government has budgeted a total of IDR 699.4 trillion for the PEN.

Monetary and macro-financial

• Bank Indonesia (BI) reduced the policy rate by 125 bps cumulatively in February, March, June, July, and November 2020, and by 25 bps in February 2021, to 3.5 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. The minimum down payment requirements on automotive loans, as well as the loan-to-value ratio for residential real estate, have also been eased, effective from March 1 until December 31, 2021. A Presidential decree has expanded BI’s authority to maintain the stability of the financial system in the presence of the COVID-19 shock, including by facilitating BI liquidity assistance to banks, allowing BI to purchase government bonds in the primary market, and financing the deposit insurance agency (LPS) for bank solvency problems. The government and BI announced on July 6, 2020, a burden sharing scheme to help finance the economic response to the pandemic. The scheme, implemented in 2020, covered (i) BI’s purchases of government bonds with coupons at the BI’s policy rate to finance priority spending on public goods such health and social protection; (ii) the budgetary interest cost of spending support to firms will be subsidized by BI transfers to the budget; and (iii) BI will act as buyer of last resort for long-term local-currency bonds to finance other spending. The government issued the first bond under the burden sharing scheme on August 6, 2020. In 2021, only the buyer-of-last-resort arrangement remains in place. BI has also been providing funding to LPS through repo transactions and purchases of government bonds owned by LPS. 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, supporting digital payment in various sectors, 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. They have also postponed banks’ implementation of mark-to-market valuation of government and other securities for six months; relaxed the obligation to fulfill the Liquidity Coverage Ratio and Net Stable Funding Ratio requirements; and allowed the use of the Capital Conservation Buffer.

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. 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, 2020 President Rouhani announced a partial lockdown, closing businesses and government offices for two weeks and banning travel between different cities.

Early 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, 2020. On April 27, 2020 Iran reopened all international borders to revive regional trade, while mosques and schools reopened in mid-May. On May 26, 2020 all businesses and major religious sites were opened.

Consecutive waves of the pandemic: A "second wave" of virus cases hit Iran during the summer of 2020. Following this, the government instituted mandatory mask-wearing and new restrictions in Tehran. Based on this order, all schools and universities, restaurants, cafes, cultural facilities, and beauty salons were closed and a third of government employees in Tehran worked remotely. Iran entered a "third wave" of COVID-19 cases in the fall of 2020, with the number of new infections peaking at 14,000 a day in November. Facemasks became compulsory in public (indoors and outdoors) in Tehran starting October 10. A slew of additional restrictions, including partial lockdowns and curfews, came into effect on November 28, 2020 in the most affected regions. A mandatory mask rule is implemented across the country. In January 2021 the coronavirus infection rate began to slow but night-time curfews and distance learning remained in place to keep the virus at bay. Iran Air resumed flights to Qatar, Dubai, and Turkey.

In March 2021, a fourth wave of the pandemic–the most acute to date—swept through the country following the Nowruz holiday due to the surge in travel and gatherings. However, the rate of deaths and confirmed cases from COVID-19 started to decline by mid-April, with the positive trend continuing into June. By the end of that month, the total number of infections stood at around 3.2 million, with more than 84,000 deaths.

Vaccine: Mass vaccinations started in February 2021, with the government planning to vaccinate 60 million Iranians (95 percent of the adult population) by the end of March 2022 in four phases, starting with essential workers, high-risk groups, and injured war veterans. As of mid-June, 5.1 million Iranians had received at least one shot of the vaccine. According to the Food and Drug Administration of Iran, the country has purchased about 6 million vaccines, including those procured from Russia, China, India, Italy and South Korea. Out of 62 million doses ordered from Russia, about 900,000 have been delivered. Moreover, the government authorized in mid-June the emergency use of its first domestically produced COVID-19 vaccine, known as COVIran Barekat. A second Iranian vaccine, jointly developed with Cuba, is expected to be released by the end of June. Iran also became in June the first country to produce the Russian Sputnik vaccine domestically.

Key Policy Responses as of July 1, 2021

At the end of March 2020, President Rouhani announced over10 percent of GDP in COVID-19 relief and recovery measures. Iran has also received a $50mn loan from the World Bank in July 2020, which was used to finance imports of medicine and medical equipment through the WHO. In response to a new surge in cases, the government unveiled another round of relief measures for households in November 2020, totaling 1 percent of GDP.

Fiscal

• Key measures of the 2020 package included (i) extra funding for the health sector (2 percent of GDP); (ii) cash transfers to vulnerable households (0.5 percent of GDP); (iii) support to the unemployment insurance fund (0.3 percent of GDP); and (iv) subsidized loans for affected businesses and vulnerable households (4.7 percent of GDP). In addition, the government announced a moratorium on tax payments for a period of three months through June 2020 (6 percent of GDP). Sukuk bonds, the National Development Fund, and privatization proceeds provided part of the financing.

  On April 15, 2020, 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 attempts to deal with the economic consequences of COVID-19 and U.S. sanctions.

  As of the end of August, 2020,13 percent of business applicants affected by the pandemic received part of the aid package, and 56.5 trillion rials ($245million) were paid from the National Development Fund of Iran.

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.The Central Bank of Iran also reduced reserve requirements between April and September 2020 for commercial banks to boost lending to affected people and businesses.

Exchange rate and balance of payments

• The Central Bank of Iran announced the injection of USD 1.5 billion in the foreign exchange market in March 2020 to stabilize the rial. In July 2020 it injected and additional USD 1 billion. And in September 2020 it announced that it would put aside one percent of the country’s sovereign wealth fund to stabilize the stock market.

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Iraq

Background. Iraq's first confirmed case was on 22 February 2020, however in the early weeks of the crisis the number of new cases was relatively contained. At the end of Ramadan in late May 2020, the number of new cases escalated rapidly, peaking in September. By October 2020, daily new cases had declined significantly. Cases started rising again in January 2021, reaching a new peak of over 8,500 cases in April 2021, however fatalities remained much lower than during the first wave. Cases fell back in May 2021 but increased sharply again in June 2021, reaching over 7,000 cases a day. The number of fatalities now exceeds 17,000.

In the early stages of the crisis, the authorities 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), and closing schools and universities. A nationwide lockdown and curfew were first introduced on March 22, 2020. By September 2020, most containment measures were relaxed to some extent and the curfew was removed after cases had declined. Containment measures were reimposed in February 2021 due to the renewed rise in cases, including a full weekend curfew, a night curfew on weekdays as well as travel restrictions, the closure of restaurants, malls and places of worship. In March 2021, the containment measures began to be eased again. However, in early May, in response to the emergence of a new variant, a travel ban to India was introduced and a 10-day full lockdown, including schools and non-essential businesses closure, was imposed around Eid Al-Fitr but later loosened to a partial lockdown.

In September 2020, Iraq joined the COVAX Facility, a global initiative aiming to secure access to COVID-19 vaccines. Initially this facility will provide vaccines to cover 20 percent of the population. In addition, Iraq approved the AstraZeneca, Pfizer-BioNtech, Sinopharm and Sputnik V vaccines for emergency use and agreed a range of deals to secure additional vaccines. Vaccinations started in early March with donated doses from China followed by the arrival of the first shipment of vaccines under COVAX later in the month. However, the rollout has been slow to date with around 911,000 doses administered, equivalent to 2.3 doses per hundred people.

The containment and mitigation measures have had a significant negative impact on non-oil activity, predominantly from 2020 Q2 onwards. According to latest official data, Non-oil GDP contracted 20.2 percent in 2020. In addition to the direct impact of COVID-19, the decline in oil prices resulted in a sharp fall in oil revenues in 2020.

Reopening of the economy. After cases started declining in 2020, most containment measures were relaxed to some extent. In June 2020, the curfew restrictions began to be eased, and were completely removed in late September. All land border crossings reopened for trade and airports reopened in July 2020 and schools reopened in November 2020, albeit with limited in-person teaching. In late December 2020, there was a reversal in some of the easing measures, following a spike in COVID-19 cases in other countries and the discovery of new variants of the virus, with a ban on travel to several countries imposed. In February 2021, with the renewed rise in cases, most of the containment measures were reimposed. The measures were eased once again in March, despite the continued rise in cases, to cushion the economic impact by limiting the lockdown and reopening restaurants and malls. In early May, a 10-day full lockdown was initially imposed around Eid Al-Fitr but later loosened to partial lockdown and by end of May, the full weekend lockdown was downgraded to a night curfew. In early June, schools were reopened on hybrid basis with requirement of either weekly testing or vaccination.

Key Policy Responses as of July 1, 2021

Fiscal

• To support the Ministry of Health's efforts to fight the COVID-19 pandemic, the Central Bank of Iraq established a fund to collect donations from financial institutions which raised a total of $37 million, with initial donations of $20 million from the Central Bank 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 introduced a cash transfer scheme, targeting the families of workers in the private sector that do not receive salaries or benefits from the government. Each eligible individual received 30,000 Iraqi dinars ($25), with the scheme costing around 300 billion Iraqi dinars ($254 million) in total.

Monetary and macro-financial

• The Central Bank of Iraq reduced its reserve requirement from 15 percent to 13 percent. At the onset of the crisis, it also 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 the maturities of all loans as they deem appropriate. More recently, the Central Bank has offered 5 million Iraqi dinars ($4200) of additional support to existing projects under the “one trillion ID” initiative and reduced the interest rates on loans extended through the scheme. 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 six months.

Exchange rate and balance of payments

• The CBI announced a 22.7 percent devaluation of the ID/USD exchange rate in December 2020.

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Ireland

Background. Since the start of the Covid-19 pandemic on March 2020, the scale of the economic impact has fluctuated in line with the infection rate and the stringency of containment measures. The pandemic's impact on the domestic economy was severe, with the domestically-oriented sectors contracting by around 10 percent in 2020 and covid-adjusted unemployment increasing to 25 percent. Nevertheless, comprehensive policy support and, especially, strong performance of MNEs (which grew by 18 percent) helped limit the economic impact of the pandemic and as a result GDP grew by 3.4 percent in 2020. Private consumption declined by 9 percent, slightly worse than the EU average, due to the stricter containment measures and to the large share of services in the consumption basket. In June 2021, the Covid-adjusted unemployment rate stood at around 18.3 percent.

Reopening of the economy and containment measures.¹

Ireland responded to the first two waves of infections with strict lockdowns and mostly gradual reopening². However, the reopening at the beginning of December, accompanied by increased social interactions during the holidays and arrival of a more contagious virus variant from the UK, resulted in a surge of infections from the lowest levels in Europe to the highest in the world by the second week of January. This necessitated a third lockdown in January through April 5th, 2021 with tighter restrictions, including closure of schools and most construction sites. Infection rates have declined since then. At the end of April the government has announced a gradual reopening plan³. The government started vaccination program⁴ in end-December and is expecting to vaccinate 80% of the population by early July 2021.

Key Policy Responses as of July 1, 2021

Fiscal⁵

• The Irish authorities have announced a comprehensive fiscal package of €24.5 billion (about 14 percent of GNI), distributed over 2020 and 2021, which includes €20.5 billion in direct support and €4 billion indirect support through (a) €2 billion credit guarantee scheme and (b) €2 billion Pandemic stabilisation and recovery Fund (ISIF). The direct supports include: (i) €2.9 billion taxation measures, i.e., warehousing and deferrals; (ii) €17.6 billion expenditure measures through (a) €11.4 billion labor market support, (b) €2 billion health sector capacity enhancement, (c) €1.5 billion business support, (d) €0.5 billion capital works. Draft Budget 2021 contains an additional stimulus of 1.7 percent of GDP and is focused on extending the income support measures, providing targeted support to the hospitality sector, and increasing health and housing spending, as well as strengthening the green agenda. In addition to that, the government has increased unemployment and wage subsidy supports to cushion the negative shock from the tightening of restrictions announced this week. Furthermore, the automatic stabilizers operate in full, i.e., tax revenues have automatically fallen in tandem with the decline in economic activity, while unemployment spending has risen. Key discretionary policy measures include:

  I. Employment Wage Support Scheme. Employers, whose turnover has fallen 30%, will receive a flat-rate subsidy of up to €203 weekly per employee.

  II. The Pandemic Unemployment Payment—a payment available to those who have lost employment due pandemic at a flat rate of €350 per week.

  III. Covid Restrictions Support Scheme (CRSS) provides 10 to 5 percent turnover compensation payments to the affected firms in several sectors (accommodation, food and the arts, recreation and entertainment). It will only apply at the time of increased restrictions, and is capped at 5 thousand euros per week.

  IV. Additional €200 million investment in training, education, skills development, work placement schemes, recruitment subsidies, job search and assistance measures, to help those who have lost their jobs find a new one, retrain, or develop new skills, in particular for emerging growth sectors.

  V. Measures to support SMEs³ include but not limited to: (a) The Restart Grant for Enterprises ( €550 million); (b) Waiver of commercial rates; (c) Credit Guarantee Scheme: 80% gov’t guarantee for a wide range of credit products from €10,000 to €1 million up to a maximum term of 6 years; (d) MicroFinance Ireland and the Local Enterprise Measures: a package of liquidity and enterprise investment measures worth €55 million to reduce lending rate for micro and small businesses; (e) The Future Growth Loan Scheme (€500 million) with the European Investment Bank Group, so businesses with up to 499 employees can invest for the longer-term at competitive rates.

  VI. Measures to support hospitality and tourism sector include: (a) CRSS; (b) temporary VAT rate cut from 13.5 to 9 percent until end-2021; (c) Stay and Spend Incentive through a tax credit; (d) €10 million Restart Fund for the Tourism sector; (e) €10 million Performance Support Scheme for the culture sector to assist planning for events in the context of COVID-19.

  VII.Tax measures include but not limited to: (a) reduction in the standard rate of VAT from 23 to 21 percent for 6-month starting Sep 2020; (b) warehousing of tax liabilities for affected businesses to delay payment of their PAYE and VAT debts in part of in full for a set period with no interest or penalties; (c) Interest rate reduction to 3%, applying to agreed repayments of all tax debt (where agreement has been reached prior to September 30 2020); (d) To provide immediate cash-flow support to previously profitable companies, the early carryback of trading losses will be allowed, leading to an immediate refund of some or all of corporation tax paid; (e) Income tax relief for self-employed individuals who were profitable in 2019, but as a result of the COVID-19 pandemic, incur losses in 2020; (f) RCT (Relevant Contract Tax) rate review scheduled to take place in March 2020 is suspended; (g) Critical pharmaceutical products and medicines will be given a Customs ‘green routing’ to facilitate uninterrupted importation and supply.

  On June 1 the Irish government extended most of its key business and household income supports to end-2021, expected to cost €3.5bn (1% of GDP), and set out how it will spend €1bn from the EU recovery fund. The Pandemic Unemployment Payment (PUP), providing a weekly payment of up to €350, will now be extended to February 2022 – albeit with a small €50 cut in payments from September. Similarly, the wage subsidy scheme will run to end-2021, with the government leaving open the option of changing the operation of the scheme in Q4. Additionally, both tax warehousing and the commercial rates waiver will be extended to end-2021. The VAT rate for tourism will remain at 9% until September 2022. The plans also include a maximum €30,000 grant for re-opening SMEs.

Monetary and macro-financial

• For monetary policy at the currency union level, please see the Euro Area page.

  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 records, 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 the 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.

LINKS

• ¹ https://www.gov.ie/en/campaigns/resilience-recovery-2020-2021-plan-for-living-with-covid-19/

• ²https://www.citizensinformation.ie/en/covid19/living_with_covid19_plan.html

• ³https://www.gov.ie/en/press-release/7894b-post-cabinet-statement-resilience-and-recovery-the-path-ahead/?referrer=http://www.gov.ie/en/press-release/a4cd4-post-cabinet-statement-recovery-and-resilience-the-path-ahead/

• ⁴https://www.gov.ie/en/publication/bf337-covid-19-vaccination-strategy-and-implementation-plan/

• ⁵https://www.gov.ie/en/campaigns/709d1-economic-recovery-plan/

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Israel

Background. Israel has been significantly affected by the global spread of COVID-19. The first case of COVID-19 was reported on February 21. 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. While the impact on economic activity was quite large in the first half of the year, with output declining by 7 percent (on an annualized basis) in the first quarter and 29.2 percent in the second quarter of 2020; a strong rebound in the second half entailed a decline of only 2.4 percent for the year as a whole. Output declined by 6.5 percent in 2021Q1 (on an annualized basis) following a new outbreak, but activity picked-up as cases declined due to vaccination, and the economy reopened again.

Reopening of the economy. In April 2020 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. On June 29, following a resurgence in morbidity, the authorities imposed new restrictions on gatherings and increased telework for public sector employees. This was followed by further restrictions in early July including on capacity use for restaurants and public transportation buses, closing bars and gyms. The authorities eased some restrictions in late July and early August. The reopening of the economy allowed for a strong rebound in economic activity, with output increasing 38.9 percent (on an annualized basis) in the third quarter. In early September, the government imposed a lockdown in several cities with high morbidity, followed by a second nationwide lockdown on September 18, which was tightened on September 25. The lockdown started to ease on October 18, including gradually opening schools throughout November. On December 27, a third nation-wide lockdown was imposed as the number of new cases increased sharply. Lockdown restrictions were tightened further as of January 10. A gradual lifting of restrictions began in February 7, and most domestic restrictions have been lifted, but international travel remains significantly restricted due to the rapid global spread of more contagious variants. A vaccination campaign has been rolled out since December 20. So far, about 57.1 percent of the population has received two doses.

Key Policy Responses as of July 1, 2021

Fiscal

• On April 8, 2020, the parliament approved a package of NIS 80 billion (about 6.1 percent 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. On June 2, parliament adopted a 20 billion (about 1.5 percent of 2020 GDP) expansion of the package, which includes employment incentives grants, support for high-risk businesses, and additional funds to support SMEs. On July 29, the parliament approved a second stimulus package of NIS 80bn, including 50 billion in budgetary measures and 30 billion in loans and guarantees. The package's key features include extending unemployment benefits for furlough workers, expanding grants to self-employed workers and small businesses, and expanding the State Guarantee loan program for small and medium enterprises. In addition, parliament approved a one-off grant program amounting NIS 6.72bn for adults and families with children, excluding high earners. On September 29th , parliament approved additional NIS 10.5bn to support businesses and to increase eligibility for social benefits. In total, approved measures amount to about NIS 202.3 billion, of which NIS 105.6bn were implemented in 2020 and NIS 35.9bn were implemented in the first 5 months of 2021.

Monetary and macro-financial

• Key monetary policy measures include: (i) the announcement of government bond purchases up to NIS 50 billion, expanded to 85 billion in late October (NIS 65.3 billion as of end-May), (ii) repo operations to provide shekel liquidity to the banks (NIS 0.5billion as of end-May), (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, (v) a term funding scheme that has provided 3-year loans for banks to fund credit for small and microenterprises (34.2billion as of end-May) (vi) launched a plan to purchase corporate bonds on the secondary market for up to NIS 15 billion (NIS 3.5 billion as of end-May). 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; (vi) allowing commercial banks to increase customers' overdraft credit facilities and suspend restrictions on accounts of customers with checks returned due to insufficient funds, and (vii) reducing the leverage ratio by half a percent. In May 2020, 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. The framework was extended several but expired at end March. 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. It also announced the plan to purchase US 30 bn over 2021.

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Italy

Background. Net inflows of COVID-19 cases have been continuously declining. As of July 1, the number of active cases has decreased to around 49,000. The number of hospitalized patients and those in intensive care units have also been on a declining trend. Around 127,500 people have died.

Reopening of the economy and additional containment measures. The first nation-wide lockdown expired on May 4, 2020. Since then, manufacturing and construction reopened under new safety rules (e.g., staggered shifts, spaced workstation, temperature checks, masks). The government moved forward some of the reopening plans. In addition to retail shops, restaurants, cafes and hairdressers reopened on May 18 (the initial reopening plan was June 1). Sports facilities reopened on May 25, followed by cinemas and theaters 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 has been lifted on June 3, when international borders also reopen without restriction to and from other EU countries.

Following the increase in confirmed cases beginning in early August, the government reintroduced some containment measures, including closing night clubs, capacity limits at cultural sites. Mask wearing in public places (both in and outdoors) is required through end January 2021. Fines were raised for those who do not follow anti-contagion and quarantine rules. Rapid Covid tests are required for travelers coming back from a number of countries in Europe, and have been authorized for use in schools to identify and quarantine infected individuals, thereby avoiding the need to close entire schools. The state of emergency was extended through January 2021.

A series of additional containment measures have been rolled out since mid-October and have been extended until mid-May 2021. Closures of services and mobility restrictions are more focused and vary by risk levels assigns to regions. Since early-April Schools have beeen allowed to reopen — up to Grade 8 (and Grade 6 in high-risk areas). Some reopenings began in mid-May, including open-air swimming pools and secondary schools. Theatres, cinemas, concert halls and other similar venues have also reopened subject to a 50 percent capacity limit and also different hard caps for indoor and outdoor venues (500 and 1,000 people respectively). Gyms have reopened in early-June.

Key Policy Responses as of July 1, 2021

Fiscal

• On March 17 (2020), the government adopted a €25 billion (1.6 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 (2020), 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 (2020), the government adopted a further €55 billion (3.5 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).

  Following the Parliament’s approval for a further €25 billion (1.6 percent of GDP) deficit deviation, on August 8 (,2020), the government adopted a new third support package. Labor and social measures (€12 billion) include, among other things, additional income support for families and some workers, an extension of the short-time work program, and a suspension of social security contribution for new hires. Other key measures are extensions of the moratorium on SMEs’ debt repayment and the time to pay back tax obligations.

  On October 27 (2020), the government adopted a €5.4 billion (0.3 percent of GDP) package that seeks to provide quick relief to the sectors affected by the latest round of COVID containment actions. Measures include grants to 460 thousand SMEs and the self-employed, and further income support for families. The government has also extended social contribution exemptions for affected businesses.

  On March 19 and May 20 (2021), the government approved further support packages for about €72bn aiming at extending supports for business and workers affected by the pandemic as well as kickstarting the economy. Key measures include compensating businesses and the self-employed (proportional to 2020 turnover loss), and extending the firing ban (until end-June) and the short-time work schemes.

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. Existing liquidity support schemes (i.e., loan guarantee and moratoria) have been extended (from end-2020) to June 2021 and more recently to end-2021. The extension of loan moratoria (after end-June) will cover only principal repatments. New guaranteed loans made available after end-June will be at slightly smaller gurarantee rates (from 100 to 90 percent for small loans below €30,000, and from 90 to 80 percent on larger loans). The maturity of new and existing guaranteed loans have also been extended from 6 to 10 years. On July 22, 2021, the Italian Constitutional Court rejected the second extension of mortgage moratorium on primary residences (from January 1 to June 30, 2021).

  Italy has also launched several schemes for injecting capital into businesses whose finances have been affected by the pandemic, including (i) thee SME Capital Strengthening Scheme (“Fondo Patrimonio PMI”) with an overall budget of about €4 billion, aimed at subscribing bonds or debt securities issued by SMEs that have carried a capital increase of at least €250,000; (ii) the Relaunch Fund (“Patrimonio Rilancio”) with an overall budget of about €44 billion, which could be used for equity injections, investments in companies’ convertible bonds and subordinated debt; (iii) the Fund for Start-ups and Innovative SMEs (“Fondo Rilancio”) with an overall budget of €200 million to support investment in start-ups’ and innovative SMEs’ share capital; (iv) the National Tourism Fund (“Fondo Nazionale del Turismo”) to mobilize up to €2 billion to temporarily and/or partially take ownership of domestic hotels; and (v) a fund for the restructuring of corporates. The “Rilancio” decree has introduced a Fund for the restructuring of firms (merger and acquisition, turnaround, debt restructuring). Target firms are: (i) firms with historical brands or brands that are strategically important for the country; (ii) firms with less than 250 employees; (iii) firms that hold strategically important assets or relationships. For firms in financial distress, the Fund will provide an equity injection, at market conditions, jointly with a private (third party) investor.

  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  decided to maintain until October lower 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.

J

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Jamaica

Background. The first confirmed COVID-19 case was registered on March 10, 2020. 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. The daily curfews across the island remain in place, while the closure of the island’s borders to incoming visitors has been lifted for returning Jamaican citizens and non-citizens since June 1, and June 15 respectively. The government has instituted protocols for arriving visitors, including pre-arrival documentation, in-airport screening and risk assessment, followed by a risk based approach to quarantine and movement limitations. The government has also issued guidelines on the reopening of beaches, rivers and theme parks, which are key tourism attractions. In addition, guidelines have been issued for the safe capacity limits for social gatherings (e.g. weddings and funerals) and operation protocols for gyms, barbershops and hair salons.

Key Policy Responses as of July 14, 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. The first confirmed COVID-19 case in Japan was reported on January 16, 2020. In response to the outbreak, the authorities have taken several measures targeted towards health and containment efforts. Japan expanded entry bans; as a result, this brings to a total of 152 countries/regions 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. Then Prime Minister Shinzo Abe declared the state of emergency for seven prefectures (including Tokyo, Saitama, Kanagawa, Chiba, Osaka, Hyogo, and Fukuoka) on April 7 and expanded the coverage of the state of emergency to all Japanese prefectures on April 16, effective through May 6. The state of emergency enabled 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. The International Olympics Committee, International Paralympic Committee, Tokyo Metropolitan Government, the Organising Committee Tokyo 2020 and the Government of Japan decided on March 20, 2021 that international spectators will not be allowed to enter Japan for the Olympic and Paralympic Games Tokyo 2020, and on June 21, 2021 that the spectator limit for the Olympic Games will be set at 50 percent of the venue capacity, up to a maximum of 10,000 people at all venues.

Reopening of the economy. Amid the declining trend of daily new confirmed cases of COVID-19 since the beginning of May 2020, 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. Restrictions on inter-prefectural travel were lifted on June 19.

Following the second wave of infections, Tokyo raised the COVID-19 alert level to the highest on July 15. Amid that backdrop, it requested residents to refrain from traveling outside Tokyo and karaoke venues and restaurants serving alcohol to close by 10 p.m. In August, Aichi, Osaka, Miyazaki, Okinawa also requested restaurants that serve alcohol and karaoke venues to shorten operating hours to close at 8 p.m. and 10 p.m. As new infections continued to trend down, Tokyo lowered the alert level by one notch from the highest level on September 10 and lifted a measure that shortened hours for restaurants and karaoke from September 16.

As new infections increased, on November 19, Tokyo raised the COVID-19 alert level to the highest and requested residents to refrain from going outside and karaoke venues and restaurants serving alcohol to close by 10 p.m. until mid-December. Hokkaido, Ibaraki, Saitama, Chiba, Kanagawa, Aichi, Osaka also requested karaoke venues and restaurants serving alcohol to shorten operating hours to close at 9 p.m. and 10 p.m. until mid-December. Sapporo and Osaka were temporarily removed as destinations from the Go-to-Travel campaign—a government’s subsidy program to promote domestic travel—through December 8. On December 14, the government temporarily suspended the Go To Travel campaign nationwide from December 28, 2020. On January 7, 2021, PM Suga declared the state of emergency for Tokyo and three neighboring prefectures (Saitama, Kanagawa, and Chiba)—seven prefectures (Gifu, Aichi, Kyoto, Osaka, Hyogo, Tochigi and Fukuoka) were added on January 14—effective from January 8 to February 7. The government asked restaurants and bars to shorten operating hours to close by 8 p.m., urged teleworking to reduce the number of workers at offices by 70 percent, requested residents to stay at home and refrain from non-essential outings especially after 8 p.m., and limited the number of audience at large events to 5,000 people. On February 2, PM Suga extended the state of emergency for 10 prefectures (except Tochigi) through March 7. As of March 22, Japan lifted the state of emergency for all areas.

Amid the fourth wave of infections, on April 5, 2021, the priority preventative measures took effect in Miyagi, Osaka and Hyogo, asking restaurants and bars to close by 8 p.m. The priority preventative measures were subsequently extended to Tokyo, Kyoto and Okinawa on April 12, Saitama, Chiba, Kanagawa and Aichi on April 20, and Ehime on April 25. On April 23, Japan declared the state of emergency for Tokyo, Osaka, Kyoto and Hyogo effective from April 25 to May 11, and the existing priority preventative measures for the rest of prefectures effective until May 11. Under the state of emergency, the government has urged companies to allow teleworking and required restaurants to shorten operating hours to close by 8 p.m., restaurants, bars, and karaoke parlors serving alcohol as well as department stores and other large commercial facilities to close, and large events to be held without spectators. The government subsequently extended the state of emergency and the priority preventative measures it until June 20; expanded the state of emergency to include Aichi and Fukuoka from May 12; Hokkaido, Hiroshima and Okayama from May 16; Okinawa from May 23; the priority preventative measures to cover Hokkaido, Gifu and Mie from May 9, then Gunma, Ishikawa and Kumamoto from May 16, while lifting it for Miyagi on May 12 and Ehime on May 23. The prefectural governors eased the restrictions for department stores and other large commercial facilities to be re-opened with shorter hours and for large events to be held with a cap of 5,000 people and 50 percent of the venue's capacity. Japan lifted the state of emergency and replaced with the priority preventative measures for Tokyo, Osaka, Kyoto, Hyogo, Aichi, Hokkaido, and Fukuoka from June 21 to July 11. The state of emergency for Okinawa was extended until July 11. The priority preventative measures for Kanagawa, Saitama, and Chiba were also extended until July 11.

Regarding cross-border travel, Japan has resumed re-entry into Japan by all foreign nationals who possess the status of residence since September. Japan has agreed on "Residence Track" which allows essential business exchange between the two countries, on condition they take preventive and quarantine measures, with Brunei, Cambodia, China, Lao's People's Democratic Republic, Myanmar, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam. In addition, Japan has agreed with China, Singapore, South Korea and Vietnam on "Business Track" which enables limited business activities during the 14-day stay at home period (partially relaxes restrictions on such activities), immediately after arrival at those countries/regions or Japan, on condition that travelers accept additional quarantine measures such as submission of "Schedule of Activities in Japan." Starting from October, the holders of statuses of residence of "Student", "Dependent" and others, in addition to cross-border business travelers of all countries and regions have been permitted to enter Japan under the condition that the person is hosted by a company/entity that can assure observation of quarantine measures. On October 30, the Government of Japan decided to remove the entry ban on Australia, Brunei, China (including Hong Kong and Macau), New Zealand, Republic of Korea, Singapore, Taiwan, Thailand and Vietnam. However, on January 13, 2021, the government suspended “Business Track” and “Residence Track” until the state of emergency is lifted.

As a precautionary step against coronavirus variants of concern, Japan has suspended new entry into the country of nonresident foreign nationals from December 28, 2020 until further notice. Japan has strengthened the border enforcement measures to prevent the coronavirus variants of concern. The current quarantine measures are strengthened for all the travelers who enter, re-enter or return to Japan from designated countries/regions in response to both the corona virus variants of special concern on border measures and other variants, according to countries/regions. The government requires all Japanese citizens and foreign nationals to submit negative COVID-19 test results within 72 hours prior to departure and undergo tests upon arrival.

Key Policy Responses as of July 1, 2021

Fiscal

• On April 7 (partly revised on April 20), 2020, the Government of Japan adopted the Emergency Economic Package Against COVID-19 of ¥117.1 trillion (20.9 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 0.4 percent of 2019 GDP), (ii) protect employment and businesses (15.8 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, 2020, the Government of Japan announced the second FY2020 draft supplementary budget (passed on June 12). The package, worth ¥117.1 trillion (20.9 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.

  On December 8, 2020, the Government of Japan adopted the Comprehensive Economic Measures to Secure People's Lives and Livelihoods toward Relief and Hope. The package, worth ¥73.6 trillion (13.1 percent of 2019 GDP), covers measures to: (i) contain COVID-19, (ii) promote structural change and positive economic cycles for Post-Corona era, and (iii) secure safety and relief with respect to disaster management, together with allocation of the COVID-19 Reserve Fund. The specific measures include incentives for firms to invest in digitalization and green technologies, as well as an extension of the ongoing COVID-19 responses such as concessional loans to affected firms.

  Japan is the largest contributor to IMF financial resources and the Fund’s concessional lending facilities, as well as the longest standing partner in capacity development activities. In April 2020, 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 2020, 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 ember countries to follow quickly, and Japan will match an additional SDR 1.8 billion with their contributions. In October 2020, Japan announced a new contribution of US$10 million to the COVID-19 Crisis Development Initiative.

Monetary and macro-financial

• On March 16, 2020,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, 2020, 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 total size of the special funds-supplying operation and the new fund-provisioning measure amounts to about ¥90 trillion (US$838 billion).

  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, 2020, by lowering the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points. 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 businesses affected by COVID-19 through the Japan Finance Corporation and other institutions. The government also enhanced 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 (FSA) has reassured banks that they can assign zero risk weights to loans guaranteed under public guarantee schemes, draw down their regulatory capital 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. The FSA has also asked banks to defer principal payments on mortgage loans as needed, and refrain from charging fees for modifying mortgage loan conditions.

  On June 12, 2020, the Diet approved an amendment of the Act on Special Measures for Strengthening Financial Functions, which extends the deadline for regional banks’ application to government capital injection from March 31, 2022 to March 31, 2026, and provides for relaxed application conditions for those regional banks affected by COVID-19. The Act aims to strengthen regional banks’ financial intermediary function through facilitating government capital injection to them. In addition, as precautionary measures, the Diet also approved the expansion of the limit of government guarantees for capital injections into regional banks from ¥12 trillion to ¥15 trillion.

Exchange rate and balance of payments

• The exchange rate has been allowed to adjust flexibly.

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Jordan

Background. Jordan has reported 751,937cumulative cases, and =9,756 deaths related to COVID as of July 1, 2021. At the onset of the global epidemic, the authorities implemented a range of measures to try and limit the spread of the virus. Early measures included the suspension of all international flights, the enforcement of strict curfews, restrictions on movement, and the closure of businesses, schools and universities. As the number of contagions remained low, restrictions were progressively relaxed over the summer. In parallel, the authorities launched a public communication and awareness campaign to inform the public on examination and treatment facilities and imposed social distancing measures and the use of masks. In the Fall, the sharp rise in COVID cases led the authorities to enforce local lockdowns. In early October, the Government re-instated a nationwide lockdown for Fridays, and closed schools and universities until the end of the semester. Most restrictions were lifted in early 2021, as the number of daily new cases dropped to much safer levels, but week-end and evening curfews were reinstated in late February as a third wave of infections hit the country, and curfew hours were extended mid-March. Despite these measures, on March 31 Jordan reported the highest daily COVID-19 death toll since the pandemic started (111). Vaccinations started on January 13, prioritizing health-vulnerable residents, including refugees, and health care workers. The pace was initially constrained by supply shortages, but has picked up starting in April (with the arrival of new vaccine supplies), with daily vaccinations reaching 110,000 per day at end-June. After the vaccination of priority groups was completed, campaigns to vaccinate teachers at designated centers, to vaccinate public sector employees in the workplace, and to offer vaccination in private hospitals, were launched. At the start of July, 2.5 million citizens and residents of Jordan had received at least one dose of the vaccine, and 1.5 million had received both doses. The authorities hope to reach 4.5 million vaccinations administered by September, thus covering all vulnerable groups. From the beginning of July, anyone over the age of 40 will be able to receive a vaccine without an appointment, and those aged between 16 and 18 will also be allowed to register.

Reopening of the economy. First wave. A phased-out easing of the first wave lockdown started on April 6, when factories located in industrial zones were allowed to resume operations. The re-opening of the economy continued through the month of April, with work partly resuming for selected sectors on April 21^st , as well as most commercial activities on April 30. .On May 4 , Jordan lifted most lockdown measures and allowed most economic sectors to operate under strict safety guidelines. In late May 2020, the government allowed companies in hard-hit sectors to cut employees’ May and June salaries by 30%. The authorities announced that transport between governorates would resume, night curfews would be shortened, hotels and cafes would be allowed to re-open, along with sporting events with no spectator effective June 6. Universities remained closed and a curfew continued to be in effect at night. On July 15 , the Ministry of Education announced that schools would reopen on September 1 for the new academic year. 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. The phased-out approach also entailed the complete restart of economic activities in certain regions that remained closed to the rest of the country. 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 August 13, Jordan closed its border with Syria due to virus concerns following an uptick in new cases. The Government reinstated Friday curfews starting August 27 in Amman and Zarqa. On September 8, Jordan re-opened airports for regular commercial flights with strict measures to contain the pandemic. Passengers from green-listed countries (low COVID cases countries) were able to enter Jordan if they proved they had resided for at least 14 days in the origin country, presented a negative PCR test conducted less than 72 hours before departure and took another test at the airport in Jordan. Passengers from other countries would need to quarantine for 7 days and take another PCR test at the end of the quarantine – in November, the 7-day quarantine was introduced for passengers from all countries who tested negative when entering Jordan.

Second wave. The Government enacted Defense Order 16 in mid-September, which introduced new measures designed to contain the pandemic (e.g.: limits to social gatherings) and includes strict penalties on people and businesses which do not comply with health safety measures (incl. fines, establishment closure and potential imprisonment). On October 6, the Government announced that a total lockdown would be imposed on all governorates on all coming Fridays and Saturdays until further notice. On October 20, the newly formed Government of Prime Minister Bisher al Khasawneh announced that total lockdowns would apply to all governorates only on Fridays, and introduced a daily curfews from 11pm to 6am for citizens and from 10pm to 6am for businesses across the country. Schools and universities were also closed and distance learning re-instated until the end of the first semester. On October 22, the Government issued defense orders 19 and 20 which allowed Friday prayers while introducing strict safety guidelines, restricted restaurants’ operations to only 50 percent of capacity with no more than six people per table, and introduced new fines for establishments and persons not abiding by the defense orders rules. On November 3, the Ministry of Health struck a deal with the Private Hospitals Association to allocate at least 1,000 beds and 150 ICU beds for COVID-19 patients who would be referred to private hospitals by public hospitals. The authorities announced that starting from November 11, a total lockdown would be implemented for 4 days. In early December, the number of new weekly cases started to decline for the first time since the beginning of the second wave and reached safer levels in early January 2021.

Third wave. The first phase of vaccinations started on January 13, with the goal to vaccinate about 1.75 million people. Priority is being given to healthcare workers, and health-vulnerable populations (including refugees). An electronic registration system was open to all residents, regardless of nationality or status, and 920,000 people have registered thus far (as of March 30). On February 24, the government announced the reimposition of Friday lockdowns, in addition to new curfew hours; on March 13 curfew hours were extended (businesses are allowed to operate from 6:00 am until 6:00pm while public movement is permitted from 6:00am until 7:00pm), in an effort to halt the rise in new cases. In-person education initially continued for all those who had already returned to classrooms, but in-class teaching in schools and universities was suspended starting March 10. On March 28, the government announced that the vaccination campaign for elderly residents in care homes had been completed. At the start of Ramadan, delivery hours for restaurants and pharmacies and food service hours for hotels were extended, and worshippers were allowed to perform Friday prayers at mosques; on April 28, the government announced the suspension of the blanket curfew on Fridays. The government has launched a campaign to vaccinate teachers at designated vaccine centers, to facilitate plans to resume in-class learning at schools and universities in September. The government has also announced its intent to reopen the economy in summer 2021. On May 26, the government announced a three-phased plan to reopen the economy: the first phase, starting in June, will see the gradual reopening of various sectors, the second phase, starting in July, will include the reduction of curfew hours and the full return of public sector employees to work, while a full reopening is envisaged at the start of September. On June 1, the government announced a three-phased plan to reopen the economy: the first phase, which started in June, saw the gradual reopening of various sectors; the second phase, which started on July 1, included further reopening of the economy; a full reopening of schools and remaining institutions is envisaged for the start of September. The authorities have put in place various measures to allow more freedoms for vaccinated citizens during the reopening, including ability to travel during curfew hours. At the end of June, the EU added Jordan to its safe travel list.

Relationship with the IMF. On May 20, 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. On December 14, 2020, the IMF Executive Board approved the completion of the 1st review under the Extended Fund Facility (EFF), which made SDR 102.93 million (about US$148 million) immediately available. On April 12, the Managing Director issued a statement expressing the Fund's support for Jordan's reform efforts. On June 30, the IMF Executive Board approved the completion of the 2nd review under the EFF as well as an augmentation of Fund access under the program of SDR 144 million (US$ 200 million).

Key Policy Responses as of March 31, 2021

Fiscal and structural

• On March 18, the Ministry of Finance announced a host of measures in response of the epidemic. Measures included (i) sales tax exemption on sanitizers, face masks, and medical equipment; (ii) the allocation of 50 percent of maternity insurance revenues (JD 16 million – about USD 23 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 customs duty collections due from selected companies and the reduction of social security contributions from private sector establishments (from 21.75% to 5.25%). On March 31 ,2020, 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. The government allocated additional spending (JD 50 million – about USD 71 million) for purchases of health equipment and supplies, rental of hotels for quarantines, and additional COVID-related security costs. It also instituted a temporary cash transfer program for the unemployed and self-employed (JD 81 million – about USD 114 million). On June 15, Prime Minister Razzaz announced a battery of measures to support the tourism sector, by: (i) allowing tourism sector to pay its 2019 tax liability in installments with no penalty; (ii) reducing the general sales tax from 16pc to 8pc and of the service tax from 10pc to 5pc for hotels and restaurants. The Ministry of Labor announced a plan to re-instate a one-year military service to help contain youth unemployment in the aftermath of the pandemic. On December 3, , Prime Minister Khasawneh announced expansion of the cash transfer program to cover 100,000 new families and daily workers; funding to protect nearly 180,000 jobs in the hard-hit sectors, and additional support for the tourism sector.

  On March 31, 2021, the government announced a COVID stimulus package with a total value of JD 448 million. The package includes measures to protect existing jobs (JD 113 million), employ youth in COVID-related programs (JD 10 million), and augment social welfare programs (JD 60 million, primarily via an expansion of the Takaful cash transfer program).

Monetary and macro-financial

• The Central Bank of Jordan (CBJ) reduced most policy rates by 50 basis points on March 3rd, 2020 and further by 100 basis points on March 16 2020. In addition, the Central Bank of Jordan (CBJ) announced a a package of measures aimed at containing the impact of the Coronavirus on the economy. The measures included: (i) allowing banks to postpone loan repayments clients in the impacted sectors ; (ii) injecting additional liquidity of JD 550 million (USD 776 million) by reducing the compulsory reserve ratio on deposits from 7 percent to 5 percent and JD 500 million (USD705 million) by redeeming its CDs held by banks. (iii) expanded the sectoral coverage and reduced interest rates on its refinancing program from 1.75% to 1% in Amman and from 1% to 0.5% in other governorates, while increasing loan tenors and volume limits; (iv) reduced the cost and expanded the coverage of guarantees provided by the Jordan Loan Guarantee Corporation on SME loans, including a JD 150 million (USD 211 million) credit facilities made available for the tourist sector. Trading on Amman Stock exchange was suspended from March 16, 2020 to May 10, 2020. On March 11, 2021, the Central Bank of Jordan announced an expansion in its subsidized lending schemes for SMEs from JD 500 million to JD 700 million and extended the bank loan service moratorium to negatively impacted borrowers until the end of 2021.

Exchange rate and balance of payments

• No measures.

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Kazakhstan

Background. Kazakhstan reported 419,800 COVID-19 cases and 4,316 deaths as of June 28, 2021. Following a temporary stabilization after reaching the highest case number in April since the start of the pandemic, new infections picked up again in recent days; the surge is likely linked to the spread of the Delta variant. Five regions including Nur-Sultan and Almaty are in the high-risk zone ("red zone"), and the rest of the country is assessed at medium risk. Quarantine measures, including temporary closure or reduced hours for malls, cinemas, and other public places, and online learning for schools, remain in place. Nur-Sultan, which has been in the red zone for over two months, has tightened quarantine measures and introduced mandatory PCR testing for workers not willing to be vaccinated; moreover, vaccination or negative PCR tests are also required for organizations over twenty people. The authorities have also tightened quarantine requirements for international travelers. A mobile app was launched to track people's level of immunity and control their access to certain public places (e.g., the international airport of Nur-Sultan).

Vaccination. The authorities plan to vaccinate ten million people (over half of the population) free of charge by September 2021, starting with groups with high risk exposure (doctors, teachers, and law enforcement workers). So far, the country has administered about four million doses, with one and a half million people fully vaccinated. The doses are mostly locally produced Sputnik V and domestically developed KazVac vaccines, but also from other sources. The authorities have continued the awareness campaign about vaccination, and some regional authorities (Almaty) offer monetary incentives to stimulate vaccine take-up.

Economic outcome and policies. Real GDP growth in 2020 was -2.6 percent. The economy registered a growth of 1.6 percent for the first five months of 2021 following a contraction in Q1. Sizable government support measures have mitigated the economic fallout of the pandemic – they include regulated prices for socially-important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises (SMEs). The authorities' reform priorities include plans to enhance public administration, competitiveness in key sectors (manufacturing, pharmacy, agriculture), and social support to the broader population.

Key Policy Responses as of June 28, 2021

Fiscal

• The anti-crisis package (around 9 percent of GDP) announced in 2020 included cash payments to the unemployed and self-employed, an increase in pension and social benefits, additional health spending, and support for employment and businesses. Subsidized lending equivalent to 1½ percent of GDP is being provided under the State Program “Economy of Simple Things,“ along with actions to help SMEs finance working capital (1.1 percent of GDP). About 2½ percent of GDP is being allocated to support employment under an “Employment Roadmap“ program, including large-scale infrastructure projects. Selected enterprises and individual entrepreneurs are also eligible for tax incentives. Further measures to restore economic growth include: a subsidized mortgage program for households with a segment targeting youth specifically, tax incentives to agriculture and 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. In the summer of 2020, the authorities provided additional cash transfers to individuals who lost their jobs due to the quarantine, lowered subsidized interest rates for SME loans (to 6 percent), and extended tax concessions for vulnerable individuals and businesses. Given the ongoing second wave of the pandemic, measures such as “Employment Roadmap“ and support for SMEs (credit support, tax and loan payment deferrals) are expected to continue in 2021. The revised 2021 budget also includes additional COVID-related spending (0.6 percent of GDP) for the vaccines, testing and personal protective equipment, medical services and personnel, and construction of new health facilities. In addition, salary increase for doctors over 2021-23 have been announced with the estimated overall fiscal cost at 0.7 percent of 2021 GDP. The overall fiscal stimulus package in 2021 amounts to about 1.6 percent of GDP.

Monetary and macro-financial

• The National Bank (NBK) raised its policy rate from 9.25 percent to 12 percent on March 10, 2020, after pressures on the tenge (KZT) intensified with the drop of oil prices. It later cut the base rate and kept it at 9 percent to support activity. To support banks and the economy, the authorities have, since mid-March 2020, (i) lowered risk weights (for SME from 75% to 50%, for FX loans from 200% to 100%, and for syndicated loans from 100% to 50%); (ii) expanded the list of eligible collaterals; (iii) lowered capital conservation buffer (by one percentage point); (iv) reduced the liquidity coverage ratio requirement (from 80% to 60%), and (v) lowered limits on foreign currency positions. To support the population and SMEs, the authorities have encouraged banks and other lenders to grant loan repayment deferrals to eligible borrowers, and to freeze their loan classifications at the pre-COVID-19 status. Many of these measures are expected to remain until mid-2021 given the ongoing second wave of COVID infections; the reduced risk weights for SMEs and exemptions for holding additional provisioning against deferred loans are expected to last until end-2021.

Exchange rate and balance of payments

• The NBK allowed the tenge to depreciate by over 15 percent to almost 450 KZT/$ in March 2020, intervening to mitigate excessive volatility. It also introduced temporary administrative measures (halving the limit of daily FX purchases unrelated to payment obligations and imposing monthly limits on cash withdrawals by legal entities) to mitigate the FX outflow pressures. The NBK largely refrained from FX interventions since April 2020, except in September and October when the tenge came under pressure due to oil price drops. Overall, the tenge depreciated by 10 percent in 2020. International reserves have increased, driven by the rising gold price. According to preliminary data, the external current account improved in 2020, as the decline in exports was more than offset by lower imports and repatriated profits. The tenge has remained broadly stable in early 2021.

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Kenya

Background. The first confirmed COVID-19 case was reported on March 14, 2020. The government adopted a number of containment measures, including social distancing and heightened restrictions in most non-essential social spaces to gatherings; encouragement of teleworking where possible; establishment of isolation facilities; declaration of night curfew and limitations on public transportation passenger capacity. Some of the containment measures have since been relaxed. Domestic flights commenced on July 15th, 2020, while international flights commenced on August 1st, 2020. All international arrivals have to undertake specifically a SarsCoV2 RT PCR Swab test, failure to which they will be quarantined for two weeks. Test result notwithstanding, passengers from selected counties are required to undergo a fourteen-day quarantine. A resurgence of infections in a second wave led to reversal of some of the relaxed measures. Physical participation in places of worship with an age limit of 65 years to take a maximum of 90 minutes down from two hours. Attendance to weddings limited 50 people down from 200 people. While funeral attendance limit remains 200 people, those allowed at the grave side are only 15. Schools re-opening was in phases and were fully reopened on January 4, 2021. An initial Covid-19 vaccine deployment plan put out by the ministry of health targets 30 percent population coverage by mid-2023, with two thirds of the vaccines expected to be provided by GAVI/COVAX and the remainder procured by government. The first phase of deployment, which aims to cover 3 percent of the population by end-June 2021, would focus on frontline health workers. The first batch of the vaccine covering 0.5 percent of the population arrived in the country in early March 2021. A rapid resurgence of infections in March 2021 led to reversal of relaxation measures introduced since mid-2020. On March 26, the authorities reimposed containment measures in Nairobi and four neighboring counties, including a ban on movement in and out of the area; cessation of in-person meetings, worship, and dining; closure of bars; extension of curfew hours and withdrawal of curfew passes; directing employees to work from home; sending the Parliament on recess; and closing schools and universities again (primary and secondary schools had started planned 7-week recess the week before). In the remaining counties, physical participation in places of worship, funerals, and weddings is allowed with restrictions on the number of participants. Easing of cases from the recent third wave's peak led to relaxation of some containment measures on May 1, 2021. Cessation of movement in and out of the five zoned counties was lifted; bars to operate until 7pm; schools re-opened; suspension of sporting and recreational activities lifted. After a steep fall at the end of May 2021, infections started edging up again in June 2021 driven by an upsurge of cases in the western Kenya region. In response, authorities placed 13 counties in the region under partial lockdown. With vaccines having run out, a donation from Denmark of 358,700 AstraZeneca doses enabled inoculations to resume.

Key Policy Responses as of July 01, 2021

Fiscal

• The government, as part of the FY2019/20 budget (ending June 30, 2020), initially earmarked Ksh40 billion (0.4 percent of GDP) for Covid-related expenditure, including health sector (enhanced surveillance, laboratory services, isolation units, equipment, supplies, and communication); social protection (cash transfers and food relief); and funds for expediting payments of existing obligations to maintain cash flow for businesses during the crisis. The FY2020/21 budget includes a Ksh56.6 million (0.5 percent of GDP) economic stimulus package that includes a new youth employment scheme, provision of credit guarantees, fast-tracking payment of VAT refunds and other government obligations, increased funding for cash transfers, and several other initiatives. 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. Some of the tax measures, including the reduction of top PAYE rate, corporate income tax rate and VAT were reversed effective January 1, 2021. The budget for FY 2021/22 allocated Ksh 45 billion (0.4 percent of GDP) for covid related spending (Ksh 14.3 billion for vaccines roll-out, Ksh 7.6 billion to enhance access to affordable medical care, and Ksh 23.1 billion for economic stimulus programme to cushion vulnerable groups). In addition, various pharmaceutical products and medical equipments were offered tax relief.

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. Some of the measures including waiving or reducing of charges on mobile money transactions and suspension of listing of negative credit information for borrowers were reversed on January 1, 2021.The measures on loan restructuring and classification flexibility expired on March 2, 2021.

Exchange rate and balance of payments

• No measures.

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Kiribati

Background. Kiribati does not have any confirmed cases as of May 6, 2021. Travel restrictions have been in place since January 2020 and borders have been closed since March 21, 2020 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, 2020 and government task forces have been formed to address commodity and cargo buffers; communication and awareness; isolation centers and containment efforts; and border control.

Key Policy Responses as of May 6, 2021

Fiscal

• An economic relief package amounting to AUD 13.5 million, equivalent to about 5 percent of GDP was approved in 2020. It consists of unemployment support, private business stimulus, cargo buffer for imports, and SOE stimulus.

  The specific measures include: unemployment benefit via partial income substitution, employer cost sharing for off-shore observers, sea farers, and fruit packers, reduction in social security contributions for both employers and employees, and loan support through government-owned financial intermediaries.

  In addition, there has been donor-funded support for medical care including vaccination.

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Korea

Korea first reported confirmed COVID-19 cases in January 2020. The authorities rapidly implemented a comprehensive strategy to combat the virus based on widespread testing, aggressive contact tracing, and prompt isolation and treatment of cases. Along with voluntary social distancing, this approach slowed infections, allowed most businesses to remain open, and brought new cases near zero during the summer. A spike in infections occurred in Q4-2020, with the average daily number of new cases peaking at over 1,000 in December before declining to the 500-600 range more recently. Real GDP in 2020 declined by -0.9 percent but has recovered in quarterly terms since Q3-2020.

Key Policy Responses as of July 1, 2021

Fiscal

• On March 17, the National Assembly passed the first 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 second 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 July 3, the National Assembly passed the 3rd 2020 supplementary budget. The KRW 35.1 trillion package includes a revenue reduction (11.4 trillion) and additional KRW 23.7 trillion spending on financial support for companies, expansion of employment and social safety, disease control, and spending on digital and green industries.

  On July 14 2020, the government announced an overview of a new policy package (Korean New Deal). The package aims to "transform the economy from a fast follower to a leader, from a carbon-dependent economy to a green economy, with the society going to a more inclusive one". The package includes three main components: digital economy, green technology, and social safety net. A total of KRW 6.3 trillion spending has been included in the 2020 (3rd) supplementary budget.A total of KRW 67.7 trillion(accumulated) will be invested by 2022, and by 2025 a total of 160 trillion won (accumulated, 114.1 trillion won from fiscal investment) will be invested. A total of 1.9 million jobs are expected to be created.

  On September 22, the National Assembly passed the 4th 2020 supplementary budget. An additional KRW 7.8 trillion will be spent on support for small businesses and SMEs (3.9 trillion), employment support (1.5 trillion), support for low income households (0.4 trillion), and daycare support and others (2 trillion).

  On December 2, the National Assembly passed the 2021 budget. Budgeted revenue for 2021is 482.6 trillion, about KRW 23 trillion (1.2 percent of GDP) lower than the projected 2021 revenue published in the2020 budget plan. Budgeted expenditure is 558 trillion, about KRW 11 trillion (0.6 percent of GDP) higher than the amount projected in the 2020 budget plan.

  On March 25, 2021, the National Assembly approved a supplementary budget for KRW 14.9 trillion (0.8 percent of GDP). Measures include relief for affected small business owners and workers, employment support, vaccine rollout, financial support for small businesses, and support to low-income households.

  On July 1, 2021, the government announced a proposed 2nd supplementary budget for 2021, worth 33.0 trillion won (1.6 percent of GDP). The extra spending is mostly financed by tax revenue overperformance, and partly by budget surpluses, with insignificant impact on the government's projected overall fiscal balance. The proposal includes a COVID-19 relief package (13.4 trillion won), disease control measures (4.4 trillion won), employment and social safety net measures (2.6 trillion won), and measures to boost local economies (12.6 trillion won). In addition, 3 trillion won from the original budget will be reallocated for housing and other basic livelihood support.

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 a cumulative 75 basis points, from 1.25 percent to 0.5 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 6.0 trillion, with 5.0 trillion in additional purchases announced by end-2020). To augment available funding for SMEs, the BOK increased the ceiling of the Bank Intermediated Lending Support Facility  by a total of KRW 18 trillion (about 0.9% 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

• The BOK opened a bilateral swap line with the U.S. Federal Reserve for US$60 billion. Other measures taken to facilitate funding in foreign exchange include: 1) raising the cap on foreign exchange forward positions to 50 percent of capital for domestic banks (previously 40 percent) and 250 percent for foreign-owned banks (was 200 percent); 2)temporarily suspending the 0.1 percent tax on short-term non-deposit foreign exchange liabilities of financial institutions; and 3) temporarily reducing the minimum foreign exchange liquidity coverage ratio for banks to 70 percent (was 80 percent). The BOK has also created a facility for both banks and non-bank financial institutions to engage in repos to receive foreign exchange from the BOK, which can be activated when market conditions warrant.

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Kosovo

Background. The first confirmed COVID-19 cases were reported on March 13, 2020. Lockdown measures (including stay at home orders and suspension of public transportation) was implemented in early March when daily new cases were below 10 per million. This allowed Kosovo (and WBCs more generally) to contain the spread of the virus relatively well in the first wave (April 2020). Following the lockdown relaxation in May-June 2020, a second and third waves of infections emerged in Kosovo in July and October, with the daily number of new cases peaked at around 500 per million in November. With various containment measures reintroduced (like nightly curfews), infection rates declined again in December. Infection rates picked up again in March 2021 and peaked during the week of March 29 (about 470 new cases per million population daily). The government announced a new round of lockdown measures starting April 7, though some of those measures were eased after April 19. Infection rates declined gradually since then. As June 3 2021, the 7-day average number of daily new cases declined to 11 per million population.

Starting July 2020, wearing protection masks is obligatory. Institutions are obliged to keep disinfectants and masks at accessible places. Activity of kindergartens in public and private institutions is allowed. Recreational, cultural, and sport activities in closed premises are allowed. All shopping centers are obliged to stick to the working hours from 05:00-22.00. Religious ceremonies at religious institutions in Kosovo are allowed. Gathering of citizens more than 50 persons at public squares, parks and similar is prohibited. Fines will be applied for those they do not respect these measures.

GDP is estimated to have contracted by about 6 percent in 2020. Mobility restrictions led to plummeting economic activity in Q2:2020 (-10 percent y/y). The easing of restrictions in June led to a rebound in activity in Q3:2020, with GDP increasing about 3 percent on a sequential seasonally adjusted basis. The timid recovery occurred on the back of a subdued summer tourism season, which saw diaspora-related travel contract by about 60 percent.

Key Policy Responses as of June 3, 2021

Fiscal

For 2020, a “Mitigation and Recovery Package” (MRP), of about 4.3 percent of GDP, included allocations for the health system (0.4 percent of GDP); wage bonuses for health and security workers for overtime and the increased risk faced in discharging their duties (0.5 percent of GDP), social transfers and subsidies to vulnerable households (1.6 percent of GDP), as well as support to firms in the form of salary subsidies and easier access to borrowing (including for POEs and farms, of around 1.7 percent of GDP), and capital spending (less than 0.1 percent of GDP). To stimulate aggregate demand, the MRP also allowed early withdrawals of up to 10 percent from KPST pension accounts (2.6 percent of GDP), a majority of which (1.8 percent of GDP) will be gradually reimbursed by the budget beginning in 2023.

The MRP for 2021 (3.1 percent of GDP) includes allocations for goods and services in the health sector (0.7 percent of GDP, out of which €40 million – or 0.6 percent of GDP – for the procurement of COVID-19 vaccines), for transfers to households and firms (1.7 percent of GDP), and for capital spending in the health and education sectors (0.4 percent of GDP). Given the highly uncertain course of the pandemic, the budget also includes an allocation to address contingencies (0.3 percent of GDP). The overall deficit is projected at 5.9 percent of GDP (4.9 percent of GDP according to the fiscal rule definition).

Monetary and macro-financial

The Central Bank of Kosovo (CBK) together with the Kosovo Banking Association decided to allow banks to suspend payments of loan instalments for businesses and individuals for three months which was ended in June. Another decision taken by CBK in June by which banks are allowed to make loan restructuring for up to one year and the process of application was until end of September. The CBK will apply regulatory forbearance on loan provisions and capital requirements on reprogrammed loans. In February, the CBK further extended the loan restructuring program to March 31, 2021. The extension would allow loans that were previously not restructured due to COVID-19 to extend the maturity by 9 months.

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 and Recent Developments

First wave. Kuwait has been hit by two related shocks—the COVID-19 outbreak and sharp drop in oil prices in early 2020. The government acted early while progressively tightening measures to contain the spread of the virus. These included suspending inbound commercial flights, closing schools and universities, banning public celebrations and gathering, suspending nonessential work in governmental entities, and eventually imposing curfews. The authorities also adopted a package of policy measures to cushion the social fallout from the pandemic and prevent the economic scarring. Those measures aim at mitigating financial risks for small- and medium-size enterprises as well as preserving employment.

Second Wave in 2021. The containment measures had significantly slowed the spreading of the virus in 2020. The authorities implemented a five-phase reopening plan in 2020. Each phase is announced to last for several weeks and target certain activities. The transitioning from one phase to the next one is subject to health authorities' assessment. During early 2021, in the incidence of surging COVID-19 cases, the government reintroduced night-time curfews from March 7 to April 8, 2021—from 5pm to 5am the next day. During the curfew hours people are only allowed to go to mosques for prayer, while pharmacies, shops and supermarkets will only be permitted to operate through delivery services. Outside curfew hours, in-house dining in restaurants or cafes continued to be banned. Besides, public spaces including parks remained closed. The curfew was extended twice: (i) for two weeks until April 22; and (ii) until the end of Ramadan (May 12). On May 3, the government declared a travel ban—starting from May 22—on Kuwaitis as well as their first-degree relatives and domestic helpers if they did not receive a full vaccination. Young people who are not included in the vaccination campaign are exempted from the ban.

COVID-19 cases. The first COVID-19 case was reported on February 24, 2020, and, as of June 29, 2021, the number of confirmed COVID-19 cases reached 354,851 with 1,961 deaths and 334,445 of total recoveries.

COVID-19 vaccine. Kuwait has agreed to import two million vaccines from Pfizer, 1.7 million from Moderna and three million doses of the Oxford-AstraZeneca vaccines. Kuwait aims to vaccinate 70 percent of its population in the next few months. All citizens are expected to receive the vaccine for free. The vaccination campaign started on December 27. On May 30, Kuwait inaugurated the first drive-through vaccination center with a capacity of 5,000 cars per day. As of early June, about 65 percent population has received at least one dose of the vaccine.

Key Policy Responses as of July 1, 2021

Measures announced in 2020

Fiscal

• The government allocated KD 500 million ($1.6 billion or 1.5 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. On March 30, 2021, the parliament approved a draft law to secure guarantees for local banks to provide financial assistance to clients whose businesses are affected by the coronavirus pandemic. Other measures implanted by the CBK include:

  (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 and households affected by the shock.

  (iv)Instructed exchange companies providing services through applications and online to open accounts using EKYC and to link payments through SMS for existing clients, with the maximum amount of transfer not exceeding 1500 KD per month

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

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

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

  (viii) 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;

  (ix) 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.

  (x)On October 20, the CBK cut rates of other monetary policy instruments, by 0.125% for the entire interest rate yield curve, up to the ten-year term. This includes REPO, CBK bonds, the term-deposits system, direct intervention instruments, and public debt instruments.

Exchange rate and balance of payments

• No measures.

Measures announced in 2021

• On March 30, Kuwait’s Cabinet approved law to give a $2bn bonus to frontline staff battling against Covid-19 in recognition of their efforts and sacrifices.The proposed bill was approved by the parliament on May 27.
• On March 23,Kuwait’s Parliament approved the bill on postponing the collection of installments for citizens’ loans for another six months.
• On March 30, the Parliament approved a draft law to secure guarantees for local banks to provide financial assistance to clients whose businesses are affected by the coronavirus pandemic.

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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. The first confirmed case was reported on March 18, 2020. Recently, the epidemiological situation has improved, and new COVID-19 cases has been on downward trajectory. 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. Large shopping centers and public transport have opened on May 21, and May 25, respectively. All activities in the economic and social spheres have resumed from June 1, 2020, with some restrictions on cultural, sports, and family events; entertainment activities, and preschool activities. Domestic flights and public transport between the regions of Kyrgyz Republic resumed on June 5. International flights resumed on June 15. The authorities will strictly monitor compliance with sanitary and epidemiological standards. The Kyrgyz Republic is expected to receive vaccines supply as part of the COVAX initiative in late February.

Key Policy Responses as of June 29, 2021

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 prepared a second and a third 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 caused 13.8 percent drop in tax revenue in 2020, which will lead to a temporary widening of the budget deficit. 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. The Kyrgyz authorities received budget assistance of $50 million from the Asian Development Bank (ADB) on June 10.

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. Commercial banks can delay or restructure payments of the principal of loans extended to business and people for 6 months, if desired by borrowers.

Exchange rate and balance of payments

• The National Bank of the Kyrgyz Republic (NBKR, the central bank) sold $519.7 million of foreign exchange reserves and the KGS has depreciated by 18.7 percent vis-a-vis the US$ in 2020 after a long period of stability since mid-2016. The NBKR has also sold $83.7 million of foreign exchange reserve so far in 2021. The external position is weakening on the back of falling tourism receipts and lower exports.

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Lao P.D.R.

Background. An ongoing outbreak, which started on April 11, 2021, has led to a surge in reported cases and the re-introduction of containment measures, starting with a two-week lockdown of Vientiane (introduced on April 22) as well as in other provinces, which has been now extended until July 4.

With fewer case numbers, measures have been gradually eased. Both the public and private sectors have returned to offices, but are asked to ensure social distancing. Public transport within and between provinces as well as transport of goods are allowed for those fully vaccinated. Restaurants have re-opened, although serving alcohol remains prohibited. Schools remain temporarily suspended and large gatherings of over 50 people are prohibited. All entertainment venues are closed. With the exception of transportation of goods, international borders remain closed, while all types of visa for visitors from countries with on-going community infection remain suspended. Price control of essential goods is still in place.

Vaccination. The vaccination rate is about 10 percent as of end-June; the government plans to vaccinate about 50 percent of the total population in 2021 and close to 70 percent by end-2022. Lao P.D.R. has received vaccine doses from China (1,902,000 doses) and the COVAX Facility (233,000 doses). The government of Australia has also committed to a grant of 1 million doses, while purchase of Sputnik V vaccine from Russia is underway. The country expects to receive 6.6 million doses of COVID-19 vaccines in 2021, including those to be procured under private donation.

 

Key Policy Responses as of July 1, 2021

Fiscal

Second wave in 2021:

• 100 billion kip has been allocated in 2021 for prevention, control and treatment of COVID-19 cases, while an additional 100 billion kip from state reserves could be further allocated if the situation persists. The government has also received donations of about 80 billion kip from the private sector and foreign countries for the procurement of vaccines and medical equipment. New fiscal measures were introduced by the government, including 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; and deferral of road tax payments from March 31 to June 30. The government has also instructed utility companies including Electricite du Laos (EDL) and Public Water Company as well as telecom operators to cut their tariffs for three months. Members of the social security scheme having their work suspended from May 1, 2021 will receive an unemployment allowance and could temporarily suspend their contribution to the scheme until they resume their work. On June 30, the government has approved a budget of 1.5 billion kip to disburse cash allowances for the poorest, and provide other subsidies for almost 6,000 low-income earners and informal sector workers who have lost income due to the pandemic and suffer extreme financial hardship.

First wave in 2020:

• 30 billion kip was allocated for prevention and control, with an additional budget of 23.98 billion kip for rapid procurement of protective and medical equipment. Other measures included temporary reduction in electricity prices, income tax exemption for low income workers; profit tax exemption for microenterprises; 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 and extending the submission of the 2019 financial report (annual tax filing) by two months and road tax payment by three months. The government also agreed to compensate 60 percent of workers' salary, who participated in the Social Security Scheme, and had their work suspended during May and June 2020.

  Cuts in administrative expenses by at least 30 percent of annual budget for Ministries and central organizations and 10 percent for local authorities were approved and intentions to cut unnecessary spending in proportion to revenue shortfall was signaled.

Monetary and macro-financial

Second wave in 2021:

• Bank of Lao P.D.R. (BOL) reduced the reserve requirement from 8 to 5 percent on foreign currency and from 4 to 3 percent on local currency effective May 26, 2021. BOL instructed commercial banks and financial institutions to postpone debt payments on consumer loans from May 2021 until July 2021 and to reduce interest rate and other fees, providing new loans and restructuring debt in accordance to the BOL Decision No.238/BOL on Credit Policy to mitigate impacts of COVID-19 issued in 2020. Leasing companies and pawn shops were also asked to carry out similar measures.

First wave in 2020:

• BOL reduced reserve requirements from 10 to 8 percent on foreign exchange, and from 5 to 4 percent on local currency, effective April 2, 2020. 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 was issued. Under this policy, banks and financial institutions that implement debt restructuring and new loan provisions benefited from regulatory forbearance on loan classification and provisioning. BOL also 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. It issued additional instructions on the implementation of its credit policy expanding the coverage of this policy to non-bank financial institutions including microfinance institutions, savings and credit unions, leasing companies, and pawnshops. BOL made available 200 billion kip for low interest rate small and medium enterprises (SMEs) loans through commercial banks and prepared to allocate 1,800 billion kip as low interest bank loans for post-COVID-19 economic and business recovery. BOL signed agreements with 12 commercial banks, who will participate in first tranche of first USD 100 million SMEs loans from China Development Bank (CDB). In February 2021, the government launched a USD 40 million emergency finance support project, backed by the World Bank, enabling local banks and financial institutions to provide loans to SMEs that have been affected by closed borders and reduced trade over the past year.

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 payments 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. While new cases decreased since their March peak, a second wave hit the country hard since October. The rapid increase in cases since February 2021 has sparked fears of a third wave. The government 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.While a gradual reopening took place during the summer months, the second state of emergency was introduced on November 6, 2020, bringing back strict restrictions on individual and group behavior. The 2020 real GDP growth was -3.6percent.

 

Reopening of the economy. The first state of emergency ended on June 10, 2020 with new laws regulating COVID-19 recovery in force. Given the rapid spread of the virus in the fall, however, a state of emergency has been re-introduced since November 6. The second state of emergency ended on April 6, 2021. The latest guidance for safety and travel can be found on the the government website. Vaccine rollout had a slow start but has speeded up after the opening of mass vaccination centers.

Key Policy Responses as of July 30, 2021

Fiscal

• The announced support package of 2020 was about €3.8 billion (13 percent of 2020 GDP) covering several sectors of the economy: i) the largest package focuses on relief to businesses directly affected by the crisis in the form of loans and guarantees amounting to €1.1 billion, ii) a sectoral support package of €1.2 billion covering, among others, the air and transport industry, health and education sectors as well as infrastructure projects, iii) use of EU funds amounting to about €761 million to mitigate the impact of the COVID-19 crisis, iv) revenue measures amounting to about €344 million, and v) expenditure measures supporting idle workers and social benefits of more than €300 million.The government will also contribute €50 million to the €100 million investment funds established to support large enterprises affected by the crisis. These measures are partly financed by the issuance of €1.5billion Eurobond and some expense saving from the budget (amounting to €4.4 million). The government has also signed a 10-year €500 million COVID-19 mitigation loan from the Nordic Investment Bank. Latvia could receive nearly€10.5 billion in 2021-2027 from Next Generation EU.

  The budget for 2021 envisages additional support measures to respond to the COVID-19 crisis.New temporary support measures of about 9 percent of GDP are planned, with spending priorities focusing on continuing support to the health sector, expanding work and unemployment benefits and providing business support.

Monetary and macro-financial

• For monetary policy at the currency union level, please see the 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

• No measures.

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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 surpassed the 400,000 level and now stand at 545,000 and 7,848 deaths—with a significant decrease in daily infections and mortalities over the past few weeks. The authorities have implemented a range of measures to try and limit the spread of the virus encompassing a general mobilization until August 2, 2020 with compete closure of all private sector and public institutions through May 24, 2020; educational establishments have been closed for the rest of the school year; and now into the second. 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. As at July 1, 2020, Lebanon had completely opened up all sectors and resumed airport activity at 10 percent capacity. However, a significant surge in infections forced the government to announce a general lockdown for all public and private sectors from July 30 through August 3 and from August 6 to August 10. Authorities then announced a two-week closure from August 21 to September 7 following a significant spike in daily cases and a record one-day deaths number; and extended the general mobilization until end 2020. In addition, the government started imposing stricter quarantine measures on incoming travelers. The authorities were contemplating another two-weeks lockdown; and have finally opted for a zone approach whereby areas are completely locked down for eight days based on the number of daily infections and recoveries. With the increased strains on the health system capacities and a rise in infections and mortalities—including among medical staff—the authorities enforced a general lockdown for two weeks over November 14-30, 2020. The lockdown imposed strict mobility rules according to even-odd car matriculation numbers and closed down all but essential sectors. With the advent of the holiday season, and despite the fact that the lockdown did not lead to any improvement or flattening in the numbers of infections or mortalities, the authorities decided to open up the country gradually—this included opening restaurants at fifty percent capacity and opening schools in hybrid mode. Pubs and nightclubs were subsequently open at 50 percent capacity and curfew hours decreased. The only visible benefit of the lockdown period was a little less pressure on the health system and an increase in beds devoted to COVID cases in both public and private hospitals and across regular and ICU units. On January 7, 2021 the authorities imposed the fifth and longest general lockdown—the lockdown lasting until February 1, 2021 later extended till February 8, reinstated the odd/even car plate circulation rule, closed all educational establishments, enforced a curfew from 6 pm to 5 am, and operated the airport at 20 percent capacity. The lockdown, completely lifted now, managed to stabilize the infection cases in the past weeks despite the rise in numbers of deaths and an elevated test positivity rate; rates are now decreasing very significantly helped by the vaccine rollout: to date 9.6 percent of the population are fully vaccinated. Pfizer is sending batches weekly; the rollout has started with the medical frontliners and the elderly above 75. Lebanon approved the utilization of Sinopharm for the army and started the rollout of vaccines from Oxford-AstraZeneca; and is in the process of acquiring Johnson & Johnson and Moderna. The private sector was approved to procure Sputnik—vaccination started with employees of Lebanon's national carrier. The World Bank approved $34 million to support Lebanon's vaccination efforts, marking the first such outlay of funds by the Bank within the WB's $12 billion initiative to distribute COVID-19 vaccines.

Key Policy Responses as of June 30, 2021

Fiscal

• Parliament approved an additional allocation from budget 2020 worth LL1200 billion for Social Safety Nets; criteria for aid distribution will be set by COM through decrees. 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 and approved the disbursement of LL450 billion ($293 million) of dues to private hospitals. 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 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 reported its first COVID-19 case on May 14, 2020, and cases have been rising since then (source: https://COVID 19.who.int/region/afro/country/ls). Lesotho created an inter-ministerial committee to coordinate the response to COVID-19 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 businesses (e.g. gyms, hair/beauty parlors, arcades, liquor stores, etc.). The Ministry of Health has developed a Preparedness and Response Plan. The Government has developed the National COVID-19 Response Integrated Plan 2020 in collaboration with development partners.

On July 29, 2020, the IMF Executive Board approved SDR 34.9 million (50 percent of quota) in emergency financial assistance under the Rapid Credit Facility (RCF) and the Rapid Financial Instrument (RFI) to support authorities’ efforts in addressing the severe impact of the COVID-19 pandemic. The Government committed in its Letter of Intent requesting the emergency financing from the IMF to implement specific measures on transparency and accountability of COVID-related spending.

Reopening of the economy. The lockdown of the country was relaxed since May 5, 2020.Private businesses (non-essential) gradually reopened but some (e.g., alcohol) followed WHO’s recommendations. The lockdown was lifted on May 19, 2020, albeit with compulsory use of masks in public spaces and restrictions in high-risk sectors such as tourism, sit-in restaurants, entertainment and assembly of more than 50 people.Public servants already went back to work but practice social distancing. Schools have reopened gradually under the guidance of ministry of education.

However, since December 2020, COVID-19 infections and death tolls have increased sharply, the alert level has been raised twice from "Blue" to "Purple" to "Orange" within one week (December 29, 2020–January 4, 2021). The alert level was further raised to the highest "Red" level, triggering a second full national lockdown from January 14, initially for 2 weeks, and subsequently extended until February 3, 2021. The alert level was lowered back to "Orange" on February 4, 2021, with most of the restrictions remaining in place on various political, religious, and social gatherings, as well as businesses and recreational activities. All schools were closed, and a curfew was put in place. Borders, including airports, were closed, except for the movement of essential goods and services. Following a decrease in positivity rates, the alert level was lowered on March 1 from "Orange" to "Purple". On April 27, 2021, the alert level was further lowered to "Blue" with lighter restrictions. Schools have reopened with COVID protocols. International travel has also resumed, and businesses have been granted longer hours of operation, including accommodations facilities in the tourism industry and public recreational areas. Moreover, entertainment and sporting activities are set to resume, albeit with some restrictions, as well as political rallies, which have been banned since March 2020. The sale of alcohol is still restricted, and a curfew remains in place.

Following a surge of COVID cases in the north, where 77 students from one school tested positive, all schools were closed on June 26 until August 1. And with cases slowly creeping up, operating hours for border gates between Lesotho and South Africa have been reduced.

Vaccine DevelopmentLesotho received the first batch of 36,000 doses of the AstraZeneca vaccines under the COVAX facility on March 3, 2021, and the roll-out to vaccinate health professionals with the first batch has been underway nationally since March 10, 2021. As of April 22, 2021, 20,267 Basotho have been vaccinated, including government leaders, members of parliament, and health workers. A second batch of 36,000 doses—donated by France—was delivered on May 31. Vaccination resumed on June 10 with eligibility limited to those who have already received their first dose.

The Government has paid a deposit of LSL25 million to the African Union to procure 1.1 million Johnson & Johnson vaccine doses. Vaccines from the COVAX facility are eventually expected to cover 20 percent of the population, while the Johnson & Johnson vaccine is expected to cover the next 40 percent. A private sector-led initiative has raised over LSL40 billion for vaccine procurement of Russian Sputnik V vaccine. However, the Ministry of Health has so far refused to authorize this on the grounds that the vaccine has not been approved by WHO.

Key Policy Responses as of July 1, 2021

Fiscal

• PFM

  Introduced quarterly warrants to contain non-pandemic spending to create space for pandemic spending.

• Tax Policy Administration

  Company Income Tax filing season extended to the end of September 2020.

• SocialMitigation

  The authorities spent LSL213.5 million on pandemic-related social assistance (around 0.7 percent of GDP) for up to three months in FY20/21. Measure included:

• Increasing existing benefits (LSL50.1 million, 0.2 percent of GDP). The government topped up cash transfers to existing beneficiaries (50,000 existing households under the Child Grants Program and 12,741 existing destitute families Public Assistance Program) by LSL831 per month (Jul–Sep 2020).

• Payments to new beneficiaries (LSL112.1 million, 0.3 percent of GDP). Under the Public Assistance Program, cash transfers (LSL831 per month)were provided to 10,000 newly destitute families (Jul–Sep 2020) and 45,000 persons aged 60–69 (May–Jul 2020).

• Food security (LSL46.0 million, 0.1 percent of GDP).

• Cash support to beneficiaries in privately-owned care facilities housing (1,335 children, 23 elderly persons, and 651 persons with disabilities) (May–Jul 2020).
• Food parcels for vulnerable households (up to 100) across community councils (Jul–Sep 2020).
• Food stamps to vulnerable Basotho living in South Africa (9,000–12,000) (Jun 2020).
• Food and/or cash transfers (LSL831 per month) to acutely vulnerable households (72,626) with livelihoods affected by poor planting and COVID-19 mitigation measures.
• Under School Feeding Program, take-home rations for early childhood care and development and primary school-going vulnerable children (72,200) (May–Jul 2020)

• Gender and sports (LSL5.2 million, < 0.1 percent of GDP).

• Support to gender-based violence (GBV) survivors.
• Stipends for 14 premier league clubs
• Cash grants for athletes in other sporting codes.

• Economic Mitigation Measures

  LSL698 billion (about 2 percent of GDP) for National COVID-19 Secretariat (NACOSEC) for the National COVID-19 Response Integrated Plan 2020. More than half of which was used for health care personnel and purchase of critical goods and services, with the remainder covering logistics, security, and border management, as well as helping informal-sector vendors (LSL500 per vendor), covering business rent for May 2020 and providing 75 percent partial credit guarantee for firms.
• LSL130 million agricultural subsidy, up to 60 percent subsidy on agriculture inputs for summer cropping.
• LSL170 million salary subsidy for textile industry workers; (iv) LSL50 million grant scheme to MSMEs, especially in tourism (LSL20,000 matching grant to companies with less than 50 employees).
• LSL1.5 million for other measures (including PPE).

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. On May 22, the CBL further cut its policy rate to 3.75 percent and reduced the NIR floor from US$660 million to US$530 million. On July 28, the CBL cut its policy rate by another 25 bp to 3.50 percent and raised NIR floor from US$530 million to US$550 million. The MPC further raised the NIR floor to US$635 million on November 24, to US$670 million on January 26, to US$720 million on March 30, and further to US$800 on May 24 to safeguard the peg between the Loti and the South African Rand.

  Additional financial sector measures were also adopted: (i) Banks were directed to suspend loan repayments for three months, and insurance companies to suspend premium payments. At the end of June, the bank-related measures were extended to September; (ii) The implementation of Basel II.5 was postponed to enhancing banks’ capacity to lend; (iii) Banks and insurance companies were instructed not to pay dividends to shore up capital and liquidity; and (iv) the CBL used moral suasion to encourage banks to reduce fees on digital platforms.

Exchange rate and balance of payments

• No measures. The local currency is pegged to South Africa’s Rand., which depreciated substantially during the first few months since the COVID-19 outbreak but gradually bounced back later on.

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Liberia

Background. Liberia continues to experience rapid growth in the total number of confirmed cases of COVID-19, but from a small base. The cases are concentrated in Montserrado county (which includes Monrovia) but incidences are now reported in all other counties as well. The first case was detected on March 16, 2020.

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 remained open); mandatory washing with soap and clean water at all public and private establishments; and a hotline was established to report those exhibiting COVID-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. This was extended in early July, but with a downward adjustment in the curfew. Also mandated were the strict enforcement of wearing face masks in public, the observance of reasonable social distancing, and other approved health protocols, along with the re-opening of the international airport. The State of Emergency at mid-night on July 21, officially expired with no renewal. The immediate withdrawal of the military from various places of assignments across the country to the barracks was ordered by the President. The troops had been deployed across the country to assist with the rigid enforcement of the execution of the State of Emergency. With the expiration of the State of Emergency, Residents have been admonished to strictly adhere to the National Public Health Law and amended anti-COVID-19 protocols. The measures includes the continued closure of all night clubs and bars, Compulsory testing of outbound and inbound passengers using the international airport, the adaptation of a no face mask no service at all public places, and the increase in the admittance to banks service areas from five to ten with the observation of a three feet social distance. Meanwhile, public sector workers considered non-essential placed on administrative pay leave as a result of the outbreak, are yet to be recall to work. Line ministries and agencies are currently operation on their approved essential staff.

In accordance with pronouncements from the Ministry of Education, in-person classes for students from 6 – 11 grades have resumed at on schools. 12 graders who returned to classes in early August are currently sitting the regional West African high School Exams. Students below the 6th grade are required to complete sets of take-home exams in fulfillment of their academic curriculum for the school year readjusted to come to an end by mid-November. In light of the recent trends and the preventative measures to contain the spread of Covid-19, the Ministry of Education had announced full reopening of schools for in-person learning for all grades starting on January 4, 2021.

The International airport on July 28, resumed international flights with the expiration of the State of Emergency. Anti COVID-19 protocols and procedures have been put in place by the management of the airport in consultation with health authorities, including presenting the certificate of a negative test or undergoing a rapid test on arrival.Prior to departure, a traveler is required to undergo a test arranged by the Ministry of Health and present a negative test result to be admitted to the flight.

The Legislature has approved the request by the Executive to allocate US$25 million—to be supplemented by US$5 million of donor funds—for a World Food Programme-implemented food distribution to the most vulnerable citizens, and this program is now being implemented.

The World Bank approved about 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). On July 28, 2020 the Board of Directors of the African Development Bank approved US$14 million direct budget support for Liberia as part of a multi-country COVID-19 response to help bolster the fight against the pandemic. The funding is expected to be tailored largely towards financing vulnerable female-headed household and school-going children. Other targeted beneficiaries include the business community and small and medium-size enterprises. Other donors are also contributing, but funding shortfalls remain.

In June 2021, there is an increase in the number of positive cases (likely of a new variant B117). Overall confirmed infections reportedly stand at 3265. Fatalities have also increased from 82 to 110 with the month of June. The health clinics are reportedly experiencing lack of oxygen supplies for patients. The authorities have partially reinstituted preventive measures, such as enhanced health protocols (mandatory masks, enforcement of social distancing), reduction of government employees working in office by 50 percent. Vaccination rollout (which had started slow in spring) has increased as people are becoming more concerned about the virus and the government expanding the facilities for administration of vaccinations.

Key Policy Responses as of July 1, 2021

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, the inclusion of some COVID-19-related expenditure in the recast budget for the last fiscal year 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 over half of its available funding for actions under the plan.

  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

• The central bank reduced the policy rate by 500 bp to 25 percent partly to support increased financial intermediation. To mitigate the shortage of Liberian dollar banknotes, 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. As of June 29, Libya had registered more than 190,000 positive COVID 19 cases and more than 3,000 COVID-19-related deaths. The average of daily new infections was around 300 in late June, down from a peak of around 1,000 in early April. The true spread of the disease in Libya is likely to be higher because of restricted access to testing across the country (the positivity rate was 12 percent in May), as well as limitations in data compilation. In December 2020, the government reported that Libya had signed a contract with the World Health Organization (WHO) for the purchase of 2.8 million doses of the AstraZeneca COVID-19 vaccine at a cost of about to US$9.4 million. The WHO reports that around 370,000 vaccine doses had been administered in the country as of June 23.

Key Policy Responses as of July 1, 2021

• Fiscal. In the spring of 2020, the Government of National Accord (GNA) announced a package of USD100 million(about 1 percent of GDP) in emergency COVID-19 related spending. In early January 2021, the Central Bank of Libya stated that the total amount of funds spent to combat the pandemic had reached about USD 290million (more than 2 percent of GDP).Medical equipment is in short supply due to the pandemic and the civil war. To protect declining reserves, the GNA announced a 20 percent pay cut for civil servants in April 2020.

Monetary and macro-financial

• No measures announced.

Exchange rate and balance of payments

• No measures announced.

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Republic of Lithuania

Background. Lithuania reported its first cases of COVID-19 on February 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 easing containment measures, with the opening of certain non-food stores and services businesses, outdoor activities, libraries, and museums, and by April 30 a wider range of leisure activities, the provision of health services, and full trading in marketplaces and public places. Gradual easing continued 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. As of June 1, professional sports games, including international competitions resumed, the allowed capacity of public events began to increase, and the operating hours of cafes and restaurants operating hours were no longer limited. Guidelines for a variety of activities and establishments on opening and operating safely are provided by the Ministry of Health and frequently updated. Schools began the 2020-2021 school year on school premises, provided that COVID-19 infections rates in the municipality they are located in are below established thresholds.

The government lifted the national quarantine on June 16 but following a surge in the spread of COVID-19 in the fall, the government reinstated a national quarantine on November 7 which remained in place through June 30, 2021. Localized restrictions are still in place and others might be reinstated if warranted by evolving conditions.

Vaccination. Vaccinations of the population are underway. Vaccination rates are proceeding in line with the EU.

Key Policy Responses as of June 30, 2021

Fiscal

• On March 16, 2020, 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. This includes interest compensation support for SME’s with deferred loans, a new financial instrument for businesses to form portfolios from business loans, cheap loans targeted to hard hit sectors like travel services and accommodation and services, and increased financial support to the agricultural sector. A business support fund of 100 million euros was launched with aim to provide loans and invest in debt and equity securities.

  On May 7, 2020, the government approved to support an economic recovery for businesses and households. 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 June 10, an investment plan was approved, comprising 6.3 billion euros (13 percent of 2019 GDP), of which 2.2 billion euros (4.5 percent of 2019 GDP) is new investment and the remainder is already planned investment that will be accelerated. This plan is being reviewed by a new government that was sworn in December 2020 following parliamentary elections in October.

  In the government’s 2021 budget, 1.1 billion euros was allocated to economic support measures during the second quarantine and through June 2021. This includes an extension of wage subsidies, job search allowances, interest expense compensation, soft loans to businesses, and funds for the acquisition of COVID-19 vaccines. Additional targeted measures were later introduced including extra subsidies for businesses with the largest drop in sales due to national quarantine restrictions. The national budget has since been revised and additional funds were allocated for health and labor market measures.

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. A private moratorium was renewed on January 19, 2021 and was in place until March 31, 2021.

Exchange rate and balance of payments

• No measures.

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Luxembourg

Background. Luxembourg reported its first confirmed case of COVID-19 on February 29, 2020. 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); phase 5—outdoor playgrounds and summer activities for children (June 13–15); 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.

On June 22, the Parliament adopted two COVID-19 laws that define the legal framework, including for mandatory protective measures, to be applicable after the expiration of the state of emergency on June 24. On July 16, the Parliament adopted the new COVID-19 law that combines and replaces two previous laws. The key additions include: (i) mandatory face masks for both public and private gatherings of more than 20 people in case physical distance of 2 meters cannot be guaranteed and (ii) fines for customers of bars and restaurants if they disregard the precautionary measures. On July 19, the Parliament adopted the bill introducing a series of pandemic control measures. The key measures include: (i) limiting the number of house guests to 10 people; (ii) making gatherings of more than 10 people subject to minimum distance and seating requirements, otherwise wearing a mask is compulsory; (iii) introducing fines for non-compliance with isolation or quarantine measures ranging from EUR 25 to EUR 500; and (iv) withdrawing of the establishment license for a period of three months in an event of repeated failure to comply with preventive measures by businesses in hospitality sector.

On September 4, the government announced a plan for school reopening, including more autonomy for schools to implement specific measures depending on the local health situation.

On September 22, the government adopted the COVID-19 law extending restrictive measures until December 31, 2020 and introducing new measures that include: (i) reducing the isolation period for people with confirmed COVID-19 infections to 10 days; (ii) allowing the processing of personal data that will be kept for a period of three months and then anonymized; and (iii) making it mandatory for airlines to automatically transfer to health authorities forms completed by passengers to facilitate contact tracing.

On October 29, the government introduced temporary measures to address the recent spike in COVID-19 cases, including: (i) 11pm-6am curfew (until November 30, 2020), (ii) a 4-person limit on the number of house guests, and (iii) mandatory face masks at gatherings of more than 4 people.

On November 25, the government extended the curfew until mid-December, and introduced new restrictions, including closures of restaurants and bars, and a 2-person limit for private gatherings.

On December 4, the government announced its Covid-19 vaccination strategy. Key features include: (i) a centralized approach for the purchase (through the EU common procurement mechanism) and distribution of vaccines (via centralized vaccination centers); (ii) voluntary and free vaccination available to both residents and cross-border workers; and (iii) continued monitoring of vaccines’ safety and efficacy.

On December 26, the government introduced a temporary tightening of restrictions until January 10, including: (i) the extension of the curfew to 9pm-6am; and (ii) closure of all non-essential businesses, cultural establishments (except those intended for research), and restaurants (the latter until January 15).

On January 8, the government relaxed the 9pm–6am curfew to 11pm–6am and allowed non-essential businesses to open with strict rules. Also, all existing restrictions were extended until end-January and later further prolonged until March 14. All health restrictions were further extended to April 25s. Restrictions were extended again to May 15, including for air travel, while restrictions on sporting and musical activities were loosened to allow for larger gatherings. As of May 5, restrictions have been eased to allow for restaurants and bars to remain open until 10pm, indoor and outdoor dining of up to four persons per table conditional on negative Covid tests, and a midnight curfew. New health restrictions for travel from India from May 1st to 15th have been implemented following the rise in Covid-19 cases in India. On June 5, the government announced a lifting of the night curfew and further loosened restrictions on large gatherings and sitting per table in restaurants. These measures are expected to be effective on June 12.

Key Policy Responses as of June 3, 2021

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 until the end of 2020; (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).

  On July 9, the government announced a series of measures to fight unemployment by providing support for unemployed people of advanced age and incentives for businesses to further educate young workers, and making professional training programs more accessible to young workers.

  On November 13, the government introduced capital grants to partly cover fixed costs and extended flat-rate financial aid for most affected sectors (tourism, events, culture and entertainment) through March 2021. Businesses eligible for both schemes should choose the one most suitable for their needs. Several existing aid schemes (available to all sectors) have been extended through Q2 2021, including partial unemployment benefits, credit guarantees and capital advances.

  On November 20, the government announced new measures to support businesses, including: (i) lump sum grants for most affected sectors to partially compensate the increase in minimum wages scheduled for early 2021; and (ii) a capital injection to the public credit insurer (€20 million), the Office du Ducroire, to increase its capacity to provide guarantees to exporters.

  On December 21, the government extended the list of sectors eligible for capital grants that partly cover fixed costs to retail and personal care sectors.

  On March 2, the government temporarily relaxed the limit on non-worked hours eligible for partial unemployment benefits for hospitality, tourism and event sectors (up to 100 percent for April and then back to 50 percent). The current partial unemployment scheme was maintained at 100 percent and extended to end May.

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 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.

M

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Madagascar

Background. Madagascar’s macroeconomic outlook has been affected by weaker external demand, the increased spread of the pandemic, and significant losses of revenue. Since the first reported cases on March 20, 2020, the number of confirmed COVID-19 cases stands at 42,216 (1,487 cases per million inhabitants) and 913 deaths confirmed as of July 1, 2021.

The authorities continue to implement mitigation measures to accommodate the impact of the pandemic to ensure the health of the population and preserve macroeconomic stability. The national state of emergency first declared on March 23, 2020 and followed by several lockdowns and gradual ease of quarantine measures was lifted on October 18, 2020. On March 26, 2021 authorities reinstated restrictive measures and declared a second wave of the pandemic, as the number of COVID-19 cases were increasing, and new variants were detected. While a full lockdown was avoided, on May 17, 2021 curfew was imposed on four regions, including total lockdown over the weekends. Following the activation of their national contingency plan, the authorities are taking measures to increase health spending, help the most vulnerable, support the private sector, and preserve the stability of the financial sector. In support of these measures, a multisectoral and interdisciplinary coordination unit Covid-19 Operational Command Center (CCO) was established at central, regional and local levels.

Reopening of the economy. Despite lifting the state of emergency on October 18, 2020, mask wearing remains mandatory (failure to wear one may result in 24-hour arrest or mandatory public works) and public events remain restricted to no more than 100 attendees. Domestic flights require 48-hour testing prior to boarding for all passengers. As of March 27, 2021, all international flights remain suspended. The COVID-data portal has been reactivated, and the Special Intervention Battalion will be redeployed to assist medical staff in monitoring COVID cases and patients.

Key Policy Responses as of July 1, 2021

Fiscal

• Key measures include: (i) targeted investments to strengthen the health system following the activation of the national contingency plan in coordination with the WHO to protect against the pandemic; (ii) expansion of social assistance to the most vulnerable, including cash-transfers and in-kind necessities to the poorest and those unemployed; and (iii) supporting private sector through tax relief, suspension of government fees and waived social contributions. As of end of July 2020, medicine and medical equipment were exempted from paying import duties.

Monetary and macro-financial

• The central bank provided monetary policy support and acted to safeguard financial stability. The central bank is providing liquidity to the commercial banks, reaching MGA 609 billion (about 1.2 percent of GDP) at end December2020 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 has made interventions in response to market tensions on the foreign exchange market and large fluctuations in the EUR-USD exchange rate, and in 2020 the exchange rate depreciated respectively by about 5 percent vis-à-vis US$ and 16 percent vis-à-vis EUR€.

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Malawi

The first three cases of COVID-19 were confirmed on April 2, 2020. A moderate increase in cases followed through end-May, when the number of cases accelerated and reached a peak in early-July. Malawi has faced a severe second round of COVID infections exceeding the first wave in early 2021. The number of positive cases of COVID-19 increased from 6,028 to 33,481 between December 2020 and end-March 2021, though daily positive cases have started to decline since mid-January. The authorities continue to expand local COVID-19 testing capabilities—with assistance from development partners (DFID, UNICEF, and the Global Fund). In addition, Malawi has been approved for participation in the COVID-19 Vaccines Global Access (COVAX) Facility. In this context, the authorities published in February 2021 Malawi's COVID-19 Vaccine Deployment Plan. Malawi started vaccine innoculation in the second quarter of 2021 and plans to cover 20 percent of the population (3.8 million people), starting with high risk groups. In addition, 100,000 doses covering 0.5 percent of the population have been secured through the African Union. As of early June 2021, 357,650 people (out of first round target of 503,600 people) had received vaccination.

To curb the spread of the pandemic, on April 4, 2020, the government instituted a partial lockdown and all international flights to Malawi were suspended except those carrying essential health & other supplies and returning Malawian citizens or residents. However, since September 1, some flights have resumed and a two-week mandatory self-quarantine for people arriving from areas highly affected by coronavirus disease remains 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 is expected to decline to reach 0.6 percent in 2020 and 2.2 percent in 2021 (0.4 and 0.3 percentage points below projections in IMF Country Report 20/168.

Key Policy Responses as of June 4, 2021

Fiscal

• The government’s response plan includes US$39 million (0.3 percent of GDP) in spending on health care and targeted social assistance programs; this includes hiring additional health care workers. In addition, tax waivers are being granted on imports of essential goods to manage and contain the pandemic. An Emergency Cash Transfer Program of about $50 million (0.5 percent of GDP), mostly financed by development partners, was implemented during May-November.

Monetary and macro-financial

• The Reserve Bank of Malawi reduced the policy rate by 150 basis points to 12 percent. 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 to 12.2 percentage points, 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 moratorium on their debt service until end-June 2021. Fees on mobile money transactions have been temporarily waived to encourage cashless transactions.

Exchange rate and balance of payments

• No measures have been taken.

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Malaysia

Background. Malaysia has been severely hit by the spread of COVID-19. The first COVID case appeared in Malaysia in early February 2020 but a local outbreak only emerged in March, prompting the introduction of a nationwide Movement Control Order (MCO) which helped significantly reduce the spread of the virus. Restrictions were eased under a Conditional Movement Control Order (CMCO) from May 4, 2020, which was followed by a Recovery Movement Control Order (RMCO) on June 10, 2020, lifting most restrictions on domestic activities and movement. A new wave of infections in Malaysia in September 2020 prompted the reinstatement of the CMCO on various states until January 14, 2021. But the worsening of the pandemic prompted the re-imposition of the stringent Movement Control Order (named MCO 2.0) until February 18, which was extended until March 4 to Kuala Lumpur and three other states. Stay-at-home orders were reintroduced, interstate traveling and social gatherings banned, and only five essential economic sectors allowed to operate: manufacturing, construction, services, trade and distribution, and plantations. Restrictions were eased from March 5 as new cases appeared to stabilize, and states were placed under a CMCO or RMCO. New cases resumed rising rapidly in mid-April, however, prompting the re-imposition of another two-week MCO (named MCO 3.0) on May 5 in Johor, Kuala Lumpur, Penang, Serawak, Selangor, and Kelantan, with the remaining states kept under the CMCO. By May 31 new cases were still rising, and new variants were being detected. The authorities therefore imposed the MCO 3.0 nationwide from June 1 until June 14. Essential sectors remain operative under the MCO 3.0 while manufacturing sectors operate at 60 percent capacity, but schools are closed, social gatherings are banned, and inter-state travel is not allowed. International borders remain closed and overseas travel restricted.

Key Policy Responses as of June 3, 2021

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), including grants for micro SMEs, scaled-up wage subsidies, and a 25 percent discount on foreign workers’ fees. On June 5, 2020, the authorities announced a fourth stimulus package of RM 21 bn (1.4 percent of GDP), which includes an extension of the wage subsidies scheme, hiring and training subsidies, support for business digitalization, and additional tax relief.

  On September 23, 2020, the authorities announced a fifth stimulus package of RM 10 billion (0.7 percent of GDP), which includes a further extension of the wage subsidies scheme and microgrants for entrepreneurs, and a new round of cash transfer to lower income households.

  On October 26, 2020, the Temporary Measures for Government Financing (COVID-19) Act 2020 was enacted. It temporarily increased the government debt ceiling by 5 percentage points to 60 percent of GDP.

  On November 6, the authorities released the 2021 budget, which included RM 17 billion spending on COVID-related measures that was carried over from the packages announced earlier in 2020. These measures will be financed from the funds borrowed under the Temporary Measures for Government Financing (COVID-19) Bill 2020. The total amount of fiscal injection envisaged in five stimulus plans over 2020-2021 (RM 55 billion) remains unchanged. Of that, around RM38 billion have been spent in 2020 and the remainder, RM17billion, has been allocated to 2021.

  On January 18, 2021, the authorities announced a new package, totaling RM15 billion. Key initiatives include accelerated social security payments under the existing programs, accelerated withdrawals from the EPF, extended tax relief on communication equipment and locally produced cars, expansion of the wage subsidy program, and additional grants for microenterprises. It also includes relaxation of the unemployment benefits eligibility criteria and extension of terms.

  On March 17, the authorities announced a new stimulus package of RM20 billion or 1.3 percent of GDP. The main initiatives include additional funds for procurement of vaccines, additional cash payments to the vulnerable, extension of targeted wage subsidies, grants for SOEs, increase in small-scale infrastructure projects, and fuel subsidies. The package also includes measures to extend financing for firms and improve digitization of the economy.

  The announcement of a nationwide MCO 3.0 on May 31st was accompanied by the announcement of a RM 40 billion package focused on additional health spending to fight the pandemic surge as well as transfers to the most impacted by the recent surge (including an extension of the wage subsidies program).

Monetary and macro-financial

• (i) In response to the crisis, (BNM) lowered the Overnight Policy Rate (OPR) in 3 consecutive MPC meetings on March 3, May 5, and July 7. Including the January rate change, the OPR has been cut in 2020 by a cumulative 125 bps to-date to 1.75 percent. The policy response was initially geared to address market disruptions and financial market volatility in March, and most recently was responding more to weak 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. On June 5, the authorities announced measures to help business financing by both the private sector and public banks worth about RM 6 bn (0.4 percent of GDP).

  (iii) on March 23, 2020, the Securities Commission Malaysia (SC) and Bursa Malaysia suspended short-selling. the suspension has been extended through end-2020. 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.

  (iv) To support the real estate sector, the Home Ownership Campaign was re-launched in June 2020, with stamp duty exemptions for properties between RM300,000 to RM 2.5 million until May 31, 2021; the Loan-to-Value requirement of 70 percent for third mortgages (properties valued above RM600,000) has been lifted until May 31, 2021; and Real Property Gains Tax exemption for disposal of residential homes until December 31, 2021.

  (v) On July 29, the BNM announced that the banking industry will provide a targeted loan payment moratorium extension following the 6-month blanket moratorium expiring on September 30, 2020) and provision of repayment flexibility to borrowers affected by COVID-19 as follows:

  • Individuals who have lost their jobs in 2020 and have yet to find a job will be offered an extension of the loan moratorium for a further three months by their bank.
  • Individuals who are still in employment but whose salaries have been affected due to COVID-19 will be offered a reduction in loan installment in proportion to their salary reduction, depending on the type of financing. Banks will offer the flexibility for a period of at least six months.

  In addition, banks have also committed to provide repayment flexibility (e.g. allowing temporary interest-only payments and lengthening the repayment period) to other individuals and all SME borrowers affected by COVID-19. The flexibility offered by each bank will take into account the specific circumstances of borrowers.

  (vi) On November 6, the BNM announced several additional facilities and enhancements for SME support, including the establishment of (i) RM2 bn Targeted Relief and Recovery Facility (TRRF); (ii) RM 500 mn High Tech Facility (HTF); and (iii) RM 110 mn enhancement to the existing Micro Enterprise Facility. The BNM announced an additional allocation of RM 2bn for the TTRF, and established the RM200 million Disaster Relief Facility in February 2021.

Exchange rate and balance of payments

• No announced measures.

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Maldives

Background. Maldives has been hit hard by the outbreak. Maldives’ economy is very dependent on tourism, with tourism receipts representing about 60 percent of GDP. The government declared a Public Health Emergency on March 12, 2020 that was extended to July 3, 2021 on Jun 3, 2021. Local community transmission was detected in Mid-April last year. The greater Malé region was placed on full lockdown from April 15 through May 28, 2020 with all people leaving their homes needing the approval of the Maldives Police Service.Several containment measures were adopted during the outbreak, but many of them have been gradually lifted overtime.

Reopening of the economy. The country has implemented different lockdown ease phases since July 1, 2020. International flights as well as tourism island resorts reopened on July 15, 2020. Tourists with reservations do not need to quarantine but they are required to have a negative COVID-19 test conducted within 96 hours prior to their arrival in the Maldives. The Health Protection Agency (HPA) shortened the non-tourist standard quarantine period to 10 from 14 days, effective from December 4, 2020 onwards. Maldivians and work visa holders arriving from abroad to Malé were not required to remain in quarantine after presenting a negative PCR test result since December 20, 2020. Additional measures were reintroduced for Maldivians and work visa holders arriving from India in late April 2021 (a PCR test within 24 hours of arrival and at the end of their quarantine of two weeks). Mobility and other restrictions in and within inhabited islands have also fluctuated over time. Individuals travelling from Malé to other islands for essential and urgent purposes needed to obtain a negative PCR test 72-hours prior to departure during February and March 2021. The HPA announced on April 1 the easing of some restrictions that were put in place on February 2 in the Greater Malé area, ahead of the holy month of Ramazan and the Local Council and Women's Development Committee elections. Nonetheless, as a result of a new wave of COVID-19 cases, some restrictions were reinstated for the period after May 5 2021 including night curfew hours, the closure of government offices, online classes for schools, closure of gyms, suspension of services at cafes, restaurants and teashops with the exception of delivery services, and ban on public gatherings in crowds of more than three people. Moreover, effective from May 4, the HPA restricted inter island travel within the atolls allowing it only for essential needs and for medical services. On June 29, the lifting of the lockdown in the Male' Area from July 1 onwards was announced, along with the reduction of the curfew hours and the easing of restrictions for dine-in services for cafés, restaurants and food outlets. The 19th directive issued by the President's Office on July 1st stipulated that government offices would officially reopen on July 4, 2021.

Key Policy Responses as of July 1, 2021

Fiscal

• To minimize the economic impact of the COVID–19 virus, the authorities announced on March 20, 2020 an Economic Recovery Plan of 2.5 Billion rufiyaa (3.4 percent of GDP). Under the plan, the Government of Maldives (i) planned to reduce recurrent expenditure by 1 billion rufiyaa (1.4 percent of GDP); (ii) increased the amount of funds allocated for the health sector; (iii) subsidized 40 percent of electricity bills and 30 percent of water bills for the months of April and May; (iv) gave special allowances to those who lose their jobs due to Covid-19; and (v) ensured through banks, availability of working capital to businesses.

Monetary and macro-financial

• The Maldives Monetary Authority (MMA) has been in close contact with banks to discuss the impact on the domestic financial system and has identified measures that can be taken through the financial institutions to reduce economic disruptions and loss of jobs and output. The announced measures in March 2020 included: (i) reduction of the minimum required reserves (RR) up to 5 percent as and when required (MVR RR were reduced to 7.5 percent on April 23; foreign currency RR were reduced to 5 percent on July 16); (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). The moratorium was extended to end-2020 on September 29.

Exchange rate and balance of payments

• The MMA has increased its foreign exchange interventions and used other available facilities to maintain the exchange rate peg against the US dollar. The Reserve Bank of India extended foreign currency swaps support, totaling US$400 million, to the MMA on April 28 and December 29, 2020, under the currency swap agreement framework signed between the MMA and the Reserve Bank of India in July 2019. US$250 million of the swap support remain outstanding as of April 1, 2021.

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Mali

Background. The outbreak reached Mali relatively late, with first confirmed cases on March 24, 2020. The number of total cases continues to rise. The spread of the pandemic accelerated since October 2020, with the start of the second wave, from around 15 new cases a day to over 100 cases at end-December 2020 (calculated as a 7-day moving average due to high variability of the daily data). After decelerating since January 2021, the number of new daily cases picked up at end-February with the start of the third wave and peaked at a record high of over 400 new cases on April 9, 2021. The spread of the virus has slowed significantly since then and is hovering around 5 daily cases at end-June 2021.

Since mid-March 2020, at the start of the pandemic, the government has introduced preventive containment measures. These included 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. In addition, the government set up a crisis response unit, a hotline for signaling any suspicious case, and stepped up sensitization campaigns, strengthening testing capacities, expanding quarantine and hospitalization facilities, and improving medical care capacities. Working hours in the public administration were reorganized to end earlier (at 2:30pm), to protect civil servants. Retail markets remained 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 20, 2020, 400 prisoners were released as a preventive step against the spread of COVID-19.

Reopening of the economy and additional containment measures. As of May 9, 2020, the night curfew was lifted and it has become mandatory to wear masks in public. Schools reopened on June 2 for final year students. The schools for other students reopened on September 1. On July 24, the Prime Minister signed a decree putting an end to the pandemic-related containment restrictions. Air and land border reopened on July 25 and July 31, respectively. Normal working hours resumed in public administration starting from August 1.

Policies during the second wave of the pandemic. On December 1, the authorities issued a statement announcing reinforcement of measures, including stricter application of preventive measures (e.g. mandatory wearing of masks, physical distancing, promotion of teleworking, etc.); strengthened monitoring of the pandemic, and enhanced awareness campaigns. On December 18, the authorities re-introduced measures on prohibiting cultural and touristic activities, and public gatherings and events (conferences, workshops, etc.). Universities and other educational institutions were closed during December 22, 2020 - January 25, 2021. On January 25, the measures on prohibiting public gathering were lifted and educational institutions re-opened. On January 20, the authorities submitted a national strategy for introducing the COVID-19 vaccine. The goal is to vaccinate 20 percent of the population under the COVAX initiative. This will include population over 60 years old, medical workers and population with underlying health conditions. The vaccination campaign is to start in April 2021.

National vaccination strategy. In January 2021, the authorities prepared a national strategy for introducing the COVID-19 vaccine. The goal is to vaccinate 20 percent of the population under the COVAX initiative that would require around 8.2 million doses of vaccine to cover the population over 60 years old, medical workers and population with underlying health conditions. The first batch of the Astra-Zeneca vaccine arrived to Bamako on March 5, 2021, and the vaccination campaign started the week of March 29. Around 179.6 thousand doses of vaccine have been administered as of end-June, which is enough to cover around 0.5 percent of the population (assuming two doses per person).

Key Policy Responses as of July 1, 2021

Fiscal

• With the onset of the pandemic in April 2020, the government 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, costed at about 0.6 percent of GDP (including bonuses to health workers), and the World Bank (respirators, quarantine facilities, etc.) The measures to support the most vulnerable households included the setup of a special fund to provide targeted income support and a mass distribution of grain and food for livestock to the poorest households, the supply of electricity and water free of charge to the consumers in the social tranche for April-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). Other measures also aimed at easing liquidity constraints on ailing firms, including an SME-support guarantee fund, clearing the budget spending float, granting tax deferrals and relief to the hardest-hit companies, especially in the hospitality sector (hotels, restaurants, transportation). 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. This temporary suspension allowed member-countries to raise their overall fiscal deficit temporarily and use the additional external support 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.

  Preliminary estimates suggest that around 95 percent of the planned COVID-19-related spending was committed or implemented in 2020. The government fully executed the support to electricity and water SOEs and the food distribution plans, and around 76 percent of COVID prevention and medical support spending. 100 billion CFAF in household income support were committed but only around 9 billion CFAF have been paid so far to households, mainly in Bamako. The rest of the transfers are expected to be made in 2021-22 as potential beneficiaries are being identified, including in the regions where identification and verification of recipients may be more challenging.

With the onset of the second wave of the pandemic, the transitional authorities re-introduced VAT exemption on utility bills for December 2020 and January 2021. The additional measures are estimated at around 0.03 percent of GDP. To provide further support to the economy and to strengthen medical capacity, new policy measures at around 0.9 percent of GDP have been budgeted for 2021, which include medical spending related to COVID-19, support to companies and households (as of March 31, 2021, around 11 percent of this planned spending was executed).

• https://graphics.reuters.com/world-coronavirus-tracker-and-maps/countries-and-territories/mali/
• https://www.finances.gouv.ml/sites/default/files/Situa_depenses%20COVID_31_12_2020.pdf
• https://www.finances.gouv.ml/sites/default/files/Sit_depenses%20COVID_31032021.pdf

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. In April 2020, 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. In June 2020, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO also: (i) an extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set up until end-2020 a framework inviting banks and microfinance institutions to accommodate demands from solvent customers with COVID-19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced in April and May 2020, measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 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 initially issued by Mali amounted to CFAF 88 bn (0.9 percent of GDP), with some rollover possibility through such special T-Bills benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. The BCEAO has launched in February 2021 a special 6-month refinancing window at the floor of the interest rate corridor to help WAEMU governments meet COVID recovery funding needs. Through this special window banks shall be able to refinance all bonds with maturity of 3 years or more governments currently plan to issue on the regional financial market in 2021. The amount of bonds eligible to the new refinancing window for country Mali is equivalent to 5.2 percent of projected 2021 GDP. The new refinancing window is expected to remain in place for the term of the eligible bonds issued in 2021. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basel II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) created a CFAF 100 billion window for extending 5 to 7 year refinancing of banks' credit to SMEs in the eight WAEMU member countries. In December 2020, the BCEAO encouraged WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the COVID crisis on asset quality.

Exchange rate and balance of payments

• No measures.

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Malta

Background. 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. Malta reported its first confirmed case of COVID-19 on March 7, 2020.

In spring 2020, as the number of active and new cases decreased, containment measures were gradually lifted with the reopening of certain non-essential shops started on May 4, 2020. More activities and businesses have been allowed to open since May 22, including restaurants, hair salons, hotels, funerals, individual sports, outdoor pools and gatherings of up to 6 people. Most remaining measures have been lifted on June 5. On June 30, the government lifted the public health emergency and repealed the remaining restrictions including the closures of schools and the ban on mass gatherings. People are advised to maintain social distancing and wear face masks. Malta’s ports and airport reopened for international passenger travel to and from safe countries on July 1.

Following the increase in infections, containment measures were reintroduced on August 7 and 18, 2020, including a ban on mass gatherings, a closure of bars and nightclubs, limits on hospital and elderly visits, and a requirement to wear face masks in all public closed spaces. Travels from “safe corridor countries” remain permitted, while a new list of countries was created on August 21 requiring travelers from these countries to submit a negative COVID-19 test result. The lists are updated regularly. A contact tracing mobile application was launched on September 18. Gathering in public spaces was further limited to no more than 10 people on September 30. On October 16, wearing face masks became mandatory in outdoors and in offices, and bars and clubs were required to close at 11pm. The restrictions were further tightened on October 26, closing bars and further limiting the size of public gathering from 10 to 6 people.

In response to a further surge in infections, on January 27, 2021, additional restrictions were announced for the month of February, including cancellation of all mass events, closure of restaurants at 11pm, and an extension on the closure of bars and nightclubs. On March 4, 2021, the government extended the restrictions and introduced new measures, including a closure of restaurants, a limit on private gatherings, a ban on contact sports for children, and telework by public sector workers. On March 11, 2021, the government extended restrictions to close all non-essential shops, services and schools until at least April 11.

With a decline in infections and hospitalization, the restrictions have been gradually lifted since April 12, 2021, starting with the reopening of schools, the resumption of elective surgeries and visits at elderly homes. Non-essential shops and services were allowed to open from April 26, and the number of people allowed to gather in public was raised to six by June 7. Restaurants and snack bars are allowed to open from May 10, until midnight from May 24, and until 2am from June 28. Further easing measures include the reopening of pools, gyms, and contact sports from May 24, language schools and seated weddings from June 1, and bars, cinemas and theaters, and gaming and betting establishments from June 7. Fully vaccinated people and children under 12 are allowed to remove a mask outdoors from July 1 when they are with a vaccinated person.

The phased COVID-19 vaccination program started on December 27, 2020, initially with the priority group of healthcare workers, staff and residents in homes for the elderly and people aged 85 and over. With more vaccines approved, the vaccination program has expanded its coverage on different age groups. As of July 1, 2021, 72.1 percent of adults in Malta have taken at least one vaccine dose, and 72.5 percent of them have completed the vaccination.

Key Policy Responses as of July 1, 2021

Fiscal

• The government has announced a series of spending measures, projected to cost €520 million (4 percent of GDP) that aim to support the healthcare sector as well as firms and households income. 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.

  On June 8, 2020, the government announced a €900 million (7 percent of GDP) package to help the economy recover from the impacts of the pandemic. It includes (i) €400 million (3 percent of GDP) of infrastructure investment over the coming years, (ii) the extension of tax deferrals, estimated at €200 million (1.5 percent of GDP), (iii) the extension of wage subsidy schemes, (iv) subsidies for rent and electricity bills for businesses, (v) lower taxes for property transactions, (vi) cash vouchers redeemable at bars, restaurants, hotels and retail outlets, (vii) lower fuel price, (viii) tax refund for workers, (ix) additional in-work benefit and grants, and (x) various funds, grants and supporting schemes for businesses.

  In October 2020, the government further extended the wage subsidy schemes until at least March 2021. On January 5, modification to the wage subsidy scheme was announced. The new scheme decides the assistance level according to the losses in business turnover incurred during the pandemic. In March 2021, the government extended the wage subsidy scheme until at least the end of 2021, and the tax deferral scheme to cover all taxes until December 2021 with payments starting from May 2022.

  In January 2021, the government set up a financial aid scheme for businesses forced to close. It offered one-time payment of up to €2,870 for bar and club owners (total €2.2 million)to cover costs of business closures since October 2020.With the expansion of containment measures in March 2021, the scheme offered additional €1,000 to restaurant and bar owners (total €2 million).

  In April 2021, the government announced new economic measures totaling €20 million (0.15 percent of GDP) to provide direct liquidity support to the businesses affected by the pandemic and incentives aimed at stimulating economic activity. The direct support measures include the extension of rent and electricity subsidies for businesses and a cash grant to businesses closed due to containment measures.In addition, a number of business incentives were announced, including a scheme to re-engineer and transform businesses, advisory and psychological support to entrepreneurs, cash grants and tax credits to assist companies in kick-starting new investments, and extension of the tax credit certificate issued through the micro-invest scheme.

  In May 2021, a new voucher scheme worth €50 million (0.4 percent of GDP) was launched, distributing €100 in vouchers redeemable at restaurants, bars, retail outlets and services that were closed during the pandemic.

  In June 2021, the government announced three new schemes worth €12 million (0.1 percent of GDP) for enterprises which remained closed during pandemic, including one-off cash grant, and rent and electricity subsidies.

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. In March 2021, the government extended the maximum duration of the moratoria period to 18 months and the guarantee scheme until September 2021, and allowed the guaranteed loans to cover the financial costs related to servicing bank loans.

  The Central Bank postponed by one year the planned tightening of a loan-to-value limit for secondary and buy-to-let properties, and allowed a relaxation of debt-service-to-income (DSTI) limits for six-months for borrowers who can demonstrate the temporary nature of the increase in DSTI.

Exchange rate and balance of payments

• No measures.

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Republic of Marshall Islands

Background. As of July 1, there are zero active COVID-19 case and four recovered cases, all of them imported in the Marshall Islands. Given the limited capacity of the healthcare system, the government responded to the pandemic with swift precautionary measures early on. Travel restrictions from affected countries have been imposed since January 24, 2020. President David Kabua declared a State of Health Emergency for COVID19 on February 7th, 2020. A ban to incoming travelers established on March 8,2020 was extended, with the possibility of extensions towards the end of the year. On August 26, 2020, the Cabinet approved the temporary suspension of non-essential departures of RMI citizens, on the back of surging number of COVID-19 cases in Hawaii and Guam. All air travel between Kwajalein and Majuro on international airlines is suspended. All cruise ships and liveaboard vessels and yachts are suspended from visiting. All fishing vessels that have transited through Covid-19 infected countries are suspended from entering RMI ports. A limited number of carrier vessels coming from Covid19-infected countries are allowed to enter, with strict safety requirements including prohibition of human contacts and a minimum of 14 days between departure from the restricted countries and arrival in RMI. Fisheries, transportation, accommodation, and other tourism related activities are experiencing significant losses.

Reopening of the economy. The RMI's National Disaster Committee in early May lifted the 14-day quarantine requirement for fishing vessels in response to negative economic impact. As a result, fishing vessels can enter Majuro without extra waiting days to meet quarantine requirement. To ensure safety of fishing fleets entering Majuro without quarantine requirements, the Ministry of Health and Services has started rolling out the Johnson & Johnson Covid-19 vaccine for fishermen. As of May 20,2021, the temporary ban on non-essential outbound travel for RMI citizens has been rescinded. However, strict quarantine protocol (which requires 14 days in Hawaii including two required COVID-19 PCR test and 20 days quarantine in Kwajalein) remains. As of June 22, 2021, in total 32,381 people have received the first round of vaccination supported by U.S., accounting for more than 55 percent of the population.

Key Policy Responses as of July 1, 2021

Fiscal

• The national preparedness plan in response to the global health pandemic on COVID19 has been increased from 42.3 million USD (18 percent of GDP) in June 2020 to about 63 million USD (27 percent of GDP) currently. Much of funding will cover urgent needs for RMI's Ministry of Health and Human Services (including infrastructure, medical supplies and equipment, and surge support) and support to the Outer Islands COVID19 preparedness plans. The authorities have received USD 50 million grant support to cover these expenditures (out of which USD 19.6 million from the Asian Development Bank).

  To date, the RMI has spent around $21 million for medical equipment and supplies, personal protection equipment, surge capacity and major infrastructure projects such as the new isolation and quarantine buildings in both Majuro and Ebeye.

  Other major activities include building of hand-washing stations, RMI foreign missions assisting the Marshallese citizens living abroad and are impacted from COVID19, the economic relief payouts to local companies whom are currently affected by COVID19 impacts(The Cabinet approved an initial $6 million Economic Relief package from ADB, and about 128 local businesses have received the assistance), and activities in the Response Plan for the Neighboring Islands/Outer Islands i.e. food baskets, fishing gears and farming tools.

Monetary and macro-financial

• The U.S. dollar is the country’s only legal tender.

Exchange rate and balance of payments

• Not applicable, given the adoption of U.S. dollar as the legal tender.

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Mauritania

Background. Mauritania reported its first confirmed COVID-19 case on March 14, 2020.The COVID-19 crisis was met early with strict containment measures that help limit cases and fatalities, 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, universities, and non-essential businesses, such as restaurants. Non-essential interregional movements of people and the Friday prayer were also suspended. A curfew was imposed throughout the country from 9 pm to 6am. The authorities stepped up imports of medical equipment and medicines.

Reopening of the economy. In May 2020, the government lifted several restrictions, including by opening most businesses, relaxing the curfew, and reauthorizing Friday prayer; with the latter measure being rescinded in mid-May until end-June following the spike in new infections. In September 2020, all the remaining restrictions were removed. However, some restrictions were subsequently re-imposed, following the gradual increase of new COVID-19 cases in November with the Health Minister alerting the population of a potential second wave. In particular, the government instructed (i) the closure of all schools and universities for two weeks; (ii) strict minimum presence of civil servants in the offices; and (iii) the suspension of public ceremonies. As a result, the numbers of new cases and deaths declined and most of the restrictions were lifted. Mauritania launched its vaccination campaign on March 25, 2021 with the aim to vaccinate about 2.677.870 people (about 63 percent of its population). It received approximately 448.000.000 doses from the Covax initiative, China and the UAE so far, of which about 28.519 doses were administered as of May 22, 2021 and 6.410 people are fully vaccinated. Following the uptick in new Covid-19 cases, the authorities have updated their vaccination and testing strategies and reimposed a curfew at midnight to prevent a third wave.

Key Policy Responses as of June 3, 2021

Fiscal

• On March 25, 2020, the government 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. On May 6, 2020, the government approved a supplemental budget with additional health, medical supplies, social protection, SME support, foodstuff stocks, and security-related expenditures to address the pandemic (about $260 million or 3.9 percent of GDP). To help provide critical resources for health 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 sixth and final review of the government program supported by the IMF Extended Credit Facility was completed on March 3, 2021, making available a final disbursement of SDR 16.56 million (about $23.5 million), in addition to the SDR 36.8 million disbursement (about $52.2 million) on September 2, 2020 upon completion of the fifth review. The country secured financing of around $ 95 million from the Debt Service Suspension Initiative (DSSI) in 2020 and is expected to secure further relief under the two extensions of the DSSI in 2021. It has appealed to development partners for additional financing and debt relief.

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. The latter was increased back to 6 percent in December 2020.

Exchange rate and balance of payments

• No measures.

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Mauritius

Background. Mauritius reported its first cases of COVID-19 on March 18, 2020. The authorities have implemented a range of containment measures since the outbreak, 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. The economy has been significantly affected by the crisis, with tourism coming to a halt and slowing of activity in other sectors. There had been virtually no cases of domestic transmission from late April 2020 until early March 2021, when a second outbreak led to a new lockdown.

Reopening of the economy. On April 27, 2020, mass testing for antigens was initiated. With no new cases being recorded for almost 3 weeks and no active cases since May 11, 2020, a strategic phased resumption of economic activities began on May 15, 2020. The nationwide curfew ended on May 30, 2020. On Aug 31, 2020, it was announced that borders would be reopened in three phases: the first phase focusing on repatriation of Mauritians from abroad; the second phase from October 1, 2020, with travel to and from certain destinations; and the third phase involving full border reopening with date to be determined in light of the evolution of the pandemic. The border was reopened on October 1, 2020, however as all arriving passengers were required to quarantine for two weeks, there have been few travelers. In late 2020, Mauritius launched a new, one-year visa (Premium Travel Visa), with an option for further extensions, to encourage long stays and help the tourism sector. The visa applies to both tourists and remote workers.

Vaccinations began in February 2021, and the authorities target vaccinating 60 percent of the population by end-September 2021. Following a new spell of domestic transmission after almost a year, a lockdown was re-imposed on March 11, 2021 with phased reopening from April 1. Partial lockdown remained in place until end-April, when only some specific economic activities could operate under strict sanitary conditions. In May 2021, the second phase of reopening started and the third phase on July 1. In each phase more activities were allowed—subject to compliance with health protocols—while passengers were still not allowed to enter or transit, without a quarantine requirement. Mauritius will be reopening its border in phases, welcoming first international travelers from July 15, with adults required to be fully vaccinated and have a negative PCR test on arrival at the airport in Mauritius. During the first phase until Sep 30, the travelers will be able to stay at a resort holiday. A tourist will be allowed to leave the resort after 14 days with a negative PCR test. Incoming Mauritian nationals, if unvaccinated, would still be subject to self-paid 14-day quarantine and PCR tests on arrival, day 7 and 14, before being able to move around. In the second phase, from Oct 1, vaccinated travelers will be allowed entry without restrictions upon presentation of a negative PCR test taken within 72 hours before departure. All unvaccinated travelers would be subject to self-paid 14-day quarantine and PCR testing.

Key Policy Responses as of July 1, 2021

Fiscal

• At the beginning of the Covid outbreak, the authorities announced plans to increase general public health spending by Rs1.3bill (0.28 percent of GDP). A range of fiscal support measures have also been taken to limit the socio-economic impact of COVID-19.

  The on-budget measures include the implementation of a wage subsidy to employers under Government Wage Assistance Scheme (GWAS) – for employees drawing a monthly basic wage of up to Rs 50,000 subject to a cap of Rs 12,500 per employee, as well as income support under Self-Employed Assistance Scheme (SEAS) for those employed in the informal sector or self–employed–receiving an amount of Rs 5,100 per month. Since July 2020, the schemes covered only employees in the tourism sector. It was announced that the support to the sector would continue until the opening of borders, with some Rs23.5 bill being used as of June 2021. Throughout the lockdown in March 2021, the support was also provided to other sectors as half-a month payment, as well as a one-off grant of Rs 10,000 to the self-employed. In April 2021, as reopening started, the full month assistance was provided under both GWAS and SEAS for all sectors. The schemes were extended until September 2021 for tourism-related companies. In addition, the government is to provide Rs9 bill support to Air Mauritius (the national airline) from its National Resilience Fund. In October 2020, it was announced that Rs9 bill would be redirected to limit the increase in unemployment. As a result, from November 1, 2020, until June 30, 2021 five initiatives were funded: i) The Human Resource Development Council (HHRDC) increased the National Training and Reskilling Intake by some 9,000 unemployed in the construction, manufacturing, logistics, ICT-BPO, agro-industry, renewable energy and the circular economy. Beneficiaries are paid monthly stipends of Rs10,200 over a training period spanning six months; ii) Employment Support Scheme for SMEs to support 11,000 employees with a monthly payment of Rs10,200 per capita; iii) Recruitment by Landscope (Mtius) Ltd of some 2,000 technically unemployed people for the National Clean-Up Campaign; iv) The Air Freight Scheme, incorporated into the Economic Recovery Plan, has two components; namely supervision for the national airline, currently under voluntary administration and support for the export sector.

  To support the most vulnerable following a new lockdown, the electricity was made free for March and April for individuals under the Social Register of Mauritius (SRM) or under the National Empowerment Foundation (NEF), as well as low-consuming SMEs, and at 46 percent discount for the following 4 months. 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), primarily relying on donations from the public and enterprises, however this fund is quite small at roughly Rs 500 mill.

  Regarding off-budget measures, the Development Bank of Mauritius Ltd (DBM) is to provide Rs10.2 bill (2.3 percent of 2020 GDP) in credit to distressed enterprises and cooperatives. The State Investment Corporation has raised Rs4 bill (0.9 percent of 2020 GDP) to make equity investments in troubled firms, including SMEs. All labor contracts set to expire this year have been extended through December 2021.

  In terms of revenue measures, the Mauritius Revenue Authority introduced a tax relief, where tax payments with due date falling between November 2020 and May 2021 were deferred to end of June 2021.

  To support a green recovery, the new budget 2021/22 lays out various green initiatives. A sum of Rs 2.2 bill (Rs 5.3 bill over 5-year horizon) is allocated to the National Environment and Climate Change Fund, to rehabilitate the coastlines, strengthen environmental monitoring, clean-up the country, and promote greening the economy. To turn green energy industry into a new economic growth pole, the target is to produce 60 percent of the country's energy needs (currently at Rs 20 bill) from green sources by 2030, with use of coal totally phased out before 2030.

Monetary and macro-financial

• The Bank of Mauritius (BOM) reduced the Key Repo Rate from 3.35 percent to 2.85 percent in March 2020, followed by a further reduction to 1.85 percent in April 2020. In March 2020, 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; ii) special credit line of Rs5 bill (1.2 percent or 2020 GDP) through commercial banks for affected firms to meet their cash flow and working capital requirements; iii) commercial banks also introduced 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 bill (1.1 percent of GDP) of 2.5 percent two-year BOM savings bonds which were made available to retail investors.

  In March 2020, BOM announced additional support measures: (i) six-month moratorium on household loans at commercial banks, while BOM would bear interest payments for households with the lowest income; (ii) Special Foreign Currency (USD) Line of Credit (initially $300 mill, extended by 200mill) targeting operators having foreign currency earnings, including SMEs; (iii) swap arrangement to support import-oriented businesses (initial amount $100 mill); and (iv) Shared ATM Services - waving ATM fees during national confinement period.

  In September 2020, BOM announced the extension to December 31, 2020 of the moratoriums granted to economic operators (including Small and Medium Enterprises), households and individuals under its COVID-19 Support Program. The terms and conditions of the moratoriums remained unchanged. In December 2020, these, together with other measures falling under the Support Program, were further extended to June 30, 2021, and subsequently to June 30, 2022.

  Following the amendments to the BOM Act adopted by the parliament as part of COVID Bill on May 15, 2020, the BOM Board approved the following additional measures in late May 2020: 1) a one-off exceptional contribution of Rs60 bill (14 percent of 2020 GDP) for the purpose of assisting Government in its fiscal measures to stabilize the economy of Mauritius; 2) setting up the Mauritius Investment Corporation Ltd (MIC) as a Special Purpose Vehicle with two-fold objectives: (i) mitigate contagion of the ongoing economic downturn to the banking sector, thus limiting macro-economic and financial risks; (ii) secure and enhance financial wealth for current and future Mauritian generations while ensuring the stability of the banking sector. BOM announced that it would invest $2 bill of FX reserves in MIC towards the latter objective. It has also been announced Mauritius Investment Corporation (MIC) will focus on investing in the Pharmaceutical and Blue Economy as new strategic sectors. As of April 30, 2021, the MIC has been provided with Rs80 bill in financing by the BoM, of which Rs3.75 bill has been disbursed by June 10, 2021.

  In mid-March 2021, additional financial support has been put in place to support the SMEs through the new lockdown: (i) An SME Interest-Free Loan Scheme in the amount of Rs100,000, without interest rate and a 5-year moratorium, for SMEs with less than Rs50 mill turnover; (ii) the One Million SME COVID Special Support Scheme by DBM, with loans of up to Rs1 mill, without a guarantee, at 0.5 percent interest rate p.a. The DBM also granted an extended loan moratorium period of one year to all SMEs.

Exchange rate and balance of payments

• After allowing for some initial depreciation of the rupee in 2020Q1, the BOM substantially limited exchange rate flexibility by intervening on the foreign exchange market to cover the significant shortage of foreign exchange caused primarily by the halt in tourism. Before the end of the first half of 2021 the depreciation of the Rupee vis-à-vis the USD has accelerated while FX sales interventions continued. In addition, BOM conducted swap transactions with commercial banks under its support program for import oriented businesses for an initial amount of $100 mill, later enlarged by another $100 mill available until December 2020. Furthermore, it has also provided the State Trading Corporation Ltd (STC) with FX to ensure adequate supply of essential goods to the public.

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Mexico

Background. The first confirmed COVID-19 case was reported on February 28, 2020.

To delay the spread of the coronavirus, the Government declared a health emergency and implemented a range of sanitary measures, including travel restrictions, social distancing, school closures, and the shutdown of non-essential activities. On April 5, President López Obrador outlined his Government’s policy priorities to combat the economic effects provoked by the spread of the disease, including increased health expenditure.

Mexico's highly open economy was affected by a reduction in export demand on top of the impact of lockdown measures. It was also hit by the decline in oil prices and global market volatility. The local government bond market saw cumulative non-resident outflows of around US$15.4 billion through the middle of 2020, reversing somewhat to US$11.8 billion cumulatively through the end of the year (1.1 percent of 2020 GDP). The 10-year sovereign dollar credit spread widened from 132 bps to 423 bps but has since fully recovered, while the spread on Pemex bonds widened from 377 bps to 1188 bps before substantially recovered though remaining above pre-pandemic levels. At peak, the peso has depreciated by 26 percent but also substantially recovered before the end of 2020.

Reopening of the economy. On May 14, 2020 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. Restrictions rose beginning in December 2020 but have declined since February 2021 with the easing of the second wave.

Key Policy Responses as of June 30, 2021:

Fiscal

• The Government implemented a set of measures aimed to: 1) ensure that the Ministry of Health has sufficient financial resources and does not face red-tape in procuring medical equipment and materials; 2) support households and firms; 3) boost credit, strengthen liquidity and guarantee the proper functioning of financial markets; 4) accelerate the tender processes for public expenditure to ensure full budget execution.

  Besides higher health expenditure of 0.4 percent of GDP, Mexico’s fiscal response included the following measures in 2020: 1) frontloading payments of the old-age and disability pensions by 8 months; 2) accelerating procurement processes and VAT refunds; 3) lending to firms and workers in both formal and informal sectors; 4) providing liquidity support and guarantees by development banks (257.1 billion pesos).

  Specifically, the Ministry of Economy granted loans with optional repayments amounting to 37.9 billion pesos to: (a) SMEs that maintain employees on payroll, self-employed and domestic workers; and (b) loans to family businesses previously registered in the Welfare Census (26.6 billion pesos). The government provided subsidized unemployment insurance for 3 months to workers that hold a mortgage with the Housing Institute (5.9 billion pesos). Moreover, additional resources were allocated to housing programs (4 billion pesos).

  The Government implemented other measures in 2020, including housing credits for government workers with low-interest rates (ISSSTE’ loans for a total amount of 34.3 billion pesos), personal loans at a low rate (3 billion pesos) and special program to reactivate the economy by Housing Fund of the Institute for Social Security and Services (Fovissste, 2 billion pesos).

  Overall, the above-the-line fiscal measures in 2020 amounted to 0.7 percent of GDP while below-the-line measures in 2020 amounted to around 1.2 percent of GDP.

  During the week of April 19,2020 the President further announced an austerity program for public expenditures, including reallocation of non-priority expenditure to priority items and voluntary wage reductions for high-ranked government officials.

Monetary and macro-financial

• The central bank has cut rates by 300 basis points since the pandemic outbreak, from March through February 2021. It has also introduced measures to support the functioning of the financial system amounting to up to 800 billion pesos, or 3.5 percent of 2019 GDP as described below. The central bank registered its first policy rate hike of 25 basis points in June 24th 2021 in response to inflation risks.

  To support the flow of credit, the central bank has reduced the mandatory regulatory deposit (by 50 billion pesos, or about 15 percent of the current stock). It is also opening financing facilities for commercial and development banks (350 billion pesos) that would allow them to channel resources to micro, small and medium-sized enterprises and individuals affected by lockdown measures after the COVID-19 pandemic. Credit is being provided in exchange for conventional repo collateral as well as banks’ corporate loans, which would free up liquidity in the banks’ balance sheets.

  To support liquidity in financial markets, the central bank has substantially expanded its liquidity facilities, making them more affordable, accepting a broader range of collateral, and expanding the range of eligible institutions. In particular, the Central Bank opened a facility to repurchase government securities at longer maturities than those of regular open market operations for up to 100 billion pesos. The cost of the repos was reduced significantly. A debt securities temporary swap facility has been introduced to promote orderly debt markets and provide liquidity for trading instruments. The central bank also established a corporate securities repo facility to support the corporate bond market.

  To ensure the full functioning of financial markets, the central bank has drawn on the US$60 billion swap line with the Fed. It held two auctions to commercial banks of US$ 5 billion each,.and completed several roll-over auctions with declining demand. The swap facility has been extended through September 30, 2021. Increased liquidity is being provided during trading hours to avoid spikes in short-term interest rates and sterilized at the close of trading. The Central Bank also engaged in government bond swaps to shorten government bonds' maturities in the hands of private institutions, thereby improving their liquidity position. With improvement in market conditions, bond swaps to lengthen maturities were undertaken in late 2020.

  On the financial side, the National Banking and Securities Commission (CNBV) issued temporary exceptional accounting standards allowing credit providers to defer loans for up to 4 or 6 months. and taken measures related to the digital onboarding of legal persons for the opening of banking accounts and the granting of loans. The CNBV, together with the National Insurance and Surety Commission (CNSF), also recommended banking and insurance institutions not to pay dividends, carry out share buy-backs or conduct any other mechanism aimed at remunerating shareholders. It prohibited naked short-selling, while the circuit breakers in the Mexican Stock Exchanges are working well to smooth volatility. Furthermore, the Committee on Liquidity Banking Regulation outlined temporary flexibilities on liquidity requirements for banks, permitting the use of up to 50% of the capital buffer and announcing temporary flexibilities, including those applicable to listed companies, general financial warehouses, and Financial Support Entities.

Exchange rate and balance of payments

• The flexible exchange rate has absorbed external shocks while helping ensure 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 with foreign intermediaries during European or Asian trading hours.

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Federated States of Micronesia

Background. As of July 1, 2021, the Federated States of Micronesia (FSM) remains COVID-19 free, but the country's health system has limited capacity for handling an outbreak (see U.S. Department of State travel advisory for the FSM). The public health emergency is effective from January 31, 2020 to September 30, 2021. The national and state governments introduced travel restrictions, including restricting residents from traveling abroad and banning or requiring 14-day self-quarantine in a COVID-19-free area prior to entry into the FSM.

Reopening of the economy and vaccination. On November 30, 2020, the national government relaxed outward travel restrictions, allowing residents to travel abroad. The FSM has received vaccines supported by the United States since December 28, 2020 and around 35 percent of its eligible population are fully vaccinated thus far. The FSM started the repatriation of stranded citizens abroad to the state of Pohnpei on May 13, 2021.

Key Policy Responses as of July 1, 2021

Fiscal

• To address the emergency caused by COVID-19, the national government has prepared a US$20 million (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 3, 2020, the government announced the Pandemic Unemployment Assistance Program of up to US$36 million (9 percent of GDP), supported by the U.S. Department of Labor, through March 2021. On March 23, 2021, the PUA program was extended through September 6, 2021. On April 22, 2020, the government approved the economic stimulus package of US$15 million (3.8 percent of GDP). The package included measures to support affected businesses, including wage subsidies, debt relief, as well as social security tax and other tax rebates. In December 2020, the government announced a social protection scheme of US$14 million (3.5 percent of GDP) to provide cash transfers for low-income households and vulnerable individuals affected by the COVID-19 pandemic and strengthen social awareness, out of which the US$7 million low-income assistance program was officially launched in June 2021.

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

Background. The first confirmed COVID-19 case was reported on March 7, 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.

Reopening the economy and additional containment measures. The Extraordinary National Commission for Public Health issued its Decision No. 56 from June 3, 2021 that reinforces measures ahead of the parliamentary elections on July 11. On the election day, measures to be enforced include social distancing, respiratory and hands hygiene, compulsory mask wearing, and ensuring that all polling centers are equipped with PPEs and hand sanitizers. At the administrative level, all territorial units with Red Code alert will institute an emergency situation in public health. The Chisinau Municipal Extraordinary Commission for Public Health has changed its infection risks from orange to red, reflecting lower infection rates. At the national level, wearing of protective masks in all public spaces, keep a minimum of a meter for social distance, observe hygienic and respiratory rules, observe the self-isolation regime for those prescribed, monitoring of health conditions and early addressing for medical help if necessary. Restrictions include compulsory PCR COVID-19 negative test at border crossing when entering Moldova or a vaccination certificate with a series of exceptions for students, truck/bus drivers. Shops, malls, public catering units, cultural and religious institutions are obligated to ensure all epidemiological and sanitation measures are strictly observed by the personnel and clients or visitors. Romania updated its list of countries classification and now Moldovan citizens can travel to Romania without need of self-quarantine or any other restrictions. As of June 30, 2021, a total of 716,641 people or 13 percent of the population have received vaccinations.

Key Policy Responses as of July 1, 2021

Fiscal

• A comprehensive fiscal package has been adopted as per two 2020 State Budget Amendments, 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. The approved 2021 Budget envisages more support to the health sector, and farmers support.

Monetary and macro-financial

• The National Bank of Moldova decreased the base rate applied to the main short-term monetary policy operations to 2.65percent, decreased the required reserve ratio in local currency to the level of freely convertible currencies of 26.0 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. When COVID-19 first hit Mongolia in early 2020, the government immediately declared a state of high alert and took prompt actions to contain its spread through social distancing and closure of the border with China. In the first wave, the number of COVID-19 cases were limited and sporadic, originating from individuals repatriated from abroad. Domestic transmissions of the virus were reported in early November 2020 for the first time. Since then, the government has reinforced stringent measures, including intermittent nationwide lockdowns. The cumulative number of cases is about 34,000 per million at end-June 2021 . The government aims to vaccinate 60 percent of the population (i.e., 100 percent of the adult population) by end-June 2021. 59 percent of population has had at least one shot, and 53 percent has been fully vaccinated at end-June 2021. In mid-June, the government started vaccination for children (ages 12-18).

Key Policy Responses as of June 3, 2021

Fiscal

• On February 19, 2020, MNT17 billion (0.04 percent of GDP) of additional health spending was approved and allocated to epidemic prevention and control, acquisition of medical supplies and medical staff overtime salaries. This measure is being financed by the Government Reserve Fund.

• On March 27, 2020, a comprehensive set of fiscal measures was adopted 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 2020; and (iv) an increase in credit guarantees to SMEs and soft loans from the development bank to cashmere producers.

• On May 6, 2020, 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 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.

• On August 5, 2020, the government announced the extension or modification of COVID-19 fiscal measures through the end of 2020 including: (i) child money allowance; (ii) CIT exemption; (iii) exemption of rent income tax; and (iv) exemption of customs duty and VAT on certain imported goods. Modification of measures includes: (i) increased food stamp allowance; (ii) increased social welfare pensions; and (iii) reduced social security contribution. A supplementary budget to contain these measures (amounting to about 7½ percent of GDP in total including the previous measures) was approved by Parliament on August 28 2020.

• On November 18, 2020, the government announced further extension of selected COVID-19 fiscal measures through end-June 2021, in response to potential adverse effects of the country's lockdown associated with domestic transmissions, These include: (i) exemption of rent income tax; and (ii) exemption from customs duties and VAT on certain imported goods.

• On December 2, 2020, the government announced COVID-19 measures, which include (i) MNT3 billion financial support to selected provinces affected by domestic transmissions; (ii) temporary exemption of tax penalties and charges on late payment; and (iii) coal briquette price subsidy to ger districts in Ulaanbaatar City.

• On December 13, 2020, the government announced COVID-19 measures which will be financed by selected state-owned enterprises. The measures include (i) waiving utilities (electricity, heating, water, and waste disposal) payments to business entities and households; and (ii) reducing the price of coal briquettes by 75 percent.

• On April 8, 2021, the government announced a cash handout of MNT300,000 per citizen (MNT1 trillion in total equivalent to 2½ percent of GDP)to compensate an income loss associated with a renewed lockdown.

• On May 5, 2021, the government announced a bonus of MNT50,000 to individuals that are fully vaccinated.

• On May 27, 2021, Parliament proposed an amendment to the Law on Social Insurance to repeal the 2 percentage points increase on social insurance contribution implemented in January 2021. The reduction is expected to be implemented in July and the resulting additional financing need (estimated at MNT94 billion for 2021) to be addressed under the Anti-Pandemic Law.

• On June 28, 2021, the government announced further extension of (1) the temporary increase in child money allowance and (2) waiving utilities (electricity, heating, water, and waste disposal) payments to end-December 2021.

Monetary and macro-financial

• On March 11, 2020, 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, 2020, 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 2020 compels the BOM to implement nonconventional measures, including a SOE-issued bond purchase to compensate banks’ revenue shortfall caused by the cancellation of the pension-backed loan program in January 2020, short-term concessional financing to gold miners, and temporary resumption of the subsidized mortgage program which ended at end-2019. At end-December 2020, such BOM's nonconventional quasi-fiscal operations amounted to MNT825 billion (2 percent of GDP).

• On August 7, 2020, the BOM extended temporary financial forbearance measures, which had been supposed to expire at end-July 2020, through the end of the year.

• On September 14, 2020, the BOM cut the policy rate by 100 bps to 8 percent.

• On November 23, 2020, the BOM cut the policy rate by 200 bps to 6 percent and lowered MNT reserve requirement by 250 bps to 6 percent, and further extended financial forbearance measures through end-June 2021.

• In January 2021, the Anti-Pandemic Law, which had been supposed to expire at end-2020, was extended until end-June 2021. As a result, the BOM’s quasi-fiscal operations, notably subsidized mortgage program and concessional financing to gold miners, have been extended as well.

• On February 10, 2021, the Prime Minister announced a three-year stimulus package, so-called comprehensive economic recovery plan for 2021-23. The size for stimulus in 2021 is estimated at 5 percent of GDP, which will be largely financed by the BOM.

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 15,2020.

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Montenegro

Background:The first confirmed COVID-19 case was reported on March 17, 2020. After experiencing multiple waves of infections, the number of active cases have been steadily declining since mid-March 2021. The first vaccinations were administered in late February, and by June 30 around 22 percent of the population have received two doses of the vaccine.

Reopening of the economy. Following an initial lockdown in the early phases of the virus, a phased reopening of the economy began on May 4, 2020, where borders were reopened selectively. A negative PCR test is required for entry into the country, except for those coming from the following countries – Serbia, Kosovo, Croatia, Bosnia and Herzegovina, Albania, Russia, Ukraine, Belarus, North Macedonia, member states of the European Union, Israel, Switzerland, Moldova, and Kazakhstan. Several containment measures are in force in accordance with the current epidemiological situation.

Key Policy Responses as of July 1, 2021

Fiscal

• On April 29, 2021, the Montenegrin government adopted a new package of support measures for businesses and citizens for the second quarter, worth an estimatedEUR 160 million. This package includes a reduction of electricity bills for the most vulnerable groups and a new salary subsidization plan.

  A fourth economic package was announced on January 28, 2021 of EUR 163 million. Measures include (i) wage subsidies (with an expanded list of eligible sectors); (ii)one-off support to the vulnerable population; (iii) tax deferrals; (iv)support for new employment; (v)one-off support for firms to implement e-fiscalization; (vi) domestic travel vouchers for health and education workers; and additional measures for the tourism, catering, and agriculture and fisheries sectors. The measures are aimed at maintaining employment levels, improving liquidity, increasing the number of tourists, the stability of agriculture, as well as supporting the vulnerable population.

  This follows three packages that were adopted in 2020:

  The third package (adopted by the Government on July 23) comprised of short- and long-term measures worth EUR 1.22 billion over four years (EUR 281.2 million in 2020); however, implementation has been reportedly low. Short-term measures in this package include (i) support to the tourism sector (such as interest subsidies on loans and the reduction of VAT from 21 percent to 7 percent in the hospitality industry), (ii) interest subsidies for the agriculture sector; (iii) programs for improving competitiveness; (iv) wage subsidies; and (v) one-off support to veterans and pensioners.

  The second package of economic measures was approved on April 24 and included (i) wage subsidies 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) wage subsidies of newly employed workers in SMEs for six months if these workers are registered as unemployed; (iii) 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; (iv) energy firms will exempt the fixed portion of electricity bills for businesses that have stopped operating due to the pandemic-related lockdown; (v) the state utility EPCG will double its electricity subsidies for vulnerable households; (vi) assistance to the agriculture and fisheries sector, including one-off assistance to fishermen and payments for the contributions of insured agricultural workers; and (vii) 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; (vii) and an increase in the March 2020 wages of healthcare workers by up to 15 percent.

Monetary and macro-financial

• On May 25, 2021, the Central Bank expanded the categories of companies who are loan beneficiaries of the moratorium (ending August 31, 2021) to also include those whose total revenues in 2020 were at least 50 percent lower than in 2019.

  This is further to earlier announcements of: (i)April 28, 2021, which extended the scope of loan beneficiaries who may use the moratorium until 31 December 2021 to include employed persons who have not received net wages for more than three months due to the impact of the pandemic, and (ii) March 30, 2021, where the loan moratorium for those who lost employment from March 31, 2020, or later as a result of the pandemic will be extended until December 31, 2021 and where the list of eligible activities was also increased.

  The announcement of April 28, 2021 also includes the phasing out of a previous measure, where banks are permitted to exceed prescribed exposure limits until June 30, 2021. The Central Bank had earlier announced a sixth package of support measures on March 1, 2021. This package focuses on micro, small and medium-sized enterprises and citizens. It expands the list of eligible sectors for loan beneficiaries entitled to a moratorium, approval and restructuring of loans with preferential regulatory treatment.Loan beneficiaries whose earnings have reduced by more than 10 percent due to the pandemic may be extended a repayment period by a maximum of five years. Banks can also agree on a longer-term when restructuring and classifying loans to natural persons, including those when the loan is not secured by collateral. The extension period may be up to five years providing the maturity does not exceed 10 years.

  The fifth package of Central Bank support measures was announced on October 22, 2020, aimed at helping the most affected citizens.The Central Bank introduced a six-month moratorium on the repayment of loans for citizens who have lost their jobs after March 31 due to the COVID-19 crisis and have not delayed the repayment of their loans by more than 90 days before end-2019, and whose loans have not been classified as non-performing by end-2019. Other measures include a loan restructuring for citizens whose wages have fallen by at least 10 percent due to the pandemic, and a change in the amount of demand deposits included in the calculation of due liabilities (20 percent instead of 30 percent).

  This follows the announcement of July 30that banks are obliged to grant a moratorium to borrowers from two priority sectors: tourism, as well as agriculture, forestry, and fishing. The moratorium can be used in the period ofSeptember 1, 2020 to August 31, 2021, and is available to borrowers in these sectors who are not past due in loan repayments for more than 90 days and whose loans were not classified as non-performing assets as of December 31, 2019. Banks are also allowed to treat approved or restructured loans in these sectors as loans from category “A” during the duration specified above.

  Earlier, on May 20, the Central Bank 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.A previously announced moratorium on loan repayments for a period of up to 90 days (announced on March 17) was available to all borrowers.

  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).

  The Deposit Protection Fund has also increased its credit line with the EBRD to EUR 50 million (from EUR 30 million).

Exchange rate and balance of payments

• No measures.

Links

Containment measures in force

Economic support measures for Q22021

Fourth package of economic measures(for Q1 2021)

Third package of economic measures

Central Bank extension of scope and duration of moratoria (May 25, 2021, April 28, 2021 and March 30, 2021)

Central Bank sixth package (announced March 1, 2021)

Banking sector moratorium for the unemployed (in Montenegrin) (announced October 22, 2020)

Banking sector moratorium for priority sectors (announced July 30, 2020)

Banking sector moratorium(announced May 20, 2020)

Banking sector dividends

Reduction in fees for withdrawal of reserve requirement liquidity

Reduction in the reserve requirement rate

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Morocco

Background. Morocco reported its first confirmed cases of COVID-19 on March 2, 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 until August 10, 2020, initially, 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.

Reopening of the economy. The authorities announced partial reopening measures starting June 11, 2020. Most businesses were authorized to resume, including dine-in at café and restaurants, theaters and hammams. The authorities eased restrictions in most rural areas and small towns, resuming operations of public transport and removing restrictions to movement and travel, including for domestic flights. International borders were reopened on July 14, 2020 for Moroccan nationals leaving abroad and foreigners established in Morocco. However, the increase in the number of cases in late July required to tighten restrictions in a number of urban areas that remain under a partial lockdown and now experience new restrictions to movements. Additional containment measures—including a national night curfew—were reinstated on December 23, 2020, initially for 3 weeks and later extended until further notice. On May 20, 2021, the government eased the length of the national night curfew. Large gatherings continue to be banned and wedding parties are not allowed in Morocco. On April 16, 2021, the government suspended air links with 13 additional countries until further notice—the closing of borders now covers 53 countries in total. The government also extended the state of health emergency until July 10, 2021.

COVID-19 Vaccine distribution plans. Morocco started a nationwide Covid-19 vaccination campaign on January 28, 2021. The campaign aims at covering 80 percent of Moroccan population over 18 years old (about 25 million people). The campaign is relying on Morocco's network of primary health care institutions and mobile clinics. Priority is given to citizens in the frontline such as health workers, authority agents, security forces, teachers, elders and people with underlying health conditions. As of June 29, 2021, 10 million persons received a first dose of vaccine and about 9 million are fully immunized.

Key Policy Responses as of June 29, 2021

Fiscal

• The authorities have created a special fund dedicated to the management of the pandemic, of about 3 percent of GDP financed by the government and by voluntary contributions from public and private entities which will be tax deductible. This fund covers 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 were authorized to defer social contribution payments until June 30. Their employees who become temporarily unemployed and are registered with the pension fund received 2,000 dirhams a month and were allowed put off debt payments until June 30. In April, 2020 almost 1 million workers from 134,000 companies were eligible to these transfers. Companies and households can also defer income tax payment until September 30, 2020. In addition, the government has decided to accelerate payment to its suppliers to support businesses. The government has extended social transfers to employees temporarily unemployed and further deferred social contribution payments for some sectors (including tourism) until end-March 2021.

  The government also took measures to support households working in the informal sector. Households’ benefiting from the non-contributory health insurance (RAMED) received a monthly mobile payment of DRH 800-1200 (USD 80-120) from April, depending on households’ composition. Other households which do not benefit from RAMED can 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, 2020 authorizes the government to increase external borrowing beyond the ceiling approved in the 2020 Budget Act.

  On August 6,2020 the authorities announced a plan to sustain the economic recovery and employment levels. The plan envisages the mobilization of DRH 120 billion, mainly in the form of credit guarantees to firms and funding for a newly -created “Fund for Strategic Investment”, which will finance investment projects (including PPPs) and sustain the capital of firms that needs equity injections to develop their business.

Monetary and macro-financial

• The central bank reduced the policy rate by 75 bps to 1.5 percent since March 2020. 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. In addition, Bank al-Maghrib decided to bring reserve requirements to zero (from 2 percent) to increase liquidity provision, and to ease refinancing of banks’ contribution to microcredit institutions and credit unions.

  On March 29, 2020 the central bank decided the following prudential and regulatory 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. In February 2021, the central bank extended the reduction in the capital conservation buffer until June 2022.

  On April 24, 2020 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.Some 50,000 companies have benefitted from this facility, for a total outstanding amount of 1.6 percent of GDP.

  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, 2020 the government announced a post crisis facility (Damane Relance) 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. At mid-April 2021, banks provided loans worth about 3.3 percent of GDP to about 25,000 firms under this facility. The government launched three new facilities to provide financing to, very small firms, real estate firms (Damane Relance Promotion Immobilière) and to firms operating in the tourism sector which provided with loans worth about 0.1 percent of GDP. On March 30, 2021 the government extended the Damane Relance facility until end-June 2021.

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, 2020 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. In January, 2021 the Moroccan made an early repayment of about SDR651 million or USD936 million and about 0.8 percent of GDP.

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Mozambique

Background. Mozambique reported its first COVID-19 case on March 22, 2020. A first peak of infections was reached in September 2020, a second, much higher peak, was reached in February 2021, and the country seems to be entering a third wave of infections since early June 2021, with daily new cases currently at par with the figure from early March 2021. As of June 29 2021, there were 75,138 cases (2,404 cases per million inhabitants) and 872 deaths were confirmed with a fatality rate of 27.9 per million habitants.

Early on, the government took several actions to contain an outbreak of COVID-19 in the country, stating that “prevention remains the best strategy.” These actions included (i) the shutdown of schools from pre-school up to university, (ii) the ban of all gatherings – 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 (v) the creation of a technical and scientific committee to advise the government. The government has made it mandatory to wear face masks in public places.

On March 30 2020, President Nyusi declared a state of emergency, extended until July 30. In August, the President declared a second state of emergency (after 3 consecutive months of State of Emergency allowed by the Constitution) to further halt the spread of the Covid-19. The measures to prevent the spread of the new coronavirus included: (i) imposing limitations on movements within the country and border entries; (ii) ban on all types of public or private events; (iii) closure or reduction of non-essential shops; (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 employee rotation in the workspace; and (vii) ensuring the adoption of preventative actions in all institutions, public or private.

Reopening of the economy. Gradual easing of restrictions in three phases started in August 2020, with low risk activities including reopening of universities and other senior level colleges and religious gathering with no more than 50 people. In October, the government introduced additional requirements for firms to ensure readiness to manage COVID cases. Mid-December, the government further eased restrictions, allowing bars to reopen, and increasing the upper limit for private gatherings. However, due to the steady increase of cases, the government tightened the Covid-19 measures, on February 04, including a ban of private social events, conferences and religious services, closure of schools, and a curfew of Maputo City and Province, where about 70% of active cases originate. In March 2021, the President announced the re-opening of all schools (primary, secondary, technical, professional and higher education) for in-person learning. In May, further easing of restrictions was announced, including reopening of pre-school education, swimming pools and gyms. On June 25th, due to the emerging third wave, the government tightened the confinement measures, including extending the overnight curfew and the closure of beaches and cultural centers.

The government plans to vaccinate 6.4 million people (20 percent of population) by December 2022, and formally launched the vaccination campaign in March 2021, starting with health workers, vulnerable people (including people in nursing homes), and defense and security forces. As of June 28, about 341,707 persons had been vaccinated with at least one dose and 95,979 persons were fully vaccinated.

Key Policy Responses as of July 1, 2021

Fiscal

• Early on, the government has asked Mozambique’s development partners for US$ 700 million to help 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 extended the VAT exemption on sugar, vegetable oil and soap until the end of the year. Some emergency spending was delayed by the government due to particular care to following appropriate budgetary procedure and putting in place a revised budget, which has been approved by the general assembly in early November 2020.

Monetary and macro-financial

• To ease liquidity conditions, the central bank reduced reserve requirements by 150 basis points in March 2020 for both foreign currency and domestic currency deposits (to 11.5 percent and 34.5 percent respectively). 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 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.In March 2020, the central bank announced measures to ease 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.In April 2020, the central bank introduced the requirement for exporters to exchange 30 percent of FX proceeds into domestic currency.In 2020, the central bank reduced the policy rate by 250 bps to 10.25 and lifted the twice-a-week access restriction on the standing lending facility introduced in October 2016. However, with exception of FX conversion requirement and the exemption from constituting additional provisions that was extended until end-June 2021, the measures were waived and the central increased its policy rate by 300 basis points in January 2021 to 13.25 percent.

Exchange rate and balance of payments

• The metical has depreciated by about 15 percent against the US dollar between early March 2020 and January 2021. Following the increase in the policy rate in January, the trend of depreciation had temporarily reversed in January-April 2021, with sharp nominal appreciation vis a vis the dollar of about 22 percent.. However, as of June 15, the metical has depreciated by 6½ percent since April. No major capital flow movements have taken place, while international reserves have remained relatively stable over the past months.

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Myanmar

Background. Myanmar has 157,277 confirmed COVID-19 cases (3,334deaths and 136,443discharged) as of July 1, 2021 . There were local transmissions rapidly increased in Rakhine State and Yangon Region during September 2020-January 2021. Semi lockdown with stay-at-home instruction for entire Rakhine State was started on August 27, 2020 and it was lifted on March 1, 2021. Similarly, all townships except the isolated Cocogyun Township (located on a far island) in Yangon Region were placed under the stay-at-home starting September 21, 2020. It was also lifted on April 10, 2021 due to the ease of virus infection. 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. Another committee, the Control and Emergency Response Committee on COVID-19, was setup on March 30, 2020 to help with stricter administrative measures to control the spread of the virus including quarantining migrant workers coming from neighboring countries. 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. In addition, the government is drafting the Myanmar Economic Resilience and Reform Plan (MERRP) to extend the efforts to economic recovery and relief. However, Covid-19 cases started increasing again in early June 2021 amid low rate of testing. Myanmar government imposed stay-at-home orders to 11 townships in Chin State, Sagaing Region and Shan State after a spike in COVID-19 cases there To accelerate vaccination to the people, private companies and hospitals are permitted to import, distribute and inject the Covid-19 vaccines. Also private hospitals and laboratories and allowed for Covid-19 testing and care. All instructions (excluding some relaxations) relating COVID-19 prevention and control have been extended to July 31, 2021. Restrictions on visa issuances and international passenger flights have also been extended to July 31, 2021.

Key Policy Responses as of July 1, 2021

Fiscal

• Revenue measures. (i) exemptions and subsidies of household electricity charges starting July 2020 and extended to March 2021; (ii) deferment of income and commercial tax payments due in the second, third and fourth quarters of FY 19/20 to January 31, 2021; (iii) exemption of the 2 percent advance income tax on exports in second half of FY19/20 and October 2020-April 2021of FY20/21; (iv) 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; (v) exemption of fees for renewal license of hotels and tourism businesses for one year up to end of March 2021 and reduced custom duties for businesses operating with the Myanmar Automated Cargo Clearance System; (vi) reduction of income tax rate by half for real estate purchase, construction, access and establishment of new business on income up to 3 billion kyat effective on July 1, 2021 for FY 2020/21.

  Expenditure measures. (i) Medical spending. Purchasing the necessary medicines, medical equipment and related items for hospital upgrade and spending on building and renovation works (MMK 268 billion); (ii) Household support. In-kind and cash transfers to the most vulnerable population (MMK 404billion)through Apr-Sep and 4 round cash transfer (MMK 164 billion) in Nov-Dec; (iii) Spending programs to support rural and agriculture sectors (MMK 93 billion).

  On-lending. (i) transfer of MMK 400 billion to Myanmar Economic Bank to establish a COVID 19 Fund to provide soft loans to affected business (particularly the priority garment and tourism sectors and SMEs) at 1 percent interest for one year. Repayment term was extended by six months; (ii) provision of MMK 600 billion loans to farmers.

  Government guarantees. The government has announced that it would guarantee 50 percent of new loans made by private banks to enterprises which are not beneficiaries of the government COVID fund.

  Up to 10 percent of FY 2019/20 initial budget expenditure (excluding those implemented by foreign loans and grants) of each ministry has been re-allocated to fight against COVID-19.In addition, unspent expenditures were also returned to the General Reserve Fund (GRF). In sum, reallocation within respective organizations accounted 306 billion kyat while reallocation through GRF reached 2,631 billion kyat.

  Insured Fund for Workers: The Social Security Board, under the Ministry of Labor, Immigration and Population, will pay 40 percent of the salary to insured workers, as a family assistance fund, in accordance with the Social Security Law. Insured workers who are included in the Stay-at-Home order and worked at the private factories and businesses as of September 23 are entitled to this benefit.

  COVID-19 Vaccination Fund: Myanmar government established the COVID-19 Vaccination Fund to procure vaccines. The fund is initially contributed US$250 million and MMK 1,000 million kyat by the government, and calls for donation of people and organizations in the country and abroad.

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. It announced a further 1.5 percentage points reduction 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, 2021 but it was again revised down to 3.0% effective for the maintenance period from (28-4-2021~25-5-2021) to (15-9-2021~12-10-2021). This has been extended to March 31 and again to September 30, 2021. 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, has also been extended till September 30, 2021. The weight of government treasury bonds was then revised on May 7, 2021 to 100 percent with any maturity. It will be effective till September 30, 2021. On April 23, 2020 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 reported its first case of COVID19 on March 13, 2020. Daily reported cases increased rapidly in late 2020 and early 2021 but stabilized in recent days. At the onset of the crisis, 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 closures of all points of entry and comprehensive restrictions on cross-border travel. Many of these restrictions have been relaxed gradually, including the quarantine requirement for international travelers with negative PCR test results. However, in a response to the recent rise in COVID cases, a lockdown of the capital city has been reintroduced on June 16, 2021. In terms of vaccination, the government paid US$1.6 million in November 2020 to acquire vaccine doses enough to vaccine 20 percent of the population through the COVAX Facility; and signed a financial commitment agreement for the remaining US$9.1 million. Namibia started its vaccination campaign on March 19, 2021, after receiving donations of the Sinopharm vaccine from China (100,000 doses) and Covishield vaccine (30,000 doses) from India. The first batch of vaccines through the COVAX Facility (24,000 doses) arrived on April 16, 2021 and the second batch of 43,000 doses on May 21, 2021. As of June 24, 2021, only about 1.5 percent of the targeted population (22, 285 individuals) have been fully vaccinated.

Key Policy Responses as of June 28, 2021

Fiscal

• On April 1 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 2.6 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. On June 15, the government announced it will extend the deadline of submitting Individual Income Tax returns from June 30 to September 30 (not the payment of taxes due, which is still June 30). In August the Bank of Namibia announced it will participate in the operationalization of the loan guarantee program, providing 50 million Namibian dollars in capital targeted to SME credit.

Monetary and macro-financial

• The central bank reduced the policy rate by 25 basis points to 3.75 percent on August 19, 2020 (250 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

As of July 1, 2021, Nauru has no confirmed cases of COVID-19. It remains one of only 12countries in the world with no confirmed cases, as per the Johns Hopkins Coronavirus Tracker. The main impact of the pandemic thus far has been due to travel restrictions and quarantine. Supply chain dislocations have also had an impact as a lower frequency of cargo ships have affected the timely supply of construction and consumption goods. That said, incoming data on fishing license revenues and recent developments suggest that the overall real impact of the pandemic has been relatively mild.

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, 2020. 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, 2020 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 2020, the Government of Nauru extended the emergency measures to be in force until mid-May. 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 July 1, 2021

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 8 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 July 1 , 2021, 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. The ADB has approved a US$5 million policy-based grant to support public investment management, fiscal sustainability in Nauru; and to help the Government of Nauru improve the management of public expenditure and national infrastructure, as well as the governance of state-owned enterprises (SOEs).

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Nepal

Background. Nepal's first confirmed COVID-19 case was on January 23, and the country continues to see a gradual increase in the number of confirmed cases. Containment measures imposed included a nationwide lockdown (until June 12), a ban on domestic and international flights (until July 5), 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.

Reopening the economy. The government began easing the lockdown on June 12, allowing shops to open. Government, private offices, and banks have reopened from June 15, with government staff working in shifts. Private vehicles are allowed to operate on an alternating odd-even license-plate-number basis, corresponding to the calendar date.

Key Policy Responses as of June 30, 2021

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.

  Measures announced May 28. In the budget speech for fiscal year 2020/21, Finance Minister Khatiwada announced additional measures in the areas of healthcare (the establishment of additional hospital facilities), business-support (a lending program for cottage, small and medium-sized enterprises and those in the tourism sector), and job-creation (labor-intensive in the construction sector, and training for work in manufacturing and services sectors).

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. In response to a first wave of COVID-19 infections in late February 2020, the authorities adopted a series of sanitary measures, including a partial lockdown to limit the spread of the virus. Following a progressive easing of these measures from May 11, and the resurgence in the number of infections, several containment measures with gradual restrictions were announced successively on August 6, August 18, September 25, October 2, October 14, and November 4.

After a second and more severe wave of infections started late in the summer 2020, the number of infections surged again toward the end of the year, prompting the authorities to impose the strictest lockdown since the beginning of the pandemic. All non-essential businesses, schools (with few exceptions), daycares, and many public spaces such as parks and zoos were ordered to close. It was required to work from home unless not possible, avoid public transportations, limit gatherings to one guest from a different household (three during Christmas celebrations), maintain social distancing, and strongly advised not to travel abroad. These restrictions initially in place from December 15 to February 9, were subsequently extended through April 27. A curfew from 9 pm to 4:30 am was also introduced (from January 23 to April 27). In addition, a negative PCR test was required for travelers to the Netherlands from high-risk countries.

On March 3, a few restrictions were lifted to allow partial reopening of primary and secondary schools. This was followed by a progressive reopening strategy, as infections and hospital admissions declined steadily and vaccines became widely available (as of June 30, 2021, about 15.5 million doses of vaccines have been administered)., Under the first phase starting on April 28, the curfew was lifted, restaurants and cafés were allowed to operate outdoor, and shops to reopen at limited capacity, among other measures. Additional restrictions were lifted in a second phase from May 19, including the use of public transportations, travel to certain destinations, and hours of operations for some businesses. Under the third phase starting on June 05, restaurants and cafes can operate indoor, cinemas and other larger cultural institutions can reopen, all under strict conditions (including for example maintaining 1.5 meters social distancing). From June 26, the fourth phase allows all businesses to operate at their regular hours, with a requirement to maintain a 1.5 meters distance or to wear a face mask, except if vaccinated. The advice to work from home and restrictions to group gathering are lifted. Several travel restrictions are also lifted.

Key Policy Responses as of July 1, 2021

Fiscal

• A series of fiscal measures have been introduced since the start of the pandemic to contain the economic impact of the outbreak. The two first support packages (announced in March and May, respectively) include spending measures estimated at about 35.3 billion euros (4.4 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), (v) allowances for SMEs to help them finance their fixed costs. In addition, companies can defer tax payments without penalties, and calculate provisional taxes on the basis of expected reduced activity levels. In 2020, revenue shortfalls from deferral of tax payments and other forgone revenue measures are estimated at 17.2 billion euros (or 2.2 percent of GDP). Also, public guarantee schemes (with a ceiling increased by 65 billion euros, or 8.1 percent of GDP), 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 has also been established. On August 28, the government announced the third support package which primarily aims at expanding and adjusting measures already in place on the expenditure side through June 2021. The authorities also aim at supporting labor mobility toward expanding sectors. Platforms to facilitate job transition are being developed, and public financing is being allocated for training, re-skilling and career counseling. Tax incentives are also introduced to support private investment. In 2020, expenditure support amounted to 27.8 billion (or 3.4 percent of GDP), and the government has budgeted a 40.9 billion (or 4.7 percent of GDP) support package in 2021.

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) 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 Eurosystem 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; 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.

  In addition, the Dutch central bank has reduced systemic buffer requirements for the three largest banks to support bank lending. The central bank is also taking measures to provide temporary regulatory relief to less significant banking institutions.Banks under direct supervision of DNB are also allowed to exclude specific central bank exposures when calculating their leverage ratios. Furthermore, the planned introduction of a floor for mortgage loan risk weighting was initially postponed; however, the May 2021 Financial Stability Report announced that this floor would be introduced on January 1, 2022. The largest Dutch banks grant SMEs a six-month postponement of their loan repayments. To protect homeowners, the government and relevant stakeholders agreed that there will be no mortgage foreclosures until July 1 2020. From July 1st, homeowners facing financial difficulties are encouraged to contact their lender to renegotiate more flexible terms for the period covering the ongoing economic crisis. On October 6, 2020, the authorities adopted a law to facilitate debt restructuring for companies facing financial difficulties. The law is intended to prevent bankruptcies.

Exchange rate and balance of payments

• No measures.

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New Zealand

Background. The first confirmed COVID-19 case in New Zealand was reported on February 28, 2020. 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, and closure of schools. This followed the closure of all borders to non-residents on March 19, 2020, with returning residents required to enter into two weeks of supervised quarantine since April 10, 2020. After a gradual reopening through Alert Levels 3 (April 28, 2020) and 2 (May 13, 2020), New Zealand moved to Alert Level 1 on June 8, 2020, lifting restrictions on personal movements, gathering, workplaces, and services. While the virus has been effectively suppressed since then, there were subsequent, brief localized lockdowns in Auckland in August/September 2020 and February/March 2021. On June 23, 2021, Wellington was placed under Alert Level 2 restrictions after a visit by an infected Australian tourist. Vaccinations have begun, with 7.8 percent of the population fully vaccinated. The authorities expect to fully vaccinate the eligible population by the end of the year.

The border closure and quarantine requirement remain in place, except for travel bubbles with Australia (from April 19, 2021) and the Cook Islands (from May 17, 2021). In response to new cases in Australia, the Trans-Tasman travel bubble was paused on June 26, 2021, but will resume from July 5, 2021 (except for travelers who have been to the Australian state New South Wales).

After contracting by 11 percent q/q in Q2, 2020 (production side), New Zealand's economy recovered quickly in the second half of 2020. Overall, real GDP contracted by 2.9 percent in 2020. Real GDP grew stronger than expected in Q1 2021 (1.6 percent q/q), while the unemployment rate declined to 4.7 percent by end-March.

Key Policy Responses as of July 1, 2021

Fiscal

• The government has announced fiscal measures amounting to a total of NZ$62.1 billion (19.3 percent of GDP) through FY2024-25. The total amount includes the COVID-19 Response and Recovery Fund, of which NZ$5.1 billion have been set aside as contingency for a possible resurgence. Announced fiscal measures include: (i) healthcare-related spending, the cost of managed isolation, and the purchasing of vaccines (NZ$5.1 billion or 1.6 percent of GDP); (ii) a permanent increase in social spending to protect vulnerable people (total NZ$2.4 billion or 0.7 percent of GDP); (iii) a wage subsidy to support employers severely affected by the impact of COVID-19 (NZ$13.9 billion or 4.3 percent of GDP); (iv) income relief payments to support people who lost their jobs (NZ$0.6 billion or 0.2 percent of GDP); (v) revenue measures including a temporary tax loss carry-back scheme and a permanent change in business taxes (NZ$8.6 billion or 2.7 percent of GDP); (vi) infrastructure investment (NZ$3.8 billion or 1.2 percent of GDP); (vii) transport projects (NZ$0.6 billion or 0.2 percent of GDP); (viii) support for the aviation sector (NZ$0.6 billion or 0.2 percent of GDP); (ix) a tourism recovery package (NZ$0.4 billion or 0.1 percent of GDP); (x) housing and urban development (NZ$4.7 billion or 1.5 percent of GDP); (xi) education (NZ$3.4 billion or 1.1 percent of GDP); (xii) government R&D (NZ$0.2 billion or 0.1 percent of GDP); and (xiii) training and Flexi-wage subsidies (NZ$0.6 billion or 0.2 percent of GDP). The government has also announced contingency measures for a possible resurgence, including the Resurgence Support Payment and Wage Subsidy Scheme. The government has approved a NZ$1.5 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 has introduced NZ$0.2 billion short-term R&D Loan Scheme to support private sector R&D investment. The New Zealand government is also providing loans of up to NZ$100,000 to small businesses that employ 50 or less employees until the end of 2023. In addition, on March 28, 2020, the government announced temporary removal of tariffs on all medical and hygiene imports needed for the COVID-19 response.

Monetary and macro-financial

• In its May 2021 Board meeting, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) at 0.25 percent and maintained unchanged the Large Scale Asset Purchase (LSAP) of up to NZ$100 billion and the Funding for Lending Program (FLP).

  The OCR was reduced by 75 basis points on March 17, 2020. The FLP started in December 2020, providing banks up to NZ$28 billion of three-year funding priced at 0.25 percent to enable them to lower borrowing costs for firms and households. In August 2020, the RBNZ had expanded the LSAP program to purchase government bonds and Local Government Funding Agency (LGFA) bonds in the secondary market from up to NZ$60 billion for 12 months to a maximum of NZ$100 billion by June 2022.

  Since March 2020, 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 established a new Term Auction Facility (TAF), which allows banks access to collateralized loans of up to 12 months, and announced corporate open market operations (COMO) 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 also introduced a Term Lending Facility (TLF), a longer-term funding scheme for banks at 0.25 percent for up to 3 years duration initially for six months from May 26, 2020. In August 2020, the lending term of the TLF was extended to 5 years and the facility was extended to February 1, 2021. Subsequently, the TLF was further extended to July 28, 2021. Access to the TLF is linked to each banks’ lending under a NZ$6.25 billion Business Finance Guarantee Scheme (BFGS), in which the government covers 80 percent of the credit risk and will require approved eligible collateral. The BFGS was expanded in August 2020, increasing the maximum loan amount from NZ$0.5 million to NZ$5 million, lengthening the maximum term from three to five years, and allowing more loan access by medium-sized firms. Its availability period has been extended to June 30, 2021. In April 2020, the RBNZ reduced the banks’ core funding ratio requirement from 75 to 50 percent to help banks make credit available. With the improvement in financial market conditions, the TAF and COMO, for which usage had been very low, were removed after March 16, 2021. The minimum requirement on banks’ core funding ratio will be raised back to 75 percent from January 1, 2022.

  To further support the stability of the financial system, the start date for a regulatory change requiring higher capital for banks was initially postponed for 12 months to July 2021, and subsequently for a further 12months to July 2022.Other regulatory initiatives in the pipeline were also put on hold for at least six months. The RNBZ has also agreed with the banks in April 2020 that there will be no dividend payments on ordinary shares and redemption of non-CET1 capital instruments. On March 31, 2021, the RBNZ eased the restrictions, allowing banks to pay up to 50 percent of their earnings as dividends to shareholders until July 1, 2022, at which point the RBNZ intends to remove the restrictions entirely.

  The RBNZ removed temporarily the mortgage loan-to-value ratio (LVR) restrictions effective May 1, 2020. The RBNZ has re-imposed these restrictions from March 2021 at pre-pandemic levels, with a further tightening of investors’ LVR restrictions from May 2021.

  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 a