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 November 20, 2020.

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


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Afghanistan, Islamic Republic of

Background. Afghanistan reported its first confirmed COVID-19 case on February 24, 2020. As the infection spread in March, the government progressively tightened containment measures, including introducing screening at ports of entry, quarantine for infected people, and closure of public places for gathering. On March 28, it imposed countrywide lockdown, which was subsequently extended twice.

Afghanistan is now facing a potential second wave of infections. The government is considering to re-introduce some containment measures, including closing wedding halls and other high-density public areas across the country.

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

Reopening of the economy:

  • The government progressively eased the lockdown over the summer, with most containment restrictions removed and businesses re-opened by end-August.
  • In early August, working hours for government and non-government organizations were normalized to its 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.
  • Universities and schools reopened in mid-August.
  • On May 17, Pakistan re-opened its Torkham and Chaman borders points with Afghanistan, followed by a restoration of bilateral trade and transit at all border crossings to pre-Covid-19 status on July 13. On July 15, trade with India through Wagah border post in Pakistan resumed. At end-June, the authorities announced the resumption of domestic and international flights and exports to Europe via the air corridors.
  • 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 November 19, 2020

Fiscal

The government initially allocated Af 8 billion (0.5 percent of GDP) from contingency funds for emergency pandemic response, of which Af 1.9 billion (0.1 percent of GDP) for urgent health needs, such as establishing testing labs, including at border crossings; setting up special wards to boost hospitalization and care capacity; and procuring critical medical supplies.

On April 29, the government started providing free bread to the poor in Kabul, later extended to other cities. The program was ended in late June. In May, the government 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. Recognizing the liquidity constraints of many taxpayers, the government extended the tax filing deadline for the first quarter by 45 days. No further extensions have been provided.

The authorities are preparing a mid-year budget revision, which is expected to include the following COVID-19 related spending, including those approved in the July budget amendment:

  • Health package amounting to Af 6.2 billion, including for building hospitals;
  • Social package, including the now concluded bread distribution program of Af 2.8 billion and the World Bank-supported social distribution program in the amount of Af 20.8 billion (see below);
  • Wheat purchase program (Af 1.7 billion);
  • Transfers to provinces to finance Covid-19 response (Af 2.3 billion);
  • Package to support agriculture (Af 5.9 billion) and short-term jobs (Af 1.0 billion).

In 2020, the authorities envisage up to 2.9 percent of GDP for pandemic-related spending, with about 15 percent directed to health.

With the support of the World Bank grant, the authorities are rolling out a relief package, amounting to 1.6 percent of GDP, to Afghan households with incomes of US$2 per day or lower (twice the national poverty line). As about 90 percent of all households fall below that threshold, the program is near universal. Households in rural areas will receive an equivalent of US$50 in essential food staples and hygiene products, while those in urban areas a combination of cash and in-kind equivalent to US$100, in two tranches.

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 among depositors. 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 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. 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 allowed to expire at end-July.

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 spring. Due to its proximity and close links to Italy, Albania adopted some of the toughest lockdown measures in Europe in March 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.

Reopening the economy and additional containment efforts. On June 1, Albania removed all domestic restrictions to movement and travel and re-opened its land borders after virtually shutting them since mid-March. Maritime passenger transport resumed on June 22 and airlines have resumed flights on a lighter schedule since mid-June. There are no quarantine requirements for incoming visitors and tourists. The EU continues to maintain travel restrictions for Albanian citizens as with other third countries with high infection rates.

With the number of cases rising fast and hospital capacity being strained, some restrictions have been reintroduced, albeit much milder than the spring lockdown. On November 11 a night curfew (10pm-6am) was announced, allowing only movements for health emergency and essential needs. Additional measures were announced on November 17 that limit the number of people that can assemble to 10 both outdoors and indoors and impose a ban on social and political gatherings. Wearing masks outside became mandatory as of October 15th, while indoor use has become so since mid-July. Wedding parties are not allowed, and funerals are restricted to family members. Public transport was allowed to resume in June. Pre-university schools re-opened on September 14 classes divided in smaller groups and multiple shifts to ensure physical distancing. The government decided that universities-which were scheduled to start on November 1st- will switch to online learning for at least a month.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has adopted two support packages for people and businesses affected by the COVID-19 pandemic of a combined size of Lek 45 billion (2.8 percent of GDP) consisting of budget spending, sovereign guarantees and tax deferrals. The first package adopted on March 19 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 vulnerablewhich 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 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 96 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 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 and unemployment benefits.

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, 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.

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

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

    On July 17, the Bank of Albania announced it had set up a €400 million repo line with the ECB. The line will remain in place until June 2021, unless an extension is decided

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 to smooth temporary excessive volatility caused by initial disruptions of lockdown measures.


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Algeria

Background. Algeria is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both shocks. The first case of COVID-19 was reported on February 25, 2020. The authorities have been implementing containment measures since early February (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.

Reopening of the economy. The full lockdown of certain cities ended in early June, while the curfews, notably in Algiers, were relaxed. A gradual easing of the containment measured was announced and started on June 7, mostly consisting in allowing certain stores to open, under social distancing rules such as wearing masks and limiting the number of people in the stores. Faced with a resurgence in the daily number of cases, new restrictions to mobility, retail activities and social events were announced in several provinces on June 29. The authorities continue to monitor and adapt the lockdown measures as needed (latest decision on August 8 here ). International borders remain closed, but the authorities plan to reopen schools this month. As of November 19, 2020, the number of daily cases has spiked towards 1000, up from a trough of under 150 in mid-October and around 300 in early November, and compared to around 600 during the summer peak. The spike in cases has been accompanied by an upswing in mortalities which, however, remains below the spring peak.


Key Policy Responses as of November 19, 2020

Fiscal
  • A national socio-economic recovery plan was discussed at a conference on August 18 and 19. Among other things the plan aims to ensure food and pharmaceutical security, promote a favorable business climate, and foster high value added sectors and international trade and FDI. A supplementary finance law (SFL) was enacted on June 4. It includes provisions amounting to 70bn dinars to mitigate the health and economic impacts of the COVID-19 crisis. For the health sector, this includes 3.7bn for medical supplies, 16.5bn for bonus payments to health workers, and 8.9bn for the health sector’s development. For the economic impact, the law includes 20bn for allowances to the unemployed because of COVID, and 11.5bn for transfers to poor households. Overall, in order to adjust to the new low oil price environment, the SFL plans for a reduction in current and capital spending by 5.7 percent (representing 2.2 percent of 2019 GDP) compared to the initial 2020 budget law. In response to the economic impact on household and enterprises of the lockdown measures, the authorities also announced that: (i) the declaration and payments of income taxes for individuals and enterprises have been postponed except for large enterprises; and (ii) contractual deadlines would be relaxed and penalties for companies that experience delays in completing public contracts would be suspended.

Monetary and macro-financial 
  • On March 15, the Bank of Algeria lowered the reserve requirement ratio from 10 percent to 8 percent, and its main policy rate by 25 basis points to 3.25 percent.

    On April 6, the Bank of Algeria announced that it was easing solvency, liquidity and NPLs ratios for banks. Banks are also allowed to extend payments of some loans without a need to provision against them.

    On April 30, the Bank of Algeria announced that it was cutting its main policy rate from 3.25 to 3.00 percent, that it was lowering its reserve requirement ratio from 8 percent to 6 percent, and that it was lowering haircuts on government securities used in refinancing operations.

    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 of the year.

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.

    On October 11, 2020, the government announced that a previous ban on imports of cars less than 3 years old would be maintained.


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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 21.6 percent in 2020Q2 with respect to same period last year.

Reopening of the Economy. Following the economy’s re-opening and the end of the summer season, which required students to go back to school, there was a resurgence of cases, with daily new infections almost tripling those of the first wave. While the rate of active cases is among the highest in Europe, the deaths remain contained. The government adopted more stringent social distancing measures in September 21, initially for a two-week period but then repeatedly extended and reinforced. Meaningful restrictions are in place for indoor entertainment, restaurants and bars are partially open, and only small group gatherings are permitted. As a result of the improvement in COVID statistics, in November 17 the government relaxed the restrictions imposed on bars and cafes, which could not offer dine-in service since October, but they must follow strict protocols. All efforts are aiming at controlling the surge in cases before the beginning of the winter season, which is crucial for Andorra’s tourism-based economy.


Key Policy Responses as of November 19, 2020

Fiscal
  • Key above-the-line measures, amounting to 2.7 percent of 2020 GDP (€67.7 million), include: (i) additional healthcare-related spending (€13.1 million); (ii) payment of 75 percent of the salary to workers under temporary suspension of contract (€27.4 million); (iii) social security contributions for workers who were temporarily laid off due to the pandemic (€12.0 million); (iv) extraordinary benefit for self-employed workers affected by economic activity suspension (€5.2 million); (v) rent/mortgage payment support to the sectors most affected by the pandemic (bars/cafes, nightclubs, indoor recreation parks, and travel agencies), with the benefit per establishment capped at €2,000 per month and varying depending on extent of the restrictions imposed to each sector (€0.9 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.

    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 (€1.6 million, 0.1 percent of 2020 GDP), as well as the possibility of paying the bills in up to 12 monthly installments. On November 18, 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. This benefit is retroactive to October 1st; the telecommunication subsidy will be in place at least until the end of November and the electricity subsidy for indefinite time.

Monetary and macro-financial
  • The government has 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, to cover operating costs (€60 million) or to service existing debts with Andorran banks (€70 million). The second package, amounting €100 million, 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. On November 18, the government relaxed the conditions to access the second package, including the payment of rent and of utility bills as additional purposes for requesting the guaranteed loans.

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

    On June 11th, the Andorran Banking Association adopted non-legislative sector-wide moratoria to provide repayment relief until July 2020 to households and businesses, for 6-12 months depending upon the types of loan and borrower. This private moratoria scheme complements the one approved by the government, and cannot be applied simultaneously.

    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. On October 24, authorities extended the sanitary restrictions in the country for another month, and movements from and to Luanda, and other provinces with high number cases, -are now restricted to essential activities. Authorities expanded testing activities to hospitals, informal markets, and public institutions; made the use of masks mandatory. Testing capacity has increased tenfold from 400 to 6000 tests per day and consequently the number of cases hit the highest level since the start of the pandemic, reaching more than 300 cases per day at the end of October. However, in the first weeks of November the average number of cases reduced to 200 cases per day. Resumption of primary schooling was postponed sine die. Home quarantine is now allowed for national and foreign citizens returning from abroad and asymptomatic COVID-19 patients. The World Bank, the United Nations, and the African Development Bank are providing financial support and resources in several ways. In mid-September the IMF disbursed US$1 billion in frontloaded budget support to help cope with the pandemic.


Key Policy Responses as of November 19, 2020

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, 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.

Monetary and macro-financial
  • Since late March, 2020, the central bank (BNA) reduced the rate on its 7-day permanent liquidity absorption 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 allocation required from banks to extend credit to producers of priority products and instructed banks to provide credit in local currency to assist importers of essential goods. In May 7, 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.

Exchange rate and balance of payments
  • On April 1, the central bank introduced an electronic platform for foreign exchange transactions, which will be progressively extended for all such transactions. Oil, diamond and the Treasury are now trading on the platform which has also started to trade exchange rate futures.


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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 have had a significant economic impact, with a GDP contraction of around 20 percent of GDP in the first half of 2020. Capital Flow Management Measures (CFMs) that were already in place since August 2019 have largely protected Argentina from the impact of capital outflows.

Reopening of the economy. The government's policy of moving from strict lockdown to a gradual reopening of the economy is contingent on the speed of contagion, defined as the length of time it takes for the number of reported cases to double. On May 8, with the doubling of contagions rising above 25 days, the government announced a gradual reopening aimed at raising regional mobilization, except for the Buenos Aires metropolitan area. On May 23, restrictions in the Buenos Aires metropolitan area were tightened in response to an acceleration in infections and, in early June, the mandatory lockdown was extended to other selected large cities. In July, the government loosened restrictions in the Buenos Aires metropolitan area and announced a phased reopening of activities. However, with infections continuing to rise, mandatory lockdown was extended until November 7, with tighter enforcement in some inland provinces. On November 7, with cases levelling off in the Buenos Aires metropolitan area, the government announced a move to a stage of social distancing, but some inland provinces remain in the isolation phase.


Key Policy Responses as of November 19, 2020

Fiscal
  • Announced measures (totaling about 6.0 percent of GDP, 3.9 percent in the budget and 2.1 percent off-budget, based on the authorities’ estimates) have focused on providing: (i) increased health spending, including for improvements in virus diagnostics, purchases of hospital equipment and construction of clinics and hospitals; (ii) support for workers and vulnerable groups, including through increased transfers to poor families, social security benefits (especially to low-income beneficiaries), unemployment insurance benefits, and payments to minimum-wage workers; (iii) support for hard-hit sectors, including an exemption from social security contributions, grants to cover payroll costs; and subsidized loans for construction-related activities; (iv) demand support, including spending on public works; (v) forbearance, including continued provision of utility services for households in arrears; and (vi) credit guarantees for bank lending to micro, small and medium enterprises (SMEs) for the production of foods and basic supplies. In addition, the authorities have adopted anti-price gouging policies, including price controls for food and medical supplies and ringfencing of essential supplies, including certain export restrictions on medical supplies and equipment and centralization of the sale of essential medical supplies.

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

Exchange rate and balance of payments
  • A broad set of CFMs have been in place since August 2019, aimed at restricting financial account transactions (limits on purchase of dollars, transfers abroad and debt service in foreign currency), and some current account transactions (surrender requirements on export proceeds, restrictions on imports of services, dividend payments abroad, and interest payments on foreign currency debt). CFMs helped limit outflows in the wake of the pandemic. The exchange rate has depreciated by over 28 percent vis-à-vis the US dollar since early March.


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Armenia

Background. The first confirmed case was reported on March 1, 2020. Armenia is currently facing a steep increase in COVID-19 cases with a very high infection rate per capita. 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, the movement restrictions were removed, and containment measures were eased, allowing for resumption of public transport, retail businesses, and restaurants. In September, airspace was reopened, and the government lifted the state of emergency, and established quarantine in effect until Jan 11, 2021, imposing fines for those not wearing masks in public, bans on large gathering, and 14-day self-isolation and testing for incomers.


Key Policy Responses as of November 19, 2020

Fiscal
  • The measures fall into three broad categories: (i) subsidized 2-3 year loans to provide short-term support to affected businesses and SMEs; (ii) direct subsidies to SMEs and 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 mid-August, the authorities have adopted 24 support packages and, together with bank supports, allocated around 144.5 billion AMD ($295m) 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
  • The Central Bank of Armenia (CBA) reduced the policy rate by another 25 bps to 4.25 percent on September 15. The interbank market has been active, and the central bank has easily met liquidity needs so far and provided a few FX swap operations to assure sufficient liquidity in dram and in FX. The CBA undertook few foreign exchange sales to limit excessive dram volatility around the beginning of April, although since then the dram has strengthened, and the CBA has been able buy some FX. The CBA has not used macroprudential policies actively, 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 appreciated to pre-pandemic level against the US$. No balance of payment or capital control measures have been adopted.


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Aruba

Background. The number of reported new Coronavirus cases has resurged significantly since reopening borders on June 15. The total number of confirmed infections now stands at 4,676 with 44 deaths since March. The outbreak is affecting Aruba through two key channels—disruption to domestic activity from voluntary and mandatory social distancing and a sharp decline in tourism. The authorities have adopted containment measures, including a shelter-in place, a compulsory dusk-to-dawn curfew, travel restrictions, suspension of non-vital government work, closures of schools and non-essential business activities, and limits on social gatherings.

Reopening of the economy. On April 30, the Aruban government announced a four-phase plan to gradually relax restrictions starting May 4, and as of June 27, all economic activities resumed. On June 15, travels between the Dutch Kingdom Islands of Aruba, Bonaire and Curaçao resumed with the need of a medical test on arrival. International borders reopened to Europe, Canada, and the Caribbean, except the Dominican Republic and Haiti, on July 1st, and to the United States on July 10. The Aruban government requires travelers from 24 high risk states in the United States to upload negative Covid-19 test results online 72 hours prior to arrival, while travelers from the other 26 states can choose to have a prepaid test taken upon arrival with a mandatory quarantine while awaiting test results. Travelers also need to be insured for medical expenses should they test positive during their stay. With open borders, the Aruba Department of Infrastructure and Tourism Authority has taken action to promote hygiene, health, and environmental protocols. The authorities are also promoting Aruba as an alternative destination for foreigners to work remotely.

At the same time, due to the resurgence of new cases, the department of health announced on August 3rd a contingency plan to slow down the spread of local transmission, which includes the launch of a mobile app for locals to facilitate the process of testing, and more recently, the establishment of a special helpline for Covid-19 patients in need of assistance.

On October 22, the government announced a relaxation of the measures aimed at curbing the second wave of COVID-19 pandemic and replaced the curfew by “area prohibition” in beach zones. Bars, nightclubs and rum-shops remain closed, while social gatherings and home parties prohibited with the exception of funerals where a maximum of 25 people are allowed. Social distancing protocols remain in effect when in public.

On November 16, the authorities communicated that the additional drastic measures taken have shown positivegreat results curbing the second wave that began in early August. Currently, the number of active cases is below 200 compared to the more than 700 cases experienced during August and September.


Key Policy Responses as of November 18, 2020

Fiscal
  • On March 26, the parliament approved the amended 2020 budget, containing a higher spending related to the healthcare sector and three supporting programs: 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.

    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.

Monetary and macro-financial
  • On March 17, the central bank of Aruba (CBA) lowered: the reserve requirement on commercial bank deposits from 12 to 11 percent; the minimum capital adequacy ratio from 16 to 14 percent; and the prudential liquidity ratio from 18 to 15 percent. Furthermore, the maximum allowed loan-to-deposit ratio was increased from 80 to 85 percent (see: https://www.cbaruba.org/cba/readBlob.do?id=6307) . Moreover, on May 5, the CBA further lowered reserve requirement to 7 percent. 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, the CBA announced that it would not grant any new foreign exchange licenses related to outgoing capital transactions, and that it stands ready to take further measures to preserve the peg.


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Australia

Background. The first COVID-19 case in Australia was confirmed on January 25, 2020. Social distancing measures were increasingly tightened in late March/early April, including by 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 to relax COVID-19 restrictions, States and Territories eased regional containment measures.

A regional COVID-19 resurgence triggered a renewed lockdown in metropolitan Melbourne from July 9. This was further tightened (stage 4 restrictions) on August 2, and restrictions (stage 3) were also put in place for the State of Victoria (outside of Melbourne) starting August 6. As new daily cases declined, restrictions in metropolitan Melbourne and the rest of the State of Victoria were gradually eased starting September 28. On October 23, the National Cabinet agreed in principle on a Framework for National Reopening by December 2020. The stay-at-home order in Melbourne ended on October 28, and further easing was applied across Victoria from November 9. Some States and Territories have eased regional travel restrictions. However, 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.

On November 19, South Australia implemented an immediate, strict lockdown for six days as circuit breaker following the spread of a community cluster.

Real GDP contracted by 7 percent q/q in the second quarter of 2020, and high-frequency indicators point to an incipient recovery in the third quarter.


Key Policy Responses as of November 19, 2020

Fiscal
  • At the Commonwealth level, fiscal stimulus, consisting of expenditure and revenue measures worth A$272.3 billion (14 percent of GDP), has been put in place through FY2023-24. These measures are reflected in the FY2021 budget (released on October 6), and the majority of the stimulus will be executed through FY2020-21. The stimulus includes the multiyear JobMaker program (A$73 billion), comprising new measures (loss carry-backs and personal income tax cut), as well as the extension of existing measures (full expensing, infrastructure investment, among others). The overall stimulus includes previously announced JobKeeper wage subsidies (5.4 percent of GDP), income support to households, cash flow support to businesses, investment incentives, and targeted measures for affected regions and industries (including the HomeBuilder program supporting the construction industry). The Commonwealth government will also help finance a series of fast-track infrastructure projects across States and Territories (A$3.9 billion) and the arts and screen industries to support job creation, and has put in place a home care package to support senior citizens (A$0.3 billion). The Commonwealth government provided free childcare to around one million families through mid-July (A$0.3 billion) and announced targeted support to the education system. In mid-July, the government announced extensions of the JobKeeper wage subsidies through March 2021 and of the additional income support to households through December 2020, with payment reductions to facilitate a gradual transition to a recovery. It also instituted a new JobTrainer skills package (A$2 billion). Pandemic Leave Disaster Payment has been arranged with the State and Territory governments to provide a lump sum payment to help workers during their 14-day self-isolation period. The Commonwealth government will also invest in green technologies (A$1.9 billion) to lower emissions.

    Other measures include an allocation of up to A$15 billion to invest in residential mortgage backed securities and asset backed securities to help funding for small banks and non-bank financial institutions, and loan guarantees between the Commonwealth government and participating banks to cover the immediate cash flow needs of SMEs (up to A$20 billion). In mid-July 2020, the latter scheme was extended through June 2021, with the maximum loan size raised from A$250,000 to A$1 million and the maximum maturity extended to five years.

    Separately, the Commonwealth government has committed to spend an additional amount of almost A$14.3 billion (0.7 percent of GDP) to strengthen the health system and protect vulnerable people, including those in aged care, from the outbreak of COVID-19. The Commonwealth government has also agreed with the States and the Territories to share the public health costs incurred by the States and Territories in treating the COVID-19.

    State and Territory governments also announced fiscal stimulus packages, together amounting to A$40 billion (2.1 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
  • On November 3, the Reserve Bank of Australia (RBA) reduced the cash rate target, the 3-year yield control target, and the interest rate on its Term Funding Facility (TFF) by 15 basis points to 0.1 percent. (The cash rate had been at 0.25 percent following two 25 basis point cuts on March 3 and March 19.) The interest rate on commercial banks’ exchange settlement balances at the RBA was reduced to zero (from 0.1 percent). In addition, the RBA announced secondary market purchases of A$100 billion of 5 to 10-year government bonds over the next six months. It also stepped up its forward guidance by stating that it will 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 for at least three years.

    Prior to this round of policy easing, on March 19, the RBA had announced yield targeting on 3-year government bonds at around 0.25 percent through purchases of government bonds in the secondary market. To support liquidity, the RBA conducts one-month and three-month repo operations daily until further notice. Repo operations of longer-term maturities (six months or longer) are held at least weekly if market conditions warrant. To assist with the smooth functioning of Australian capital markets, the RBA has broadened the range of eligible collateral for open market operations to include securities issued by non-bank corporations with an investment grade. The RBA has established a swap line with U.S. Fed for the provision of US dollar liquidity up to US$60 billion. To support the provision of credit, especially to SMEs, the RBA established the A$90 billion TFF in March for banks to access three-year funding at 25 basis points until September 2020. The facility was subsequently expanded to A$200 billion, with access extended through June 2021.

    The Australian Prudential Regulation Authority (APRA) has provided temporary relief from its capital requirement, allowing banks to utilize some of their current large buffers to facilitate ongoing lending to the economy as long as minimum capital requirements are met. APRA also announced on March 30 that it is deferring its scheduled implementation of the Basel III reforms in Australia by one year to January 2023. APRA is also temporarily suspending the issuing of new licenses for at least six months in response to the economic uncertainty created by COVID-19. On July 27, APRA updated its guidance issued in April, which expected banks and insurers to consider deferring decisions on the level of dividends or approve a dividend at a materially reduced level, with a 50 percent cap on payout ratios for the remainder of this calendar year. APRA also expects banks to conduct regular stress testing to inform decision-making and make use of capital buffers to absorb the impact of stress to continue to lend to households and businesses.

    APRA announced on March 23 that loans on repayment deferrals in the context of COVID-19 need not be treated as being in arrears for a period of up to six months for capital adequacy and regulatory reporting purposes for borrowers who have been meeting their repayment obligations. On July 7, the Australian Banking Association announced that banks will extend the period of deferred repayments by up to another four months for affected borrowers. APRA also extended the regulatory approach on deferred repayments to cover a maximum period of up to 10 months until March 31, 2021. In addition, APRA clarified that loans that are restructured before March 31, 2021 to put the borrower on a sustainable financial footing may continue to be regarded as performing loans for capital adequacy purposes.

    Insolvency relief measures for businesses put in place by the Commonwealth government from March 2020 for six months as part of its response to COVID-19 have been extended through December 2020.

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. Daily new cases have surpassed the previous peak in March with the effective reproductive rate of above 1, although the fatality rate remains low. A pickup in the infection rate has prompted the authorities to tighten containment measures, including reintroducing mandatory mask since July. The authorities eventually announced a 4-week partial lockdown effectively on November 3 and further tightened the containment measures until December 6 to a similar extent as the Spring lockdown. Restaurants, bars, non-essential shops, hairdressers, and schools are closed. During the initial outbreak, the authorities progressively tightened containment measures between mid-March and mid-April. By March 16, leaving home was banned by law with limited exceptions, restaurants and shops not delivering daily products were closed, and enforced by administrative and police measures, and a number of communities and regions were declared risk areas and put under quarantine. For all judicial and administrative procedures, the clock was put on hold to avoid hardship due to missed deadlines.

Reopening of the economy. A gradual re-opening of the economy has started after April 13, from small shops, construction and garden centers, while other stores and hairdressers were allowed to open at the beginning of May. By mid-May when religious services, outdoor sports, museums, libraries, and archives reopened, and the Bundesliga was allowed to restart. Open air markets and business premises are exempted from the mandate on mouth and nose protective masks since June 1. The re-opening process is expected to last through June though some steps were accelerated recently due to low infection rates, such as the reopening of the borders with Germany, Switzerland, Lichtenstein, Czech Republic, Slovakia, and Hungary from June 5. Since June 15, the standing obligation for all persons to wear a face mask was limited to public transportation, pharmacies and services when a 1-meter distance cannot be maintained, or no other protective measures are available. On 16 June, travelling 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • The total fiscal package announced on March 15 amounts to 38 billion euros (about 9.5 percent of 2019 GDP). Financing includes: 4 billion euros for the health care system, long-term care, short-term work, and to compensate self-employed, family- and micro-business for the loss of earnings related to the sickness; 9 billion euros in guarantees to companies, including exporters and the tourism industry; 10 billion euros for the deferral of personal and corporate income taxes (for 2020), social security contributions (3 months), and VAT payments (until end-September 2020). The General Civil Code was enacted on March 15 declaring COVID-19 a force majeure enabling companies to force workers to take up to two weeks of leave accumulated in previous years. On March 22, €22 million were earmarked for research and short-term work was extended to 3 months with the possibility to extend it by another three months (up to September). Under this provision working hours may be reduced to up to 10 percent (later revised to 30 percent), at 80 to 90 percent of regular pay. Employers only pay the hours worked, while the rest is paid from the budget. From April 2, households could delay rent payments to their landlords until end-2020. Households and SMEs may also delay their debt servicing by 3 months. Funding for short-term work was increased from € 3 to € 5 billion on April 13, to € 10 billion on April 30, and again to € 12 billion on May 19 while the time frame for the submission of applications extended. The authorities are rolling out new fiscal measures including tax relief measures for the hospitality sector of € 500 million and support to non-profit organizations of € 700 million open for 6 months. To jump-start the economy, a new tax incentive was introduced for companies that recruit apprentices, with € 2,000 per position created during March 16 and October 31 of this year. On June 16, the package was increased to € 50 billion (13 % of GDP). Measures on the expenditure side include investment in climate protection, affordable housing, health, and digitalization and a one-off support for unemployed and families. Several specific tax relief measures are aimed at the agricultural and forestry sectors, culture and publishing. 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. Several measures are under discussion for possible extension. They include a new phase of short-term work arrangement (until March 2021), fixed cost subsidy (March 2021) pending on EU approval, hardship fund for small businesses (March 2021), and unemployment assistance (end-2020).

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, 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 in 7 cities (e.g., a few beaches were reopened and the requirement to receive SMS permission to leave home was eased). 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • 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 (six of which have been completed) 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 will be 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 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).

Monetary and macro-financial
  • On March 19, the CBA left the refinancing rate unchanged at 7¼ percent, butraised 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 April 23, 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.

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


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The Bahamas

Background.The Bahamas has so far reported 7,348 confirmed cases of COVID-19, with 163 deaths (as of November 18). Borders were initially reopened for international travel on July 1, as part of a phased plan that began with a reopening for boaters and private aviation on June 15. Soon after, confirmed cases increased rapidly, leading the government to issue a new order for travel procedures and restrictions on July 22 and new lockdown restrictions in August. Lockdown restrictions have been gradually rolled back since mid-August. Starting September 8, regulations on activities were eased further, such as providing indoor dining and in-store services under specific protocols (except for New Providence) and extending beach access time for all islands. Phase 3 reopening began on October 15, with hotels and beaches available to visitors abiding by a 14-day “Vacation-In-Place” (VIP) guideline until November 1 when excursions and tours recommenced. Visitors, returning citizens, and residents will need to obtain a RT-PCR test no more than seven days prior to their travel to The Bahamas. In addition, and to ensure that travelers remain COVID free, a rapid antigen test will be conducted four days after arrival in The Bahamas. New weekend lockdown measures in worst hit islands have recently curtailed the rise, as testing capacity and tracing have also improved. Furthermore, protocols on The Bahamas’ health travel visa are continuously being revised to prevent further spread that may arise from international and domestic travel.


Key Policy Responses as of November 18, 2020

Fiscal
  • The government announced various support measures totaling B$121.7 million (1 percent of GDP) , including (i) B$15 million for health care, (ii) B$4 million for food programs, (iii) B$15.9 million as income support for the self-employed, (iv) B$20 million to support business loans to SMEs with an additional B$5 million allocated to grants to assist with payroll expenses, (v) B$60 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).

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

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

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

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

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


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Bahrain

Background. Bahrain has been hit by the spread of COVID-19 and by the recent sharp decline in oil prices. The first case of COVID-19 was reported on February 24, 2020. To contain the rapid spread of COVID-19, the authorities have expanded social distancing and stay-at-home measures: closing educational institutions, retail shops, restaurants and cinemas; suspending flights to infected areas; suspending prayers in mosques; rescheduling major events; restricting gathering to 5 people; introducing mandatory use of masks while in public; and switching to remote working at public entities. Recently introduced measures include a reduction of private schools’ tuitions by 5-10 percent and a provision to accommodate expatriates in temporary housing where social distancing practices can be maintained. The authorities are also expanding intensive care units (ICU) facilities should the existing stock of ICU beds become insufficient.

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


Key Policy Responses as of November 18, 2020

Fiscal
  • A BD 560 million ($1.5 billion or 4.2 percent of GDP) stimulus package to respond to the economic distress due to the COVID-19 pandemic was announced on March 17. The package, effective for a period of three months from April, comprises seven initiatives: (i) payment of salaries for Bahrainis working in the private sector to be financed from the unemployment fund; (ii) payment of electricity and water bills for Bahraini individuals and companies; (iii) exemption of commercial entities from municipalities' fees; (iv) exemption of tourist facilities from tourism fees; (v) exemption of industrial and commercial entities from paying rent to the government; (vi) doubling of the size of the liquidity fund to support SMEs; (vii) and redirection of Tamkeen (a semi-autonomous government agency that provides loans and assistance to businesses) programs to support adversely affected companies, as well as restructuring of all debts issued by Tamkeen. In addition, to respond to urgent health needs created by COVID-19, the Cabinet has authorized the Minister of Finance and National Economy to withdraw from the general account BD 177 million ($470 million or 1.3 percent of GDP), which has subsequently been added to the 2020 budget on July 13, 2020. On April 8, 2020 a further BD 5.5 million enhancement to social benefits for lower income families was announced. On April 20 the authorities announced their objective to reduce non-priority government agencies expenditure by up to 30 percent and delay some capital expenditure to accommodate lower oil revenues due to the decline in oil prices. Other measures announced include the extension of the existing package to drivers, driving instructors and nurseries, as well as a proposal to delay the collection of some claims on nationals.

    On June 29, the authorities approved new measures to extend some of the support adopted in the previous package. The new measures include i) payment of 50 percent of salaries for Bahrainis working in the most affected sectors for a further three months starting in July 2020; ii) extend the payment of electricity and water bills for Bahrainis for a further three months starting in July 2020; iii) reduce by 50 percent work permit fees and exempt the most affected sectors from work permit fee for three months starting in July 2020; and iv) expand financial support to hard hit sectors through Tamkeen.

    At end-July 2020 the authorities approved the following new measures: i) for three months, exempting industrial companies operating in the industrial zone and exporting more than 30 percent of production from paying rent; ii) exempting companies hardest hit by the crisis from paying the commercial record registration or renewal fee for 2020; iii) exempting households from paying municipality fees on their first residence for three months; and iv) exempting tourist facilities from paying the tourism fee for the third quarter of 2020.

    At end-September 2020 the authorities approved the extension of the following measures for the period October-December 2020: i) sponsoring of electricity and water bills in first residences for Bahrainis; ii) support 50% of salaries of Bahrainis in the most affected sectors; iii) fees exemption for tourist facilities; and iv) further wage support to taxi drivers, transport drivers and driving instructors. The authorities also approved as a new measure the coverage of 50 percent of salaries of uninsured employees in kindergartens and nurseries.

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

Exchange rate and balance of payments
  • No measures.


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Bangladesh

Background. Bangladesh reported the first confirmed cases of COVID-19 on March 8. On March 23, the government declared a general holiday from March 26 to May 30, leading to the closure of government offices, private offices, and courts, and shorter operating hours for commercial banks. On April 8, the government restricted operations in Rohingya refugee camps to critical services and assistance only, citing the need to minimize risk within the camp setting. While the number of cases remains low, reluctance to be tested presents a challenge. The government has announced the ‘no mask, no service’ policy in all the government and private offices, and the mandatory use of masks when outside, to combat the possible second wave of COVID-19.

Reopening of the economy. On May 28, the authorities announced that closures and movement restrictions would be gradually lifted starting May 31. Civil servants have returned to their offices and public transport in Dhaka has resumed. Beyond the domestic impact of the health crisis, the two main channels through which the Bangladesh economy will be impacted are remittances and exports of ready-made garments (RMG). Remittances represent over 5 percent of GDP ($16.4 billion in FY 19), and a majority of migrant workers are based in Gulf countries that are affected by the abrupt decline in oil prices. A significant increase in remittances observed since July 2020 may be linked to incentives to repatriate these funds through official channels. The RMG sector accounts for more than eighty percent of the country’s exports. After the COVID-19 outbreak, the industry was hit by the cancellation or postponement of several billion US dollars in orders from major retailers in importing countries. The looming second wave in the major trading partners could dampen the recent pick up of export demand, coupled with more order cancellations. Another concern for the authorities stems from historic monsoon floods which affected close to four million people, with nearly one-third of the country underwater. This will likely have a negative impact on agricultural production, possibly leading to higher food imports.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has introduced a series of fiscal measures to contain and mitigate the impact of the COVID-19 outbreak. At end-March, the Ministry of Finance issued a revised budget for FY20 including additional resources to fund the Ministry of Health’s COVID-19 Preparedness and Response Plan and expanding existing transfer programs that benefit the poor. Increased allocation has been made to the Open Market Sale program to facilitate the purchase of rice at one-third of the market price, and the Ministry of Disaster Management and Relief is distributing food supplies at the district level. On March 31, the Ministry of Finance announced a Tk. 50 billion (about USD 588 million) stimulus package for exporting industries to be channeled through a refinance scheme operated by Bangladesh Bank. The amount of the loan was increased in July-August by an additional Tk. 60 billion following pressure from factory owners. Loan proceeds will be used to pay worker salaries, primarily through mobile financial services, and the scheme is expected to benefit close to 4 million workers for a four-month period. Exporting firms that have laid off workers will not qualify for the loans. The Ministry of Finance will also subsidize interest payments on up to Tk. 500 billion in working capital loans by scheduled banks to businesses. On April 15th, the Prime Minister announced the allocation of Tk. 21.3 billion under a housing scheme for the homeless, Tk. 7.6 billion for poor people having lost their jobs as a result of the pandemic, Tk. 7.5 billion to provide health insurance for government employees most at risk, and a Tk. 1 billion bonus payment for government doctors and health workers treating COVID-19 patients. The Prime Minister also announced that the government would cover Tk. 20 billion in interest payments on behalf of 13.8 million loan recipients negatively impacted by the national shutdown. The National Board of Revenue has suspended duties and taxes on imports of medical supplies, including protective equipment and test kits. The FY21 Budget includes higher allocations 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 international financial institutions and bilateral development partners seeking budget support.

Monetary and macro-financial
  • The focus of Bangladesh Bank (BB) is to ensure that there is adequate liquidity in the financial system to support the operations of financial institutions, and it has announced that it will buy treasury bonds and bills from banks. The repo rate was from 6 percent to 4.75 percent in three cuts in March, April and July. The cash reserve ratio (CRR) for banks was reduced from 5 percent to 3.5 percent (daily-basis) and from 5.5 percent to 4 percent (bi-weekly basis). CRR was cut to 1.5% (daily basis) and 2.0% (bi-weekly basis) for offshore banking operation, effective July 1, and 1.0% (daily basis) and 1.5% (by-weekly basis) for NBFIs, effective June 1. BB has also raised the advance-deposit ratio (ADR) and investment-deposit ratio (IDR) by 2 percent to facilitate credit to the private sector and improve liquidity in the banking system. The Export Development Fund (EDF) was raised to $5 billion, with the interest rate slashed to 1.75 percent and the refinancing limit increased. BB has created several refinancing schemes amounting to a total of Tk 380 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 stimulus packages. To further support farmers, BB also announced an agriculture subsidy program that will take effect for 15 months until mid-2021. In addition, BB has taken measures to delay non-performing loan classification, relax loan rescheduling policy for Non-Bank Financial Institutions (NBFIs), waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services.

Exchange rate and balance of payments
  • Foreign exchange rules were eased by Bangladesh Bank to: (i) provide foreign currency to Bangladeshi nationals visiting abroad and facing problems in 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 of BDT/USD 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), 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, 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 in recent months—which accounts for 40 percent of economic activity—will significantly depress overall economic activity in 2020.

Reopening of the Economy. The authorities adopted a four-phase plan to reopen the economy. The shift to phase 2 occurred on May 4 with a modest relaxation of social and economic restrictions. Specifically, the 24hr curfew was replaced with a nightly curfew and the resumption of construction, manufacturing, and food production/distribution services. Phase 3 commenced on May 18 with the phased re-opening of remaining businesses and trades but with restrictions, such as social distancing requirements, temperature testing protocols, and limited admittance to retail spaces. More recently, the curfew was lifted effective July 1 and quarantine procedures for travelers arriving in Barbados have been relaxed ahead of the resumption of commercial airlift in July. Phase 4, which is characterized as the resumption of life as normal, will be triggered upon the development and procurement of a vaccine.


Key Policy Responses as of November 19, 2020

Fiscal
  • The Government of Barbados (GoB) identified upfront emergency health and capital expenditures needed to manage and mitigate the spread of infection. This included resources to refurbish the hospital and clinics, build isolation centers, and provision critical medications and supplies. In addition, the GoB have boosted priority capital spending and introduced social programs for displaced workers to mitigate the effects of COVID-19 on the economy. This included infrastructure investment to renovate schools, government buildings and industrial complexes, as well as introduced a Household Survival Program. The latter involves a minimum income for households made unemployed by COVID-19 and supplemental unemployment benefits though the National Insurance Scheme. In addition, the targeted clearance of roughly 1 percent of GDP in outstanding income tax and VAT arrears provided an infusion of liquidity to households and businesses. The authorities also rolled out a deferred public wage-savings scheme (BOSS) to help finance a stepped-up capital investment program intended to boost growth while the tourism sector recovers from the COVID shock.

    On September 15, the Governor General announced additional policy measures during a Throne Speech to open a new session of Parliament. Key initiatives include a 12-month jobs program and a tourism-sector stimulus and transformation package (available for up to two years). The Governor General reiterated the government’s commitment to long-term debt reduction—which underpins the ongoing financial arrangement with the IMF—while indicating that a reduction in the debt-GDP ratio may not be possible during next two years as the economy works through the impact of the COVID-19 shock. On balance, the pandemic response has prompted the Government of Barbados 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 budget presentation).

Monetary and macro-financial
  • The Central Bank of Barbados (CBB) announced a series of measures (effective April 1, 2020) to help support commercial banks and other deposit-taking institution manage the economic fallout from the coronavirus shock. Specifically: i) the Bank’s discount rate at which it provides overnight lending to banks and deposit-taking non-banks licensed under the Financial Institutions Act was reduced from 7 percent to 2 percent; ii) the securities ratio for banks was lowered from 17.5 percent to 5 percent; iii) the 1.5 percent securities ratio for non-bank deposit taking licensees was eliminated; and, iv) the Bank indicated it stands ready to make collateralized loans for up to six months as liquidity support for licensees. These measures follow an agreement brokered by the GoB for commercial banks to provide forbearance in the form a 6-month debt-payment moratorium for individuals and business directly impacted by COVID-19 (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. The government has been implementing a range of measures to delay the spread of the disease and to support individuals and businesses. Containment measures currently in place—limited relative to other countries—include travel restrictions (e.g., cancelations of international flights and ground transportation), social distancing (e.g., self-isolation rules for the sick, and their first and second-level contacts; and a ban on gatherings/events with international participation), and recommendations for schools and education. In some regions such as Minsk, there has also been cancelation of public events. In order to facilitate travel abroad, the Ministry of Health has developed a certificate of the absence of COVID-19, and is identifying clinics where the certificate and a test can be obtained for a fee. Policy measures are elaborated below. First re-opening measures became effective in mid-June: The national airline Belavia continues to update its international flight schedule (flights to Russia resumed in late September) and restrictions on transit truckers were lifted. In mid-October, quarantine regulations were further amended, and the Ministry of Health issued enhanced recommendations to businesses and non-profit organization on social distancing, limiting any meeting with more than 5 participants and encouraging video conferencing.

In addition to the impact of the Covid pandemic, Belarus faces a gradual loss of oil price subsidies from Russia through the “tax maneuver” till 2024, the economic impact of protests and strikes that are taking place since the presidential election of August 9, 2020, and the recent oil-price shock and its negative impact on the price of Belarus’ exports of refined products.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has announced a package of fiscal measures, which include additional resources for the healthcare sector (including salary allowances for essential personnel) and tax relief and tax deferral measures to support businesses. Some of these measures are being implemented on the local government level (e.g. in Minsk on June 1 and June 11). 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). 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 3.5 and 12.1 percent (q/q) in the first two quarters of 2020, followed by a rebound of 10.7 percent in the third.

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 less stringent than in spring. Specifically, until December 13, non-essential businesses are closed, non-medical contact-intensive activities banned, and close contacts limited to 1, while teleworking is mandatory. After an extended fall break, schools have resumed on November 16.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government put in place a package of fiscal measures to address the crisis, detailed in its 2021 Draft Budgetary Plan these have an estimated budget impact of €17.5 bn (about 3.9 percent of GDP), together with some €52 bn (about 12 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 further support these efforts.. In June, measures were adopted to extend existing support schemes until August or end-2020, to provide additional support to hard-hit sectors and vulnerable groups, and to extend and modify the bank guarantee scheme to improve access, in particular for SMEs. Additional support to households and firms affected by the re-imposition of restrictions, mostly in the form of an extension or expansion of existing temporary measures, was announced in October.

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 mid-2021; (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 to end-December 2020.

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. Although the number of active cases has remained lower than in neighboring countries, it is also trending upward slowly. 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. The economic impact of the pandemic has already begun to materialize through higher Eurobond spreads and lower cotton prices, while a more widespread domestic outbreak could significantly impair exports, further reduce confidence and capital inflows, and cause a significant disruption to economic activity. In addition to Covid-19, Benin is also being impacted by the closure of border with Nigeria since end-August 2019. Government policy is responding to both developments.

Reopening of the economy. The authorities have announced measures to gradually start reopening 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 November 19, 2020

Fiscal
  • The authorities have developed an ambitious response plan to covid-19 pandemic, which aims at raising healthcare spending, granting cash transfers to vulnerable households, and providing support to impacted businesses. More specifically, the response package consists of: (i) an increase in health spending by CFAF 60 billion to cover the cost of purchasing medical equipment, the construction of temporary centers to care for people who are sick, and quarantine arrangements for at-risk populations; (ii) a total of CFAF 50 billion to help the most vulnerable segments of the population through various forms of cash transfers; and (iii) a CFAF40 billion to support struggling businesses through targeted and temporary tax exemptions and a relaxation of certain payment rules. The cost of this plan for 2020 has been set at CFAF 150 billion (1.7 percent of GDP).

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted 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. On June 22, 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 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 issued by Benin amounted to 1.5 percent of GDP. Benin has been recently allowed to issue the equivalent of 1.5 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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.

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. Until July 30, active cases had flattened, with no evidence of community transmission and no deaths. However, on August 11th the government announced its first nationwide lockdown, following report of a COVID-19 positive case in a returning traveler who had been released from quarantine. A National Taskforce endorsed a guideline that ensures that every zone is a self-contained unit with access to essential shops and services. Under the lockdown, all schools, offices, and commercial establishments are to remain closed. 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. The PMO office announced a three phased unlocking starting August 31 and incrementally through September 7. On June 19, 2020, the Prime Minister announced a range of changes including easing of restrictions for some ‘lower risk’ businesses, and all government agencies to discontinue "work from home" from June 22. All agencies are encouraged to minimize face-to-face interactions and make use of technology for meetings and other official correspondences. Bhutan started imposing containment measures immediately after the first case, with restriction of entry of foreign tourists initially for two weeks but extended afterwards and closure of schools in three cities. On March 22, Bhutan sealed off its land borders as a precautionary measure to prevent the spread of COVID-19. For non-Bhutanese, exits are allowed. Incoming non-Bhutanese are scrutinized and quarantined where applicable. On March 27, more containment measures were imposed on public gatherings, travel (within and outside Bhutan), business and entertainment, games and sports and civil service, corporate, private, and other agencies. With the resumption of domestic air travel in India from May 25th and train services from June 1st, the Bhutanese in India who wish to return to the country can now take Indian domestic airlines. Upon arrival in Bhutan, they will have to report to the relevant COVID-19 task force for the mandatory 21-day quarantine.


Key Policy Responses as of November 19, 2020

Fiscal
  • Linked to the Build Bhutan (BB) initiative, the government has launched the Specialised 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 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 March 2021. 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, 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.

Monetary and macro-financial
  • On October 5, 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, 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.

Exchange rate and balance of payments
  • On March 24, ban on select food product (e.g., betel leaf, betel nut) import from India has been imposed to curb the spread of COVID-19. As of June 29, 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. While Bolivia was initially spared from the full force of the pandemic, the situation has deteriorated in recent months. As of November 18, there are 143,569 confirmed cases, and 8,875 deaths have been reported. The government has taken a series of measures to prevent the spread of the virus, including a generalized lockdown, entailing the temporary closure of many businesses, border closure and suspension of schools, and postponed the general elections scheduled initially on May 3. On March 25, the authorities announced the state of health emergency until April 15 and further tightened the quarantine orders, completely closing the borders, restricting the movement of people to once a week, and prohibiting movements of vehicles except for security and health reasons. The national quarantine has been extended several times and will remain in effect through November 30 with reopening modifications (see below). Wearing facemasks in public places is mandatory, and face-to-face classes and other public events remain suspended. Efforts are underway to strengthen Bolivia’s health care system, which has struggled to accommodate the demands arising from the pandemic. In recent months, the former interim President, several members of her cabinet, and the now ex-president of the central bank have tested positive for COVID-19. National elections, which occurred on October 18, were delayed twice owing to the pandemic.

Reopening of the economy. From September 1st it is now possible to enter and leave Bolivia by air on commercial flights to some allowed countries. Passengers boarding flights to Bolivia must have negative test results for COVID-19. By supreme decree the post-confinement phase started on September 1 and has been extended to November 30. The decree entails: (i) Land, river and lake borders will remain closed, (ii) public events, cultural, sports, festive, political activities will remain suspended, (iii) people and vehicles are permitted to circulate from Monday to Sunday between the hours of 05:00 and 24:00, (iv) permitted to open commercial activities, services and others, on Saturday and Sunday from 05:00 to 24:00, (v) face-to-face classes remain suspended. High, medium and low risk indices will remain, where those in high risk locations are subject to more rigid rules, and others have more flexibility. For the low risk municipalities: Use of public and private transportation is authorized following accordance and guidelines of the central level of state and municipal governments. 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • The authorities have provided direct relief payments of about $US 73 per child to households with children in public schools, a measure calculated to provide most of its benefits to poorer households. This payment was extended to students in private schools from May 18. In addition, the government instituted a program (Canasta Familiar) of direct payments for food to 1.5 million of families ($US 58 per family), pay the electric energy 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 till May, and independent workers can claim tax deductions against their expenses on health, schooling, food and related expenditures. The government is creating a fund of approx. $US 219 million to support the operations of micro, small and medium businesses. This fund will provide soft loans to companies to pay wage bills without layoffs for two months (companies can withdraw $US 1230 per employee, repayable in 18 months). Imports of respiratory equipment in the amount of $200 million is planned, while ICU capacity is being doubled.

    The latest transfer to households available: The Bono Contra el Hambre, 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.

    The following 5 financial tools to inject resources into the economy and preserve 4 million jobs (announced by the interim government):

    a) Fondo de reactivación (FORE): The objective of this fund is to partially finance the reprogramming of credits granted to companies in the sectors of tourism, hotels and restaurants, manufacturing, construction, agricultural and forestry, commerce, transport, storage and communications, among others and through the financial intermediation entities. Amount: Bs.12,000 million (USD 1,740 million).

    b) Fondo de garantía sectorial (FOGASEC): The purpose of this one is to guarantee: a) new loans granted by bank and non-bank EIFs to legally constituted companies; and b) new issues of debt securities of legally constituted companies. Amount: Bs. 1,100 million (USD 160 million).

    c) Fondo de Afianzamiento d elas Micro, Pequeñas y Medianas Empresas (FA-BDP): This fund is to guarantee credit operations to micro, small and medium-sized companies. Amount: Bs. 120 million (USD 17.5 million).

    d) Fondo de garantía de vivienda social y solidaria (FOGAVISS): Its objective is to finance housing needs of lower-income sectors and boost the construction sector, within the framework of the social housing program. Amount: Bs. 5,000 million (USD 729 million).

    e) Portfolio securitization process: In order to grant a financing tool to financial entities, the procedures for the securitization of loan portfolios are enabled. The amount calculated is Bs. 8,000 million (USD 1,166).

Monetary and macro-financial
  • The Central Bank of Bolivia (BCB) injected 3.5 billion Bolivianos (more than $500 million) by purchasing bonds from the pension funds, which, in turn, are expected to deposit the money at banks, increasing the banking system liquidity by about 50 percent. The liquidity was also increased by reducing the reserve requirements in local and foreign currency. The authorities have also announced that they are suspending borrowers’ loan repayments in the financial system for 2-4 months and then up to the end of the year, with the delayed installments to be paid at the end of the loan closure date.

Exchange rate and balance of payments
  • No measures.


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Bosnia and Herzegovina

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

Reopening of the economy. Both entities have ended their curfews for individuals of all ages. Most public events remain cancelled and public gatherings face limitations on total number of people present. Grocery stores, pharmacies, restaurants, and cafes throughout the country are open, along with most other businesses. Restaurants and bars must close by 11:00pm. There are still social distance restrictions in place. Social distance restrictions include limitations on the number of people who can attend public gatherings and a requirement to wear masks indoors, on public transportation, and in public areas when social distancing is not possible. Sarajevo airport has reopened to passenger traffic.  BiH citizens and residents, and citizens of Croatia, Serbia, and Montenegro may enter the country. Starting July 16, BiH borders are open for citizens and residents of EU and Schengen countries with a negative PCR test not older than 48 hours. Starting November 11, a new nighttime curfew has been imposed on most businesses as part of new measures to contain a second surge in the coronavirus.


Key Policy Responses as of November 18, 2020

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

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

Exchange rate and balance of payments
  • No measures.


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Botswana

Background. Botswana recorded its first case on March 31. The government has declared a state of emergency, effective April 2, 2020, and has adopted a list of containment measures, including social distancing and travel bans. The government has lifted some restrictions on May 22 after 7 weeks of lockdown. Since end-June, the country has recorded a resurgence of cases, resulting in a partial 2-weeks lockdown limited to the capital starting July 30. The state of emergency was also extended to March 2021 but restrictions on travel have been eased. On the economic front, diamond sales, and tourism and travel activities have fallen sharply, and lockdowns in neighboring countries could disrupt both regional supply and demand. The parliament has approved the mid-term review of NDP 11 including a 15 billion stimulus to support the recovery and facilitate structural transformation.


Key Policy Responses as of November 19, 2020

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

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

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


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Brazil

Background. The first confirmed case was reported on February 26, 2020. As of October, the case fatality rate is at 3 percent. The pandemic reached a peak in mid-August, when daily new case numbers hovered 45 thousand, and has since steadily receded. Hospital occupancy rates have also declined in all regions and state capitals. Non-essential businesses and services have reopened (with restrictions), but public schools keep closed in most locations. The federal government reopened the borders of Brazil for foreign passengers traveling by plane. The restriction had been set in March. The entry ban remains, however, in the states of Mato Grosso do Sul, Paraíba, Rondônia, Rio Grande do Sul and Tocantins. Entry restrictions by land remain in place. President Bolsonaro was diagnosed with Covid-19 on July 7 and has recovered.


Key Policy Responses as of October 22, 2020

Fiscal
  • To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures adding up to 12 percent of GDP, of which the direct impact in the 2020 primary deficit is estimated at 8.4 percent of GDP. Congress declared a state of “public calamity” on March 20, lifting the government’s obligation to comply with the primary balance target in 2020. The government has also invoked the escape clause of the constitutional expenditure ceiling to accommodate exceptional spending needs. Emergency measures are being included in a separate (so called ‘war’) 2020 budget, not bound by the provisions of Brazil’s Fiscal Responsibility Law and the constitutional golden rule. The fiscal measures include temporary income support to vulnerable households (cash transfers to informal and low-income workers, 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 workers which are temporarily suspended or have a cut in working hours, 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. Financial assistance states and municipalities – with a temporary stay of debt payments– was also announced. Public banks are expanding credit lines for businesses and households, with a focus on supporting working capital (credit lines add up to 4.5 percent of GDP), and the government will back about 1 percent of GDP in credit lines to SMEs and micro-businesses to cover payroll costs, working capital and investment.

Monetary and macro-financial
  • The central bank lowered the policy rate (SELIC) by 225bps since mid-February, 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) have been implemented. The reserve requirement has been reduced from 25 to 17, on top of a reduction of 6 bps in early March, 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.

Exchange rate and balance of payments
  • The exchange rate has depreciated by about 22 percent since mid-February and by 29 percent since end-2019. The central bank has intervened various times in the foreign exchange market since mid-February (both with spot and derivative contracts sales), by a total of 41 USD billion (about 12 percent of gross reserves). The central bank resumed repo operations of Brazilian sovereign bonds denominated in US dollars, having released US$9 billion into the money market thus far.



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Brunei Darussalam

Background. Brunei Darussalam reported its first confirmed case of COVID-19 on March 9, 2020. 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, growth outturn was better-than-expected—due to an exceptional pickup in downstream activities.

Reopening of the economy. Brunei started relaxing COVID-19 restrictions since May 16, in phases. In the initial phase, the plan was to gradually lift physical and social distancing measures for premises such as sports facilities, food courts and markets, while relaxing operating capacity of commercial premises. With the pandemic under control, further de-escalation plans were implemented in July and August. Travel restrictions have also been relaxed. 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) and other considerations, subject to conditions. 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 government has also launched a domestic tourism campaign on November 4, aimed at encouraging residents to visit local attractions in an effort to cushion the impact on the tourism industry.


Key Policy Responses as of November 19, 2020

Fiscal
  • On March 21, the Ministry of Finance and Economy (MOFE) announced targeted measures centered mainly around tax, utility and social security deductions/deferments to assist hardest-hit households and firms affected by the COVID-19 pandemic, while supporting demand. An interim fiscal package (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). Coupled with the earlier fiscal assistance, these measures will increase the value of Brunei’s Economic Stimulus Package to a total of BND450 million (or 3.2 percent of GDP).

Exchange rate and balance of payments
  • No measures.

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Bulgaria

Background.After a mild and well contained first wave of the epidemic, Bulgaria is entering a second wave of infections with the number of daily new cases rising fast. The extraordinary epidemic situation, which replaced the state of emergency introduced in mid-March, has been extended until November 30 and additional containment measures, such as mandatory mask wearing, are being gradually introduced. As the emergency epidemic situation has been prolonged much more than initially anticipated, the government announced a new set of social and economic measures.

Preliminary data suggest a significant economic impact from the pandemic. According to the flash estimate, the Bulgarian economy shrank by 4.3 percent q/q in 2020Q3, after registering a quarterly decline of 10.1 in 2020Q2 and a slight increase of 0.4 percent in Q1. As of end-October, the registered unemployment rate is 0.7 percentage points higher than its level in end-February. Meanwhile, the budget remained in surplus cumulatively till October despite a large number of announced COVID-related policy measures.

Reopening of the economy. The government has re-introduced mandatory mask wearing both in closed and open public spaces (with some exceptions) in response to increased number of cases, but maintained other relaxation measures that ended nation-wide lockdowns over late March—April, including the lifting of some travel restrictions, increased accessibility to spaces and sport and recreation activities, reopening of restaurants while securing minimum distance between tables, reopening of kindergartens and nurseries, and reopening of shopping malls.


Key Policy Responses as of November 19, 2020

Fiscal
  • Key tax and spending measures have been implemented under the revised 2020 budget, allowing for a budget deficit of BGN 3.5 billion and increased ceiling on newly incurred public debt of BGN 10 billion for 2020. The second amendment to the 2020 act was passed, increasing the amount of state guarantees that might be undertaken in order to cover Bulgaria’s contribution to the EU Recovery Fund and SURE program. Currently, a third budget revision is under discussion, setting a BGN 5.2 bn (4.4% of government projected GDP) budget deficit for this year. The key fiscal measures include i) coverage of 60% of the wages of the employees in affected sectors that would have been otherwise laid off, including the social security contributions due by the employers (about 0.9 percent of 2019 GDP). The measures will be extended until end-2020 with expanded coverage and loosened eligibility criteria; ii) corporate tax deferral until June 30 (about 0.5 percent of 2019 GDP); iii) additional remunerations in the ministries of health, interior and defense (0.4 percent of 2019 GDP); iv) bonus payments to medical and social services staff and expansion of social patronage services; and v) support for various vulnerable groups, such as freelancers in the area of culture, one-off transfers to parents forced to be on unpaid leave during the state of emergency; vi) VAT reduction for restaurant services, books and baby food to 9 percent (from 20 percent) until end-2021. Recently, the coverage of the reduced VAT was expanded to wine, beer, tour operators and tourist trips, gyms and sports facilities; vii) reallocation of BGN 173 and 200 million from the EU fund, respectively to support SMEs and larger companies (annual turnover of over BGN 1 million) that experienced at least 20 percent loss in revenues due to the pandemic; viii) a minimum wage subsidy for the duration of three months to companies that hire an unemployed person; ix) starting July 1, a monthly subsidy of BGN 290 (up to six months) for each job preserved, in tourism, hospitality and transportation sectors (with a budget of BGN 40 million); On July 27, 2020, the government announced a new set of economic measures (about leva 1.16 billion) to mitigate the impact of the pandemic, including x) BGN 858.3 mn (0.7 percent of 2019 GDP) in total for pension supplements of BGN 50 for all pensioners. Initially the measure was announced for a 3-month period, August-October, costing BGN 318.3 mn. The measure has been lately extended until end-March, which will cost the state budget BGN 108 mn per month; xi) state subsidy of 35 euros per seat for tour operators who use air carriers (0.05 percent of 2019 GDP); xii) additional expenditure in the health and social care sectors (0.4 percent of 2019 GDP) xiii) foreign investment promotion (0.01 percent of 2019 GDP) and xiv) tourism vouchers for the Bulgarian seaside of BGN 210 for persons who have directly carried out or are carrying out activities related to treatment, preventing the spread and / or overcoming the effects of COVID - 19 (0.01 percent of 2019 GDP). On August 4, the government announced xv) a 30% increase in the wages of employees in 28 administrations as of Sep 1, The cabinet motivated the wage increase with the necessity to reward the people in charge of activities addressing the COVID-19 pandemic and its consequences; xvi) BGN 85 million to provide a new monthly allowance in a state of emergency for families with children up to 14 years of age who meet certain social conditions and income criteria; xvii) BGN 81 million to support the healthcare system to fight COVID – these include payments to general practitioners, COVID-treating centers and hospitals and antigen tests.

Monetary and macro-financial
  • The Bulgaria National Bank has implemented the following measures. i) capitalization of the 2019 profit in the banking system (about 1.4 percent of 2019 GDP); ii) increase in liquidity of the banking system by BGN 7 billion (6 percent of 2019 GDP) by reducing foreign exposures of commercial banks; iii) cancellation of the increase of the countercyclical capital buffer planned for 2020 and 2021 with effect amounting to BGN 0.7 billion, or about 0.6 percent of 2019 GDP; iv) agreement on a moratorium on bank loan payments for up to 6 months but no later than March 2021 with deadline for requests set at end-September 2020; and vi) establishment of EUR 2 billion swap line with the ECB until end-2020 or as long as necessary, with the maximum maturity of 3 months for each drawing. In addition, the government 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 (up to BGN 4500). 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 on March 9, 2020. The government immediately adopted several containment measures, including social distancing, a nationwide curfew, closure of schools and universities, cancelation of major public events, closure of terrestrial borders, suspension of commercial flights, quarantine of the affected cities and the mandatory nationwide use of masks. The number of reported new daily positive cases of COVID-19 has broadly declined since late April.

Reopening of the economy. The authorities began to ease some social and economic restrictions in late April with the reopening of some urban markets and venues of religious worship and suspension of quarantine of some cities. The reopening of passenger flights took place on August 1st accompanied by strict protocols for testing and quarantine for new arrivals. This gradual reopening is subject to continued social distancing guidelines and mandatory use of masks, among other measures.


Key Policy Responses as of November 19, 2020

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. 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. On June 22, 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 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 is equivalent to 0.8 percent of GDP. Burkina Faso has been recently allowed to issue the equivalent of 0.5 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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.

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. Six hundred forty-two (642) cases of COVID-19 have been officially reported as of November 19, 2020. At least five hundred seventy-five (575) people have recovered and one died on April 12, 2020. A large-scale testing campaign was conducted from July 6, 2020 to October 6, 2020. Testing now costs US$ 50 per test, except for cases when it is necessary.

Measures taken to minimize the risk of the pandemic breaking out in Burundi have been very limited: The population has been instructed to follow some basic rules of limited social distancing and frequent handwashing. Hand sanitizers and water for handwashing have been installed in public places. 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. Travelers from high-risk countries are required to undergo quarantine. The border with the DRC remains closed, except for merchandise. The border with Rwanda is closed for both merchandise and people. The border with Tanzania is opened for both merchandise and people. The ban will be reviewed depending on how the pandemic evolves.

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 enhance the screening capacity, the equipment of hospitals and health centers, and the stock of drugs. IMF staff estimates that the cost of the response plan will reach at least US$150 million (4.7 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • In addition to spending on the pandemic response plan, the authorities are considering 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, with a rest to be financed (about US$12 million or 0.4 percent of GDP) over 2020 and 2021.

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

Monetary and macro-financial
  • 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. Burundi has been engaged in multiple currency practices, with a parallel market exchange rate that is substantially more depreciated than the official exchange rate.


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Cabo Verde

Background. 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, 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.


Key Policy Responses as of November 19, 2020

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

    On April 1, the authorities introduced a moratorium on insurance payments and loans repayment during April-September 2020 for household, companies, and non-profit associations, as well as the SMEs. The moratorium on loan repayment has now been extended to December 31, 2020.

    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. There have been no deaths so far. 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. Domestic travel restrictions were lifted on 16 April. Massage parlors, sports arenas, fitness centers, and public transports have been closed since March. Public events and gathering (including religious gathering and concerts) have been banned. Since June, casinos, cinemas, museums and theatres have varyingly been reopened. Entertainment venues (e.g. karaoke and clubs) have been reopened as restaurants since July; schools have also been reopened in phases starting from September. The crisis has hit the Cambodian economy very hard during the first half of 2020, through exports of garments and textiles and tourism.


Key Policy Responses as of October 22, 2020

Fiscal
  • A package worth USD 60 mn has been allocated for virus testing, containment, and treatment. Social assistance of nearly USD 400 mn is being implemented, including USD 300 mn for a new monthly cash transfer program for poor and vulnerable households (5-7 months from June 2020) and USD 100 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 64 mn has been allocated for wage subsidies and skill training program for suspended workers/employees in the garments and tourism industries. Other spending has been rationalized, yielding savings of roughly USD 900 mn, of which around USD 500 mn will be from capital spending. Several tax relief measures, worth around USD 200 mn, have been introduced. The government has allocated USD 600 mn as special low-interest loans to specialized banks (USD 200 mn in Credit Guarantee Fund and USD 300 mn in Additional Financing Facility), in addition to packages issued to SMEs in manufacturing (USD 50mn) and SMEs in agricultural sector (USD 50mn). In September the government extended until the end of this year: 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 has implemented four measures to improve liquidity in the banking system: (i) delaying additional increases in the Capital Conservation Buffer; (ii) cutting the interest rate in its Liquidity Providing Collateralized Operations, decreasing banks’ funding costs in domestic currency; (iii) cutting the interest rate on Negotiable Certificates of Deposit (the collateral for LPCOs), to encourage banks to disburse loans; and (iv) lowering required reserves that banking and financial institutions must maintain at the National Bank of Cambodia both for local (riel) and foreign currencies. The Central Bank has also issued guidelines to financial institutions on loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics).

Exchange rate and balance of payments
  • Cambodia continues to maintain managed floating system. Suspension of white rice, paddy and fishexports have been lifted.


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Cameroon

Background. The first cases were reported on March 6. Cameroon continue to record daily increases in the number of COVID-19, but at a reduced rate since end-July The government announced a package of 13 containment measures on March 17, 2020 including closure of land, air and sea borders, quarantine for travelers returning from a country with a high level of infection, closure of schools and universities, prohibition of gatherings of more than 50 persons, closure of bars, restaurants and entertainment spots after 6 pm, suspension of missions of civil servants and parastatals abroad, cancellation of school and university games, and a ban on overloading taxis and public transportation.

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

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


Key Policy Responses as of November 20, 2020

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

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

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

    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.

    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.

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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Canada

Background. Canada has experienced around 307,000 cases and more than 11,100 deaths as of November 18. Canada is also being hit by the sharp decline in global oil prices. Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus, including travel restrictions, social distancing, and declarations of states of emergency and closures of non-essential businesses in some provinces. The rate of new cases peaked in April, remained at low levels throughout the Summer, but has since begun to rise.

Reopening of the economy. On April 28, Prime Minister Trudeau released a joint statement with premiers across Canada on their shared public health approach to support restarting the economy; all provinces began to implement detailed, data-driven plans to reopen in May. However, a recent surge in new cases has prompted a tightening of restrictions in some areas in Quebec and Ontario.


Key Policy Responses as of November 18, 2020

Fiscal
  • Key tax and spending measures (16.4 percent of GDP, $354 billion CAD) include: i) $20 billion (0.9 percent of GDP) to the health system to support increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities; ii) around $249 billion (11.6 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.

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

    Other measures in the financial sector include: i) OSFI, the bank regulator, lowered the Domestic Stability Buffer for D-SIBs to 1 percent of risk weighted assets (previously 2.25 percent); ii) under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC); iii) the federal government announced $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.

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 and the number of new cases has declined sharply over the last three months, owing in part to the discontinuation of widespread testing. 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. 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.


Key Policy Responses as of November 19, 2020

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.

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 of the 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% to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution.

Exchange rate and balance of payments
  • No measures.


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Chad

Background. The first confirmed COVID-19 case was reported on March 19. After decreasing since mid-October the cumulative number of cases per week appears to stabilize since mid-November. The province of Moyen-Chari has recently been the focus of the pandemic. Chadian authorities have adopted containment measures, including passenger flight suspension, closure of borders with CAR and Sudan, quarantine for nationals returning from high risk countries, closure of shops and stores (excluding basic goods), shortened banking working hours, cancellation of events and gatherings of more than 50 people, closure of worship places as well as schools and universities. This comes in addition to an inter-ministerial management committee meets daily to monitor developments, as well as the establishment of hygiene regulations in all public places. A hospital in N’Djamena was designated to receive infected cases and measures are being taken to strengthen laboratory capacities to increase testing. In light of the recent spikes in the number of COVID-cases, the curfew time changed from 11PM-5AM to 7PM-5AM in Moyen-Chari and Mayo-Kebbi west provinces and to 9PM-5AM in N’Djamena and other provinces. The curfew has been continuously extended by two weeks since April. Additionally, the state of medical emergency was extended for six months starting from October 17. Wearing a face mask became mandatory in public places starting May 7.

Reopening of the economy. On May 18, the health crisis management committee decided to relax some of the containment measures, including reopening of: (i) restaurants and grills; (ii) stores, shops and markets. Urban public transportation resumed subject to a maximum number of passengers (4 for taxis and 10 for minibuses). On June 25: (i) classes resumed partially for elementary, middle and high schools, as well as universities (ii) worship places reopened and (iii) travel limits from and into N’Djamena were lifted. Additionally, the temporary removal of restrictions on inter-urban transport was extended. Travel flights resumed on August 1st at N’Djamena airport, with four carriers (Air France, Ethiopian Airlines, Turkish Airlines and EgyptAir).


Key Policy Responses as of November 19, 2020

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 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 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.

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 regards to dividend distribution.

Exchange rate and balance of payments
  • No measures.

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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 till mid-September), travel restrictions, closure of schools, curfews and bans on public gatherings, and a Law on teleworking. The authorities have also unveiled measures to support employment and incomes, and provide liquidity, elaborated below. The COVID-19 outbreak comes only a few months after the social unrest that started in mid-October 2019.


Key Policy Responses as of September 11, 2020

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

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 has extended until January 9, 2021 the window for possible resumption of FX sales and NDF operations that was opened in November 2019 (during the social unrest). 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 on March 13, 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 on March 28 followed by a full lockdown on March 30. These measures helped to contain the spread of COVID-19 during the first wave of the pandemic, although the economic activity came to a halt. Following a gradual phasing out of the domestic restrictions, the number of COVID-19 infections started to rise in late August and the government has re-introduced a curfew and restrictions on gatherings to control the spread of the virus. The curfew was brought forward on November 16, now starting at 9:00 pm instead of 11:00 pm. The authorities are working in close collaboration with the Curaçao Tourist Board to guarantee a safe reopening of hotels.

Reopening of the economy. Since June 15, the authorities have gradually reopened the borders to international travel by allowing travel from several low and medium risk countries; stayover tourist arrivals in Q3 increased to 26 percent of the same period in 2019. Occupancy rate based on the largest 8 hotels has inched up by 34 percent between September and October. As of October 7, a maximum of 20,000 passengers will be welcomed to the island so that there will be minimal pressure on the local health system. As of October 22, the low-risk countries comprise Bermuda, Barbados, Bonaire, Cayman Islands, the Eastern Caribbean Currency Union, Jamaica, Trinidad and Tobago. Travelers departing out of any of these countries have to complete a digital immigration card online and fill out the Passenger Locator Card (PLC) within 48 hours before departure. The medium-risk countries comprise Canada, China, Cuba, Guyana, 13 EU countries, Hong Kong, Morocco, New Zealand, Taiwan, Turkey, Turks and Caicos, Trinidad & Tobago, Sint Maarten, India, the United Kingdom and Uruguay. As of October 7, the USA Tri-State area (New York, New Jersey and Connecticut) and the state of Florida are considered medium risk. Arrivals from these countries are allowed to enter Curaçao without quarantine, provided they meet certain conditions, including completing the digital immigration card, presenting a negative COVID-19 test taken a maximum of 72-hours prior to departure, and completing the digital PLC 48 hours prior to departure. All other countries are considered high-risk and travelers from these countries must request permissions to enter Curaçao and are subject to 2-week mandatory quarantine.


Key Policy Responses as of November 19, 2020

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. The agreement unlocked the third tranche of liquidity support in the amount of NAf 286 million (6½ percent of GDP) for the rest of the year, increasing total financing in 2020 to 15 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 Q1.

Reopening of the economy. Starting in mid-February, the government has gradually removed mobility and activity restrictions, prioritizing essential sectors, specific industries, regions, and population groups based on ongoing risk assessments. Most businesses and schools have reopened nationwide, but social distancing rules remain in place at the micro level and foreign entry remains restricted to contain imported cases. Localized movement restrictions were re-imposed in new hotspots, including in Jilin, Heilongjiang, Beijing, Liaoning, and more recently in Qingdao and Kashgar. These restrictions were lifted once the local outbreaks became under control. Testing and individualized health QR codes are used to gauge the path of the virus and contain outbreaks. With normalizing economic activity, real GDP rebounded by 3.2 percent (yoy) in Q2 and continued to recover by 4.9 percent in Q3.


Key Policy Responses as of November 19, 2020

Fiscal
  • An estimated RMB 4.8 trillion (or 4.7 percent of GDP) of discretionary fiscal measures have been announced. Key measures include: (i) increased spending on epidemic prevention and control, (ii) production of medical equipment, (iii) accelerated disbursement of unemployment insurance and extension to migrant workers, (iv) tax relief and waived social security contributions, 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 (of which 0.8 trillion was phased out at end-June) 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 March 2021, and eased loan size restrictions for online loans, and other credit support measures for eligible SMEs and households, (iii) tolerance for higher NPLs and reduced NPL provision coverage requirements, (iv) support bond issuance by financial institutions to finance SME lending, (v) additional financing support for corporates via increased bond issuance by corporates, including relaxing rules on insurers for bond investments, (vi) increased fiscal support for credit guarantees, (vii) flexibility in the implementation of the asset management reform, and (vii) easing of housing policies by local governments.

Exchange rate and balance of payments
  • The exchange rate has been allowed to adjust flexibly. 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 was raised by 25 percent for banks, non-banks and enterprises. Restrictions on the investment quota of foreign institutional investors (QFII and RQFII) were removed and new quota for domestic institutional investors were granted.


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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) prohibiting public gathering of more than 4 people, unless exempted, (iii) reducing the seating capacity in restaurants by 50 percent, and limiting dine-in services until midnight, (iv) implementing a temporary entry ban on Hong Kong SAR non-resident from overseas countries, (v) reducing and partially suspending cross-border transport and border control point services, (vi) imposing a 14-day compulsory quarantine for travelers from overseas and Mainland China, with all travelers except those from Mainland China being required to complete their quarantine in a hotel (starting from November 13), (vii) requiring passengers flying from “high-risk” countries to have negative COVID-19 testing results before arriving in Hong Kong SAR, and (viii) tightening exemption arrangements for air and sea crews. The government provided one-off virus testing services to all citizens on voluntary basis during September 1-14 and another round of free tests for taxi and public light bus drivers during October 3-16. Reflecting these containment measures, the economy contracted by 5.5 and 0.1 percent (qoq, sa) in Q1 and Q2, respectively.

Reopening of the economy. As the COVID-19 situation has improved since late August, some social distancing measures have been gradually relaxed: (i) allowing removal of face mask for outdoor and indoor sports and in country parks, (ii) re-opening cinemas, beauty parlors, fitness centers, bars, clubs, public entertainment places and some sports premises, subject to certain social distancing requirements, (iii) relaxing the restrictions on religious gathering to no more than half of the original capacity, (iv) allowing more than 4 people for team sports at sports premises, (v) allowing travel agents to organize registered local tours with a cap of 30 people, and (vi) increasing maximum number of participants at business meetings or wedding ceremonies without catering provision to 50. Face-to-face classes at all schools have resumed since September 29. Transfer and transit services for passengers from airports in Mainland China at the Hong Kong International Airport resumed on August 15. Starting from November 23, Hong Kong SAR residents returning from Guangdong Province and Macao SAR will be exempted from 14-day quarantine, subject to a daily quota of 5,000. With normalizing economic activity, real GDP rebounded by 2.8 percent (qoq, sa) in Q3.


Key Policy Responses as of November 19, 2020

Fiscal
  • An estimated HK$311.5 billion (or about 11 percent of GDP) of fiscal measures have been announced and are being implemented. Key measures include (i) enhancing anti-epidemic facilities and services (HK$43 billion or 1.5 percent of GDP) including the establishment of a new Anti-Epidemic Fund, (ii) tax and fee reliefs and other one-off relief measures (HK$85.5 billion or 3.0 percent of GDP), (iii) cash payout to Hong Kong SAR permanent residents aged 18 or above (HK$71 billion or 2.5 percent of GDP), (iv) employment subsidy scheme (HK$80 billion or 2.8 percent of GDP), (v) sector-specific relief measures (HK$25.5 billion or 0.9 percent of GDP), and (vi) temporary job creation (HK$6 billion or 0.2 percent of GDP).

Monetary and macro-financial
  • Under the currency board arrangement, the Base Rate was adjusted downward to 1.50 and 0.86 percent on March 4 and March 16, respectively, according to a pre-set formula, following the downward shifts in the target range for the US federal funds rate. The jurisdictional countercyclical capital buffer for Hong Kong SAR was reduced further from 2.0 to 1.0 percent on March 16 and the level of regulatory reserves was cut by half in April 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.

    Key measures to provide financial relief include (i) the introduction of low-interest loans for SMEs with 100 percent government guarantee (HK$70 billion), (ii) enhancing the 80- and 90-percent government guarantee products by raising the maximum loan amount and extending the eligibility coverage to listed firms, (iii) pre-approved principal payment holiday for corporates, and (iv) 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 46 confirmed COVID-19 cases and no deaths as of November 19, 2020. The government imposed strict containment measures soon after the first case was registered on January 21, 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, travel restrictions have included a temporary entry ban on foreign visitors and foreign non-resident workers, and from March 25, entry restrictions to visitors from Mainland China, Hong Kong SAR and Taiwan POC, who have traveled overseas in the previous 14 days. Starting on July 15, 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. Effective from September 4, arrivals from Mainland China do not need to be quarantined in Macao SAR as long as they have a negative NAT certificate obtained within the last 7 days. Arrivals from Hong Kong SAR must present a negative NAT certificate obtained within the last 24 hours; arrivals from Taiwan POC must present a negative NAT certificate obtained within the last 7 days. In addition, arrivals from Hong Kong SAR and Taiwan POC must undergo 14 days of centralized isolation medical observation. Starting from November 10, arrivals who have been to Kashgar Prefecture of Xinjiang, Kizilsu Kyrgyz Autonomous Prefecture of Xinjiang, Zhuqiao Township in Pudong New Area of Shanghai, Hangu Street in Binhai New Area of Tianjin and cold-chain logistics area at the central fishing port in Binhai New Area of Tianjin in the past 14 days prior to entering Macao SAR must undergo 14 days of centralized isolation medical observation. Starting from December 1, foreign visitors who were in Mainland China in the past 14 days prior to arrival are eligible to file an exemption application to enter in certain exceptional cases; foreign visitors who were in Hong Kong SAR, Taiwan POC and/or foreign countries in the past 14 days prior to arrival could file an exemption application to enter provided that their arrivals could serve the public interest of Macao SAR.

Reopening of the economy. (i) Eased border restrictions: on May 8, the shuttle bus service in Hong Kong-Zhuhai-Macao Bridge (HZMB) connecting Hong Kong SAR and Macao SAR restarted after over a month of suspension; operating hours of HZMB and Zhuhai Gate returned to normal on May 3; starting on May 11, non-resident workers from Zhuhai are eligible for an exemption from the 14-day medical observation period with certain requirements; starting on August 12, the 14-day quarantine on Macao SAR residents travelling to Mainland China has been 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, respectively; primary school classes resumed on May 25 (for year levels four to six) and on June 1st (for year levels one to three). (iii) Businesses: casinos reopened on February 20. (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, respectively. Nevertheless, a negative NAT certificate obtained within the last 7 days and a Guangdong Health Code must be presented when entering Macao SAR.


Key Policy Responses as of November 19, 2020

Fiscal
  • Key fiscal measures include (i) additional health spending handouts to all permanent residents (600 patacas per resident) amounting to 400 million patacas or 0.09 percent of GDP, (ii) handouts to all residents amounting to 5.8 billion patacas or 1.3 percent of GDP (electronic vouchers with 3,000 patacas per resident valid from May to July; electronic vouchers with 5,000 patacas per resident valid from August to December), (iii) transfers to eligible employees amounting to 3.8 billion patacas or 0.9 percent of GDP (5,000 patacas monthly for 3 months), (iv) transfers to self-employed professionals and eligible firms (ranging from 15,000 to 200,000 patacas) under the condition of not laying off employees, amounting to 2.4 billion patacas or 0.6 percent of GDP, and (v) transfers to taxi drivers leasing a taxi, lessees of wet market stalls, holders of hawker licenses or holders of tricycle rickshaw licenses (10,000 patacas). In addition, other measures include free utility fees for residents (for 3 months), subsidized utility fees for firms other than gaming operators and high-end hotels (for 3 months), interest-free loans and interest subsidy for SMEs (2.6 billion patacas or 0.6 percent of GDP), interest subsidy schemes for self-employed individuals (110 million patacas or 0.03 percent of GDP), paid occupational training (317 million patacas or 0.07 percent of GDP), and tax exemption/deductions for residents and local enterprises. To support the local tourism business, between June 22 and September 30, a subsidy was in place for eligible residents to join two local tours (280 patacas per tour, amounting to 280 million patacas or 0.06 percent of GDP). Starting on September 1, a campaign was launched to attract visitors by providing promotional offers and vouchers (400 million patacas or 0.09 percent of GDP). Fiscal measures amount to an estimated 52.6 billion patacas or 12.1 percent of GDP.

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

Links

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. These restrictions will remain in place until at least November 30th. Limited international air travel resumed on September 19.

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 November 19, 2020

Fiscal
  • A state of emergency decree created a National Emergency Mitigation Fund, which will be partially funded from regional and stabilization funds (around 1.5 percent of GDP) and will be complemented by 1.3 percent of GDP from domestic bond issuance and other budgetary resources. The Fiscal Rule Consultative Committee had allowed a 2020 fiscal deficit of 6.1 percent given the expected economic impact, but on June 15 allowed the government to temporarily suspend the fiscal rule in 2020 and 2021. The government now projects headline deficits of 8.9 and 7.6 percent of GDP for 2020 and 2021 respectively. Additional budgetary support for health has been announced including part payment for Covid-19 tests, 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.

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. Banks cannot increase interest rates on loans, charge interest on interest, or report entities to credit registries for availing themselves of any forbearance measures. Countercyclical provisions have been released, and Superfinanciera has authorized certain related-party transactions for fund managers, including the purchase of Certificados de Deposito a Termino (term deposit certificates) issued by an associated entity. Fund managers can also invest, directly or indirectly up to 15 per cent of the value of each fund, in other investment funds managed by them.

Exchange rate and balance of payments
  • To provide liquidity in FX markets, the central bank has auctioned FX swaps (in US dollars), 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 exisiting FCL arrangement was augmented on September 25.


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Comoros

Background. The pandemic in Comoros has not turned into a deep health crisis and only seven deaths have been officially reported since the first case was reported on May 1. The COVID-19 shock comes 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. The economy has gradually started to open. Air travel has resumed. School attendance and religious ceremonies are now allowed. The authorities have prepared a public-health related plan that describes the measures to be taken to minimize risks from pandemics. Implementation of the plan appears to be proceeding slowly, however, reflecting the authorities’ severe financial and capacity constraints. The WHO ranks the health system’s preparedness at the lowest level in international comparison.


Key Policy Responses as of November 19, 2020

Fiscal
  • The authorities are implementing their pandemic preparedness plan. Their top priority is to substantially expand spending on health care in line with pandemic-related needs, trying to overcome to the greatest extent possible the health care system’s capacity constraints. 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.

    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.

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 declared its first case of COVID-19 on March 10, and the virus continues to spread slowly across the country with thousands of confirmed cases and hundreds of deaths. On March 24th, the government declared a state of emergency and imposed the confinement of the capital, Kinshasa, which includes restrictions to travel between Kinshasa and the rest of the country and the prohibition of all gatherings of people in public spaces. Passenger flights from abroad are not allowed and border posts are closed to non-cargo shipments. These measures add to previous restrictions, such as closure of all education centers, suspension of all religious and sporting events, and closure of bars and restaurants. In 2020, the effects of the COVID-19 pandemic are projected to reduce real GDP growth (including through lower mining activity), increase consumer prices (particularly of imported products), reduce fiscal revenue (both mining and non-mining), and increase fiscal spending through the implementation of a COVID-19 response plan, which includes the opening of new COVID-19 test centers in Lubumbashi and other cities. In late June, the government announced the deconfinement of the Gombe business district in Kinshasa and the gradual deconfinement of workers in mining sites. Also, a new 9-month multi sectoral response plan against the pandemics (PMUAIC-19) was officially launched in June. The plan includes actions to strengthen the health system, stabilize the economy, and reinforce security and social protection.


Key Policy Responses as of November 19, 2020

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

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

    In the context of sustained increases in inflation and exchange rate depreciation, on August 18 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”.

Monetary and macro-financial
  • On March 24, 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 has also postponed the adoption of new minimum capital requirements and encouraged the restructuring of non-performing loans. In addition, the BCC announced measures to reduce contamination risks in bank notes and promote the use of e-payments.

    In order to re-anchor inflation expectations and maintain a positive in real terms policy rate, on August 10 the BCC increased its policy rate to 18.5 percent.

Exchange rate and balance of payments
  • On August 5th, 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 sharp decline in oil prices. The first confirmed COVID-19 case was reported on March 15, 2020. The authorities’ policy is responding to these developments. The Ministry of Health has prepared a national contingency plan in collaboration with WHO and other international partners. In the meantime, the authorities started to adopt containment measures, including social distancing, travel bans on visitors from high-risk countries and quarantine for nationals/expatriates returning from those countries, screening at ports of entry, and school closures. A lock-down 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. In late September, the lockdown period was reduced to 11PM-5AM.

Reopening of the economy. On May 18, the lockdown was eased with opening up of public transportation, primary schools final year class and graduation class. As of late June, 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, a large scale screening for teachers and administrative staff has been occurring. The flight space reopened fully as of August 24 with the requirement that each arrival is equipped with a negative covid19 test result dating from at most 3 days. The official school opening date on campus has been brought forward to October 12.


Key Policy Responses as of November 19, 2020

Fiscal
  • The overall cost of the response plan to the COVID 19 epidemic has been estimated at US$170 million (100 billion XAF), equivalent to 1.6 percent of 2020 GDP. The EU, WFP, France are getting together to provide support for the poorest segments of the population with combined support amounting to about 3 billion XAF as of now. Other UN agencies have provided about 7 billion XAF to support covid19 efforts. Up to mid November, the total amount of funding provided for covid19 expenses is about 75 billion XAF.

    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 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% to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution. Discussions are taking place at the country level on whether private companies can have access to the 100 billion XAF fund set up by the President and on simplifying access to refinancing instruments. A guarantee scheme has been set up to help private companies service their banking debts, but no details have been provided on the amounts or conditions.

Exchange rate and balance of payments
  • No new measures.


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Costa Rica

Background. Costa Rica reported its first confirmed case of COVID-19 on Mar 6, and as of November 17, the country has registered 127,012 confirmed cases and 1,588 deaths. In response, the government has implemented a range of measures to contain the spread of coronavirus, including declaration of a state of yellow alert and a national emergency, restrictions and bans on non-essential private and public vehicle circulation, international travel restrictions, mandatory quarantines for close contacts and those who enter the country, closures of schools, churches, beaches, national parks, bars, clubs and casinos, entry restrictions for foreign truck drivers, increased testing, and the conversion of a rehabilitation center into a hospital specializing in COVID-19 treatment. 2020H1 GDP declined by -4.0 percent y/y. A monthly indicator of economic activity so far points to 2020Q3 growth of around -7 percent y/y.

Reopening of the economy. Costa Rica began easing some coronavirus measures starting May 1. Theaters, gyms and athletic centers will be permitted to reopen during the week but with limited capacity and under strict rules (cleaning, distances etc.). The Health Ministry announced a further loosening of restrictions, to be implemented in four phases over 80 days. The first phase 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. The second phases 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. Since August 31, restrictions have been relaxed further in the entire country, with a focus on increasing economic activity. Restrictions were further relaxed starting September 9, when 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 will open to visitors from all U.S. states by November 1.


Key Policy Responses as of November 14, 2020

Fiscal
  • The government announced a package of revenue and expenditure measures to protect workers and companies against the economic effects of COVID-19, including (i) an interest-free 3-month moratorium on the payment of value-added taxes, business income taxes, and customs duties; (ii) a temporary adjustment to social security contributions by making them proportional to the time worked for a period of 6 months, as well as a deferral of the payment until the end of the year; (iii) a 4-month moratorium on taxes to be paid to the Costa Rican Tourism Institute for firms in the tourism sector facing liquidity constraints; (iiv) a monthly subsidy of ¢100-200,000 for 3 months to about 375 thousand households economically affected by the crisis. In addition, salary increases for public employees (except for the police) are suspended this year to direct more resources to the attention of COVID-19. In addition, the government announced public investment of 3.1 billion colones over 2020-2021 (out of which 1.1 billion colones are for PPPs).

Monetary and macro-financial
  • The Central Bank cut its policy rate by a full percentage point to a record low of 0.75 percent to soften the economic damage caused by the pandemic and to improve credit conditions for households and businesses. In addition, the Central Bank started purchasing government securities (issued pre-2020, in Costa Rican colones, and with a maximum maturity of 10 years) in the secondary market to provide liquidity during market distress. Further measures that aim at protecting workers and companies include (i) reducing the cost of credit (including through ¢900,000 million loans at preferential interest rates to firms across all sectors from state-owned banks); (ii) relaxed regulations on restructuring of loans and on buybacks; (iii) a minimum 2-month moratorium on the payment of principal and/or interest for personal credit, mortgages, auto loans, credit card loans, consumer loans, and education loans for affected households and firms (the National Bank of Costa Rica announced it would extend moratoria for affected clients until December 2020); (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 swap facilities that the Central Bank is offering to financial intermediates.

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, theatres and other recreational facilities; and imposing restrictions on public transportation and movements between regions in the country; (v) making wearing masks mandatory and encouraging teleworking. On March 30, 2020, the authorities launched a vast cleaning and disinfection operation in Abidjan.

Reopening of the economy. On May 7, 2020, the authorities announced the relaxation of the containment measures, which were further eased on May 14, 2020. In the Grand Abidjan district, they lifted the curfew and the closure of restaurants on May 15, while the reopening of schools and universities 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. Though, the state of emergency will remain in place. 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.


Key Policy Responses as of November 19, 2020

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

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted of a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, 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 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 for such special T-Bills issued by Cote d’Ivoire amounted to 1.5 percent of GDP. Côte d’Ivoire has been recently allowed to issue the equivalent of 0.6 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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.

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.


Key Policy Responses as of November 11, 2020

Fiscal
  • Key measures include: deferment of public obligations, free of interest for three months, which can be extended by additional three months if necessary; temporary suspension of payments of selected parafiscal charges; interest free loans to local governments, the Croatian Health Insurance Institute, and the Croatian Pension Insurance Institute to cover the deferred payments; subsidization of net minimum wages for three months to preserve jobs, which could be extended for another three months; and early refund of taxes for individuals. Beneficiaries of some EU Structural and Investment Funds will be able to receive larger advance payments. Part of the EU funds envelope has been reallocated to micro loans, a new credit line was introduced, accompanied by measures to facilitate faster disbursements of loans with lower interest rates, and larger partial risk guarantees. The government has also resorted to purchases of unsold stocks of finished goods in agriculture, food processing industry, medical equipment, and similar strategic goods.

    On April 1, the government announced additional measures, including: an increase of the subsidization of the net minimum wage; tax obligations of companies to be reduced or written-off depending on their turnover and loss; VAT payments will not be due until payment is received from customers and the deadline for the 2019 financial reports will be extended to June 30. 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.

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 instalments to clients' possibilities and cash inflow. The CNB has temporarily adjusted its supervisory practices in line with the EBA statement of March 12 ( https://eba.europa.eu/eba-statement-actions-mitigate-impact-covid-19-eu-banking-sector ). Banks will not distribute dividends.

    The Croatian Bank for Reconstruction and Development (HBOR) has issued a moratorium on debt service for three months, can provide liquidity loans, export guarantees, and restructure obligations. 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 1st, 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.

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.

Reopening of the economy. With low daily new infections since end-April, the government has started implementing lifting of restrictions in four phases. The first phase started on May 4, allowing reopening of construction sites, retail stores and public sector under social distancing and health guidelines. The second phase started on May 21, allowing reopening of public schools and open-air restaurants as well as free movement within the country. The third phase 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • Cyprus has implemented an economic support package that is estimated to amount to €899 million (4.5 percent of GDP) in 2020 for the health sector, households and businesses. The package includes: (i) a €100 million support for the health sector to combat the pandemic; (ii) income support for households including leave allowance for parents and those with health issues; (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 wave, Cyprus has extended some of the support measures until March 2021 in a more targeted manner, including support for crisis-affected businesses and extension of unemployment benefits.

    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

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

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

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

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

Exchange rate and balance of payments
  • No measures.


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Czech Republic

Background. The 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 1.9 percent in Q1 and 11 percent in Q2, and 5.8 percent in Q3-2020 compared to a year earlier.

Reopening of the economy. The list of permitted activities had been gradually expanded since end-April. However, due to an accelerating resurgence in new infections, several restrictions had to be reintroduced. The requirement to wear face masks in public transport and specific indoor spaces was reinstated as of September 1 and extended to all indoor spaces on September 10. As of October 5, a 30-day state of emergency was reinstituted and later prolonged to December 12. As of October 12, distance learning applies to all schools and universities, with the exception of preschools and, as of November 18, of pupils in the first two grades of elementary schools (6 to 8 years of age). As of the same date, restaurants accessible to the public are closed. As of October 22, retail shops and services are closed, except for shops with basic goods (food stores, drugstores, pharmacies, gas stations). With a few exceptions, hotels and other accommodation facilities are closed as well. Movement of persons and physical contact with others are restricted to the shortest time necessary. As in the spring, there are several exceptions to this measure, in particular for trips to work and in connection with business, for family visits, for the purchase of basic goods, and for trips to health-care facilities. People are also allowed to go out to parks, into nature or travel to their own holiday cottage and to stay there. With the exception of members of the same household, only two persons are allowed to move about together in public places. Wearing of masks outside is obligatory in developed areas of municipalities as well as in vehicles (subject to specific conditions). As of November 18, a limit on the number of customers in shops was introduced not allowing more than one person per 15 square meters.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government announced a fiscal package of CZK273bn (€10.4bn, 4.9 percent of GDP). Until the end of 2020, the government contributes 80 percent of wages (incl. SSC) to employers if employees are sent into quarantine and 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. Until end-2020, the government contributes 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. Between June and end-August, 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. The government also lowered the VAT rate (from 15% to 10%) on selected services (accommodation, culture, sport) 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). Between April and June, 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 approved a one-off benefit for pensioners of CZK 5,000 as well as a bonus for workers in social services and the health-care system of CZK 16.6bn in total. The government approved grants for tourism (e.g. spas, hotels, etc.) of CZK 2 bn 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) will be able to apply for a lump sum of CZK 500 per day for the period between Oct 5 and 4 Nov. The government has again approved grants for culture, sport, tourism, agriculture, bus transportation in total amount of CZK 7.7 bn. Between July and September the state will again cover 50% of rents of selected businesses, this time without the necessary reduction of 30%. The government further pledged close to CZK 500bn (EUR 19bn, 9 percent of GDP) in potential state guarantees. 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 the postponement of the electronic registration of sales for all subjects until the end of 2022. 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 , and 75 bps on March 26 and May 7 , respectively, to 0.25 percent. It also increased the frequency of repo operations from one to three times a week and reduced the countercyclical capital buffer rate by 75bps to to 1 percent , effective April 1, 2020, and on June 18, further toto 0.5 percent , effective July 1, 2020. 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.

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 centersclosures of entertainment, hospitality and public leisure facilitiessending home non-essential public employees  and asking all private businesses to keep employees home when possible .

Reopening of the economy. The authorities announced a careful and gradual lift of some containment measures (April 6). In the 1st Phase  primary schools and under, as well as additional health care sectors and liberal professions opened up mid-April. As part of the 2nd Phase , retailers (May 11), restaurants (May 18), secondary schools (May 18), and cultural activities (May 27) opened. The assembly ban was raised from 10 to 50 people (June 8) and the border to most European Union (EU) countries and the Schengen area was opened June 27 as part of the 3rd 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), made adjustments to Phase 4 of the reopening (August 14), introduced new targeted measures against Covid19 (18 September) and lowered the assembly ban to 50 people (September 25).


Key Policy Responses as of October 22, 2020
Fiscal
  • The authorities responded to the ongoing crisis quickly and forcefully through various initiatives. Currently, discretionary fiscal support amounts to DKK 131.4 billion (5.7 percent of 2019 GDP) and includes increased spending for additional health care needs and extraordinary budgetary measures to support workers and businesses . The latest initiative will phase out the relief measures and replace them with a recovery package . Another 5.1 percent of 2019 GDP in countercyclical support is expected to come through Denmark’s strong automatic stabilizers—including from weaker tax receipts and higher social benefits. Temporary liquidity measures, including postponement of tax payments and government guarantees , will further support activity in Denmark. The government also announced to support the plan to recapitalize Scandinavian Airlines with up to DKK 6 billion. The recently published fiscal budget for 2021 foresees a green, fair and responsible recovery of the Danish economy. A new agreement will support bars, restaurants and cafes which had their opening hours reduced.

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


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Djibouti

Background. Djibouti has had 5580 confirmed COVID-19 cases as of November 4, 2020. The government implemented various prevention measures, including restrictions at air, land, and sea borders, interruption of passenger flights and trains to (and from) Djibouti; suspension of visa issuance; confinement of non-essential employees, and steps to encourage social distancing (including school closures and cancellation of public gatherings).

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

Reopening of the economy. The government has gradually relaxed containment measures since May 17. 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 spaces receiving the public. In July, the borders were officially reopened and international travel permitted, but a recent uptick in cases led the authorities to reimpose restrictions for a two-week period ending November 4. The government continues to target those who have potentially been in contact with people who have tested positive. Starting July 17, the borders were officially opened. The recent uptick in cases has led the authorities to close the land borders till November 4.


Key Policy Responses as of November 5, 2020

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

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

Exchange rate and balance of payments
  • No measures.


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Dominican Republic

Background. 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 will commence from 9 pm to 5 am for Monday through Friday, and 7 pm to 5 am during weekends. On October 18, the state of emergency was extended for 45 days. On November 10, the curfew was extended for 20 days until December 1.

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.

Elections. The presidential and congressional elections took place on July 5. PRM’s candidate—Luis Abinader—won the presidential vote and the change of administration took place on August 16, 2020.

Reopening of the economy. On May 20, 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, 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, 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 with the reopening of all regions and airports to tourists. American Airlines restarted its flights to four destinations (Puerto Plata, Punta Cana, Santiago and Santo Domingo). 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. On November 11, the ferry service between the Dominican Republic and Puerto Rico resumed operations.


Key Policy Responses as of November 18, 2020

Fiscal
  • The original economic measures announced by the previous administration amounted to RD$32 billion (about US$576 million, or ¾ percent of GDP). These include higher social spending: (i) the Quédate en Casa program (RD$17 billion), subsidizing the most vulnerable households, including informal workers. Coverage under the existing program Comer es Primero, paying RD$5,000 (about US$90) per month, increased from 0.8 to 1.5 million households; 452,817 families will receive additional transfers of RD$2,000 (about US$36) per month; (ii) the newly created Employee Solidarity Assistance Fund (FASE) (RD$15 billion), which 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 billion. 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. The government accumulated more than RD$10 million from fines for the violation of the COVID-19 curfew established in March.

    On September 7, President Abinader promulgated a Supplemental Budget Law amounting to RD$202 trillion (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 billion (in 4 series), with the maturities of 10-20 years at an interest rate of 10-11 percent.

     

    [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, 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 billion (about ½ percent of GDP), which is equivalent to a 2 percent reduction in the reserve requirement rate and a release of RD$30.13 billion (US$553.7 million; about 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, the Monetary Board lessened the criteria to access these resources by allowing financial intermediaries to lend to any economic sector and extended the maturity of the loans from 1 to 4 years. The BCRD has also made available liquidity for loans to small businesses and personal microcredits. The first window amounts to RD$15 billion accessible through Banco de Reservas. It will be available for 3 years and loans would carry an interest rate of up to 8 percent. At the same time, the BCRD released RD$5.7 billion from the reserve requirement (about 0.5 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.

    Liquidity measures include easing other REPO operations for RD$50 billion (about 1 percent of GDP) to provide funds to the financial system, and provisions of U.S. dollar liquidity (US$0.622 billion, roughly 3/5 percent of GDP) through REPO operations and allowing banks to use public bonds towards reserve requirements on foreign currency deposits. Interest rate on these REPOs was lowered from 1.8 percent to 0.9 percent. In addition, the BCRD made arrangements with the Federal Reserve for a liquidity facility worth US$1-US$3 billion through short-term repos. Debt relief measures include a temporary freeze of debtor ratings and provisioning; classifying overdue loans for a 60-day period; and giving 90 days to debtors to update loan guarantees. In addition to these measures, on May 7, the BCRD announced a new facility to provide financing up to RD$20 billion for businesses operating in tourism, construction, exports, and manufacturing. Loans under this facility would carry an interest rate of 8 percent and would receive the same regulatory treatment as all other facilities put in place so far.

    As of November 17, of the RD$190 billion (about 4.0 percent of GDP) made available to financial intermediation entities to provide liquidity to economic agents, approximately RD$147 billion have been disbursed, providing financing to sectors such as commerce, manufacturing, exports, agriculture, construction, and tourism.

    At the August 2020 monetary policy meeting, the BCRD lowered its monetary policy rate by 50 basis points to 3.00 percent and reduced its interest rate on the Repo standing facility by 100 basis points to 3.50 percent. The BCRD left unchanged the rate on the deposit standing facility, narrowing the corridor to a band of ± 50 basis points. The decision on the policy rate and corridor came despite a recent uptick in inflation, which reached 4.35 percent in July. Market consensus continued to point towards inflation remaining within the target range of 4.0 percent ± 1.0 percent. At the September and October meetings, the BCRD kept its policy rate unchanged.

Exchange rate and balance of payments
  • The BCRD has intervened in the foreign exchange markets to prevent disorderly market conditions and maintains a relatively strong international reserve position (about US$9.5 billion, or about 12.1 percent of GDP, as of November 17, 2020). Also, the BCRD announced that it will expand its operations with Non-Deliverable Forwards (NDFs) to offer hedging instruments for international investors in local bonds denominated in domestic currency.


E


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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 (in Antigua and Barbuda), and the number of new cases continued to increase until mid-May. The COVID 19 case has since fallen and stabilized with no active case in most of the ECCU countries today. 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.

Reopening of the economy. 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 November 19, 2020

Fiscal

Several ECCU members have announced fiscal measures.

  • Anguilla.On April 15, the Premier announced several measures, including (i) unemployment assistance and direct financial support, (ii) waiving of duties and taxes on essential food and hygiene item imports, (iii) a fund to grant small low interest loans, and (iv) waiving all interest and penalties on debt obligations (excluding arrears) and social security payments by employers. On April 16, the UK government announced an emergency grant of US$1.5 million to fund the COVID-19 response. The government removed all regulations restricting movement and gatherings, effective April 29. 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, the government announced several measures, including (i) an increase in health spending (0.5 percent of GDP); (ii) a 20 percent reduction in electricity costs to the public and fuel costs to fishermen for 90 days; (iii) one-year investment incentives for home renovation and construction; (iv) suspension of the common external tariff on food imports and all new tax measures announced in 2020 budget; and (v) expansion of social safety net programs. The reduction in the electricity bills, currently at 15 percent, has been extended through October 2020. Since April 13, the government has begun a gradual phased approach to easing containment measures and reopening the economy. Most businesses including personal services have been allowed to operate, and access to churches and beaches has been granted, following specific health protocols. The government reopened the borders on June 4. All passengers arriving by air (includes transiting passengers but excludes children under 12 years old) must provide a negative covid-19RT-PCR test result, taken within seven days of their flight. Further screening, testing, monitoring and other protective measures, both for visitors and returning nationals are in place. Several regional and international air carriers (from the US and the UK) resumed operations to the island in July and August. Air Canada announced at end-October that it will delay its flights to Antigua and Barbuda to December 2020 amid quarantine requirement for persons returning to Canada. The state of emergency has been extended to December 31, and the curfew window remains at 11pm-5am daily. Failure to comply with the curfew regulations could result in EC$10,000 fines or six-months in jail. The Antigua and Barbuda Hotel and Tourism Association (ABHTA) reports that as of end-September 2020, 32 out of 41 hotels and resorts have restarted operating, and that about 3,360 employees were expected to return to work to these properties compared to 5,605 before the pandemic hit tourism activity. As of September 30, 2020, 48 percent of the available rooms had been open to accommodate guests . The average occupancy rate was 45 percent, but only 14 percent compared to the total room night available in 2019.

  • Dominica. On May 17, the Prime Minister announced the following measures: (i) extension of the deadline for filing of personal and corporate income tax returns; (ii) extension of three months for payment of corporate income tax; (iii) Waiving penalties for businesses that enter into payment plans within 6 months of the new payment deadline; (iv) reduction in the corporate income tax rate (from 25 percent to 17 percent) to companies which commit to continue to employ at least 80 percent of their staffing as of January 1, 2020, for a period of 12 months; (v) reduction to zero percent in the import duty and the value-added tax charged on disinfectants, cleaning supplies, protective gears and face masks; (vi) increased budgetary funding to the Ministries of Health and Agriculture; (vii) cash grants to approximately 2,500 individual crop farmers, based on the size of the farmers holding; (viii) implementation of multiple infrastructure projects with expenditure of up to US$100 million, with total additional investments in construction expected to amount to at least US$296.8 million; (ix) pay to small contractors and merchants with amounts owed by the Government of EC$100,000 and less, utilizing the resources approved by the IMF under the Rapid Credit Facility (RCF); and (x) income support for the period April-June 2020 for heads of families and single persons who are currently unemployed. Phase one of reopening of borders began on July 15th, allowing nationals to return home. The government announced that all travelers, including non-nationals, will be allowed to travel to Dominica from August 7th, as part of phase two of reopening.

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

  • 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. On March 22 and March 26, the Prime Minister announced an increase in the health budget (½ percent of GDP). He also announced a slew of fiscal stimulus measures (3¾ percent of GDP), including (i) an injection of funds to SMEs and the agriculture sector; (ii) waiving of customs duties for essential hygiene and health products imports; (iii) additional support for poverty alleviation program; (iv) a reduction of the corporate income tax rate from 33 percent to 25 percent, and of the Unincorporated Business Tax rate from 4 percent to 2 percent, for three months; (v) funding for mortgage loans to citizens of St. Kitts and Nevis; and (vi) a moratorium on payments for electricity services for affected businesses and individuals for three months. On July 23, the Premier of Nevis announced tax exemptions for new constructions projects as a stimulus measure. Since May 23 and about a month after the last new case of COVID-19 was reported, the government ended its 24-hour curfew after gradually reducing the number of days in which it applied. Curfews have been shortened to 12pm to 5am. Beaches, churches, and bars have been reopened. Physical distancing of at least 6 feet applies to all persons that are not members of the small household. Borders remain closed.

  • 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.

  • St. Vincent and the Grenadines. On April 7, the government approved a fiscal package (3.6 percent of GDP) in response to the pandemic crisis. The main measures include: (i) increased health spending, (ii) waiving of VAT and duties on health and hygiene products, (iii) relief to the hardest-hit sectors (i.e. tourism, transport, and agriculture), (ii) expansion of social safety net programs, and (iv) deferred payment of personal income taxes and various license fees. Effective October 14, the country started the Phase 4 of its reopening protocols. All travelers (except those from Barbados) must arrive with a negative COVID-19 test. Also, visitors from high and medium risk countries have to comply with a mandatory quarantine (2-5 days depending on the risk profile of source countries.)

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 November 18, Ecuador has reported 182,250 confirmed cases and 13,052 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. On March 22nd, the Government requested the joint commandment of the armed forces to manage the province of Guayas as a zone of national security, with the objective to enforce confinement measures, in the province concentrating the largest share (70 percent) of confirmed cases in the country.

Reopening of the economy. 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). For now on the responsibility for containment measures resides with municipal governments, subject to local COEs oversight.


Key Policy Responses as of November 18, 2020

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. 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. Egypt has also resumed the export of medical supplies, after a temporary halt in March 2020.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has announced stimulus policies in the USD 6.13 billion package (EGP 100 billion, 1.8 percent of GDP) to mitigate the economic impact of COVID-19. Pensions have been increased by 14 percent. Expansion of the targeted cash transfer social programs, Takaful and Karama, are also being extended to reach more families. A targeted support initiative for irregular workers in most severely hit sectors has been announced, which will entail EGP 500 in monthly grants for 3 months to 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 8 billion has been allocated, targeted at providing urgent and necessary medical supplies, and disbursing bonuses for medical staff working in quarantine hospitals and labs. To support medical professionals, including doctors working in university hospitals, a 75 percent allowance over the wages has been announced. Energy costs have been lowered for the entire industrial sector; real estate tax relief has been provided for industrial and tourism sectors; and subsidy pay-out for exporters has been stepped up, discount on fuel price has been announced for the aviation sector As part of the EGP 100 billion stimulus, EGP 50 billion has been announced for the tourism sector, which contributes close to 12 percent of Egypt’s GDP, 10 percent of employment, and almost 4 percent of GDP in terms of receipts, as of 2019. The moratorium on the tax law on agricultural land has been extended for 2 years. The stamp duty on transactions and tax on dividends have been reduced. Capital gains tax has been postponed until further notice. 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 corporationsMicrolenders 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. Suspension of credit score blacklists for irregular clients and waiver of court cases for defaulted customers have been announced. The central bank has also launched an EGP 20 billion stock-purchase program which it has minimally used. A temporary daily limit has been put in place for deposits and cash withdrawals for individuals and companies, which was relaxed during Ramadan.

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


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El Salvador

Background. El Salvador has reported 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. 2020Q1 y/y growth is 0.8 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 September 24, 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 10 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, preventive measures have been loosened to a large extent, and the country is now in the second of four stages of normalization. The loosenings lifted the stay-at-home order and closing of the airspace and allow businesses to reopen though some with capacity restrictions. As additional preventive measures, movement between districts in the continental part of the country remain restricted and the use of masks in public is being more tightly enforced. Rates of daily new cases have been low since August.


Key Policy Responses as of November 17, 2020

Fiscal
  • Fiscal policy is facing large two shocks: the Coronavirus and lower oil prices. The government approved various measures to address the crisis. A broad emergency health spending package (1.0 percent of GDP), aims to improve hospital preparedness to respond to local transmission. It also deepens investments focused on the first response system, quarantine facilities for incoming travelers, and laboratory facilities/testing which had already been operationalized in early March. Furthermore, a social assistance scheme (0.3 percent of GDP) has been approved and initiated for the most vulnerable and will be expanded gradually to cover approximately 15 percent of the population. Other spending measures were also taken, mainly to ensure continuity of education (0.4 percent of GDP); schools have also resumed in early September with class sizes cut in half and therefore longer school days. On the revenue side, the authorities are providing some targeted and temporary support to the private sector (estimated cost of 0.3 percent of GDP). Measures include halving withholding tax rates and delaying tax payment deadlines for small and medium-sized firms, while safeguarding public revenues, and reducing electricity bills for firms affected by the Covid crisis, with a focus on SMEs, and for households. In addition, in light of the recent oil price decline, Equatorial Guinea is facing a large fiscal revenue shock, given that hydrocarbons accounted for more than ¾ of fiscal revenues. To address this shock, the government is contemplating to mobilize more financing. The government has also been postponing execution of non-priority capital expenditures, identifying savings to non-wage current expenditures, urging public enterprises to cut personnel and costs as well as continuing implementation of plans to strengthen the tax administration.

Monetary and macro-financial
  • On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. 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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Eritrea

Background. The State of Eritrea reported its first positive COVID-19 case to the World Health Organization (WHO) on March 21, 2020. After announcing full recovery of all 39 patients previously infected on May 15, the cases have started increasing again at a faster pace. The government imposed a 21-day national lockdown effective from April 2, which was extended without a timeframe on April 22. All citizens are compelled to stay at home except for those engaged in indispensable developmental and security tasks. All trading activities and transactions are banned during this period except in major productive and service sectors (manufacturing, food processing, construction, trucking etc.) which will continue their functions. Food production, supply and processing enterprises as well as grocery stores, pharmacies and banks will continue to provide services but must close at 8:00 pm every evening. All government institutions stopped routine services and functions to focus on indispensable developmental and security tasks. Except for citizens employed in institutions that will continue their functions, all other individuals confined to their homes are not allowed to use their private cars during this period.

Reopening of the economy. On June 28, the government published the guidelines on partial reopening of schools aiming to reopen all schools by end of July, 2020.


Key Policy Responses as of November 17, 2020

Fiscal
  • No measures.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.

Links

21-day national lockdown

Guidelines on partial reopening of schools


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Estonia

Background. The COVID-19 pandemic is affecting the Estonian economy. The first case of COVID-19 was reported on February 27. The government has implemented a range of measures aimed at containing and mitigating the impact of the pandemic for workers and businesses. The measures include travel restrictions, social distancing, declaration of state of emergency, distance learning for schools, ban of public gatherings and sanitary inspections. The overall epidemiological situation is under control, although some regions report an increase in the number of new cases and show early signs of the second wave. The 2020-Q2 year-on-year real GDP growth was -6.9 percent.

Reopening of the economy and additional containment measures. The Government is rolling out the exit strategy approved on April 27, 2020. After being in place for 68 days, the emergency situation ended on May 18. Shopping centers and restaurants reopened on May 11; ferry links between Tallinn and the Finnish capital, Helsinki partly reopened for work-related traffic on May 14; schools reopened on May 15 with most of the learning remaining online; Baltic states now allow travel among the three nations but travelers from outside the region need to undergo 14-day quarantine. However, children’s playrooms, casinos, slot machine halls and entertainment facilities including bowling alleys, billiard halls and adult clubs will remain closed. Gyms and swimming pools restarted operations on May 18. From June 1, Estonia reopened its borders to travelers from the EU and EEA nations without having to undergo a 14-day quarantine period. Bars and restaurants are now permitted to remain open and sell alcoholic beverages after 10 PM. Public events of up to 100 participants are now permissible with a maximum of 50 percent audience/space occupancy. Estonia has started to test digital immunity passports, seeking a safer return to workplaces following the coronavirus lockdown. Government has changed the requirement to adhere to the 2+2 rule to a recommendation. Government has decided to ease restrictions on spectator capacity at public events, from 500 to 1,500 persons for indoors and from 1000 to 2000 for outdoors, starting from July 15. The restrictions on indoor events, however, are strengthened again in September 29 from 1,500 to 750 persons in an effort to mitigate the second wave. Until August 31, it is forbidden to open direct air services from Estonia to high-risk countries experiencing 25 cases or more per 100,000 inhabitants in the past 14 days. The travel restrictions are regularly updated on the government website . In view of a potential new wave of coronavirus, Estonia is building a stock of personal protective equipment to cover the needs for a whole month and the university of Tartu developed a monitoring system based on sewage analysis to discover potential second wave of COVID-19 as soon as possible.The government reintroduced the 2+2 rule on November 16, along with mask wearing in enclosed public spaces. Mask wearing will be mandatory for all persons above 12 years of age and will be applied on public transport, in concert halls, cinemas and theaters. The 2+2 rule will apply in shopping malls, large stores, entertainment venues and government offices. However, it will not apply in cinemas, theaters or schools. For restaurants, up to 10 people will be allowed to sit at a table together. The new requirements will be reviewed every two weeks and fines will not be imposed for non-compliance. As opposed to the other Baltic countries, the government is not planning to declare a state of emergency. Education Minister Reps said the government wants to keep society open for as long as possible, especially in the education sector where in-class teaching is crucial (EER news). As of November 16, the period of mandatory self-quarantine for 10 days is lifted for arrivals from the EU/EEA area if that country has a 14-day reported coronavirus rate lower than 50 per 100,000 inhabitants.


Key Policy Responses as of November 18, 2020

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

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

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

Exchange rate and balance of payments
  • No measures.


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Eswatini

Background. Eswatini reported its first COVID-19 case on March 14, 2020 and cases have been rising rapidly since then. 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 has been affected by the closure of some ports of entry with South Africa and weak demand, registering a preliminary contraction of 8.2 percent in 2020Q2. While the exchange rate against the US$ depreciated by 28 percent in the first quarter of 2020, it has appreciated by 6 percent cumulatively in the second and third quarters. 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.

Reopening of the economy. Since May 8, the government has begun the process of carefully easing the partial lockdown by allowing some businesses to operate. The national emergency was further extended until November 19. Schools have reopened since July 6 in the completing classes, while other class levels will remain closed until January 2021, and the government issued new guidelines allowing for religious and social gatherings under strict conditions. More businesses including casinos, gyms, cinemas, and public transportation have been allowed to operate under established WHO and health guidelines since July 13. On September 30, the government lifted restrictions on international travel and issued a new travel advisory, requiring that international travelers present a negative COVID-19 certificate taken within 72 hours and discouraging non-essential travel. Essential travelers, such as daily commuters (i.e., scholars, teachers, truck drivers) who have been making cross border travel during the travel restriction period will continue to follow existing protocols. Selected arts and medium-risk sports activities, such as chess, gymnastics, swimming, and top-level football have reopened since October 12. The ban on the production and sale of alcohol was lifted on October 26 and sale is restricted to home use and restaurant consumption with meals only.


Key Policy Responses as of November 17, 2020

Fiscal
  • In FY19/20 (ending March 31, 2020), a supplementary budget was approved for additional public healthcare of E100 million (0.14 percent of GDP). 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, which is currently near finalization in Parliament, 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 has: (i) reduced the discount rate by a cumulative 275 basis points to 3.75 percent and kept it unchanged during its meeting in September; (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 15, 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. 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 14, 2020. Despite a slow rate of initial community transmission, the recent pace of confirmed infections has accelerated, with a peak of 1829 daily new cases reached on August 21, 2020. Authorities closed land borders, closed schools, ordered the shuttering of nightclubs and entertainment outlets, announced social distancing measures, and called in retired and in-training medical personnel. In addition, all people entering Ethiopia from another country are subject to a mandatory 14-day quarantine at designated hotels at the traveler’s expense. The authorities postponed the elections, which were scheduled for August 29. On September 18, the Minister of Health tabled proposals in parliament for preventative measures that could be taken to allow the election to take place, though no timeline was announced. On April 8, the Prime Minister declared a state of emergency under Article 93 of the constitution, which allowed it to impose more stringent measures. Among them, most states have banned inter-regional public transport and public gatherings, although the international border with Djibouti remains fully open to transport of commercial goods. Layoffs by private employers have also been forbidden. The state of emergency expired in early September, and some restrictions on travel and sports events have since been lifted.

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

GDP growth over this fiscal year and next (starting in July 2020) is expected to suffer a cumulative reduction of 10½ percentage points relative to the pre-crisis baseline.

Reopening of the economy. Ethiopian Airlines has started to resume flights to about half of previously suspended destinations in July. On October 20, the government announced that around 30 percent of schools would be reopened, though schools in Addis Ababa, where the bulk of cases have been reported, will remain closed.


Key Policy Responses as of November 5, 2020

Fiscal
  • Ethiopia initially announced a Br 300 million package to bolster healthcare spending in early March. On March 23, the Prime Minister announced the aid package would be increased to Br 5 billion (US$154 million or 0.15 percent of GDP) but details on the precise modalities of the assistance were not made available. On April 3, the Prime Minister’s office announced a COVID-19 Multi-Sectoral Preparedness and Response Plan, with prospective costing of interventions 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. In practice, much less has been spent to date. The Urban PSNP is being temporarily expanded in early FY 2020/21 to cover over 500,000 new beneficiaries for three months at a cost of US$88 million.

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

    On June 25, 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.

    A broader set of measures including further support to enterprises and job protection in urban areas and industrial parks is under discussion with the donor community but has not been formalized. The Urban Productive Safety Net Programme will be expanded to 16 additional cities over the first two months of FY 2020/21, in collaboration with the World Bank, at an estimated cost of $88 million.

    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 33 billion birr of additional liquidity to the Commercial Bank of Ethiopia.

Exchange rate and balance of payments
  • No measures.


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European Union/Euro Area

Background. Since the first reported cases on January 24, 2020, COVID-19 has spread across the European Union (EU) with a severe impact. More than 11.3 million cases and 279,827 deaths have been reported in the EU as of November 19. Real GDP contracted in the second quarter of 2020 by 11.8 and 11.4 percent (q/q) before rebounding strongly in the third quarter by 12.7 and 12.1 percent in the euro area and the EU, respectively. Most European countries have taken several containment measures ranging from lockdowns and travel restrictions to school closures and bans on large gatherings, which had eased with a steady decline in cases during the summer. However, as the numbers of new cases and deaths have increased since August, some countries have started increasing lockdown restrictions. On May 20, the European Commission proposed country-specific recommendations providing economic policy guidance to all EU Member States, with a focus on the most urgent challenges brought about by the pandemic and on relaunching sustainable growth.

Reopening of the economy. The European Commission presented guidelines for exit strategies and called for a common framework across member states. The criteria include: (i) sustained reduction and stabilization of new cases, (ii) sufficient health system capacity such as adequate hospital beds, pharmaceutical products, and equipment, and (iii) appropriate monitoring capacity to quickly detect and isolate infected individuals as well as to trace contacts. The Commission recommended Schengen Member States and Schengen Associated States to lift internal border controls by June 15, 2020, extend the temporary restriction on non-essential travel to the EU until 30 June, and set out an approach to progressively lifting the restriction afterwards. As of July 1, residents of certain third countries , which have met a set of criteria, should not be affected by temporary external borders restriction on non-essential travel into the EU.


Key Policy Responses as of November 19, 2020

Fiscal
  • The EC presented proposals to the Council for decisions to grant financial support of €87.3 billion to 16 Member States under the SURE instrument on August 24. The EC announced on October 22 that it will issue its forthcoming EU SURE bonds of up to €100 billion as social bonds.

    The European Council agreed on the Next Generation EU (NGEU) recovery fund on July 21. It will provide €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, 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 European Parliament and national parliaments still need to ratify the agreement in order for the EU to issue the debt to finance the NGEU.

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

    Key measures from the EU Budget (about €37 billion and 0.3 percent of 2019 EU27 GDP) include (i) establishing the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Investment Initiative Plus (CRII+) in the EU budget to support public investment for hospitals, SMEs, labor markets, and stressed regions; (ii) extending the scope of the EU Solidarity Fund to include a public health crisis, with a view of mobilizing it if needed for the hardest-hit EU Member States (up to €800 million is available in 2020); (iii) redirecting €1 billion from the EU Budget as a guarantee to the European Investment Fund to incentivize banks to provide liquidity to SMEs and midcaps; (iv) announcing credit holidays to crisis-affected debtors; and (v) adopting a proposal for a €3 billion macro-financial assistance (MFA) package to ten enlargement and neighborhood partners to help them limit the economic fallout of the coronavirus pandemic. The European Commission proposed modifications to its 2020 budget to make €11.5 billion for crisis repair and recovery available already this year. The European Commission also activated the general escape clause in the EU fiscal rules, which suspends the fiscal adjustment requirements for countries that are not at their medium-term objective and allows them to run deficits in excess of 3 percent of GDP. After announcing a flexible interpretation of EU State Aid rules to support national support measures for critical sectors, the European Commission has further directed Member States to apply Article 107(2)(b) TFEU, which enables them to compensate companies for the damage directly caused by exceptional occurrences, such as COVID-19, including measures in sectors such as aviation and tourism. To date, national liquidity measures, including schemes approved by the European Commission under temporary flexible EU State Aid rules amounted to €3 trillion .

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

Monetary and macro-financial
  • The ECBdecided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020 under the existing program (APP), and (ii) temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) between June 2020 and June 2021, with interest rates that can go as low as 50 bp below the average deposit facility rate. More recently, the ECB introduced a new liquidity facility (PELTRO), which consists of a series of non-targeted Pandemic Emergency Longer-Term Refinancing Operations carried out with an interest rate that is 25bp below the average MRO rate prevailing over the life of the operation. The PELTROs commenced in May will mature in a staggered sequence between July and September 2021. In March the ECB introduced an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP), initially through end-2020. On June 4, the weaker inflation outlook in the ECB’s June projections prompted the Governing Council to expand the size of the PEPP by €600 billion to €1.35 trillion. The duration of the program has been extended to at least June 2021, and the ECB will reinvest maturing securities until at least the end of 2022. Further measures included an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs). The ECB also announced a broad package of collateral easing measures for Eurosytem credit operations in early April. These include a permanent collateral haircut reduction of 20 percent for non-marketable assets, and temporary measures for the duration of the PEPP (with a view to re-assess their effectiveness before the end of 2020) such as a reduction of collateral haircuts by 20 percent, an expansion of collateral eligibility to include Greek sovereign bonds as well as an expansion of the scope of so-called additional credit claims framework so that it may also include public sector-guaranteed loans to SMEs, self-employed individuals, and households. In a move to mitigate the impact of possible rating downgrades on collateral availability, on April 22, the ECB also announced that it would grandfather until September 2021 the eligibility of marketable assets used as collateral in Eurosystem credit operations falling below current minimum credit quality requirements of “BBB-“ (“A-“ for asset-backed securities) as long as their rating remains at or above “BB” (“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 25, 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.

    The ECB Banking Supervisionallowed significant institutions  to operate temporarily below the Pillar 2 Guidance (P2G), the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical capital buffer (CCyB) by the national macroprudential authorities will enhance its capital relief measures. 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. The leverage ratio is currently not a prudential requirement for banks but will become mandatory next year. If 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 extended its recommendation on dividend distributions and share buy-backs until January 2021, asked banks to be extremely moderate with regard to variable remuneration, and clarified that it will give enough time for banks to restore buffers in order not to act pro-cyclically. 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 June 18, the European Parliament and the European Council adopted the "banking package," which was proposed by the European Commission on April 28. 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.

    In mid-September EBA announced that its temporary guidance (April) emphasizing flexible provisioning would lapse at the end of the month. Loans granted debt-service relief before end-September would be grandfathered. For all other loans—including those covered by new or extended moratoria—banks would be asked to reinstate their steady-state risk management and asset valuation processes.

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 (on March 19) 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. The repatriation of Fijian citizens since July led to a temporary resurgence of border cases that were quarantined in government-designated facilities and the last active COVID-19 patient was diagnosed and quarantined on October 30.

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, leads 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.


Key Policy Responses as of November 5, 2020

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 are 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$50.9 million for the development of sugar sector. More recently, the government expanded its unemployment assistance, guaranteed the debt of Fiji Airways and announced a concessional loans initiative for MSMEs impacted by COVID-19, approving loans of in the amount of F$ 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 in the period from late March to early September, 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$2371.0 million (8.7 months of retained imports) as of August 31, 2020. The reserves increased on account of fresh loans from ADB and World Bank and grant by the European Union. The ADB has announced to provide US$ 2million to Fiji from its Asia Pacific Disaster Response Fund (APDRF) to respond to pandemic crisis in the country.

  • The Fijian Government and the United States signed Trade and Investment Framework Agreement (TIFA), first of its kind with the United States to promote trade and investment ties between the two countries.

Link

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

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Finland

Background. The first confirmed case was reported on January 29, 2020. The number and incidence of new coronavirus infections remains small nationally but there are recent signs of a second wave as the number and incidence of new cases is increasing. 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, the government invoked the Emergency Powers Act, which was used to close borders, restrict domestic movements, and expand service obligations of essential personnel. In response, unemployment climbed to nearly 12 percent in March.

Reopening of the economy. Restrictions to and from the region of Helsinki were lifted on April 14. On May 4, the government announced a plan to lift broad restrictions in favor of more targeted containment measures, including: on May 14, resumption of primary and lower secondary school and cross-border movement of essential traffic; on June 1, reopening of restaurants and public facilities and limits on public gatherings increased from 10 to 50 people; on July 31, resumption of public events with more than 500 people. Effective June 16, the government repealed the use of powers under the Emergency Powers Act, declaring that the country is no longer in a state of emergency. Barring any significant setbacks, the restrictions on gatherings will be lifted altogether on October 1. 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 with a limit value of 8 new cases per 100,000 persons in the previous 14 days. As of July 13, travel between Finland and non-EU countries on the ‘green list’ approved by the Council of the European Union will be permitted subject to restrictions which depend on the incidence of COVID-19. On August 13, the government adopted resolutions on recommendations for wearing face coverings and face masks, and for remote work. On August 18, the government reinstated travel restrictions on traffic between Finland and several countries based on their 14-day incidence rates. This is in addition to entry restrictions for three countries introduced on August 6. 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 will continue through October 18. The government also adopted a resolution on a hybrid strategy for cross-border traffic and travel which requires a rapid increase in cross-border testing capacity and analysis by 10,000 tests/day. This would allow a more flexible approach to border restrictions. On September 24, the government reintroduced travel restrictions between Finland and several Schengen area countries. The government has imposed new restrictions starting October 8 on the opening and licensing hours of food and beverage service businesses. As of November 20, restrictions on the activities of food and beverage service businesses in five regions will continue due to their epidemiological conditions. 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. The government continues to recommend that Finnish citizens and residents avoid unnecessary travel to high-risk countries.


Key Policy Responses as of November 19, 2020

Fiscal
  • Key discretionary tax and spending measures(close to 3 percent of GDP) include additional spending for (i): healthcare and testing, protection and medical equipment, public safety and border controls, and research on the coronavirus epidemic, in particular to develop methods for rapid diagnostics and vaccines and a knowledge base for timely decision-making on coronavirus measures, (especially on the exit strategy) (€1 billion); (ii) lower pension contributions through the remainder of 2020 (€1.05 billion); (iii) grants to SMEs and self-employed (€650 million); and (iv) expanded parental allowance, social assistance and unemployment insurance (€3 billion). In addition to discretionary measures, automatic stabilizers are expected to increase the fiscal deficit by about 4-5.0 percentage points of GDP. Deferral of tax and pension payments for 3 months are expected to provide additional short-run relief of 2 percent of GDP (€4.5 billion). Finland is also contributing €5 million to international non-profit companies working on the development of a COVID-19 vaccine. On April 15, the Finnish Government agreed to increase funding for the World Health Organization (WHO) to €5.5 million. This brings funding to the 2015 level and marks a €1.9 million increase from 2019.  On April 29, the government announced a €500 million recapitalization scheme for Finnair (which is 56% state-owned).  On May 8, the government published a third supplementary budget proposal for 2020 which includes €700 million (0.3 percent of GDP) for share acquisitions in state ownership steering, €123 million for supporting restaurant and catering businesses, and €16 million for vaccine and drug development research.  The supplementary budget proposal also includes guarantees for the Employment Fund (€880 million), SURE (€432 million), and the EIB (€372 million). The total guarantee increase amounts to €1.68 billion (0.7 percent of GDP). On June 3, the government published a fourth supplementary budget proposal for 2020 which includes an additional €1.2 billion in support to households and businesses; and increased public investment (€1 billion). The supplementary budget also includes 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 23, 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. On November 19, the government submitted a proposal to amend the 2021 budget to include among others EUR 266 million for the second phase of future-oriented investments; 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.

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

    Key measures within Finland include: (i) Bank of Finland to support liquidity through investing in short-term Finnish corporate commercial paper (€1 billion); (ii) 1 ppt reduction in the structural buffer requirements of all credit institutions by removing the systemic risk buffer and adjusting institution-specific requirements (increases Finnish banks’ international lending capacity by an estimated €52 billion – that, plus other countries’ measures, increase lending capacity to Finnish households and firms by an estimated €30 billion); (iii) Finland’s Export Credit Agency is expanding its lending and guarantee capacity to SMEs by €10 billion to €14.2 billion  (and the government increased its coverage of the agency’s credit and guarantee losses from 50 to 80 percent); (iv) the State Pension Fund will also invest in commercial paper (€1 billion); (v) a state guarantee for Finnair (€600 million); (vi) state guarantee for shipping companies (€600 million); and (vii) easier re-borrowing of pension contributions allowed; support restaurants in employing workers (€40 million) and compensation for the imposed restrictions on activities (€ 83 million). The fourth supplementary budget contains 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, Finland’s Financial Supervisory Authority relaxed to 90 percent the macroprudential limit on loan-to-collateral ratios for residential mortgages. On September 30, the Board of Finland's Financial Supervisory Authority decided not to extend the validity of the 15% risk weight floor on housing loans which is due to expire January 1, 2021.

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. After a steady decline since mid-April, infections are surging again, with daily new cases past the previous peak. Localized clusters with outbreaks are being continuously monitored. In mid-March the government introduced a range of measures to reduce the spread of COVID-19, including school closures, the ban of all non-essential activities, outings and long-distance travel, and the introduction of night-time curfews in some cities. The French economy contracted by 5.9 percent in Q1-2020, compared to the previous quarter, and by 13.8 percent in Q2-2020. Activity rebounded strongly in Q3-2020, with GDP growing by 18.4 percent.

Reopening of the economy and additional containment efforts. As of May 11, France started to ease the containment measures, beginning with the reopening of primary schools, shops, and industry, on a differentiated regional basis. Most major domestic restrictions were lifted as of June 22. Internal and intra-European travel restrictions have also been lifted. The resurgence of infection at end-August prompted the government to first apply regional night curfews and eventually a (partial) lockdown beginning October 30. Schools remain open but non-essential retail and services are ordered to close. While intra EU borders remain open, extra-European borders are closed, and circulation between France’s regions is not allowed.


Key Policy Responses as of November 5, 2020

Fiscal
  • The authorities have introduced three amending budget laws between March and July increasing the fiscal envelope devoted to addressing the crisis to about €135 billion (nearly 6 percent of GDP, including liquidity measures). This adds to a package of public guarantees of €327 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 reduced-hour 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). Some support measures are being gradually phased out since June (e.g. by scaling down the generosity of the reduced-hour scheme), except for industries that still face opening restrictions (e.g. tourism, which will benefit from targeted exemptions from taxes and social security contributions, and extended support through the reduced-hour scheme and the solidarity fund until end-2020). On September 3rd, the government announced a new fiscal package to support the recovery of the French economy (“Plan de Relance”). The 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 this envelope is expected to be covered by grants from the EU Recovery Fund. In response to the reintroduction of lockdown measures, the authorities announced the extension of emergency support for firms and households (by about 0.9 percent of GDP) in the context of the fourth amending budget law.

     

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 in place until May 18; and (iii) credit mediation to support renegotiation of SMEs’ bank loans.

Exchange rate and balance of payments
  • No measures.


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Gabon

Background. Gabon, as all oil exporters, is being hit by two shocks—the global impacts of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The 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 Monday, April 27th, some of these measures were relaxed, including the full lockdown in Libreville. A second reopening wave started on July 1st 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 are envisaged to be reopened by November 2020. Public gatherings are still not approved. Travelers departing to the countryside from the two main cities (Libreville and Franceville) must show a negative Covid-19 test performed up to five days prior to departure. Since early September, the test for domestic trips can be performed up to 14 days prior to departure. Travelers flying abroad must take the test if the destination country requires it, whereas all passengers arriving in Libreville’s airport 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. More recently, on October 10, a new round of relaxation of the preventive measures have been announced, allowing restaurants and religious centers to resume activity. The gradual reopening of the economy has been based on a comprehensive-testing strategy with a capability of more than 10,000 tests to be performed per day. With the equivalent of fifteen percent of its population tested, Gabon has one the highest rates of testing per capita of sub-Saharan Africa.


Key Policy Responses as of November 19, 2020

Fiscal
  • The approved Amended Budget Law approved in end-June 2020 proposes the control of non-priority expenditure and redirect savings and development partners support of FCFA 66.1 billion (USD 118.1 million or 0.74 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.

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, 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 after majority of the lawmakers voted against it. The situation led the President to announce 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 measures 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. Meanwhile, those without the required certificate as well as those who are COVID-19 positive will be quarantined.

Tourism, a key driver of trade and foreign exchange inflows, has halted. Interest rates on T-bills increased and remained elevated but have eased recently on the back of a decline in inflation and measures taken by the Central Bank to support market liquidity. Remittances from official channels have remained exceptionally high so far, in part, due to a reduction in private transfers through informal channels (which have migrated to formal channels) and remittances by the Gambian diaspora in response to COVID-19. Meanwhile, 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.

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 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 the recent (mid-July) overwhelming surge in the number of COVID-19 cases, with a large number of healthcare workers and some 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. The Turkish Airline also resumed its weekly flight to Banjul on October 4, while Royal Air Maroc is scheduled to resume daily flights to Banjul by December 14 and to continue through January 10, 2021, after which period it will announce its subsequent summer program.


Key Policy Responses as of November 19, 2020

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 500 million Dalasi (0.6 percent of GDP) from the current budget to the Ministry of Health and other relevant public entities for containment measures to prevent and control the spread of the COVID-19 outbreak. The government 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 approved by the National Assembly in July included a GMD 546 million relief package to various sectors, including the municipal councils, public entities, the tourism sector, the media, and additional food assistance delivered through WFP. RCF and CCRT financing from the IMF (see below) helped to cover some of these costs.

    Donor agencies, including the UNDP, WFP, WHO, FAO, UNICEF, UNFP and UNICEF, have focused financial assistance (about US$ 1.5 million cumulatively, so far) to strengthen social assistance support for programs aimed at vulnerable groups impacted by COVID-19 by improving communication, safeguarding nutrition, and ensuring food security. The WFP provided technical support and training on targeting, design and distribution of the government food relief program, and it is also working on a food distribution program. On April 2, The World Bank approved a US$ 10 million grant for the COVID-19 Response and Preparedness Project to enhance case detection, tracing, prevention, and social distancing communication as well as the provision of equipment to isolation and treatment centers. The WB is accelerating the rollout of its Social Safety Net project to help mitigate the impact of COVID-19 on the most vulnerable households. The European Commission provided, at end-April, a 9-million Euro COVID-19 support to The Gambia and intends to provide an additional 5.5million Euro financing in Q4 2020. Many of the other donors will also be expanding their social assistance support through cash transfers using mobile money and direct payments targeted to poor households, new mothers and farmers using existing databases of past recipients, village lists and voter rolls.

    The Gambia Revenue Authority 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 has also revised down its annual revenue target by about 2.2 percent of GDP. However, the revenue performance thus far points to 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 before declining on November 11 to around 3 percent, which is below its end-2019 level of 7.5 percent. 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 (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 latest monetary policy committee sittings held on August 26-27, 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 end-September FSIs, non-preforming loans of banks edged up relative to end-2019 but capital adequacy and liquidity indicators remained strong. The CBG successfully completed 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, 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. 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) has been already approved for delivery. The second six-month tranche (covering October 14, 2020-April 13, 2021) of US$3 million was approved on October 5, 2020. The total debt relief can be extended up to US$ 10.8 million if resources are identified to extend the initiative for 24 months. The Gambia is also seeking debt service deferral under the G20 debt service suspension initiative, which could provide between US$ 2.19 million (from the creditors that have already endorsed the initiative) and close to US$ 6.68 million, if The Gambia’s plurilateral and private creditors endorse the initiative.


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Georgia

Background. Georgia has reported 17,112 active positive cases, 71,468 recovered and 815 deaths as of November 18 , 2020. The second-wave outbreak is has been gaining pace since August. The number of active cases increased 2.5 times during the past month. Daily incidence of new cases exceeds 3000. The capacity of hospitals has been stretched. A curfew has been introduced from 10 pm to 5 am. All schools are closed in the cities. The restaurants are allowed to provide delivery services after 10 p.m. The first round of the parliamentary elections were held on October 31st in observance of the medical protocol; but the following street protests entailed large public gatherings. The second round of the elections will be held on November 21.

Due to the rapid worsening of epidemic situation in Georgia, the EU removed Georgia from the list of 15 safe countries on October 22.

Earlier in the year, during March 21 to May 22, 2020, the country lived under the state of emergency and curfew, with strict containment measures , including social distancing, lock down of high-risk districts, closure of border crossing, travel ban for foreign visitors, quarantine for nationals returning to Georgia, closure of shops (other than groceries and gas stations) and schools; a two-week ban on the private vehicle intercity movement (ended on April 27th); prohibition of intercity and intracity public transport movement (ended late May). Various forms of economic activity, including tourism, came to a standstill during the state of emergency as borders remained closed; international flights were in limited in numbers

All foreign citizens arriving in Georgia are required to have a valid PCR test. The returning citizens of Georgia are required to self- isolate for 12 days and to take a PCR test on the 12th day. Public outdoor gatherings of above 200 people are prohibited from September 10 (political rallies are exempted from this rule). Public indoor gatherings for rituals (parties, funerals) are limited to 10 people.

To reduce unemployment, the Georgian government allowed the Georgian citizens to travel for work to the neighboring Turkey, provided they have at least 3-month invitation from the perspective employer. Upon return, they will have to quarantine themselves.

Reopening of the Economy. The government effectively implemented the 6- stage re-opening plan, announced on April 24. Fast improving COVID19 statistics in May-June allowed the government to open the economy quicker than it was initially envisaged. At first (starting April 27, 2020) the passenger cars, taxies, online trade, deliveries and open air-markets became operational. Starting May 5: construction, production of construction materials, carwash, computer and equipment repair shops, parks are open. Since May 11, all shops that have their own entrance from ground (other than malls, apparel and footwear shops) are open; all kinds of production and publishing services are also operational. The beauty parlors and aesthetic medical centers also opened faster than initially planned (May 18). Tbilisi and other big cities opened for intercity travelers. The public transport, including metro, resumed operation on May 29; All types of shops as well as the malls opened on June 1; all the restaurants and hotels opened on June 8; (i.e. about 1 month earlier than initially planned), however, all the above-mentioned need to observe strict cautionary measures. The sports halls and swimming pools resumed their operations from July 7th. Effective July 13, outdoor cultural events and indoor rehearsals were allowed. Domestic tourism opened on June 15. Public schools temporarily resumed inhouse classes on the October 1, 2020 for the classes from 1 to 6, but moved to full online schooling from November 4, 2020.The theatres and cinemas, child entertainment centers have not not been allowed to resume their operations.


Key Policy Responses as of November 18, 2020

Fiscal
  • Fiscal. On June 24, 2020, the parliament approved an amendment to the state budget 2020 funding the relieve measures of the ‘Anti-Crisis Economic Action Plan’ of the Government that was announced onApril 24. The supplemental budget fiscal deficit increased to 8.5 percent of GDP. The initiatives, with total cost of GEL 3.4 billion were to cover higher health spending needs and support the households and businesses that have been most impacted by the shock. The following measures were finance by the 2020 budget:

    1. Support for citizens who have been employed but lost their jobs during the pandemic: GEL 200 per person for 6 months (GEL 450 million).

    2. Income tax waiver for low-income citizens: during 6 months: (1) salaries up to 750 GEL will be fully exempt from income tax; for the salaries below 1500 GEL per month, the first GEL 750 will be exempt from income tax (GEL 250 million) will be forgone.

    3. One-time assistance of GEL300 to the self-employed (GEL 75 million.

    4. Utility subsidy: payment for gas, electricity and utilities for the for households consuming up to 200 kW of electricity and/or up to 200 m3 natural gas monthly (GEL 170 million).

    5. Assistance to low-income families (with the social score of 65-100 thousand); assistance was given according to the number of people in the household for 6 months (GEL 48 million).

    6. Assistance to the families with the social score above 100 thousand: GEL 100 for 6 months (GEL 13 million).

    7. Assistance to the disabled and disabled children GEL 100 for 6 months (GEL 24 million).

    8. StopCoV Fund proceeds of GEL 133,5 million will be used for the needs of the medical sector and hospitals engaged in fighting the coronavirus (reflected in “other revenues” and in expenditures).

    9. Government has to cover costs of organizing quarantine spaces; sponsoring flights that returned the citizens to Georgia Total cost: GEL 45 million.

    10. Healthcare costs and virus spread prevention measures. Total cost: GEL 285 million.

    11. Improvement of healthcare infrastructure to serve COVID patients. Total cost GEL 60 million.

    12. Credit guarantee scheme to help businesses cope with the pandemic GEL 330 million.

    13. Interest subsidy was issued to help the hotels meet their banking obligations and co-finance up to 80 per cent of the annual interest rate on loans issued to family-owned, small and medium-sized hotels. Total cost GEL- 70 million; This interest subsidy was initially designed for 3 months but was prolonged to 6 months. In addition, the government allows new application process (Sep-Oct 2020) for the interested hotels.

    14. Touristic enterprises are exempt from profits tax- GEL 45 million (reflected in tax revenues).

    15. Microgrants GEL 20 million.

    16. Support to construction sector/ purchase of houses for the refugees: Total cost: GEL 40 million.

    17. Support to agriculture. Total cost: GEL 139 million. This includes State Program for Maintaining Prices of Primary Consumption Food Products, including building stocks of the following commodities: (rice, pasta, buckwheat, sunflower oil, sugar, milk powder, beans, wheat, and wheat powder.

    18. Additional VAT refunds GEL 600 million; (reflected in tax revenues).

    19. Lari deposits for commercial banks GEL 600 million (reflected in domestic debt and government deposit).

    20. 3m bank loan service holidays for individuals (initially available for March-May) were prolonged for 3 more months for those borrowers who asked for extension.

    21. The custom clearance term for vehicles imported before 1 April 2020 was once extended to September 1, 2020 and then further to March 2021. This measure will benefit 24 thousand importers of cars, but postpones GEL 30 million revenues for the state budget.

    22. Pensions: Starting from January 2021, the rule of indexation of pensions will be introduced. According to this rule, the pensions will increase by at least the rate of inflation; for pensioners aged 70 and above: the pensions will increase in addition by 80% of the real economic growth rate. Regardless of the actual rates of inflation and economic growth, the pension increase will be at least GEL 20 for the pensioners below 70 and GEL 25 GEL for pensioners above age 70.

    23. The government increased the list of villages that benefit from the provisions of the law on ‘Mountainous Regions’ by 59 villages. Total 272,000 people will benefit from this law. These are dwellers of high mountainous regions; as well as the villages adjacent to the occupied territories. The benefits introduced by this law include: subsidized electricity and heating to households; higher pensions; social transfers for the newborns; increased salaries for teachers and medical personnel; some tax allowances for businesses operating in those areas.

    686 thousand people benefited from the government’s economic benefits package described above. On August 6, the Prime Minister’s unveiled new new/modified measures to support the citizens of Georgia to cope with the pandemic. According to which:

    1. The government provided GEL 200 one-time assistance to all children below 18, which benefited 855,000 families with a total cost of 0.4 percent of GDP or GEL 160 million. The government asked the banks to ensure that these sums reach the intended beneficiaries (i.e. children) so, that the banks do not offset the credit or belated liabilities of the parents, if such exist with these sums. The beneficiaries receive these grants before the start of the school year.

    2. Tuition assistance to university students from vulnerable families (with the social score below 150 thousand), benefitting 33,000 individuals at a cost of 0.1 percent of GDP

    3. Additional social transfers to the self-employed who lost income, by relaxing eligibility criteria for a one-time cash transfer of GEL300, benefiting 80,000 individuals at a cost of 0.05 percent of GDP..

    4. Extension of the electricity and gas subsidies from November 2020 until February 2021. So far, over 1 million households have benefitted from the subsidies, with the extension expected to cost 0.5 percent of GDP.

    The government is working on new support measures for households and businesses affected by the pandemic which will be reflected in the 2021 budget

Monetary and macro-financial
  • The National Bank of Georgia (NBG) announced measures to support capital and liquidity in the banking sector. Banks have been asked to evaluate the quality of the loan portfolio; on-site inspections have been suspended; and a moratorium on fines was introduced where a breach emerged due to the crisis. The NBG reduced its policy rate cumulatively by 100 bps since April 2020 (by 50 bps on Apr 29; 25 bps on Jun 24, 2020; 25 bps on Aug 5). NBG kept the policy rate at 8 percent at the Sep 16 and Oct 28 MPC meeting. Next MPC meeting will be held on Dec 9th. The office operations of currency exchange booths and other payment service providers are fully operational since early June, after closing them for 2 months due to the pandemic. To ease lari liquidity pressures, the NBG started FX swap lines with banks and microfinance institutions in mid-April. In addition, starting June 1 the NBG launched a new tool for liquidity management to support the financing of small and medium-sized businesses in Georgia, which consists of two components: the first is for commercial banks, which receive liquidity support from the NBG in exchange for mortgaging the loan portfolio; the second component is for micro-financing organizations. The depreciation in Georgian Lari has gained pace over the last weeks, along with the deteriorating epidemic situation and lari depreciated by 18.7 percent vis-à-vis the U.S. dollar since March 6th.

Exchange rate and balance of payments
  • NBG has sold net USD 820 million foreign exchange since the beginning of the year to prevent disorderly depreciation.


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Germany

Background. Germany registered the first confirmed COVID-19 case on January 27th, 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. However, mortality rates remain relatively low to date.

Reopening of the economy. On April 20th, smaller shops re-opened subject to social distancing requirements. Select grades in schools gradually re-opened on May 4th, as did cultural and leisure venues. On May 6th, the government announced further easing of containment measures extending to all shops, restaurants and sports facilities, with the exact timeline to be determined at state level. Re-opening is subject to an “emergency brake”, whereby an occurrence of more than 50 new infections per 100.000 inhabitants over 7 days will require state governments to reverse the re-opening and re-institute containment. Border controls to neighboring countries are being gradually lifted starting May 16th. Quarantine requirement for travelers from EU-countries has been lifted in several states starting May 18th. On May 26th, federal and state governments agreed to ease restriction on public gatherings for up to 10 people or two separate households subject to minimum distancing and face mask requirement in public places. The travel warning to all EU countries, Schengen states, the UK and Northern Ireland, has been lifted on June 15th though some “high risk” destinations have been put under travel warning as infections resumed On June 16th, 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 1st, the entry restriction for travelers from 11 non-EU countries is lifted (3 of which conditional on reciprocity).

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 8th. 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 14th, 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. Gathering in public is limited to maximum 10 persons from two households. Non-essential travel is strictly discouraged and hotels must not offer accommodation to tourists.


Key Policy Responses as of November 18, 2020

Fiscal
  • To combat the COVID-19 crisis and subsequently support the recovery, the federal government adopted two supplementary budgets: €156 billion (4.9 percent of GDP) in March and €130 billion (4 percent of GDP) in June. The authorities plan to issue €218.5 billion in debt this year to finance the packages. 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 include 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.

    Parallel to the “lockdown light” to combat the second wave of COVID infections, the government introduced additional fiscal measures to support affected businesses, including revenue compensation (of up to 75 percent), as well as, public loan guarantees andbasic income provision.

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 30th 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.

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 is 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. Land and sea borders continue closed for human traffic.


Key Policy Responses as of November 5, 2020

Fiscal
  • The government has so far committed a total of GHc 11.2 billion to face the pandemic and its social and economic consequences. The bulk of these funds (GHc 10.6 billion) are being used under the Coronavirus Alleviation Programme to 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. Another GHc 600 million were used initially to support preparedness and response.

    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.

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

    At its September 28 meeting, the MPC kept the policy rate unchanged. A 10-year government bond with a face value of GHc 10 billion (2.6percent of GDP) has been purchased by the Central Bank.

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 1st. However, as result of rising cases, the government has announced a three-week national lockdown and nighttime curfew, while leaving essential businesses open, starting on November 7.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has announced a fiscal package of measures totaling about 14 percent of GDP (€24 billion), including loan guarantees, financed from national and EU resources (some of the latter involves reprogrammed funds). Key measures include: (i) health spending for hiring of 3,300 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 with delinquent 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, 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. On November 5, the government extended selected support measures in parallel to the imposition of new movement restrictions.

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 have launched loan moratoria for household and corporate borrowers through end-2020 (in addition to the interest payment subsidies mentioned above).

Exchange rate and balance of payments
  • No measures.

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


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Guatemala

Background. As of November 19th, Guatemala has reported 116,381 confirmed cases and 4,008 fatalities of COVID-19. On March 13th, the government declared a State of Calamity, which was extended six times, providing the legal framework to implement several provisions to counter the effects of the pandemic. In late September, the government withdrew the State of Calamity and announced a recovery plan to support the re-opening of the economy. As of October 1, a full-fledge reopening has been in order whereby all commercial and other activities can operate with some restrictions on physical distancing partly affecting their capacity.


Key Policy Responses as of November 19, 2020

Fiscal
  • For COVID-19 prevention and mitigation, Congress approved three fiscal packages, totaling around 3.4 percent of GDP. This fiscal stimulus was financed mainly by IFIs and the issuance of treasury bonds. The fiscal response is now focused on two programs: i) stepping up healthcare resources (0.2% of GDP) and ii) providing support to different sectors in the economy through cash transfers (1.2% of GDP), salary subsidies (0.3% of GDP) and funding to SMEs (0.6% of GDP). 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 by 75 basis points to 2 percent on March 18. To support further the financial sector, the Monetary Board eased through year-end credit regulations to facilitate loan restructuring for borrowers facing temporary liquidity constraints, due to the impact of the pandemic. On June 24, the Monetary Board cut its policy rate by an additional 25 basis points to 1.75 percent, in response to the detrimental impact on domestic growth from weaker global conditions than initially foreseen.

  • Upon Congress’ special authorization, Banco de Guatemala could purchase GTM Treasury Bonds for up to GTQ 11 billion (about USD 1.5 billion). The government has been using the proceeds to finance programs for the COVID-19 emergency. Thus far, GTQ 10.4 billion (94.5 per cent of the total bond issuance authorized by Congress) has been purchased by Banguat already. Through September, the financial system was performing relatively well: more than enough liquidity and reasonable profitability, however, because of the temporary regulatory forbearance, non-performing loans have remained stable at below 3% throughout the pandemic period but bank reserves have kept increasing, perhaps, as an anticipation that the stock of non-performing loans might be higher than currently estimated. The SIB have requested additional information to borrowers, which, hopefully, will help to have a better assessment of the risks involved.

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 have adopted several measures to reduce the risk of contagion. Notably, large public gatherings have been banned, the international airport has been closed to non-essential flights, and public areas (markets, religious facilities) are required to have hand sanitizing equipment. All schools have been closed. Other measures included closure of land borders, suspension of public events, religious, and leisure facilities; limiting public transport; and a nationwide night curfew. Guinean embassies and consulates have suspended visa issuance to travelers from countries with more than 30 confirmed cases. On March 26, Guinea declared a state of emergency and tightened lockdown. 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, 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.


Key Policy Responses as of November 19, 2020

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

    In addition, a COVID-19 economic response plan was announced on April 6, 2020. The Plan aims at strengthening infrastructure in the health sector, protecting the most vulnerable, and supporting the private sector, notably small and medium enterprises. The authorities estimate the cost of the Plan at about US$ 328 million (2.3 percent of GDP). Key measures include: the introduction of temporary exonerations on taxes, social contributions and payment of utilities for firms in the most affected sectors; the implementation of labor-intensive public works, provision of cash transfers, a waiver on the payment of utilities for the most vulnerable.

    On June 23, the authorities announced additional measures, including a three-month extension of some measures initially planned till end-June. The additional cost is estimated at about US$ 50 million (0.34 percent of GDP). Additional measures include: 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.

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

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

Exchange rate and balance of payments
  • No measures.


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Guinea Bissau

Background. The first cases were reported on March 25 and have kept increasing since then. On March 18, borders were preemptively closed. A state of emergency was declared on March 28 and extended eight times until September 8 when a “state of calamity” was declared for ninety days. This entails targeted confinement and testing and reinforces prevention measures. Flights to Bissau resumed in September and schools reopened in October. Guinea-Bissau was amongst the 25 beneficiary countries of the IMF debt service relief through the Catastrophe Containment and Relief Trust (CCRT), approved on April 15.


Key Policy Responses as of November 18, 2020

Fiscal
  • The government has increased health expenditure by CFAF 222 million (US$ 0.4 million) to purchase medicine, food, services, and medical equipment. Regarding assistance to households, CFAF 580 million (US$ 1 million or 0.07 percent of GDP) were used to distribute 20,000 bags of rice and 10,000 bags of sugar throughout the country, including in distant areas. The government has increased its targeted number of families to benefit from food supply from an initial 3,000 to 20,000 and provided other family support (CFAF 100 million). 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. 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. On June 22, 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 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 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 issued by Guinea Bissau is equivalent to 1.9 percent of GDP. Guinea-Bissau has been recently allowed to issue the equivalent of 1.2 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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.

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 at 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 cash transfer grant for COVID-19 relief assistance in addition to up to G$19,000 in allowances for each essential frontline worker’s child under seven years of age attending school.

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. Bars, sporting events and gatherings of more than ten persons are still prohibited, and stay-at-home orders remain 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, however; outdoor dining at restaurants are still under the updated national curfew regulations from 6am until 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 opening of airspace started on October 12. The new government also worked on a plan to reopen the Guyana-Suriname border to facilitate trade and travel (18 land ports of entry, out of 53, opened on October 1). Although all the lockdown regulations specified above remain in place, on October 30 the Government issued its COVID-19 emergency measures for November, adjusting the curfew hours to run from 10:30 PM to 4 AM in comparison to the October curfew hours from 9 PM to 4 AM. During lockdown hours, citizens must remain indoors and practice social distancing measures including the mandatory wearing of masks when in public spaces.


Key Policy Responses as of November 19, 2020
Fiscal
  • The Ministry of Finance and the Guyana Revenue Authority have implemented waivers of VAT and duties on COVID-19 medical supplies and lab testing kits, as well as tax deductions for all donations made by local businesses to staff and health institutions for the treatment of the virus. The authorities have also implemented the 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 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. Most recently, the Ministry of Health has budgeted G$3.2 billion of its overall G$14.3 billion allocation to medicine and supply shortages in the healthcare system.

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. The main economic impact from COVID-19 will come through remittances, which represent about 30 percent of GDP and are expected to drop with the income shock in the United States and other source markets.

Reopening of the economy. The 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 on April 19th 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.


Key Policy Responses as of November 19, 2020

Fiscal
  • The authorities launched a public health preparedness plan for containment and treatment; they plan to boost some social programs, and are also considering additional health care and security spending, as well as transfers to support workers and households, including supporting wage payments temporarily in some sectors. Altogether, spending should increase by 2.12 percent of GDP, of which 1.74 percent of GDP on healthcare, 0.35 percent of GDP to protect vulnerable populations (including dry food rations) and 0.03 percent of GDP in other transfers. 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. The first confirmed COVID-19 case was reported on March 12, 2020. The government has declared a national state of emergency and adopted containment measures, including a nation-wide curfew and closing of national frontiers. The authorities have taken fiscal and monetary and macro-financial measures actions to respond to the healthcare and humanitarian crisis, protect employment and mitigate the impact on economic activity.

Reopening of the economy. Honduras went into lockdown on March 16, with only essential services operating (food production and distribution, banks, pharmacies and production of medical supplies, energy, telecoms, and related transport activities). Access to retail grocery stores remains restricted by weekday according to last digit in ID numbers. Re-openings of non-essential activities started with hardware stores (April 16), restaurants for delivery (May 4), construction (starting May 11, sequenced by priority and size of projects), maquila sector (gradual reopening) and selected government services. Since June 8 the government is implementing a plan agreed with the private sector to gradually reopen all sectors by regions, aiming to reach full normalization of activities at different stages depending on the incidence of COVID by region. Out of 298 municipalities, 232 without known cases of COVID started with 60% of workers, 53 municipalities with limited incidence of COVID with 40% of workers, and 13 with high incidence and population density (including the capital and main business hub San Pedro Sula) with 20%. The reopening of most municipalities with high incidence was delayed until August 3.


Key Policy Responses as of September 23, 2020

Fiscal
  • The authorities are deploying a well-targeted fiscal response to the pandemic while establishing strong transparency and accountability frameworks. In this context and following a request to Congress to make use of the emergency clause included in the Fiscal Responsibility Law (FRL), the authorities’ program initially envisaged a fiscal deficit of the Non-Financial Public Sector of 4 and 3 percent of GDP in 2020 and 21—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 crisis deepened, the government submitted to Congress in September a revised request under the FRL escape clause for fiscal deficits of the NFPS of 5 and 4 percent of GDP in 2020-21.

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

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

Monetary and macro-financial
  • Since the start of the pandemic, the central bank has cut the policy rate by 150 bps to 3.75 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 announced the suspension of liquidity absorption operations until end-June, and accelerated the implementation of previously announced elimination of obligatory investments in the central bank, providing estimated liquidity injection of L21,400 mn, about 3.5 percent of GDP. 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 will provide L6,875 mn (1.1 percent of GDP) in guarantees to cover potential losses on new loans to SMEs and other companies, with varying coverage of commercial banks' exposures on the loans covered by the guarantee scheme. The bank is also deploying 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 will be funded with loans from the regional development bank CABEI.

    The government also issued a decree mandating all supervised financial institutions to provide temporary debt service relief to companies and individuals whose incomes have been affected by the crisis. Debt service of affected sectors was suspended until end-June, without penalties or impact on credit classification; at end-June, financial institutions were granted discretion to extend the grace period further depending on assessed debt service capacity of most affected households and corporates. The government also announced a 3-month moratorium on service of bank loans financed by Banhprovi (covering about 5 percent of total bank credit to the private sector).

Exchange rate and balance of payments
  • No measures.


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Hungary

Background. The first case of COVID-19 was reported on March 4, 2020. The economy has been hit hard by the outbreak as it is tightly intertwined globally through supply chains and tourism. The government declared a state of emergency on March 11 and implemented various containment measures, including travel and activity restrictions, and mandatory distance learning for schools and universities. On March 27, mandatory shelter-in-place in place was imposed, except for essential business and activities (e.g., food shopping, healthcare).

Reopening of the economy. Starting May 4, 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 wave. While the first wave of the pandemic relatively spared Hungary, cases have been rising very rapidly since the end of August. The government imposed border restrictions early September, and reintroduced the state of emergency as of November 4th, imposing a 12-5am curfew, and closing nightclubs. It subsequently tightened the restrictions, extending the curfew to 8pm-5am, restricting opening hours of shops and other businesses, and closing restaurants except for home deliveries. Hotels can only receive business travelers but no tourists. Gathering are limited to ten people. Universities and schools above eighth grade are back to digital education.


Key Policy Responses as of November 17, 2020

Fiscal
  • A first wave of fiscal measures were introduced earlier in the epidemic, including, on the revenue side, measures to alleviate the fiscal burden on businesses: (i) employers' social contributions will be lifted in the most affected sectors; (ii) the health care contributions will be lowered through June 30; (iii) around 80,000 SMEs (mainly in the services sector) will be exempt from the small business tax (the payment of the tax by other companies in affected sectors will be deferred until the end of the state of emergency); (iv) the tourism development contributions will be temporarily cancelled; (v) media service providers will be given a tax relief for incurred losses of advertising revenue; and, (vi) procedures for collecting tax arrears will be suspended during the state of emergency. On the spending side, about HUF 245 billion (0.6 percent of GDP) was reallocated to the healthcare sector. On 28 September, 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 April 8, a new package of new measures was announced, supported by the creation two new funds, the Anti-Epidemic Protection Fund and the Economy Protection Fund. The latter Fund will be financed through new taxes on the private activity and reallocations from ministries and from the Employment Fund. Their spending targets (i) job protection, notably by subsidizing wages to companies on workers who were put on shortened work hours (with rules that were made more flexible on April 23); (ii) job creation by supporting investments worth a total of HUF 450bn; (iii) support for priority sectors, including tourism, health, food, agriculture, construction, logistics, transport, film and entertainment industries; (iv) provision of interest-subsidized and guaranteed credit facilities to Hungarian companies; (v) an extra week of pension will be paid out every February during 2021-24. On April 16, the government introduced three new export support measures through the state-owned Eximbank: (i) EUR 800,000 grant for investments of export companies; (ii) preferential working capital loans, and (III) a new guarantee and insurance scheme. On April 23, a state-owned development bank MFB launched a HUF 1,490bn package of financial support instruments for companies, consisting of three loan products, two guarantee instruments and four capital programs. On May 7, the government announced it will purchase up to HUF 150 billion (0.3 percent of GDP) of bonds issued by banks in order to support lending during the crisis and to ensure financial stability. On May 20, the government announced a new wage subsidy program for new hires, with the condition for a company of keeping a worker for at least nine months. 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 as of end-August.

Monetary and macro-financial
  • Since the start of the pandemic, the central bank (MNB) increased access to liquidity through: (i) an increase in the regular forint-liquidity swap stock at regular auctions; (ii) the introduction of the daily provision of one-week forint-liquidity swaps; (iii) the expansion of eligible collateral; (iv) the introduction of a long-term unlimited collateralized lending facility; and (v) suspension of penalties for unmet reserve requirements. On April 1st, it introduced a one-week deposit tender at the Lombard rate, which effectively tightened overall liquidity and eased depreciation pressures on the HUF. On April 7, the MNB announced (i) a change in the overnight lending rate by 95 bps to 1.85 percent, making the interest rate corridor symmetric (with the overnight deposit rate at -0.05 percent; the base rate at 0.9 percent; and the overnight lending rate at 1.85 percent); (ii) an increase in the one-week lending rate to 1.85 percent; and (iii) the elimination of the target on the amount of the liquidity injection or withdrawal to give greater flexibility to monetary policy. 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, 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.

    Measures were also taken to provide financial relief to households and corporates borrowers, including: (i) the provision of a grace period of repayment of loans to the Growth Funding Facility (subsidized lending to SMEs supported by the MNB); (ii) the extension of short-term loans to businesses until June 30; (iii) a repayment moratorium on all existing loans, corporate and retail, until the end of this year, with a reprofiling of debt payment thereafter to avoid an increase in monthly payments; and, (iv) a cap on the average annual percentage rate (APR) on new unsecured consumer credit at the central bank base rate (currently, 0.9 percent) plus 5 percent. On September 20, the government extended debt repayment moratorium by six months for select groups.

    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. As a country dependent on tourism, Iceland has been highly exposed to health, economic, and financial contagion from the global spread of the COVID-19 virus. By November 19, 5213 domestic cases COVID-19 have been confirmed, of which 213 are active. Twenty-five have died. The recovery rate from the latest wave of infections already exceeds 90 percent. The strategy to contain the disease has involved a national pandemic plan with significant focus on mass testing, contact tracing, and quarantines. The economic impact of the pandemic is partially being offset by Iceland’s use of its available policy space. GDP growth fell to -9.1 percent (y/y) in Q2 from a -1.2 growth in Q1 (y/y).

Containment measures. In response to the ongoing upsurge of infections, containment measures were tightened, with the maximum size of social gatherings down to its lowest level of 10 individuals and venues for high-contact economic activity temporarily closed. Cautious relaxation of the containment measures is ongoing following the reduced number of new infections. Since August 19, to avoid a 14-day quarantine, arriving passengers must take two COVID-19 tests in between a 5-day quarantine.


Key Policy Responses as of November 19, 2020

Fiscal
  • Parliament has 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, state contributions to firms’ dismissal costs to prevent bankruptcies of viable firms and protect workers’ rights; and state-guaranteed loans to companies. Key measures to restart the economy include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage tourism in Iceland. On June 16, parliament approved simpler temporary rules for financial restructuring of companies. With expectations of recurrent flare ups, a number of supporting fiscal measures have been extended beyond their original sunset clauses. The 2021 budget and accompanying medium-term fiscal strategy plan submitted to parliament envisages 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 has cut policy rates by 175 basis points to 1 percent and reduced deposit institutions’ average reserve requirements to 1 from 2 percent to ease their liquidity positions (by about 1 percent of 2020 GDP). To increase liquidity in circulation, the CBI eliminated its intake of 30-day deposits. The CBI Financial Stability Committee reduced the countercyclical capital buffer from 2 percent to 0 percent, providing scope for banks to increase lending by ISK 350 billion (12 percent of 2020 GDP). See also: Link4 and Link 5 .

Exchange rate and balance of payments
  • The CBI has allowed the exchange rate to adjust, while preventing disorderly market conditions. Through November 3 this year, the CBI intervened in the foreign exchange market, selling about €665 million and buying about €60 million. On September 9, the CBI announced a program of FX sales for up €240 million through end-2020, which currently involves selling a minimum of €3 million a day. As of end September, international reserves stood at US$6.8 billion.


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India

Background. The first case of COVID-19 in India was reported on 30 January 2020 and the number of cases continues to rise. Prime Minister Modi announced on March 24 that the entire country will go under lockdown, with localized lockdowns in containment zones extended to November 30 in the latest announcement. Prior to the March 24 announcement, numerous containment measures had already been imposed, varying in intensity across the country, including travel restrictions; closing educational establishments, gyms, museums, and theatres; bans on mass gatherings; and encouraging firms to promote remote work. The economic impact of COVID-19 has been substantial and broad-based. GDP contracted sharply in 2020Q2 (-23.9 percent year-on-year) due to the unprecedented lockdowns to control the spread of COVID-19.

Reopening of the economy. On April 15, with a view to supporting economic activities, the government announced several relaxation measures in geographical areas designated as non-hotspot, with effect from April 20, 2020. On April 29, the government permitted inter-state movement of stranded people, including migrant workers, managed by the nodal authorities who are designated by the states. Some graded relaxations in economic activities have been allowed in geographic areas designated as orange and 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. The ceiling on congregations has been extended to 200 people. The latest government announcements on October 27 extended localized lockdowns till November 30, under the same guidelines as in “Unlock 5.0”.


Key Policy Responses as of November 19, 2020

Fiscal
  • India’s India’s fiscal support measures can be divided into two broad categories: (i) above-the-line measures which include government spending (about 3.2 percent of GDP, of which about 2.5 percent of GDP is expected to fall in the current fiscal year), foregone or deferred revenues (about 0.3 percent of GDP falling due within the current year) and expedited spending (about 0.3 percent of GDP falling due within the current year); and (ii) below-the-line measures designed to support businesses and shore up credit provision to several sectors (about 5.2 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 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 more recent measures that were announced in October and November 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. 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.

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 extended till March 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 (on September 29 the delay was extended till April 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 needs 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 is 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, with no insolvency cases until December 25,2020. 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 INR1,00,000 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, and then till March 31, 2021, while at the same time relaxing the eligibility criteria.

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


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Indonesia

Background. Indonesia reported its first confirmed COVID-19 case on March 2, 2020. The government adopted various containment measures, including temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and other restrictions on public events. The government also banned Indonesia’s traditional annual exodus for Muslim holidays during Eid al-Fitr celebrations in May in an effort to curb the spread of the virus from Jakarta and other high-risk regions.

Reopening of the economy. In June, Indonesia began easing some containment measures. The city of Jakarta started a transitional phase from large-scale social restrictions on June 5th and further eased restrictions on malls (on June 15) and parks and recreation areas (on June 20). However, the city of Jakarta has extended the transitional phase from large-scale social restrictions through September 10 in the absence of a sustained decline in daily new virus cases. On September 9, Jakarta’s governor announced that large-scale social restrictions would be tightened further to contain the spread of the virus.

Indonesia’s growth improved in the third quarter of 2020 to -3.5 percent y/y (up from -5.3 percent Q2:2020) or 12.4 percent q/q, s.a.a.r., mostly driven by recovery in domestic demand. External pressures eased in April and May, although some volatility remains.


Key Policy Responses as of November 19, 2020

Fiscal
  • In addition to the first two fiscal packages amounting to IDR 33.2 trillion (0.2 percent of GDP), the government announced an additional package of IDR 405 trillion (2.6 percent of GDP) on March 31, 2020, which was further expanded to IDR 677.2 trillion (4.2 percent of GDP) on June 4, 2020, as part of a national economic recovery program. The national economic recovery program has been continuously refined and currently stands at IDR 695.2 trillion. The fiscal packages comprise (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. In addition to tax and spending measures, the fiscal packages include 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.

Monetary and macro-financial
  • Bank Indonesia (BI) reduced the policy rate by 125 bps cumulatively in February, March, June, July, and November 2020, to 3.75 percent. BI also announced other measures to ease liquidity conditions, including: (i) lowering reserve requirement ratios for banks; (ii) increasing the maximum duration for repo and reverse repo operations (up to 12 months); (iii) introducing daily repo auctions; (iv) increasing the frequency of FX swap auctions for 1, 3, 6 and 12 month tenors from three times per week to daily auctions; and (v) increasing the size of the main weekly refinancing operations as needed. BI also adjusted macroprudential regulation to ease liquidity conditions and support bond market stability. A Presidential decree has expanded BI’s authority to maintain the stability of the financial system in 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 a burden sharing scheme to help finance the economic response to the pandemic. The scheme, expected to be implemented only in 2020, covers (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. BI has 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, President Rouhani announced a partial lockdown, closing businesses and government offices for two weeks and banning travel between different cities. Accordingly, the Purchasing Managers’ Index in March and April collapsed.

Reopening of the economy. Concerned about the economic damage from the outbreak, the government ordered a step-by-step reopening of businesses that it considered to be at low or average risk in terms of spreading the virus starting on April 8. On April 27, Iran reopened all international borders to revive regional trade, while mosques and schools reopened in mid-May. On May 26 all businesses and major religious sites were opened. While the Purchasing Managers’ Index in May and June suggested that industries had started to recover, it registered a 6 percent contraction in July.

Second and third wave: A “second wave” of virus cases is hit Iran during the summer. 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. With the number of new infections above 3,000 a day, Iran appears to be in grip of “third wave” of COVID-19 in September. Border crossings between Iran and Iraq have been sealed to prevent Iranian pilgrims from traveling to the neighboring country for the annual Arbaeen pilgrimage which takes place on October 22th. Tehran and six other provinces have closed down recreational centers, universities, schools and places at high risk of contagion for one week to stem the spread of the pandemic. Health officials said the lockdown measures will most likely be extended in Tehran for the second week of October. Facemasks will become compulsory in public (indoors and outdoors) in Tehran starting next from October 10 with fines for those who breach the law.


Key Policy Responses as of November 19, 2020

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

Fiscal
  • Key measures include (i.) extra funding for the health sector (2 percent of GDP); (ii.) cash transfers to vulnerable households (0.3 percent of GDP); (iii.) support to the unemployment insurance fund (0.3 percent of GDP); and subsidized loans for affected businesses and vulnerable households (4.4 percent of GDP). In addition, the government announced a moratorium on tax payments due to the government for a period of three months (6 percent of GDP). Sukuk bonds, the National Development Fund and privatization proceeds will provide part of the financing.

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

    As of end of August, 13 percent of business applicants affected by the pandemic has received part of the aid package and 56.5 trillion rials ($245 million) have been 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.

Exchange rate and balance of payments
  • The Central Bank of Iran announced  it injected USD 1.5 billion in the foreign exchange market to stabilize the rial. In July it injected another USD 1 billion. In September it announced that it will put aside one percent of the country’s sovereign wealth fund to stabilize the stock market.


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Iraq

Background. The COVID-19 crisis intensified in Iraq over the summer. Iraq’s first confirmed case was on 22 February, however in the early weeks of the crisis the number of new cases was relatively contained. At the end of Ramadan in late May, the number of new cases escalated rapidly. Although daily new cases have fallen slightly in recent weeks, they remain high, averaging over 2,500 cases a day. 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. Most containment measures have now been relaxed and the curfew has been removed. In late June, the World Health Organization launched a COVID-19 awareness campaign, which is ongoing, focusing on education initiatives in high risk areas. In September, Iraq joined the COVAX Facility, a global initiative aiming to secure access to future COVID-19 vaccines.

The containment and mitigation measures have had a significant negative impact on non-oil activity, predominantly from 2020 Q2 onwards. Non-oil GDP is projected to contract significantly in 2020. In addition to the direct impact of COVID-19, the decline in oil prices has resulted in a sharp fall in oil revenues since the beginning of the year. Revenues are likely to remain low for a prolonged period, reflecting both a lower profile for oil prices and a decline in production, following the OPEC+ agreement.

Reopening of the economy. Most containment measures have now been relaxed to some extent. On June 14, the curfew restrictions began to be eased, and were completely removed in late September. All land border crossings are now able to open for trade and airports reopened on July 23. Malls and shopping centers are permitted to reopen with the mandatory wearing of face masks and social distancing rules, restaurants and five-star hotels can resume operations, and sporting events can also take place without live audiences. Places of worship and parks are also permitted to reopen. Schools and universities are scheduled to reopen at the end of November.


Key Policy Responses as of November 19, 2020

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 is introducing 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 a total cost of around 300 billion Iraqi dinars ($254 million).

Monetary and macro-financial
  • The Central Bank of Iraq has reduced its reserve requirement from 15 percent to 13 percent. 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
  • No measures.


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Ireland

Background. The first confirmed COVID-19 case was reported on March 1, 2020. The government has implemented a wide range of containment measures. On March 27, the government has issued strict restrictions on business activity, social distancing, and travel. Q2 2020 GDP release surprised on the upside with only 3.7 percent decline year-on-year, supported by export growth and strong performance of pharmaceutical and IT sectors. Most indicators point to a robust pick-up in economic activity in Q3 2020. However, a six-week lockdown started on October 22 will have an adverse impact on Q4 domestic consumption and output, with some upside risks from the pharmaceutical sector.October was the seventh deflationary month, with the CPI averaging -0.2 percent in the first ten months of the year. Uncertainty remains high, including due to the risk of a no-deal Brexit.

Reopening/Closing of the economy. On May 18, Ireland started a gradual reopening plan in five phases and progress was made up to phase 4, thanks to declining infection rate. The final phase was delayed due to the rebound in community transmission. In August, the government adapted a medium-term national framework for living with Covid-19. It consists of five levels depending on the pandemic indicators, with lower level having less social restriction. On October 19, the government made a decision to move to the highest level 5 restrictions from the level 3 introduced on October 5 due to a surge in new cases. This implies traveling restrictions within 5 km, closure of non-essential retail and personal services, a ban on indoor/outdoor gatherings, restaurants and bars can only offer take-away, construction and manufacturing will be allowed to operate, schools and childcare centers will remain open. These measures have helped to bring the infection reproduction rate below 1 and new cases are declining.The lockdown is due to expire on December 1 and the government is currently discussing the exit modalities. /p>

Key Policy Responses as of November 19, 2020


Fiscal
  • 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 subcidy 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— runs until April 2021 but with a gradual reduction in payment level, linked to previous incomes, bringing payments in line with existing social welfare levels over time.

    III. Covid Restrictions Support Scheme (CRSS), a new scheme that will provide 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 SMEs 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.

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.


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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. The impact on economic activity has been large, with output declining (on an annualized basis) by 6.8 percent in the first quarter and 29 percent in the second quarter of 2020.

Reopening of the economy. Starting on April 17, the authorities took gradual steps to ease containment measures by increasing the share of allowed employees in the workplace and reopening most stores. In May, the authorities also allowed schools to gradually open by the end of the month, eased movement and gathering restrictions. Malls opened early in the month, while restaurants towards the end of the month. The authorities have issued safety guidelines for distancing and sanitation in businesses and requiring the use of face masks in public places. 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 37.9 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 opening schools for students in grades 1 to 4 on November 1.


Key Policy Responses as of November 19, 2020
Fiscal
  • On April 8, 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 183 billion for 2020, and additional NIS 72 billion for 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 37 billion as of end-October), (ii) repo operations to provide shekel liquidity to the banks (NIS 1.5 billion as of end-October), (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 amounting NIS 5 billion to provide 3-year loans for banks to fund credit for small and microenterprises—launched in April, renewed and expanded in July, and increased by 10 billion in late October (vi) launched a plan to purchase corporate bonds on the secondary market for up to NIS 15 billion (NIS 3.1 billion as of end-October). 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, 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, which was extended in July. 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.


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Italy

Background. Net inflows of COVID-19 cases have been back on the rise . As of November 18, the number of active cases has increased to about 760,000, number of hospitalized patients and those in intensive care units is increasing rapidly towards the previous peaks in Spring. Nearly 48,000 people have died.

Reopening of the economy and additional containment measures. The nation-wide lockdown expired on May 4. 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 theatres on June 15. Regional governments are allowed the discretion to adjust the dates in both direction. People can now travel within their own region, and mobility restrictions across regions 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 will remain in place until early-December. A nationwide curfew is in place from 10pm to 5am. Across the country, museums, cinemas, theatres, pools, and gyms are shut. Schools remain open but older students will switch to remote learning. Public transportation capacity is reduced to 50 percent. In addition, closures of services and mobility restrictions are more focused and vary by risk levels assigns to regions. Regions with the highest level of infections must close all bars, restaurants, and most non-essential shops. Travelling into high risk regions (and between municipalities in these regions) is only permissible for essential work- and health-related reasons. In low risks area, bars and restaurants must close by 6pm with a maximum of four persons per table.


Key Policy Responses as of November 18, 2020

Fiscal
  • On March 17, 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, the Liquidity Decree allowed for additional state guarantees of up to €400 billion (25 percent of GDP). The guarantee envelope from this and earlier schemes is aimed to unlock more than €750 billion (close to 50 percent of GDP) of liquidity for businesses and households (see below).

    On May 15, the government 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, 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, 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 familes. The government has also extended social contribution exemptions for affected businesses.

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

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

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

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

    CONSOB  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.

Reopening of the economy. Amid the declining trend of daily new confirmed cases of COVID-19 since the beginning of May, the state of emergency was lifted for 39 prefectures out of a total of 47 prefectures on May 14 and for Osaka, Kyoto, and Hyogo on May 21. On May 25, the state of emergency was lifted for all prefectures, earlier than the previous May 31 expiry date. 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 has requested residents to refrain from traveling outside Tokyo and karaoke venues and establishments serving alcohol to close by 10 p.m., until the end of August. 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. On November 19, Tokyo raised the COVID-19 alert level to the highest, as new infections increased.

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, Lao’s People’s Democratic Republic, Myanmar, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam. In addition, Japan has agreed with Singapore and South Korea 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 Viet Nam.


Key Policy Responses as of November 19, 2020

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

    On May 27, the Government of Japan announced the second FY2020 draft supplementary budget (passed on June 12). The package, worth ¥117.1 trillion (21.1 percent of 2019 GDP), covers (i) health-related measures, (ii) support to businesses, (iii) support to households, (iv) transfers to the local governments, and (v) raising the ceiling of the COVID-19 reserve fund. The specific measures include expansion of the work subsidies, provision of subordinated loans by the public financial institutions to affected firms, and subsidies to affected firms for their rent payments.

    Japan is the largest contributor to IMF financial resources and the Fund’s concessional lending facilities, as well as the longest standing partner in capacity development activities. In early April, Japan pledged an additional US$100 million contribution to the IMF’s Catastrophe Containment and Relief Trust as immediately available resources to support the Fund’s capacity to provide grant-based debt service relief for the poorest and most vulnerable countries to combat COVID-19. In order to provide emergency financing for broader emerging markets and developing countries to meet their prospective imminent needs, on April 16, Japan announced that it is aiming at doubling its contribution to the Poverty Reduction and Growth Trust (PRGT) from the current SDR 3.6 billion. Japan made available the first SDR 1.8 billion immediately. Japan calls on other ember countries to follow quickly, and Japan will match an additional SDR 1.8 billion with their contributions. In October, Japan announced a new contribution of US$10 million to the COVID-19 Crisis Development Initiative.

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

    At its April 27 monetary policy meeting, the BoJ announced additional measures to maintain stability in financial markets and support credit provision. The BoJ decided to purchase a necessary amount of JGBs without setting an upper limit on its guidance on JGB purchases. In addition, it raised the maximum amount of additional purchases of commercial paper and corporate bonds, lifting the upper limit of commercial paper and corporate bond holdings to ¥20 trillion (US$186 billion) in total. The special funds-supplying operations have been scaled up by expanding the range of eligible counterparties and collateral to private debt (including household debt), as well as by applying a positive interest rate of 0.1 percent to the outstanding balances of current accounts held by financial institutions at the BoJ that correspond to the amounts outstanding of loans provided through this operation. On May 22, the BoJ introduced a new fund-provisioning measure to support financing of mainly small- and medium-sized enterprises, providing funds against loans such as interest-free and unsecured loans made by eligible counterparties based on the government’s emergency economic measures. The 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, 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 will also enhance access to loans with the same conditions from local financial institutions, such as local banks. To support borrowers during this period of stress, the Financial Services Agency (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, 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 163,926 cumulative cases, and 1,969 deaths related to COVID as of November 19 . 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 until the end of 2020, and closed schools and universities until the end of the semester.

Reopening of the economy. 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 21t , 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. 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. On November 16, the government issued Defense decree 23 that allows the government to access private hospitals to provide COVID care and also set the price that the private hospitals can charge.

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. IMF has conducted (virtually) the 1st review mission under the Extended Fund Facility that was approved in March 2020, and reached staff level agreement in October, 2020.


Key Policy Responses as of November 19, 2020

Fiscal
  • 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 , 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. In October, the government extended temporary employment protection schemes (financed by the Social Security Corporation) to cover restaurants and cafes.

Monetary and macro-financial
  • The Central Bank of Jordan (CBJ) announced a a package of measures aimed at containing the impact of the Coronavirus on the economy. CBJ allowed banks to postpone loan repayments by clients in the impacted sectors; 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; cut the policy rate by 150 basis; and injected 8 percent of GDP in liquidity, by (i) reducing the reserve requirement from 7 to 5 percent (JD 550 million to banks); conducting outright purchases and reverse repos (JD 1.1 billion); and expanding support for subsidized lending schemes, especially SMEs (JD 800 million).

Exchange rate and balance of payments
  • No measures.


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Kazakhstan

Background. Kazakhstan reported 122,335 COVID-19 cases and 1,945 deaths as of November 18. A state of emergency introduced in mid-March to contain the spread of the coronavirus was lifted on May 11 and followed by a gradual ease of quarantine measures. Quarantine measures were re-imposed in early July as the number of confirmed cases was trending up, and have only been gradually relaxed since late August following signs of stabilization of the COVID-19 situation. The authorities agreed with Russia to purchase the newly developed vaccine. Preliminary estimate suggests that overall growth in the first nine months was about -2.8 percent (yoy), with tentative signs of recovery in September compared to previous months. The economic contraction is mainly due to weak activity in the service sector and the oil production cut required under the OPEC+ agreement. In March, the President announced a significant anti-crisis package (9 percent of GDP), and further supportive measures were proposed in the presidential statement delivered in early September. Immediate policy actions have included trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises. Near- to medium-term plans include improving public administration through civil service reform, enhancing competitiveness in priority sectors such as manufacturing, pharmaceutical, and agriculture, and adopting social policies to support the welfare of the population.

Reopening of the economy. The authorities started to re-open the economy in mid-May. Enterprises in selected sectors were allowed to resume work with strong sanitary and epidemiological measures. Restrictions on food exports introduced under the state of emergency to ensure domestic food supply were lifted on June 1. The reopening was interrupted by the reintroduction of the quarantine regime in early July amid rising number of cases. The authorities only resumed partial reopening in late August following the epidemy’s stabilization, and have remained cautious and monitored the situation closely. The daily number of cases rose significantly in late October. The most affected regions (East Kazakhstan and North Kazakhstan) are under quarantine. The authorities have also imposed more stringent controls and testing requirement at the border and reduced the number of flights connecting a few countries with worsening epidemiological situations.In contrast, the authorities continue to soften restrictions on activities in low-risk regions and with low human contact.


Key Policy Responses as of November 18, 2020

Fiscal
  • The anti-crisis package includes cash payments to the unemployed and self-employed, an increase in pension and social benefits, additional health spending, and support for employment and businesses. Subsidized lending of KZT 1 trillion (1½ percent of GDP) is being provided under the State Program “Economy of Simple Things,” along with actions to help small and medium-sized enterprises (SMEs) finance working capital (KZT 800 billion). KZT 1.8 trillion is allocated to support employment under an “Employment Roadmap” program, including some large-scale projects to modernize the transportation infrastructure. Selected enterprises and individual entrepreneurs are also eligible for new tax incentives. Further measures recently announced to restore economic growth include: a subsidized mortgage program for households 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. Following the reintroduction of the quarantine in early July, 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.Some supportive measures (e.g. “Employment Roadmap” and working capital support to SMEs) are expected to continue in 2021.

Monetary and macro-financial
  • The National Bank (NBK) raised its policy rate from 9.25 percent to 12 percent on March 10 after pressures on the tenge (KZT) intensified with the drop of oil prices. It cut the base rate to 9.5 percent in early April and further to 9 percent in July to support activity. To support banks and the economy, the authorities have, since the imposition of the state of emergency, (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. Most of these measures are expected to be in place for at least six months, with some (e.g., capital conservation buffer) extending to mid-2021. Cash withdrawals limits have also been temporarily imposed on legal entities starting early June. The financial supervisor recently revoked the license of a medium-sized bank which failed to meet the minimum capital requirement.

Exchange rate and balance of payments
  • The NBK allowed the tenge to depreciate by over 15 percent to almost 450 KZT/$ in March, intervening to mitigate excessive volatility. It also introduced temporary administrative measures (halving the limit of daily FX purchase unrelated to payment obligations, monthly limits on cash withdrawals by firms) . The tenge partially recovered in April, but pressures re-emerged in the summer, triggered by increased uncertainty associated with the spread and impact of the pandemic. With no interventions (though it continues to sell FX on behalf of the national oil fund) for several months, the NBK again intervened in the FX market in late September and to a lesser extent in late October when the tenge came under pressure due to weakening oil prices. International reserves have increased, driven by the rising gold price.


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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; 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.Places of worship have opened with a maximum of third their capacity for two hours. Schools are re-opening in phases and attendance to weddings and funerals limited to 200 people.


Key Policy Responses as of November 5, 2020

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.

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

Exchange rate and balance of payments
  • No measures.


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Kiribati

Background. Kiribati does not have any confirmed cases as of November 20, 2020. Travel restrictions have been in place since January and borders have been closed on March 21, except for delivery of essential goods (quarantine requirements apply at all ports). A press release to prevent speculations and panic was released on March 17 and government task forces have been formed to address commodity and cargo buffers; communication and awareness; isolation centers and containment efforts; and border control. A state of public emergency has been declared and schools suspended on March 28. Since then schools have reopened.


Key Policy Responses as of November 20, 2020

Fiscal
  • A stimulus package was approved in June 2020. The package amounts to AUD 15.5 million, equivalent to 7.5 percent of GDP. It consists of unemployment support (AUD 2.6 million), private business stimulus (AUD 4.5 million plus AUD 3.5 million cargo buffer), and SOE stimulus (AUD 5.2 million). This excludes the first response package of AUD 11.5 million that has been largely donor-funded

  • 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.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Korea

Background. Korea first reported confirmed COVID-19 cases in late January, with the average daily number of new cases peaking at over 500 in early March. The authorities have implemented comprehensive testing and tracking, which has enabled early isolation and treatment. New cases neared zero during the summer, but a milder “second wave” began in August and nationwide infections currently average about 200 per day. Real GDP in Q2-2020 declined by -3.2 percent in quarterly terms but rebounded to 1.9 percent growth in Q3-2020.


Key Policy Responses as of November 19, 2020

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

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

    On July 3, the National Assembly passed the 3rd 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, 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 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).

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

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Kosovo

Background. The first confirmed COVID-19 cases were reported on March 13, 2020. Number of new cases continue to grow reaching 807 per day during this week. New restriction measures been introduced by Ministry of Health, all entities that provide gastronomy services such as restaurants, coffee shops, are prohibited operating from 19:00 to 5:00, except for take away services, activities of shopping mall are prohibited from 19.00-5.00.. Ministry of Health prepared a manual which sets rules that must be respected by everyone in order to control the situation. Containment measures taken by the government in order to delay the spread of the coronavirus include temporary suspension of educational process on all levels, closures of all non-essential businesses, social distancing, travel and movement restrictions. Starting from April 15th stronger movement restriction been introduced allowing people to go out only for 1.5 hours, since May 4th this was extended to 3 hours per day and from May 18 to 4 hours. From May 27, movement of people been extended to 16 hours per day from 5.00 until 21.00 and starting from June 8 no movement restrictions. After relaxation of containment measures, number of new cases has shown an increase, as a result from July 6, movement restrictions been reintroduced from 21.00 till 5.00 in four municipalities with highest number of cases and these restrictions been extended to four more municipalities as of July 13 and as of July 27 these restrictions extended to 5 more municipalities. Starting from September 25 no movement restrictions across whole country School reopening has taken place from September 14 when grades 1,2,3,6,9 grouped in first phase started than second phase with grades 4 and 5 and third phase grades 7,8, 10, 11 and 12 started from Sept 21. Schools are operating, only in those where are new cases they are closed and supposed to continue online.

Measures such are; 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 suspended, All shopping centers are obliged to stick to the working hours from 05:00-21:00, by completely following the Manual on Protection from COVID-19, Religious ceremonies at religious institutions in Kosovo been suspended, Gathering of citizens more than 5 persons at public squares, parks and similar is prohibited. Very high fines will be applied for those they do not respect these new measures. Starting from Sept 25 since number of new cases dropped, relaxation of some measures been introduced, businesses are allowed to work until 23.30, citizens are allowed to participate in religious ceremonies and activities, Indoor and outdoor sports activities are allowed and number of other measures on this regard.

Reopening of the economy. Starting from May 4, relaxation of some containment measures has started by Ministry of Health. Business activities under construction sector, real estate, trade of vehicles and some small shops been allowed to work. Second phase of relaxation measures has started on May 18 when more business activities allowed to work such are dentists, barbers, restaurants (take away), green market, museums, art galleries, urban transport. Starting from June 1st third phase started being implemented where almost all business activities allowed to work. Also, workers in public institutions been asked to show up in the office starting from June 1st. Starting from June 8 no movement restrictions and borders with countries in the region are open. From June 26, the airport started operating with number of conditions to be followed. As of July 6, restaurants and cafe bars in four municipalities with highest number of cases allowed to work only if they have open space or take away service. Restriction measures for cafe bars and restaurants still in place, they are allowed to work until 19.00.


Key Policy Responses as of November 19, 2020


Fiscal
  • Key spending and tax measures include: (i) allocation of €6 million to the health ministry; (ii) deferrals for corporate income and personal income taxes, and VAT; (iii) advancing payments for social assistance schemes by additional one month's amount (from one month to two months) to support families in need; (iv) removal of VAT on imports of wheat and flour; (v) deferral of public utilities payments until end of April. In addition, fiscal package in the amount of 180 million euro (2.5 percent of GDP) been adopted by government.. New Economic Recovery Program in the amount of 365 million been adopted by the new government within which program are also projects foreseen under emergency fiscal package. Ministry of Finance has approached IFIs (e.g., IMF, WB, EU and EBRD) and other bilateral donors for financial support. Ministry of Finance has started making payment to workers as been planned under fiscal package and total spending related to covid 19 measures reached 207 million euro as of Nov 18.. Midyear budget review included additional budget ‘economic recovery program” to address some sectors affected by covid-19. New law on economic recovery been adopted by the government and expected to be adopted by the assembly soon. Governing coalition is facing difficulties to secure votes in the assembly to pass this law. New calendar on excise rate on tobacco been adopted, increase by 1 euro per unit from Sept this year, followed with another I euro increase in Jan 2021, 2022 and continues until it reaches 55 euro per unit in 2025.

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.

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


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Kuwait

Background. Kuwait has been hit by two related shocks - the COVID-19 outbreak and sharp drop in oil prices. The first COVID-19 case was reported on February 24, and, as of November 18, the number of confirmed COVID-19 cases reached 138,337 with 857 deaths and 129,839 recoveries. The government acted early, 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 a 24-hr curfew. The authorities also adopted a package of policy measures to cushion the social fallout from the pandemic and prevent the economic scarring, focusing on small- and medium-size enterprises and preserving employment.

Reopening of the economy. The authorities announced a five-phase reopening plan on May 28. Each phase will last for three weeks and target certain activities, and the progression to next phase will be subject to health authorities’ assessment. The first phase that started on May 31 with reducing the curfew to 12 hours allows the reopening/resumption of mosques and places of worship that meet health requirements, industrial activities, home delivery services, public services (e.g., maintenance, shipping services, gas, and laundry), drive-through-services in restaurants and cafes, mass transit, gas stations, hospitals and clinics, vehicles and equipment service (e.g., car washing, spare parts, parking, and galleries), and the telecom. In the second phase that began on June 30 with easing the curfew to 9 hours and allow up to 30 percent of public and private sector employees to return to work; construction business, financial and banking business, retail shops, malls, pick-up services at restaurants and cafes, and public parks are permitted to open. The third phase started on July 28 with reducing the curfew to 6 hours. This phase envisages opening hotels and resorts and allowing taxi rides to only one passenger and social welfare visits. The resumption plan of commercial flights started on August 1st with capacity of no more than 30 percent. The fourth phase began on August 18 with the curfew kept at 6 hours and this phase would expand the activities to restaurants and cafes with safe spacing, and public transportation services with spacing; this phase also would allow employees to return to work; the authorities lifted curfew on August 30. In the last phase, family and social events, gatherings, weddings, graduation, and all kinds of events are allowed in addition to opening public and private sport courts, cinemas and theaters, personal care shops, sport and health clubs.


Key Policy Responses as of November 18, 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. 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 for six months;

    (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;

    (viiii) 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.


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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.


Key Policy Responses as of November 20, 2020

Fiscal
  • The authorities will safeguard health spending at around budgeted levels and create space for increasing health and other spending. In collaboration with international organizations, the authorities have recently adopted a health sector contingency plan, with an estimated cost of $16 million (0.2 percent of GDP) to provide training for health-care workers, procure personal protective equipment and medical tests, and to put in place a communication plan about measures to contain COVID-19. To mitigate the impact on the economy, the authorities have approved the first package of anti-crisis plan economic measures of $15 million (0.2 percent of GDP) including the postponement of tax payments, time-bound exemptions of property and land taxes, and temporary price controls on 11 essential food items. They prepared a second and, more recently, 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 has caused 17.4 percent (y-o-y) drop in tax revenue in H1 2020, which will lead to a temporary widening of the budget deficit. The authorities are seeking donor financial support to close the financing gap. On March 26, the IMF Board agreed to provide $121 million in emergency financial support to the Kyrgyz authorities. On May 8, the IMF Board approved $121 million, the second emergency assistance to the Kyrgyz Republic since the outbreak of the pandemic. 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) has already sold $313.4 million of foreign exchange reserves so far (about 70 percent more than total FX interventions for the whole year of 2019) and the KGS has depreciated by 16 percent vis-a-vis the US$ since the beginning of the year after a long period of stability since mid-2016. The external position is weakening as remittances and tourism receipts are falling (i.e. remittances by 8.8 percent in January-July compared to the same period last year).


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Lao P.D.R.

Lao P.D.R. has 25 confirmed cases of COVID-19 as of November 5, 2020. A nationwide lockdown is now being gradually lifted. All businesses can resume activities, but must abide by preventative measures and practice social distancing. In-country travel and public transport are fully operational. All schools have resumed but must ensure hygiene and distancing practices. All indoor and outdoor sporting activities are now permitted, and audiences are allowed. Large gatherings, including for traditional ceremonies and celebrations are now allowed. With the exception of certain checkpoints allowed by the government, border checkpoints for individuals and transportation of goods, will remain closed as will all international borders. However, foreign businessmen, investors, workers for large investment projects as well as diplomats and foreign experts with proper medical certification and authorization can enter the country but must be quarantined for 14 days. More recently, however, some travel restrictions from November 1 – December 31 have been further eased with the intent to allow group tours from selective countries and people with urgent need to travel. Fast-track immigration policies, with China is to be implemented, while discussion on travel bubble policy with Vietnam, Japan and with some other ASEAN countries is ongoing. Price control of essential goods is still in place. The Taskforce Committee for COVID-19 Epidemic Prevention , Control and Response is monitoring latest developments and coordinates the authorities’ response. A separate Taskforce Committee and its seven working groups, met on July 13 to discuss possible renewals of the measures and policy responses introduced for April-June period. The committee is expected to submit a new proposal, covering economic recovery measures and policies, for the government’s consideration and approval.

 

Key Policy Responses as of November 19, 2020
Fiscal
  • Thirty billion kip has been allocated for prevention and control, while an additional budget request of 23.98 billion Kip for rapid procurement of protective and medical equipment from State Budget is under process. In parallel, the Taskforce Committee has launched a fundraising campaign from the public (as of June 1, about 17.5 billion kip in cash and 85.5 billion kip in kind have been raised). A 10-measure economic stimulus package has been endorsed by the cabinet. Measures include, establishing a separate task force to address the economic impact of COVID-19. A new electricity tariff, to ensure supply of electricity, in effect from May 1, 2020 through December 31, 2025, is in place. Extra efforts to ensure revenue collections through automated platforms and inspections targeting at stockpiling of essential goods are being considered.

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

    The government has agreed to compensate 60 percent of workers’ salary, who currently participates in the Social Security Scheme, and has had their work suspended during May and June 2020. Of the 170,000 members, close to 80,000 will benefit from this scheme through June. Terminated, and thereby unemployed, workers are eligible for an unemployment allowance in accordance to the Social Security Law.

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

Monetary and macro-financial
  • Bank of Lao P.D.R. (BOL) has reduced the reserve requirements from 10 to 8 percent on foreign exchange, and from 5 to 4 percent on local currency, effective April 2. 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 has been issued. Under this policy, banks and financial institutions that implement debt restructuring and new loan provisions will benefit from regulatory forbearance on loan classification and provisioning. BOL has 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 has 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 has made available 200 billion kip for low interest rate SMEs loans through commercial banks and is preparing to allocate 1,800 billion kip as low interest bank loans for post-COVID-19 economic and business recovery. BOL has completed the signing of agreements with 12 commercial banks, who will participate in first tranche of first USD 100 million SMEs loans from CDB.

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


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Republic of Latvia

Background. Latvia reported its first COVID-19 case on March 2, 2020. The new cases have decreased since the peak in March, but since the end of September, the signs of a second wave have been appearing. 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, a second State of Emergency was introduced on November 9, bringing back strict restrictions on individual and group behavior. The Q3-2020 year-on-year real GDP growth was -3.1 percent.

 

Reopening of the economy. The state of emergency ended on June 10 with new laws regulating COVID-19 recovery in force. From August 17, further easing of restrictions took place, including an increase in the number of people allowed to gather indoors from 500 to 1,000 and a reduction of required space between visitors from four to three square meters per person in catering establishments, shopping centers and cultural venues. The guidance for the phased reopening can be found on the government website . The 10-day self-isolation is required for those who arrived from a country where the 14-day cumulative number of COVID-10 cases per 100,000 inhabitants exceeds 16 people. Travelers arriving at Latvia are registered, and the violators of self-quarantine regulations are fined up to 2,000 euros. The list of countries is published and regularly updated on the website of the Center for Disease Prevention and Control. Since October 7 the use of face mask in public became compulsory, with a fine of 50 EUR for non-compliance. Given the rapid spread of the virus in the fall, a State of Emergency has been re-introduced from November 6 through December 6.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has announced a support package of about €3.4 billion (12 percent of projected 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 €1.2 billion, ii) a sectoral support package of €875 million covering the air and transport industry, health and education sectors as well as infrastructure projects, iii) use of EU funds amounting to about €763 million to mitigate the impact of the COVID-19 crisis, iv) revenue measures amounting to about €331 million, and v) expenditure measures supporting idle workers and social benefits amounting to €196 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 €1.5 billion 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 if the plan is approved by the European Parliament and national parliaments.

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

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

Exchange rate and balance of payments
  • No measures.


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Lebanon

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 100,000 level and now stand at 110,000 and 852 deaths. 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. 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 over the past month forced the government to announce a general lockdown for all public and private sector 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 imposes strict mobility rules according to even-odd car matriculation numbers and closes down all but essential sectors.

Reopening of the economy. On April 24, 2020 a five-phase plan was approved to gradually ease the general mobilization in a manner that takes into consideration potential risks within the categories of different economic activities. The five-phase plan, now complete, opened up the different economic sector over a period of five weeks and culminates in the resumption of full economic activity and the resumption of air travel by July 1, 2020, with 10 percent of the airport’s capacity—2000 travelers a day. However, two weeks into the gradual easing, and with the continued repatriation of expats, infection cases spiked. Consequently, the government reinstated a full lockdown for the period May 14-18, 2020. It then announced resumption of the plan to gradually reopen the economy. The government then decreased curfew hours and i headed towards a complete opening up of sectors.


Key Policy Responses as of November 19, 2020

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 has reported 2052 confirmed accumulated cases and 44 deaths as of November 18, 2020. Lesotho created an inter-ministerial committee to coordinate the response to Covid19 and adopted a range of containment measures, including social distancing, travel restrictions, declaration of a national state of emergency, closure of borders to all but essential goods, closure of schools, extension of initial 21-day lockdown of the country for two weeks (until May 5) and suspension of some shops (e.g. gyms, hair/beauty parlors, arcades, liquor stores, etc.). The Ministry of Health has developed a Preparedness and Response Plan. The government has developed the National Covid-19 Response Integrated Plan 2020 in collaboration with development partners.

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. Private businesses (non-essential) gradually reopened but some (e.g., alcohol) followed WHO’s recommendations. Public servants already went back to work but practice social distancing. The lockdown was lifted on May 19, 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. Schools have reopened gradually under the guidance of ministry of education.


Key Policy Responses as of November 18, 2020

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

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

    Additional financial sector measures were also unveiled in the Prime Minister’s speech on April 13: (i) Banks and insurance companies have been asked to suspend loan repayments for three months, and insurance companies asked to suspend instalment payments. (ii) The implementation of Basel II.5 was postponed to enhancing banks’ capacity to lend.

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

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 currenting 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.

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.


Key Policy Responses as of November 20, 2020

Fiscal
  • Aside from some measures to speed up and facilitate the importation process—including by removal of the pre-shipment inspection requirement and some protective surcharges, 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. Libya reported its first COVID-19 positive case in late-March 2020, when an infected man returned from a trip to Saudi Arabia via Tunisia.

Infections and deaths from COVID-19 have increased exponentially since end-May 2020. As of November 18, 2020, the Tripoli-based National Center for Disease Control (NCDC) reported that Libya had registered about 72,000 positive COVID 19 cases. This number has more than doubled since the beginning of October. While new infections continue to grow at a high rate, more recently, they appear to have stabilized, and may be trending downward. The NCDC also reported that about 1,050 patients have died from COVID 19 related complications thus far, up from just 3 deaths at end-May, and about double the number at the beginning of October. According to the NCDC, the outbreaks appear to be most severe in Tripoli, Misrata and the southern desert town of Sebha, although cases have also been confirmed in most other major population centers. Notwithstanding the steep rise in positively identified Coronavirus cases and deaths in recent weeks, the true spread of the disease in Libya is considered to be significantly understated because of continued hostilities and restricted access to testing across the country, as well as limitations in data compilation. The NCDC continues to implement strict measures to contain the spread of the Coronavirus into and within Libya, but the fighting and migrating militias and civilians pose a challenge. Effective Friday, July 31, the Government of National Accord (GNA) imposed a near-total lockdown for at least five days, forbidding all movement outside the home except to buy necessities, thereby replacing a partial 9 p.m. to 6 a.m. curfew. On August 26, a new 4-day total curfew was declared by the GNA. It was followed by a ten-day night curfew during from Sunday through Thursday that will start at 9.00 pm and go through 6.00 am the following day. The 24-hour curfew remained in effect on Fridays and Saturdays. The country’s borders have been closed, large public gatherings banned, and travel restrictions instituted, including between cities.

So far, the continued civil war has had a severe social and economic impact than COVID-19. Libya’s economy is contracting sharply because of the steep drop in oil prices and the collapse of oil production of more than 90 percent due to the conflict. In early October, the central bank reported that during the nine months of 2020, the government lost US$10 billion in oil exports proceeds due to the stoppage of oil production and exports. Water supply to Tripoli and surrounding areas that was shut off in early April as a result of the ongoing fighting has since been restored. The combination of civil war and an accelerating pandemic could prove devastating.

On August 6, the US Treasury Department imposed sanctions on three Libyans and a Malta-based company, accusing them of acting as a network to smuggle drugs and Libyan fuel into Malta and thereby contributing to instability in Libya. On October 23, a ceasefire agreement was signed in Geneva between representatives of the GNA and the Libyan National Army (LNA) under the auspices of the United Nations. Thus far, the ceasefire agreement appears to be holding, although there is the real risk that it may be undermined by a number of militias and forces that were excluded from the negotiations. Some oil production and exports have resumed, but it is too early to tell how large and how sustainable these will be. Meanwhile, social conditions in Tripoli and other major cities have continued to deteriorate considerably, with frequent and prolonged disruptions in the supply of water, electricity, and fuel. Widespread demonstrations of frustrated civilians in Tripoli have reportedly been met by harsh force, arrests and kidnappings.


Key Policy Responses as of November 19, 2020

Fiscal
  • In the spring of 2020, the Government of National Accord (GNA) announced a package of LD 500 million (about 1 percent of GDP) in emergency COVID-19 related spending. In early October 2020, the Central Bank of Libya (CBL) stated that, to date, the actual total amount of funds requested by the Ministry of Finance to combat the Coronavirus pandemic had reached LD 847 million, of which LD 570 million were allocated to the Ministry of Health. In addition, LD 150 was allocated to the Medical Supply Authority; LD 50 million to municipalities and local councils; LD 95 to the military for medicines and medical equipment, and about LD 41 million to Libyan embassies and consulates overseas. Certain medical equipment and personal protective gear are already in short supply as a result of the civil war which has impacted imports and impeded the free flow of goods within Libya’s borders. In an effort to protect declining reserves, in mid-April the GNA announced a 20 percent pay cut for civil servants.

Monetary and macro-financial
  • No measures.

Exchange rate and balance of payments
  • No measures.


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Republic of Lithuania

Background. Lithuania 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. Gradualeasing 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. International travel is allowed and a 14-day mandatory quarantine is required for countries with a 14-day morbidity rate above 25 per 100 thousand population(raised from 16 per 100 thousand on September 14). Guidelines for a variety of activities and establishments on opening and operating safely are provided by the Ministry of Health and frequently updated. Schools are beginning 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 and temperature tests are no longer mandatory.

The government lifted the national quarantine on June 16 but maintains a national state of emergency regime . A COVID-19 management strategy is in place to coordinate efforts in containing the virus outbreaks over the next two years.

With an apparent rise in the spread of the virus since mid-September, the government has begun to introduce tighter requirements nationally and local quarantines in individual municipalities. The government has adopted the EU’s traffic light system to assess both foreign countries as well as Lithuanian municipalities .

On November 7, a three-week nation-wide quarantine began with restrictions on catering establishments, public gatherings and events, protective face masks, school attendance, and other social services. The government has launched an official contact tracing mobile app to help control the spread of the virus in Lithuania.


Key Policy Responses as of November 19, 2020

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

    Various schemes and measures have been introduced since then. The government is establishing a business support fund with a target value of 1 billion euros (2.1 percent of 2019 GDP), consisting of 100 million euros in public contributions, 400 million euros from bond issuances, and possible contributions from international financial institutions and private investors. The objective of the fund is to provide liquidity to medium and large businesses through direct loans or investments in equity and debt securities through the end of 2020. Other schemes include interest compensation support for SME’s with deferred loans, a new financial instrument for businesses to form portfolios from business loans, and cheap loans targeted to hard hit sectors like travel services and accommodation and services .

    On May 7, the government approved an additional package of nearly 1 billion euros (2 percent of 2019 GDP) 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. The plan covers investments in human capital, digital economy and business, innovation and research, infrastructure and climate change and energy through the end of 2021.

    The government has increased available financial support to the agricultural sector through the Agricultural Loan Guarantee Fund. Targeted financial support has also been made available to dairy farmers, the poultry and egg sector, as well as travel and cultural sectors.

    With a national quarantine announced in November 2020 in response to a wave of COVID-19 cases, the Ministry of Economy and Innovation announced a new subsidy schemefor affected businesses. Ongoing support measures introduced earlier in the year that have not yet expired are still available through the end of 2020.

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.  

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.


Key Policy Responses as of November 19, 2020

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

    On May 20, the government announced a new fiscal package to support economic recovery (up to €800 million, 1.3 percent of 2019 GDP). Measures include: (i) providing structural partial unemployment benefits for affected businesses based on recovery/employment retention plans 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 grantsto 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.

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 financiaQ&As clarifying, among others, reporting requirements for investment funds, and the prudential treatment of Covid-19 industry-wide private moratoria as well supervisory flexibility to avoid IFSR9-related procyclical effects for banks. Also, Luxembourg banks committed to offer a 6-month moratorium on loan repayment for SMEs, self-employed and liberal professionals.     

Exchange rate and balance of payments
  • No measures.


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Madagascar

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 17,310 (250 deaths, 16,592 recovered) as of November 18, 2020.

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, has been extended several times. 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. While the state of emergency was lifted 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 200 attendees. Domestic flights require 48-hour testing prior to boarding for all passengers. As of October 1, 2020, international flights to Nosy Be resumed with restrictions imposed on countries with high COVID-19 incidence of new cases. Tourists are not permitted to travel outside of Nosy Be.


Key Policy Responses as of November 18, 2020
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, 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 442 billion (about 0.8 percent of GDP) at end June 2020 and relaxed some mandatory deposit limits to encourage banks to defer delayed payments on existing loans and increase lending to businesses.

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


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Malawi

The first three cases of COVID-19 were confirmed on April 2nd, 2020. A moderate increase in cases followed through end-May, when the number of cases accelerated. Active cases spiked in early-July and are expected to rise further as local COVID-19 testing capabilities continue to be expanded with assistance from development partners (DFID, UNICEF, and the Global Fund)—and risks from a second wave of COVID-19 pandemic in Europe gain momentum.

To curb the spread of the pandemic, on April 4, the government instituted a partial lockdown of the country, with essential services continuing to function and critical businesses working in shifts. Initially, 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. 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 for 2020 is expected to decline to 0.6 percent.


Key Policy Responses as of November 19, 2020
Fiscal
  • The government’s response plan includes US$20 million (0.25 percent of GDP) in spending on health care and targeted social assistance programs; this includes hiring 2000 additional health care workers. In addition, tax waivers 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, is being implemented during May-November.

Monetary and macro-financial
  • The domestic currency Liquidity Reserve Requirement (LRR) has been reduced by 125 basis points to 3.75 percent (aligned with the foreign currency LRR) and the Lombard Rate has been reduced by 50 percent to 0.2 percentage points above the policy rate. An Emergency Liquidity Assistance (ELA) framework has been introduced to support banks in the event of worsening liquidity conditions and to provide support to banks on a case-by-case basis. However, financial sector buffers, including banks’ capital and liquidity buffers, are expected to counter risks to the banking system. To support small and medium enterprises (SMEs), commercial banks and micro-finance institutions will be, on a case-by-case basis, restructuring SME loans and providing a moratorium on their debt service until end-2020. Fees on mobile money transactions have been temporarily waived to encourage cashless transactions.

Exchange rate and balance of payments
  • No measures.


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Malaysia

Background. Malaysia is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. The first COVID case appeared in Malaysia in early February 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.

Reopening the economy. The authorities started easing restrictions by allowing most businesses to reopen under a Conditional Movement Control Order (CMCO) from May 4. A Recovery Movement Control Order (RMCO) took effect on June 10, lifting most restrictions on domestic activities and movement, and its end date has been extended from August 31 to December 31 2020. Schools started to gradually reopen from June 24, and all students have returned by July 22. A new outbreak associated with elections in the state os Sabah is now prompting a resumption of containment measures. Borders remain closed and overseas travel restricted until at least December 31 although the authorities are discussing travel bubbles with other countries in the region.


Key Policy Responses as of November 5, 2020

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

    A second stimulus package of RM 25 bn (1.7 percent of GDP) was released on March 27, 2020, including additional health spending; cash transfers to low income households; wage subsidies to help employers retain workers; and infrastructure spending in East Malaysia. The government also setup a RM 50 bn fund for working capital loan guarantees for all COVID-19 affected businesses. Furthermore, employees will be allowed special withdrawals from their Employment Provident Fund (EPF) account for a 12-month period and businesses will be allowed to reschedule their EPF payments. On April 6, 2020, the authorities announced a third stimulus package of RM 10 bn (0.7 percent of GDP), 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 August 25, 2020, Dewan Rakyat (Lower House) passed the Temporary Measures for Government Financing (COVID-19) Bill 2020 which proposes to temporarily raise the government debt ceiling by 5 percentage points to 60 percent of GDP. The Bill has been subsequently passed by the Dewan Negara (Upper House) on September 22, 2020. It will become law when signed by the King.

    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.

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 instalment 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.

Exchange rate and balance of payments
  • No announced measures.


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Maldives

Background. Maldives is being 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 December 5 on November 5. Local community transmission was detected in Mid-April. The greater Malé region was placed on full lockdown during April 15-May 28, with all people going outside their homes needing the approval of the Maldives Police Service. Several containment measures were adopted during the outbreak, but many of them are being gradually lifted.

Reopening of the economy. The country, since July 1, 2020, is in phase three of the lockdown ease plan. This phase permits movement in the Greater Malé Region from 5am to 11pm, and only gatherings of less than 30 people are to be allowed in public spaces. International flights as well as tourism island resorts reopened on July 15, 2020. While guesthouses in inhabited islands are opened since July for locals/residents in Covid-19 free islands, most guesthouses remain closed for tourists.


Key Policy Responses as of November 20, 2020

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

Monetary and macro-financial
  • The Maldives Monetary Authority (MMA) has been in close contact with the banks to discuss the impact on the domestic financial system and has identified the measures that can be taken through the financial institutions to reduce economic disruptions and loss of jobs and output. The announced measures include: (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 US$150 million foreign currency swap support to the MMA on April 28, under the US$ 400 million currency swap agreement framework signed between the MMA and the Reserve Bank of India in July 2019.


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Mali

Background. The outbreak reached Mali relatively late, with first confirmed cases on March 24. The number of total cases continues to rise. The spread of the pandemic has been accelerating since October from around 15 new cases a day to 30 cases in mid-November (calculated as a 7-day moving average due to high variability of the daily data).

Initial Containment Measures. Since mid-March, the government has been responding to the global emergence of the pandemic with preventive containment measures. These include the suspension of commercial flights (except cargo flights), the closure of land borders, a curfew from 9:00pm to 5:00am, the suspension of all public gatherings, the prohibition of social, sports, cultural and political gatherings of more than 50 people. In addition, the government has set up a crisis response unit, a hotline for signaling any suspicious case, and is stepping up sensitization campaigns, strengthening testing capacities, expanding quarantine and hospitalization facilities, and improving medical care capacities. Working hours in the public administration have been reorganized to end earlier (at 2:30pm), to protect civil servants. Retail markets will remain open from 6:00am to 4:00pm, to prevent disruptions in the supply of population with basics goods. 10 million masks have been distributed to the population. On May 20th 400 prisoners were released as a preventive step against the spread of COVID-19.

Reopening of the economy. As of May 9, the measures have stared to be relaxed with lifting the night curfew and it has become mandatory to wear masks in public. Schools reopened on June 2nd for final year students only who are preparing for exams. The schools for other students reopened on September 1st. 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 1st.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has updated its medical response plan to prevent the spread of COVID-19 and strengthen its medical care capacity, in collaboration with the World Health Organization, now costed at about 0.6 percent of GDP (including bonuses to health workers), and the World Bank in terms of medical equipment (respirators, quarantine facilities, etc.). The government’s social 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 the months of April and May 2020, a 3-month exemption from VAT on electricity and water tariffs, and a 3-month exemption from customs duties on the import of basic food (rice and milk). A package of economic measures was also launched to ease liquidity constraints on ailing firms, including an SME-support guarantee fund, clearing the budget spending float, granting tax deferral and relief to ease liquidity constraints on the hardest-hit companies, especially in the hospitality sector (hotels, restaurants, transportation). As of mid-September 2020, only a third of the planned COVID-19-related spending has been implemented. This, in part, was because the post-coup sanctions have cut the military authorities’ access to government’s Treasury Single Account at the BCEAO, hence no payments/expenditures could be made out of those accounts. Specifically: (i) support to electricity and water SOEs and the food distribution plans have been fully executed; (ii) COVID prevention and medical support spending registered 60 percent execution; while (iii) the execution of other COVID-related spending, including spending on vulnerable households, had not yet started. 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. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the Covid-19 crisis. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, 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 had also announced: (i) an extension of the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched 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 issued by Mali amounted to CFAF 88 bln (0.9 percent of GDP). Mali has been recently allowed to issue the equivalent of 0.5 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks’ credit to SMEs in the eight WAEMU member countries.

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. The number of active and new cases has decreased from the first peak in April, but has started to rise again from end-July.

Reopening of the economy. Containment measures were gradually lifted with the reopening of certain non-essential shops started on May 4. 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, 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 until December 1 and further limiting the size of public gathering from 10 to 6 people.


Key Policy Responses as of November 20, 2020

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, 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, the government further extended the wage subsidy schemes until at least March 2021 and decided to issue another round of cash voucher redeemable at restaurants, accommodations and shops.

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.

    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 November 19,there are 3 active COVID-19 cases and 1 recovered case in the Marshall Islands. The government responded with swift precautionary measures early on. Travel restrictions from affected countries have been imposed since January 24. President David Kabua declared a State of Health Emergency for COVID19 on February 7th, 2020. A ban to incoming travelers established on March 8 was extended through December 5, 2020, with the possibility of extensions towards the end of the year. On August 26, the Cabinet approved the temporary suspension of non-essential departures of RMI citizens, on the back of surging number of COVID-19 cases in Hawai 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. To ensure continuity of transshipment services, a limited number of carrier vessels coming from Covid19-infected countries will be allowed to enter, with strict safety requirements including prohibition of human contacts and a minimum of 14 days between departure from ten restricted countries and arrival in RMI. Fisheries, port-related activities, and the hotel and tourism sectors are experiencing significant losses.

Reopening of the economy. To ensure continuity of transshipment services, a limited number of carrier vessels and purse seiners can enter RMI for transshipment, after spending 14 days at sea and only after clearance by corresponding agencies. Container vessels and fuel tankers that have a history of entering Majuro and Ebeye ports with same crew and corresponding health records can enter ports (no disembarkation) without 14-day quarantine. Special exceptions to the ban on incoming travelers have been issued for a few returning Marshallese and essential personnel for the US Army Garrison in Kwajalein Atoll. The mandatory quarantine on anyone coming into the country has been extended to 21 days.


Key Policy Responses as of November 19, 2020

Fiscal
  • The Government has approved an initial budget of $42 million dollars (around 20 percent of GDP) for the national preparedness plan in response to the global health pandemic on COVID19. 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 Neighboring Islands COVID19 preparedness plans. The authorities have identified grant support to cover these expenditures. The authorities recently announced additional $17 million for the COVID-19 response, targeting infrastructure in the outer islands, but the details remain unclear.

    To date, the RMI has spent around $ 9.5 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. 4 local businesses have received the assistance. 70+ local companies have submitted applications and are currently under review), 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 has reported5,564 (149deaths and 2830 recoveries) as of July 15, 2020. The government has taken stringent containment measures to limit the spread of the virus, including suspension of all commercial flights into and from the country; closure of all land borders except for the transportation of goods; closure of schools and universities, as well as of all non- essential businesses, including restaurants and cafés; suspension of non-essential interregional movements of people; a curfew from 9 pm to 6am throughout the country; and suspension of the Friday prayer. The authorities stepped up imports of medical equipment and medicines.

Reopening of the economy. On May 7, 2020 the government took the following measures to relax the containment and reopen the economy: (i) the opening of most of the businesses, but restaurants will only operate for carry-out meals; (ii) the relaxation of the curfew that will now take place from 11pm to 6am, instead of from 9pm to 6am; (iii) the authorization for collective prayer on Friday, but with clear guidelines on social distancing, masks wearing, and hands washing. However, following the spike in new infections, the Friday collective prayer was suspended again from May 14, 2020 to June 24, 2020. Effective from September 10, 2020 all the remaining restrictions were removed. The curfew was completely lifted throughout the country; the restaurants and cafés were reopened; interregional movements of people and domestic flights also resumed.However, following the gradual increase of new COVID-19 cases since early November, the Health Minister on November 18 issued a statement alerting the population on a possible second wave underway, and strongly recommending the wear of masks in all public areas, as well as social distancing.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government on March 25 announced the creation of an emergency fund of about $80 million (1.1 percent of GDP) for urgent procurements of medical supplies and equipment; subsidies to 30,000 poor households; and financial support to small individual businesses. It also waived customs duties and taxes on imports of essential goods and signaled that it will take additional measures as more resources are mobilized. On May 6, 2020 the government approved additional health, medical supplies, social protection, SME support, foodstuff stocks, and security-related expenditures to address the pandemic (about $260 million (about 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 fifth review of the government program supported by the IMF Extended Credit Facility was completed on September 2, 2020, making available a disbursement of SDR 36.8 million (about $52.2 million), including an augmentation of access of SDR 20.2 (about $ 28.7 million). The country secured financing of around $ 95 million from the Debt Service Suspension Initiative and has appealed to development partners for additional financing.

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

Exchange rate and balance of payments
  • No measures.


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Mauritius

Background. Mauritius reported its first cases on March 18, 2020. 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. On March 25, the authorities further tightened the lockdown by closing all supermarkets, bakeries and shops and the next day the government began direct food distribution to needy households. On April 2, the stores were reopened with increased safety measures. On April 10, the government extended the nationwide curfew to May 4, which was further extended to June 1. The economy has been severely affected by the crisis, with tourism coming to a halt and slowing of activity in other sectors. On Nov 12, there was a confirmed case of domestic Covid transmission; first in six months.

Reopening of the economy. On April 27, mass testing for antigens was initiated. With no new cases being recorded for almost 3 weeks and no active cases since May 11, a strategic phased resumption of economic activities began on May 15 . In the first stage, to return to office the employees needed to obtain a Work Access Permit issued by the authorities, except for those working in essential sectors. Arrangements have been made by the public transport companies to comply with the prescribed health measures and to keep physical distance between passengers. Schoolchildren had to stay at home, while the courses continued to be delivered remotely. Banks and supermarkets still operated on an alphabetical order, and the same applied to post offices. On May 15, two Bills were passed in the parliament – Covid-19 Bill and Quarantine Bill – which specify the details of the transition process from the curfew by strengthening the surveillance control and health system preparedness. This allowed the progressive reopening of economic and other activities with strict sanitary rules and added measures to avoid a resurgence of the disease. The nationwide curfew ended on May 30. Physical distancing guidelines remained in place, as well as the requirement to wear masks in public. While work access permits are no longer required and offices need to incorporate social distancing requirements, working from home is encouraged. From June 15, most of the activities resumed, with masks and physical distancing requirements in effect. The schools will reopen on August 1, while the borders remain closed at least until end of August. On Aug 31, it was announced that the borders will be reopened in three phases: the ongoing first phase focusing on repatriation of Mauritians from abroad; the second phase from October 1 with travel to and from certain destinations; and the third stage involving full border reopening with date to be determined in light of the evolution of the pandemic. From, October 1 first the border has been reopened, but as all arriving passengers are required to quarantine for two weeks and thus far there have been few travelers.In late October, Mauritius announced it is launching a new, one-year visa (Premium Travel Visa) to encourage long stays and help the tourism sector. The visa applies to both tourists and remote workers.


Key Policy Responses as of November 19, 2020

Fiscal
  • The authorities have announced plans to increase general public health spending by Rs1.3 billion (0.28 percent of GDP). A range of fiscal support measures have been taken to limit the socio-economic impact of COVID-19. These include the implementation of a Wage Assistance Scheme to provide financial support to employees who became technically unemployed during the lockdown/curfew period, as well as a Self-Employed Assistance Scheme for those employed in the informal sector or self-employed. Some Rs 25 billion were used until September and will continue until June 2021. On July 17, it has been announced that both schemes will be extended for the month of July, however they will only cover employees in the tourism sector. An amount between Rs500 mill and Rs600 million was expected to be disbursement throughout the month, and it was announced that the support to the sector will continue to be paid until the borders open. The State Investment Corporation is raising some Rs4 billion (0.8 percent of GDP) to make equity investments in troubled firms, including SMEs. The Development Bank of Mauritius Ltd will provide Rs200 million (0.04 percent of GDP) in credit for firms short on cash. All labor contracts set to expire this year have been extended through December 2021. The government has also established CoVid-19 Solidarity Fund aimed at funding COVID-19 related projects (financial support to Mauritian residents and the financing of projects related to the COVID-19 virus and other related health issues), with around Rs159 million raised by the public and enterprises as of May 26, 2020.In October, the government announced that Rs 9 bill will be redirected to limit the increase in unemployment. From November 1 until June 30 next year five initiatives will be funded: i) The Human Resource Development Council (HHRDC) will increase 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 will be paid monthly stipends of Rs 10,200 over a training period spanning six months; ii) Employment Support Scheme for SMEs to support 11,000 employees with a monthly payment of Rs 10,200 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, Air Mauritius, currently under voluntary administration and support for the export sector. As part of the Covid response, the government submitted to Parliament a supplementary spending bill of Rs 17 bill (3.6% of GDP) in November.

Monetary and macro-financial
  • The Bank of Mauritius (BOM) reduced the Key Repo Rate from 3.35 percent to 2.85 percent on March 10, followed by a further reduction to 1.85 percent on April 16. On March 13, the BOM also adopted a set of measures focused on economic operators which are being directly impacted by COVID-19, including: i) reduction of the cash reserve ratio from 9 to 8 percent, with the amount released through the cut earmarked to be made available to affected economic operators; ii) special credit line of Rs5 billion (1.1 percent or GDP) through commercial banks for affected firms to meet their cash flow and working capital requirements, with Rs2 billion granted by May 29; iii) commercial banks also provide a moratorium of six months on capital repayment for existing loans of affected economic operators; iv) the BOM also eased supervisory guidelines on handling credit impairments; and v) Rs5 billion (1.1 percent of GDP) of 2.5 percent two-year BOM savings bonds which will be made available to retail investors. On September 7, BOM announced the extension to 31 December 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 remain unchanged.

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

    Following the amendments to the BOM Act adopted by the parliament as part of CoVid Bill on May 15, BOM announced in late May that its Board approved the following additional measures : 1) a one-off exceptional contribution of Rs60 billion (12% 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: 1) mitigate contagion of the ongoing economic downturn to the banking sector, thus limiting macro-economic and financial risks; 2) secure and enhance financial wealth for current and future Mauritian generations while ensuring the stability of the banking sector. BOM announced it will invest US$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.

Exchange rate and balance of payments
  • The central bank has maintained the flexible exchange rate regime and has intervened in the domestic foreign exchange market to prevent disorderly fluctuations and maintain FX liquidity in the financial system. In addition, BOM conducted swap transactions with commercial banks under its support program for import oriented businesses. 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 5th, 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 has been 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 has seen cumulative non-resident outflows of around US$18.2 billion (1.7 percent of 2020 GDP), the 10-year dollar credit spread widened from 132 bps to 423 bps at peak on April 28th but has since declined to 206 bps for the sovereign and from 377 bps to 647 bps for Pemex after peaking at 1188 bps, while the peso has depreciated by 6 percent relative to the US$ (as of November 19th 2020; compared to February 20th, 2020), down from a peak of 26 percent.

Reopening of the economy: On May 14, the government announced plans to begin the normalization of economic activities, including a green-yellow-orange-red color system for states to represent the extent of activities allowed (e.g. states with most active cases are red and would remain in a forced quarantine), the resumption of school and labor activities in municipalities free of infection, and the addition of construction, mining, and transport equipment manufacturing as essential activities. For the weeks of November 8-22, 2 states are in the red category, 18 states are in the orange category, 11 are in the yellow category, and 1 is in the green category.


Key Policy Responses as of November 19, 2020

Fiscal
  • The Government is implementing 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,Mexico’s fiscal response includes the following measures: 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 (250 billion pesos).

    Specifically,the Ministry of Economy granted loans with optional repayments to SMEs that maintain employees on payroll, self-employed and domestic workers (9.4 billion pesos); and loans to family businesses previously registered in the Welfare Census (26.6 billion pesos). The government is providing subsidized unemployment insurancefor 3 months to workers that hold a mortgage with the Housing Institute (5.9 billion pesos). Moreover, additional resources are allocated to social spending related to infrastructure, security, education,urban improvement, and other areas (62 billion pesos).

    The Government is implementing other measures, 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 amount to 0.2 percent of GDP in health spending and 0.5 percent of GDP to support households and firms. Below-the-line measures amount to around 1.3 percent of GDP comprising loans to formal workers and recently laid-off workers as well as contingent liabilities.

    During the week of April 19th, 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 275 basis points since the pandemic outbreak, from March through September 2020. 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.

    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 were 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 two roll-over auctions with declining demand. 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 is also engaging in government bond swaps to shorten government bonds’ maturities in the hands of private institutions, thereby improving their liquidity position.

    On the financial side, the National Banking and Securities Commission (CNBV) has 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 has 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 is outlining 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

To date, there are no confirmed COVID-19 cases in the Federated States of Micronesia (FSM), but the country’s health system has limited capacity for handling an outbreak (see U.S. Department of State travel advisory for the FSM) . The public health emergency is effective from January 31, 2020 to November 30, 2020. The national and state governments have 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.


Key Policy Responses as of November 19, 2020

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 US$36 million (9 percent of GDP) for the period of nine months, supported by the U.S. Department of Labor. On April 22, 2020, the government approved the economic stimulus package of US$15 million (3.8 percent of GDP). The package includes measures to support affected businesses, including wage subsidies, debt relief, as well as social security tax and other tax rebates.

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

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


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Moldova

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. The state of national public health emergency instituted from 15 May 2020 has been canceled by a decision of the Extraordinary National Commission for Public Health of 28 September 2020. A new decision was issued by the National Extraordinary Commission for Public Health on 13 October 2020 that shifts into a more de-centralized risk management approach and declares emergency situation in highly affected regions (35 out of 38 territorial regions are marked code red). The decision also set out rules that will govern the organization of the forthcoming elections and precautionary steps for voting in polling stations. The authorities have also instituted mandatory wearing of masks for students on all institutional premises. Measures to prevent COVID-19 infection at the entry to the Republic of Moldova were updated on 23 October 2020 and updates rules list 67 countries with increased risk of transmission and incoming passengers will need to observe 14-day quarantine. However, group tourism up to a maximum 10 people, mass gatherings up to a maximum of 50 people, and training for sportsmen, are allowable effective August 1. Swimming pools and kindergarten schools reopened in August. Weddings are allowed up to a maximum of 50 people. Exhibitions, festivals and fairs are now allowed, and theaters and concerts are also permissible for a maximum of 50 percent of the seats and 2 hours only. All these openings are subject to proper safety measures being in place.


Key Policy Respons as of November 19, 2020

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. Discussions on the 2021 Budget are underway and the draft envisages more support to the health sector.

Monetary and macro-financial
  • The National Bank of Moldova decreased the base rate applied to the main short-term monetary policy operations to 2.65 percent, decreased the required reserve ratio in local currency to the level of 32.0 percent, while the required reserves ratio in freely convertible currencies increased to the level of 30.0 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 hit Mongolia in early 2020, the government immediately declared the state of high alert and took prompt actions to contain its spread through social distancing and closure of the border with China.Limited COVID-19 cases have been sporadically reported from individuals repatriated abroad.Domestic transmissions of the virus were reported in early November for the first time. Since then, the government has reinforced stringent measures, including a nationwide lockdown until December 1. Nonetheless, there have been no fatalities so far reported domestic spread.


Key Policy Responses as of November 19, 2020

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

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

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

    On August 5, the government announced the extension or modification of COVID-19 fiscal measures. Extending measures through the end of the year include: (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.

    On November 18, 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 of customs duty and VAT on certain imported goods.

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

    The Anti-Pandemic Law approved by Parliament on April 30 compels the BOM to implement nonconventional measures, including a SOE-issued bond purchase to compensate banks’ profit loss related to pension-backed loan cancellation, short-term concessional financing to gold miners, and temporary resumption of the subsidized mortgage program which ended at end-2019. At end-September 2020, such BOM’s nonconventional quasi-fiscal operations amounted to MNT588 billion (1 1/2 percent of GDP).

     

    On August 7, the BOM extended temporary financial forbearance measures, which had been supposed to expire at end-July, through the end of the year.

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


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Montenegro

Background:  The first confirmed COVID-19 case was reported on March 17, 2020. On May 25, the Prime Minister announced that Montenegro was the first coronavirus-free country in Europe. In mid-June, the virus returned and the government declared an epidemic in the entire country on July 22. On July 15, the EU removed Montenegro from its safe list of countries, and non-essential travel by Montenegrin citizens to the EU member states is not allowed. Unified epidemiological measures have been reintroduced throughout the country starting November 16, including a nationwide curfew from 9pm to 5am, prohibition on travelling between municipalities during weekends (except for business, health needs and humanitarian reasons), a ban on religious and private gatherings, and restricted hours of retail and hospitality facilities. These measures are in effect until December 1, with the possibility of extension in the case of unfavorable epidemiological developments.

Reopening of the economy: A phased reopening of the economy began on May 4, and borders were reopened to countries with infections of less than 25 per 100,000 inhabitants on June 1. A decision was taken on June 30 to open borders to residents of all EU member states without additional conditions. The “green list” was further updated on August 3 to include Russia and Azerbaijan. From Aug 15, the land borders with Serbia, Albania, Kosovo and Bosnia and Herzegovina were reopened. Residents from these countries as well as the USA are permitted to enter Montenegro with a negative PCR test not older than 72 hours. Montenegrin residents who have traveled to regional countries are also required to undertake health supervision measures upon their return.


Key Policy Responses as of November 19, 2020

Fiscal
  • The Montenegrin government has extended its wage subsidy program for two additional months (October and November) to counter the effects of the pandemic. The subsidy program is part of the third package of economic measures adopted by the Government on July 23. The package, comprised of short- and long-term measures, is worth EUR 1.22 billion over four years (EUR 281.2 million in 2020). Short-term measures in 2020 amounting to EUR 82.7 million 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. Longer-term measures target the IT, tourism, energy, agriculture and fisheries sectors, and ports.

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

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

Monetary and macro-financial
  • On October 22, the Central Bank announced a new package of support measures, aimed at helping the most affected citizens. The Central Bank will introduce 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 30 that 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 of September 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.

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

    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.

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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 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 are 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 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. Large gatherings continue to be banned and wedding parties are not allowed in Morocco. The government also extended the state of health emergency until December 10.


Key Policy Responses as of November 19, 2020

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, 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. On September 9, the government has extended social transfers to employees temporarily unemployed and further deferred social contribution payments for some sectors (including tourism).

    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 authorizes the government to increase external borrowing beyond the ceiling approved in the 2020 Budget Act.

    On August 6, 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, 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.

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

    In addition, Morocco has established a funding for lending facility (Damane Oxygene) which provides loans to (V)SMEs at subsidized interest rates with a guarantee of 95 percent from the Central Guarantee Fund. On May 15, this program was extended to end-2020, and collateral requirements were removed to improve access for (V)SMEs.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, 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 end-October, banks provided loans worth about 2.5 percent of GDP to about 25,000 firms under this facility. On October 5, the government launched a new facility to provide financing to real estate firms (Damane Relance Promotion Immobilière).

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

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


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Mozambique

Background. Mozambique reported its first COVID-19 case on March 22, 2020. Daily new cases have increased rapidly in September but stabilized in October.

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 form 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, President Nyusi declared a state of emergency for the month of April, extended three times (until July 30). On August 5, 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 now include: (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. The government announced the reopening of schools for 12th grade (pre-university) and teacher training colleges. The new state of emergency envisages gradual easing of restrictions in three phases starting on August 18 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.


Key Policy Responses as of November 19, 2020

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.

Monetary and macro-financial
  • To ease liquidity conditions, on March 16, the central bank reduced reserve requirements by 150 basis points for both foreign currency and domestic currency deposits (to 11.5 percent and 34.5 percent respectively). On March 22, it announced measures to support financial markets and encourage prudent loan restructuring by: (i) introducing a foreign currency credit line for institutions participating in the Interbank Foreign Exchange (FX) Market, in the amount of US$ 500 million, for a period of nine months; and (ii) waiving the constitution of additional provisions by credit institutions and financial companies in cases of renegotiations of the terms and conditions of the loans, before their maturity, for clients affected by the pandemic, until December 31. On March 30, the central bank announced measures to 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. The central bank reduced the policy rate by 150 bps to 11.25 percent on April 16. On April 29, the central bank introduced a requirement for exporters to exchange at least 30 percent of FX proceeds into domestic currency. On June 17, the central bank reduced the policy rate by 100 bps to 10.25 and lifted the twice a week access restriction on the standing lending facility introduced in October 2016.

Exchange rate and balance of payments
  • The metical has been allowed to adjust flexibly and has depreciated by about 12 percent against the US dollar since early March 2020. No major capital flow movements have taken place, while international reserves have been increasing over the past months.


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Myanmar

Myanmar has 73,322 confirmed COVID-19 cases (1,650 deaths and 54,764 discharged) as of November 19, 2020. Local transmissions have been rapidly increasing in Rakhine State and Yangon Region. Semi lockdown with stay-at-home instruction was issued for entire Rakhine State starting August 27, and for all townships except the isolated Cocogyun Township (located on a far island) in Yangon Region starting September 21. Factories, especially in the garment sector, have been instructed to close temporarily until October 21 and work from policies are in place for all other organizations in the Yangon Region. The economy has been deeply affected by the outbreak, with sharp declines in tourist arrivals, supply chain disruptions for the garment sector, and losses for SMEs, which have resulted in large layoffs and factory closures. In response, the government has announced measures to limit the spread of the virus including travel restrictions (including quarantine requirements, suspension of visa issuances and international flights), closure of several land borders, and bans on mass public gatherings. A National Central Committee on Prevention, Control and Treatment of 2019 Novel Coronavirus has been established to coordinate the authorities’ response. A second committee, the Control and Emergency Response Committee on COVID-19, was setup on March 30 to help with stricter administrative measures to control the spread of the virus including quarantining migrant workers coming from neighboring countries. The Myanmar government has developed the COVID-19 Economic Relief Plan (CERP) consisting of seven goals, 10 strategies, 36 action plans and 76 actions that cover a range of emergency fiscal and monetary measures. The CERP seeks to mitigate the inevitable economic impact posed by COVID-19 while establishing a foundation to facilitate Myanmar’s rapid economic recovery. In addition, the government is drafting the Myanmar Economic Recovery and Reform Plan (MERRP) to extend the efforts to economic recovery and relief. All instructions (excluding some relaxations) relating COVID-19 prevention and control have been extended to November 30, 2020. Restrictions on visa issuances and international passenger flights have also been extended to November 30.


Key Policy Responses as of November 19, 2020

Fiscal
  • Revenue measures. (i) exemptions and subsidies of household electricity charges (MMK 109 billion); (ii) deferment of income and commercial tax payments due in the second and third quarters of the fiscal year to end of FY 19/20; (iii) exemption of the 2 percent advance income tax on exports in FY19/20 and first quarter of 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.

    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 325 billion) and on-going cash transfer as the 4th round (MMK 164 billion); (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); (ii) provision of MMK 600 billion loans to farmers.

    Loans to public servants: The government allocated about 550 billion kyat to provide two months’ salaries as the interest-free loans to about 1.1 million permanent public servants. It was disbursed on Oct 5. The moratorium is six months and the loans need to be repaid in one year.

    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 23rd are entitled to this benefit.

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, 2020. This has been extended to March 31, 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 March 31, 2021. On April 23, CBM announced the extension of the deadline for compliance with four prudential regulations (enacted in July 2017) by three years from end-August 2020 to end-August 2023 to enable banks to support the economy cope with the impact of COVID-19.

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


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Namibia

Background. Namibia reported its first case of COVID19 on March 14, 2020. Cases have increased rapidly recently and have caused one of the main ports to be temporarily closed (due to a lockdown in the region). The total number of cases remains low. 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. The domestic travel lockdown was relaxed on May 4th (so people can travel inside the country with some constrains on number of vehicle occupants), points of entry remain closed, except for the transportation of goods. The authorities further eased restrictions on travel by removing the obligation to quarantine for tourists with negative PCR test result.


Key Policy Responses as of November 19, 2020
Fiscal
  • On April 1st the government launched the Economic Stimulus and Relief Package to mitigate the impact of COVID-19 (8 billion Namibian Dollars, or 4.25 percent of GDP), including i) expenditure measures of 2.2 bn for health, wage subsidies for affected sectors, and income grants; and ii) guarantees of up to 2.3 bn to support low interest loans for small and agricultural businesses, and individuals. On June 15th, 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

Background. As of November 19 2020, Nauru has no confirmed cases of COVID-19. It remains one of only 12 countries 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. We project FY21 growth at 1.5 percent.

The government has imposed a number of containment measures including a near-total ban on entry by air into Nauru which was effective March 16th. Cargo flights are operating at normal frequency at this time, but subject to strict handling on arrival, including on contact with crew. Screening and quarantine measures have also been in effect since March 16th and apply to all passengers on arrival, including a mandatory 14-day stay (now lowered to 5 days in line with global best practice) in approved transition accommodation and further measures for symptomatic cases. On April 9, the Government of Nauru extended the emergency measures to be in force until 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 November 19, 2020

Fiscal
  • While mitigation measures have not been needed, containment efforts have been sizeable and expenditures on keeping the national airline and other SOEs afloat have been significant at about 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. 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. At end-March, the authorities imposed a nationwide lockdown, a ban on domestic and international flights, and a closure of land border crossings. The government lifted the national lockdown on July 22 but has since had to reimpose some restrictions because of rapidly rising Covid-19 cases. International flights resumed on September 2, 2020 and domestic flights and long-haul public transport services resumed on September 17. On November 13, the government further relaxed restrictions by opening tourist sites. A day earlier, on November 12, the government announced the reopening of schools from November 20 in low infection areas. The ongoing ‘relaxed’ prohibitory orders in the Kathmandu Valley have been extended until further notice. Land borders remain closed except to Nepali’s returning home and for the transportation of essentials goods and services.


Key Policy Responses as of November 20, 2020

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

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

    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. The loan deferral was further extended to January 2021 or later depending on how severely the borrower was affected. 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.

    Measures announced in July 17. The NRB lowered the policy rate from 3.5 percent to 3 percent and announced that additional liquidity support will be made available through longer-term repo facility as necessary. The limit on the loan to value ratio for personal residential home loans was raised to 60 percent and margin natured loans to 70 percent from 65 percent. The limit on banks’ total loans was raised to 85 percent of the sum of core credit and deposits from 80 percent. The NRB requires banks to extend at least 40 percent of their loans to micro, small and mid-size enterprises and borrowers in the agriculture, energy and tourism sectors by mid-July 2024.

Exchange rate and balance of payments
  • On April 1, the authorities 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

The first cases of COVID-19 infections were reported in the Netherlands in late February. The authorities have taken measures to limit the spread of the virus, including ordering closure of schools and many catering businesses, and advising to avoid social contact and work from home to the extent possible.

Starting on May 11, the Dutch government laid down a progressive easing of the lockdown measures under strict conditions. For example, childcare services, primary and secondary schools were allowed to reopen, as well as most businesses (including for example hairdressers, restaurants and cafes, and cultural institutions). In addition, gatherings of more than 100 people in a closed space were allowed, no limit imposed on occupancy in cinemas, cafés and restaurants, and the travel ban for travelers from 14 non-EU countries was lifted.

However, with the resurgence in the number of infections, the authorities have reintroduced measures to limit the spread of the virus. Several containment measures with gradual restrictions were announced successively on August 6, August 18, September 25, and October 2. As the number of infections continued to increase (surpassing the peak observed in the Spring), a partial lockdown was reinstated nationwide from October 14 to mid-December, with restrictions including: closure of all food and beverage outlets (only pick up allowed), closure of retails stores at 8pm, prohibition of most group events, work from home unless not possible, no consumption of the alcohol or soft drugs in public areas after 8pm, limitation of the gathering to no more than 4 people from different households. Starting on November 4, additional restrictions were imposed for two weeks to further curb the infections curve, e.g. closure of museums, theater, cinemas and parks, and limiting gatherings to no more than 2 people from different households. Following a decline of daily new infections, the stricter measures in place since early November are being lifted, but the partial lockdown remains and it is strongly advised not to travel abroad at least until mid-January.


Key Policy Responses as of November 19, 2020

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 33 billion euros (4.2 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 16.6 billion euros (or 2.1 percent of GDP). Also, public guarantee schemes (with a ceiling recently increased to 61 billion euros, or 7.8 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 measures already in place on the expenditure side through June 2021. This new package includes additional expenditure of 12.5 billion (or 1.7 percent of GDP), of which 1.5 billion of public investment. 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 of employees. The total cost of these programs will depend on demand.    

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 is postponed. In turn, the largest Dutch banks have agreed to 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 1st . 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, 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, with returning residents required to enter into two weeks of supervised quarantine since April 10. After a gradual reopening through Alert Levels 3 (April 28) and 2 (May 13), New Zealand moved to Alert Level 1 on June 8, lifting restrictions on personal movements, gathering, workplaces, and services. The border closure and quarantine requirement remain in place.

Following the emergence of new COVID-19 cases, Auckland returned to Alert Level 3 restrictions on August 12, and restrictions were subsequently eased to Alert Level 2.5 (Alert Level 2 with extra gathering restrictions) on August 30 and to Alert Level 2 on September 24. The rest of the country was placed under Alert Level 2 on August 12 and returned to Alert Level 1 on September 24. Auckland joined the rest of New Zealand at Alert Level 1 on October 22, 2020. People are no longer required to wear masks in public,though masks are encouraged, and people must continue to keep records of locations they visit.

New Zealand’s economy contracted by 9.8 percent q/q in Q2, 2020 (expenditure side), and high-frequency indicators point to an incipient recovery in Q3.


Key Policy Responses as of November 19, 2020

Fiscal
  • With the FY2020-21 budget and previous fiscal packages, the government has announced fiscal measures amounting to a total of NZ$58.5 billion (19.5 percent of GDP) through FY2023-24. The total amount includes the COVID-19 Response and Recovery Fund, of which NZ$14.1 billion have been set aside as contingency for a possible second wave. Announced fiscal measures include: (i) healthcare-related spending to reinforce capacity (NZ$0.8 billion or 0.3 percent of GDP); (ii) a permanent increase in social spending to protect vulnerable people (total NZ$2.4 billion or 0.8 percent of GDP); (iii) a wage subsidy to support employers severely affected by the impact of COVID-19 (NZ$14.8 billion or 4.9 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) a permanent change in business taxes to help cashflow (NZ$2.8 billion or 0.9 percent of GDP); (vi) infrastructure investment (NZ$3.8 billion or 1.3 percent of GDP); (vii) transport projects (NZ$0.6 billion or 0.2 percent of GDP); (viii) a temporary tax loss carry-back scheme (NZ$3.1 billion or 1.0 percent of GDP); (ix) support for the aviation sector (NZ$0.6 billion or 0.2 percent of GDP); (x) a tourism recovery package (NZ$0.4 billion or 0.1 percent of GDP); (xi) a government housing program (NZ$0.7 billion or 0.2 percent of GDP); and (xii) school infrastructure upgrades (NZ$0.2 billion or 0.1 percent of GDP). The government has also approved a NZ$0.9 billion debt funding agreement (convertible to equity) with Air New Zealand to ensure continued freight operations, domestic flights and limited international flights. The New Zealand government also provides loans of up to NZ$100,000 to small businesses that employ 50 or less employees-until the end of 2023. In addition, on March 28 the government announced temporary removal of tariffs on all medical and hygiene imports needed for the COVID-19 response.

Monetary and macro-financial
  • The Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) at 0.25 percent on November 11, unchanged since the OCR was reduced by 75 basis points on March 17. In addition to maintaining its existing Large-Scale Asset Purchase program (LSAP) program, the RBNZ announced a Funding for Lending Program (FLP) starting in December, which would enable financial institutions to lower borrowing costs for firms and households. In August, 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, the RBNZ has been providing liquidity in the FX swap market and re-established a temporary US dollar swap line (US$30 billion) with the U.S. Federal Reserve. The RBNZ has established a new Term Auction Facility (TAF), which allows banks access to collateralized loans of up to 12 months, and announced a corporate facility in which the RBNZ will offer up to NZ$500 million per week in open market operations with banks against corporate paper and asset-backed securities for 3 months. The RBNZ has 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. From August 26, the lending term of the TLF has been extended to 5 years and the facility has been extended to Feb 1, 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, 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. The RBNZ has reduced the banks’ core funding ratio requirement to 50 percent from 75 percent to help banks make credit available.

    To further support the stability of the financial system, the start date for a regulatory change requiring higher capital for banks was initially postponed for 12 months to July 2021, and subsequently for a further 12 months 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 that during this period there will be no dividend payments on ordinary shares and redemption of non-CET1 capital instruments. The RBNZ has removed, effective as of May 1, mortgage loan-to-value ratio (LVR) restrictions for the next 12 months.

    The New Zealand government, the RBNZ, and the New Zealand Bankers Association have also announced a number of financial measures to support SMEs and homeowners. These include six-month principal and interest repayment deferrals to mortgage holders and SMEs affected by COVID-19 and the BFGS.

    Other related measures taken by the government that could contribute to financial stability include a six-month freeze on residential rent increases until September 25 and restrictions against tenancy terminations during March-June. The Business Debt Hibernation process allows businesses to place their existing debts on hold for up to seven months.

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


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Nicaragua

Background. The first confirmed COVID-19 case was reported on March 19, 2020. In response to the COVID-19, the government announced the implementation of several measures, including the creation of an inter-institutional commission, the declaration of a state of national alert, and the implementation of Epidemiological Surveillance Protocols at the national level.

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

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

On July 13, the MINSA issued revised guidelines to strengthen epidemiological controls at all entry points into the country, including: (i) travelers must have a negative PCR test result for COVID-19 taken in a period not exceeding 72 hours before arriving to the country; (ii) non-national travelers who have fever or respiratory symptoms may not enter the country; (iii) Nicaraguan nationals who have fever or respiratory symptoms may enter the country, but they have to observe house quarantine; and (iv) all travelers who present a negative PCR test upon arrival and have no respiratory symptoms will be allowed without restrictions but will be follow up by telephone by health personnel for a period of fourteen days.

On the same date, the Nicaraguan Institute of Civil Aeronautics (INAC) informed that Nicaragua is ready to resume commercial air operations if airlines comply with MINSA revised guidelines. Air operators must present their COVID-19 plans to INAC before resuming commercial operations.


Key Policy Responses as of July 16, 2020

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

Monetary and macro-financial
  • Since March, the Central Bank of Nicaragua (CBN) reduced its repo reference rate, and the 1-day and 7-day repo window rate by 225 bps. The rate for domestic currency deposit window has been cut by 50 bps, and the rate for foreign currency deposit window has also been cut by 70 bps. On March 24, the CBN updated its Business Continuity Plan COVID-19 (activated on March 11) to guarantee the continuity of financial, treasury, accounting and administrative operations.

    On May 26, 2020, the National Microfinance Commission, introduced a temporary reform (from July 1, 2020 until June 30, 2021) to the “Norm on Credit Risk Management for Microfinance Institutions” in order to reduce the specific provisioning requirements for the portfolios of personal loans held by these institutions.

    On June 15, 2020, the BCN temporarily reduced reserve requirements in domestic currency from July 1, 2020 to June 30, 2021. During this period, banks can reduce the ratio of required reserves in domestic currency to as low as 4.5 percent (from 15 percent), if they extend credits to the private sector.

    On June 19, 2020, the Superintendence of Banks and Other Financial Institutions (SIBOIF) issued a temporary financial regulation, allowing banks and other financial institutions to negotiate, at the request of their clients, an increase in the maturity of their loans and/or a moratorium on monthly payments of up to 6 months on credits granted before March 31, 2020, subject to certain safeguards. Borrowers can request to benefit from this measure until December 31, 2020.

    On the same date, the SIBOIF issued another temporary financial regulation reducing the minimum monthly payment for credit cards from 3 to 2 percent of the total debt, including interests. This measure will be in force until March 31, 2021.

Exchange rate and balance of payments
  • No measures.


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Niger

Background. Niger registered its first confirmed COVID-19 case on March 19, 2020. On March 27, 2020, the President declared a national emergency and imposed a night curfew in the capital in addition to shortened work hours and earlier measures that include the closure of Niger’s borders and a ban on large gatherings. On November 13, 2020, in response to cases rising again, the authorities announced visitors would have to surrender their passports that would be returned only after a negative test following a one-week period of strictly monitored self-isolation.

Reopening of the economy. The night curfew and restriction on religious gatherings were lifted on May 13. The quarantine of Niamey and the ban on inter-city travel were lifted on May 14. The moratorium on seminars and conferences; restricted work hours and limits on non-essential government business were lifted on May 25. The authorities lifted the air border closure as of August 1 with land borders remaining closed. A negative test result is required before arrival. Price controls for essential goods for 3 months. Niger secured US$114.5 million in emergency financing from the IMF on April 14, 2020 and relief from its debt service to the IMF on April 13, 2020.


Key Policy Responses as of November 5, 2020

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

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

Monetary and macro-financial
  • The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, 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 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 total amount of such special T-Bills by Niger is equivalent to 2.7 percent of GDP. Niger has been recently allowed to issue the equivalent of 1.3 percent of GDP of new 3-months Covid-19 T-Bills that banks may refinance with the BCEAO for their term to maturity at 2 percent. 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.

Exchange rate and balance of payments
  • No measures.

Other
  • Price controls for essential goods for 3 months. Niger secured US$114.5 million in emergency financing from the IMF on April 14, 2020 and relief from its debt service to the IMF on April 13, 2020.


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Nigeria

Background. Nigeria has been severely hit by the spread of COVID-19 and the associated sharp decline in oil prices. Government policy is responding to both these developments. A range of measures have been implemented to contain the spread of the virus, including closure of international airports, public and private schools, universities, stores and markets, and suspension of public gatherings. A “lockdown” was declared in Lagos, Abuja and Ogun states. Work at home is also encouraged in several states and government institutions while isolation centers are being expanded in Lagos state. Testing capacity is increasing as NCDC now deploys digital platforms for people to get results sooner. The president ordered the release of inmates in correctional facilities to decongest prisons. On May 4, the phase 1 of three-phase economic re-opening commenced following a full lockdown that had been placed since March 30. The phase 1 moved to phase 2 on June 2—allowing most offices and schools to reopen. However, a comprehensive list of restrictions remains in place, including night time curfew, ban on non-essential inter-state passenger travel, partial and controlled interstate movement of goods and services, and mandatory use of face masks or coverings in public. On September 4, Nigeria transitioned into phase 3. Night curfew has been reduced to 12am – 4am. Groups of up to 50 people are allowed to attend parties and gathering. More opening hours are allowed for parks and gardens but clubs and bars remain closed. Schools around the country reopened on October 12.


Key Policy Responses as of November 19, 2020

Fiscal
  • The Federal Government adopted a revised budget for 2020 in response to the COVID-19 shock. A N500 billion (0.3 percent of GDP) COVID-19 intervention fund is included in the revised budget to channel resources to additional health-related current and capital spending (tests, supplies and facilities) and public works programs to support the incomes of the vulnerable, including N7.5 billion to Nigeria’s Center for Disease Control and grant of N10 billion to Lagos State. The coverage of the conditional cash transfer program has been broadened and an allocation of N150 billion to support state and local governments’ spending needs has been made available through the budget. Import duty waivers for pharmaceutical firms were introduced. Regulated fuel prices have been reduced, and an automatic fuel price formula introduced to ensure fuel subsidies are eliminated. Electricity tariff was increased. The social register was increased by 1 million households to 3.6 million to help cushion the effect of the lockdown. A broader economic stimulus plan that includes the N500 billion COVID-19 intervention fund was introduced to support the real sector. The bulk of the plan’s financing would come from CBN-supported credit facilities and from sovereign wealth and other savings funds.

Monetary and macro-financial
  • In response to the crisis, the Central Bank of Nigeria (CBN) cut monetary policy rate by and another 100 basis points in September while expanding liquidity available for nonbank financial institutions, leading to significant lowering of market yield of government securities. It also introduced additional measures, including: (i) reducing interest rates on all applicable CBN interventions from 9 to 5 percent and introducing a one year moratorium on CBN intervention facilities; (ii) creating a N50 billion ($139 million) targeted credit facility; and (iii) liquidity injection of 3.6 trillion (2.4 percent of GDP) into the banking system, including N100 billion to support the health sector, N2 trillion to the manufacturing sector, and N1.5 trillion to the real sector to impacted industries. Regulatory forbearance was also introduced to restructure loans in impacted sectors. The CBN is also coordinating a private sector special intervention initiative targeting N120 billion ($333 million) to fight COVID-19.

Exchange rate and balance of payments
  • The official exchange rate was adjusted from N307/$ before COVID-19 to N361/$ at the beginning of the crisis and more recently to N380/$, with an ongoing unification of the various exchange rates under the investors and exporters (I&E) window, Bureau de Change, and retail and wholesale windows. The authorities committed to let the I&E rate move in line with market forces. A few pharmaceutical companies have been identified to ensure they can receive FX and naira funding. While I&E window turnover has been low since April, the CBN has resumed FX supply in some of the other windows.


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North Macedonia

The first confirmed case in North Macedonia was reported on February 26. The number of new daily cases has substantially increased in recent weeks. After a strict lockdown in the spring, followed by a gradual reopening of the economy, social-distancing restrictions are being tightened to slow down contagion. Reflecting the impact of the containment measures, GDP contracted by 12.7 percent year-on-year in the second quarter.


Key Policy Responses as of November 19, 2020

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

Monetary and macro-financial
  • The National Bank of the Republic of North Macedonia (NBRNM) has cut its policy rate twice since the start of the crisis by a cumulative 50 basis points to 1.5 percent. The fees for withdrawing and returning cash to the National Bank’s central vault have been abolished to minimize any risk of transmitting the virus infection by coins and bills. In addition, the NBRNM has reduced by 60 percent the amount of CB bills offered to banks, thus providing additional liquidity to the economy. On financial sector measures, the NBRNM has revised its credit risk regulation, to encourage banks to restructure loans temporarily (initially through September 2020, but recently extended through March 2021), and has relaxed the loan classification standards for NPLs. It has also reduced the base for the reserve requirement by the amount of new loans to firms in affected sectors and has extended the deadline for banks to submit their first Internal Liquidity Assessment Report in order to allow them to focus on providing credit while maintaining the quality of the loan portfolio.

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


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Norway

The first confirmed COVID-19 case was reported on February 26 ,2020. The virus continued to spread, with the number of new cases reaching its peak at the end of March. The government had implemented a range of measures to mitigate the spread of coronavirus and to stabilize the economy. The former included travel restrictions, a quarantine-after-travel requirement, social distancing measures, and closures of schools, universities and businesses. The number of infections has fallen strongly since then, until the end of July when new cases started trending up again.

On May 7, 2020, the government announced its plan to reopen the economy, with a gradual timeline that remains dependent on keeping the spread of infection under control. Accordingly, employers of operating businesses are required to ensure at least one-meter distance between coworkers, bars can reopen under similar one meter social distancing rule, meetings up to 20 people and public events up to 200 are now permitted, all primary and secondary schools are reopened, and quarantine requirements are reduced. In addition, non-essential travel to and from other Nordic and EEA countries have resumed subject to the quarantine requirements and conditional on the infection rate and the containment measures in place.


Key Policy Responses as of November 5, 2020
Fiscal
  • Key implemented and proposed fiscal measures (discretionary measures close to NOK 126.3 billion, or 4.2 percent of 2020 mainland GDP per the authorities’ estimates, excluding the government bond fund and any losses from government guarantees and loans above budgeted loss provisioning) include:

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

    Revenue measures: (i) lowering of reduced VAT rate from 12 to 6 percent; (ii) deferral of various tax payments and reduction of the employer tax for May and June 2020, change in CIT regulations so that lossmaking companies can re-allocate their losses towards previous years’ taxed profits, and temporary amendments to the petroleum tax system to improve liquidity in the sector; suspension of aviation charges; temporary lowering of the employers’ social insurance contributions.

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

    In addition, the government proposed new expenditure measures on May 29th that include (i) a subsidy for businesses to take back temporarily laid-off workers, (ii) a green transition package, and (iii) expanding support for the construction and transportation sectors through compensations and transfers to highly impacted localities and purchasing of air and train routes, and finally (iv) expanded funding for education and training.

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

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

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


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Oman

Background. Oman is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The number of registered COVID-19 cases stands at 121,129 as of November 18. The authorities have implemented a range of measures to try and limit the spread of the virus encompassing travel restrictions (including on international flights and internal public transportation and taxis), partial lockdowns, suspending prayers at mosques, closing all schools, universities, shopping malls and commercial establishments (except for groceries, pharmacies, food delivery, and gas stations), and limiting employee attendance at government workplaces and private businesses to minimum needed. On April 15, the government approved measures aiming to maintain the employment of Omani nationals and support private sector firms, including by encouraging them to advance paid annual leave and negotiate salary cuts. For Omani employees whose salaries are lowered, their bank loans will be rescheduled without interest or additional fees for three months, fuel subsidies provided, and electricity and water bills postponed until the end of June 2020. Incentives offered to affected private sector firms include postponement of electricity and water fees for three months.

Reopening of the economy. On April 28, the government discussed proposals that consider public health and support the reopening of some business activities and decided to open some commercial activities including car servicing, repair, and rental, money exchanges, outlets selling electrical and electronic appliances, printing houses and quarries. On May 27 government decided to end the lockdown of the Muscat governorate, let private sector employees return to their offices and government agencies to begin regular operations on May 31. On June 10 and June 23 the government further opened up commercial and industrial activities. On July 14, the government decided to facilitate Oman citizens’ travel abroad, on condition that they abide by the precautionary procedures but also decided to extend the lockdown on Governorate of Dhofar and the Wilayat of Masirah. On July 25, Oman entered into a major nationwide lockdown aimed at limiting the spread of COVID-19, which was lifted on August 7. Following the approval from the Supreme Committee tasked with tackling developments resulting from Covid-19, the government decided to resume public transport services in a phased manner starting from September 27. On October 11, the authorities imposed a complete lockdown on public movement and commercial outlets from 8 pm to 5 am every night until October 24.


Key Policy Responses as of November 18, 2020

Fiscal
  • Because the decline in oil prices will result in a loss of government revenue, the authorities have announced that they will reduce spending in the 2020 budget by 10 percent (about 5 percent of GDP). The government announced several measures to support the economy on March 19. These include the suspension of municipal taxes and some government fees (till end-August) and rent payments for companies in industrial zones (for the next three months), reduction of port and air freight charges, as well as postponement of loan servicing for borrowers of Oman Development Bank and SME support fund for six months. On April 1, the Tax Authority announced a package of measures that include the waiving of fines and penalties for late disclosures, allowing the paying of taxes in instalments, and the deduction of donations made to combat the coronavirus. On October 14, the Tax Authority announced extending the duration of the incentives offered earlier to the private sector on the settlement of tax due during 2020, including suspension of application of additional tax resulting from non-settlement of overdue income tax, and enforcement of fines and penalties for non-delivery of reports and accounts utill end-December 2020. On June 23 the government authorized a program of interest-free emergency loans to assist some segments of entrepreneurs whose businesses took the brunt of the pandemic, as well as beneficiaries of loans of Oman Development Bank and Al Raffd Fund.

Monetary and macro-financial
  • On March 18, the Central Bank of Oman (CBO) announced a set of policy measures effective immediately to support the financial sector and estimated its impact in terms of additional liquidity at OR 8 billion (US$ 20.8 billion). The measures included: reduction in the interest rate on repo operations by 75 basis points to 0.5 percent, and extension of the period of repo operations to three months; reductions in the interest rates for other money market instruments; reduction in the capital conservation buffer by 50 percent; increase in the lending ratio ceiling (net credit to deposit-base) by 5 percentage points to 92.5 percent; accepting with immediate effect requests by affected borrowers for deferment of loan installment payments for the next six months without adverse impact on risk classification of such loans; deferring the risk classification of loans related to government projects for six months. On September 7, CBO announced a second set of policy measures, including extension of the loan deferment scheme to March 31, 2021; enhancing the limit of Forex SWAP facility up to 100% of a bank’s net worth from the current 25 percent joint ceiling on the SWAP and Rediscounting of commercial papers facility, and extending the tenor of the facility up to 1 year; reducing the margin of loan-to-value ratios from 20 percent to 10 percent on housing loans for first-time home buyers; and allowing banks to temporarily operate below the minimum Liquidity Coverage Ratio (LCR) requirement of 100% but not less than a minimum LCR of 75% in case of genuine liquidity stress and are approved on a case by case basis.

Exchange rate and balance of payments
  • None.


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Pakistan

Background. COVID-19 was reported for the first time on February 26, 2020. Starting on March 23, both the federal and provincial governments implemented containment and mitigation measures, which included selective quarantines, border closures, international and domestic travel restrictions, closure of educational institutions, banning of public events, social distancing, and varying levels of lockdown. Despite these measures, the number of new daily cases increased rapidly hitting the peak of 6,000 in mid-June, before slowing down in July. Between August and October, the number of daily new cases was consistently below 1,000 (reaching a low of 300 cases in early September). Starting in mid-November, the daily new cases have exceeded the 2,000-mark, and the positivity rate has been on an upward trend pointing to a second wave of infections. As a result of the COVID-19 shock, the economic activity worsened notably, with growth preliminarily estimated at –0.4 percent in FY 2020. A gradual recovery is expected in FY 2021.

Reopening of the economy and additional containment efforts. Since mid-April, the federal government, in coordination with provinces, started to gradually ease lockdown arrangements. Between August and September, further lockdown restrictions were lifted, as educational institutes, and recreational places, restaurants, malls and retail outlets were allowed to reopen. More recently, to mitigate a second wave, the authorities made it compulsory for all citizens to wear a face mask outside of their homes and have strengthened the enforcement of Standard Operating Procedures (SOPs). Smart lockdown measures have been also reintroduced. These include lockdowns of selected hotspots in major cities, the closure of restaurants and shops by 10 pm, and limits to the attendance in public and private gatherings.


Key Policy Responses as of November 19, 2020

Fiscal
  • A relief package worth PKR 1.2 trillion was announced by the federal government on March 24, which has been almost fully implemented. Key measures include: (i) elimination of import duties on emergency health equipment, which has been recently extended for three months till December 2020;(ii) cash transfers to 6.2 million daily wage workers (PKR 75 billion); (iii) cash transfers to more than 12 million low-income families (PKR 150 billion); (iv) accelerated tax refunds to the export industry (PKR 100 billion); and (v) financial support to SMEs and the agriculture sector (PKR 100 billion) in the form of power bill deferment, bank lending, as well as subsidies and tax incentives. The economic package also earmarks resources for an accelerated procurement of wheat (PKR 280 billion), financial support to utility stores (PKR 50 billion), a reduction in regulated fuel prices (with a benefit for end consumers estimated at PKR 70 billion), support for health and food supplies (PKR 15 billion), electricity bill payments relief (PKR 110 billion), an emergency contingency fund (PKR 100 billion), and a transfer to the National Disaster Management Authority (NDMA) for the purchase of COVID-19 related equipment (PKR 25 billion). The unexecuted part of the relief package will be carried forward to FY2021. In addition, the FY 2021 budget includes further increases in health and social spending, tariff and custom duty reductions on food items, an allocation for ‘COVID-19 Responsive and Other Natural Calamities Control Program’ (PKR 70 billion), a housing package to subsidize mortgages (PKR 30 billion), as well as the provision of tax incentives to the construction sector (retail and cement companies).

    Since the onset of the crisis, provincial governments have also been implementing supportive fiscal measures through June 2020, consisting of cash grants to low-income households, tax relief, and additional health spending (including a salary increase for healthcare workers). For instance, the government of Punjab’s measures included a PKR 18 billion tax relief package and a PKR 10 billion cash grants program. The government of Sindh’s measures included cash grant and ration distribution program of PKR 1.5 billion for low-income households. The FY2021 budgets for provincial governments also provide tax relaxations and sizeable increases in expenditure allocations, especially on health services, to mitigate Covid-19 effects.

Monetary and macro-financial
  • The State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate by a cumulative 625 basis points to 7.0 percent since March 17. The SBP has expanded the scope of existing refinancing facilities and introduced three new ones to: (i) support hospitals and medical centers to purchase COVID-19-related equipment (41 hospitals, PKR 7.99 billion, to date); (ii) stimulate investment in new manufacturing plants and machinery, as well as modernization and expansion of existing projects (240 new projects, PKR 186 billion, to date); (iii) incentivize businesses to avoid laying off their workers during the pandemic (2,958 firms , PKR 238 billion, to date). Given their success, these facilities have been extended beyond their original deadline of June 2020 to September or December 2020.

    Moreover, the SBP introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 44 percent to PRs 180 million ; (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year (with a total of PKR 654 billion being deferred to date); (v) relaxing regulatory criteria for restructured loans for borrowers who require relief beyond the extension of principal repayment for one year; and (vi) suspending bank dividends for the first two quarters of 2020 to shore up capital. The SBP has also introduced mandatory targets for banks to ensure loans to construction activities account for at least 5 percent of the private sector portfolios by December 2021.

Exchange rate and balance of payments
  • The SBP has introduced further regulatory measures to facilitate the import of COVID-19-related medical equipment and medicine. These include (i) lifting the limit on import advance payments and import on open account; and (ii) allowing banks to approve an Electronic Import Form (EIF) for the import of equipment donated by international donor agencies and foreign governments. SBP has also relaxed the condition of 100 percent cash margin requirement on import of certain raw materials to support the manufacturing and industrial sectors.


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Palau

Background. While there have been no confirmed cases of COVID-19 in Palau as of July 2, 2020, the authorities have adopted early prevention and containment measures. These include temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and restrictions on public events. On June 26, the first group of 58 repatriated residents and students ended quarantine of 14 days. All have been tested negative.

Reopening. Schools will reopen on August 3 with safety measures. On July 31, the government announced the re-establishment of essential air services, allowing a minimum number of flights for emergencies, repatriation, medical referral, and worker recruitment. Regular commercial air travel remains temporary suspended. All travelers including essential workers and Palauan residents are subject to quarantine regulations and are required to show proof of a negative COVID test result for the 72 hours prior to arrival in Palau. Passengers from low risk areas (Taiwan) are required to observe a 7-day mandatory quarantine in a designated government facility, and are tested on days 1, 7, and 14. Passengers from high risk areas are placed under mandatory quarantine for 14 days and are tested on days 1, 7, 14, and 21.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has initiated actions that appropriately support the health sector and hard-hit individuals and businesses. The parliament has appropriated an additional $916,808 (0.3 percent of GDP) to the Hospital Trust Fund to help with prevention and preparation for COVID-19. The government has also announced measures totaling $20 million (8 percent of GDP) to mitigate economic and social hardship through targeted support to affected businesses and individuals. These include a new unemployment benefit scheme, temporary subsidies for utility bills, a new temporary job creation scheme for public works, and a lending scheme for the private sector.

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

Exchange rate and balance of payments
  • No measures.


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Panama

Background. Panama reported its first confirmed case of COVID-19 on March 10, 2020. Since then, the authorities implemented prompt and strict containment measures. They declared a national emergency on March 13; set a sanitary fence around affected areas; ordered mandatory quarantine with a 24-hour curfew (replaced with a 7 pm-5 am curfew starting June 1) with gender-based movement restrictions (April 1-May 31, resumed on June 8); suspended all construction projects except health-related; closed schools; canceled events; and banned all commercial flights (except cargo and humanitarian). The suspension of flights started with outbound flights to Europe and Asia (on March 14), extending to all commercial international flights (March 22) and later to all domestic flights with the grounding of Copa Airlines (from March 23) and Air Panama (from March 25). All labor contracts of closed businesses were suspended. On July 14, the government formalized a reduction of monthly working hours by half. The World Travel and Tourism Council granted Panama the “Safe Travels” seal on November 15, certifying its compliance with international biosecurity standards in preventing COVID-19.

Recent natural disasters will make it more difficult to exercise social distancing in affected areas and will likely have a negative impact on the prevention of COVID-19. On November 5, Hurricane ETA hit Panama, triggering floods and landslides that affected agricultural production, resulting in economic losses estimated at US$11 million. The authorities declared a state of “Environmental Emergency” and allocated US$100 million (0.15 percent of GDP) to alleviate natural disaster risks. On November 16, Category 5 Hurricane Iota hit Central America, and it is expected to cause heavy rain and possible flooding in parts of Panama.

Reopening of the economy. The guidelines for “return to normality post COVID-19", published on the website of the Ministry of Health, cover key points that public institutions and private companies must comply with to ensure workers’ safety. On May 15, the Ministry of Labor and Development (Mitradel) published the guidelines for the gradual reopening of companies and the reinstatement of workers. Companies that are authorized to reopen may request Mitradel to extend labor contacts suspensions which may not exceed four months in total. On August 19, Mitradel extended the validity of work permits for foreign workers that expire between March and September 2020 by six months.

In August, the government authorized a limited reopening of Tocumen Airport, mainly for transit and departures, and controlled entry of Panamanians. International commercial flights resumed on October 12 (visitors must provide a negative COVID-19 test to enter Panama, those without the recent test result can get tested in the airport upon arrival).

On September 7, the government authorized a gradual reopening of the construction industry (with up to 500 workers for each project, subject to safety precautions and limitations on working hours), the free trade zones (including Panama Pacifico Special Economic Area and the Colon Free Zone), as well as the operations of private marinas, tailor and dressmaker shops, shoe stores and car washes.

Mobility restrictions by gender ended on September 14. On September 28, shopping centers and restaurants reopened for indoor commercial activity, and domestic flights resumed. Tourism activities, including cultural venues, libraries, swimming pools, cinemas, theaters, museums, galleries and other tourist sites reopened on October 12 (at 50 percent capacity). The quarantine ended on October 24, with the reactivation of beach and recreational activities (although under the strict sanitary guidelines), although President Cortizo entered self-quarantine on November 2 as a member of his staff tested positive for COVID-19. The 11:00 pm-5:00 am curfew remains in place.


Key Policy Responses as of November 18, 2020

Fiscal

Amid the pandemic-related increase in healthcare and social spending, and with SFRL limits temporarily relaxed, the NFPS deficit is expected to rise to 6¼ percent of GDP in 2020, which is 3½ percent of GDP (some US$2.1 billion) higher than the budget. The package of fiscal measures includes:

  • Expenditure side: (i) higher spending on healthcare needs, including building a new hospital, purchases of medical supplies and equipment, test kits and educational materials, and training medical personnel. On July 14, the Cabinet approved US$133.7 million to purchase medical supplies; (ii) an augmentation in social spending, including payments to affected workers and small business owners through the "Panama Solidarity Plan" with in-kind transfers including basic food supplies, and several programs (such as Opportunity Banking, Guarantee Fund, and the Soft Loan program) jointly valued at US$ 235 million, aimed at supporting the micro, small and medium-sized companies in restarting operations and continuing to employ workers; (iii) a suspension of payments for public services (electricity, landline phones, mobile phone and internet) for March-June; (iv) an electricity subsidy (50 percent to customers who consume up to 300 kWh per month and 30 percent to those who consume between 301 kWh and 1,000 kWh per month); (v) an expansion of the Housing Solidarity Fund program managed by the Ministry of Housing and Land Management, which provides $10,000 towards a down payment to the families in need of homes valued up to US$70,000 (reinforced with US$80 million from the Panama Savings Fund). The Government extended the electricity subsidy for three months, starting July 1, at an estimated cost of over US$250 million. The Panama Solidarity Plan has already benefited more than 1.5 million people. On August 23, the government began the transfer of US$50 to approximately 250,000 workers with suspended contracts, amounting to a total of US$12.5 million.
  • Revenue side: (i) tax relief through extended income-tax filing deadlines until December 31, 2020 (originally until July 17). MEF is also proposing a 10 percent discount to individuals and entities who declare and pay their tax obligations early, under the program called “Pronto Pago”; (ii) some tax benefits and suspension of payments for public services (for 4 months, without interest) for taxpayers with income below US$2,000 per month, retirees, or those displaced from the labor market; and (iv) enabling 114 virtual procedures for taxpayers.

So far, Panama mobilized: (i) US$515 million from the IMF under the Rapid Financing Instrument (RFI); (ii) US$300 million from the Inter-American Development Bank (US$150 to finance micro and small businesses, and another US$150 million to help agricultural producers); (iii) US$41 million in the Catastrophe Deferred Drawdown Option from the World Bank to expand the coronavirus care network; (iv) a US$1 million grant from the Central American Bank for Economic Integration to finance COVID-19 prevention activities; and (v) a US$400,000 grant from the Development Bank of Latin America to acquire ventilators. The President approved a law which allows the government to use liquid resources of the Panama Savings Fund (assets of US$1.3 billion). On July 9, the IDB approved another US$400 million loan to help finance efforts to contain the COVID-19 pandemic, mitigate its impact on vulnerable households, and promote policies to mitigate short-term adverse effects on the economy. On August 4, the National Bank of Panama issued a US$1 billion 10-years bond at 2.5 percent in international markets. On September 23, the government raised another US$2.575 billion in global bonds, comprising a new bond (US$1.25 billion; maturing in 2032; yield of 2.252%), reopening of a bond maturing in 2060 (US$1 billion; yield of 3.28%), and reopening of a local note maturing in 2026 (US$0.325 billion; yield of 2.77%). The government also withdrew an additional US$20 million from the Panama Savings Fund (FAP), earmarked for future acquisition of a COVID-19 vaccine, bringing total withdrawals to US$105 million since the declaration of the state of emergency following the pandemic. On November 14, the Central American Bank for Economic Integration approved US$ 250 million to support Panama’s economic recovery as part of its Development Policy Operations Program.

 

Monetary and macro-financial

The Superintendency of Banks of Panama (SBP) allowed banks to use the accumulated dynamic provisioning (about US$1.3 billion or 2 percent of GDP) to absorb the impact of credit losses. It allowed banks to undertake voluntary loan restructuring with troubled borrowers (banks can adjust existing loan conditions, grant grace periods, reduce interest rates, and eliminate some fees) and requested banks not to charge interest on unpaid interest. To provide relief to borrowers affected by the pandemic, banks agreed to extend grace periods on loan payments until December 31, 2020 (from 90-120 days offered earlier). This agreement was later enshrined in Law 156 dated June 30, which established a formal moratorium on loans granted by banks, cooperatives and finance companies for all physical and legal persons economically affected by the national emergency due to the pandemic. Borrowers have to continue paying interest, but banks will not apply late fees, charge interest on unpaid interest, or record late payments in credit history. The measure applies to mortgages, personal, auto, credit card loans, and loans to SMEs, agriculture, commerce, and transport. The moratorium is not automatic: borrowers must provide documents on the impact of the pandemic on their employment or business activities. July 1 is the start of the second phase of the moratorium (which includes additional grace periods and loan renegotiations or consolidations), with applications availaible online.

On August 6, The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) issued a guarantee on loans received by Caja de Ahorros de Panamá amounting to US$400 million to support affordable housing and loans to SMEs. The guarantee is for: (i) a US$250 million loan (maturity of 15 years) from Kairos Global Solutions S.A. (Kairos); and (ii) a US$150 million (maturity of 5 years) from Banco Bilbao Vizcaya Argentaria, S.A. (BBVA).

On August 7, the MEF and National Bank of Panama established two Trusts as part of the economic reactivation strategy.

  • The first Trust, named "Global Credit Program for the Defense of the Productive Fabric and Employment", aims to support the MSMEs in the face of the COVID-19 crisis. The initial funding amounts to US$150 million from the IDB and will be replenished in a second phase in 2021 by another US$150 million.
  • The second Trust, called "Special Bank Stimulus Fund", is intended to grant credit facilities to productive sectors to stimulate economic growth and meet temporary liquidity needs. The initial funding of US$500 million comes from the IMF’s RFI, another US$500 million are financed by the National Bank of Panama (BNP).
Exchange rate and balance of payments
  • Panama is a fully dollarized economy; BOP is expected to deteriorate as a result of the COVID-19 shock given a fall in tourism, transit through the Panama Canal and lower foreign direct investment. The Cabinet dropped import tariffs on corn used to feed animals (from 40 percent) until December 31, 2020.

Other
  • Some private parties offer economic relief to their clients affected by the outbreak (e.g., the Association of Property Owners of Panama approved a suspension of evictions of tenants affected by COVID-19, effective April 1), Minera Panama donated 20 ventilators and a gasometer for the Social Security Administration’s Special Respiratory Care Unit, while insurance companies voluntarily assumed coverage for COVID-19.


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Papua New Guinea

Background.Since early February, the PNG government has taken stringent measures to mitigate a domestic outbreak of COVID-19. Initially, these included a ban on travelers from Asian countries, reduced international flights, mandatory health declaration forms for incoming travelers and enhanced screening at designated ports of entries. On March 24th the authorities announced a State of Emergency (SoE), restricting internal bus and air travel, closure of bars, and work-from-home requirements. Following the lapse of the SoE in June, there has been a renewed outbreak of COVID-19, mainly centered on the National Capital District (NCD), but with a growing number of cases in other regions. The Government has announced that domestic travel will only be allowed for essential services and a lockdown of 14 days has been implemented in the NCD.On October 5, international travel restrictions were eased (allowing additional routes), but domestic requirements to enforce social distancing and hygiene were tightened.

On June 9, the IMF Executive Board approved the disbursement of US$363.6 million in emergency financing under the Rapid Credit Facility (RCF) to help PNG address urgent balance of payments needs created by COVID-19.

Press Release: https://www.imf.org/en/News/Articles/2020/06/09/pr20238-papa-new-guinea-imf-executive-board-approves-disbursement-to-address-the-covid-19-pandemic

Reopening of the economy.On April 2, the PNG parliament voted to shut down the country and extended the SoE, for a further two months, until June 16 which enables return to normal operations. However, businesses are to implement ‘new normal’ work arrangements which includes physical distancing and use of face masks. PNG parliament also passed the Public Health Emergency Bill 2020 which seeks to provide a practical and effective legislative mechanism for the implementation of all necessary measures to detect, prevent the entry of, and eradication of pandemic, outbreak or serious public health threat.


Key Policy Responses as of November 20, 2020

Fiscal
  • On April 2, the PNG government announced a K5.6 billion economic stimulus package in the parliament. The government has announced K600 million credit line to support businesses and individuals in coordination with the banks and financial institutions, and K500 million support from superannuation savings to employees affected by the economic slowdown. Support for businesses includes K200 million in guarantees for loans to SMEs. Moreover, the government has allocated K645 million more to support health, security and economic sector.

Monetary and macro-financial
  • The Bank of Papua New Guinea (BPNG) has reduced the Kina Facility Rate (KFR) – the main policy rate - by 200 basis points to 3 percent from 5 percent and has asked the commercial banks to reduce their respective Indicative Lending Rates. BPNG has also reduced the Cash Reserve Requirement to 7 percent from 10 percent to provide additional liquidity to the commercial banks. In addition, BPNG announced a program to repurchase government securities in the secondary market to provide liquidity to the private sector. To encourage interbank activity, BPNG has increased the margin on central bank borrowing by 25 basis point to 100 basis points of both sides of KFR. All financial institutions have agreed to provide relief of 3 months on loan repayments and interest payments to customers who have lost their jobs on a case-by-case basis. To cover for the 3-month loan repayment holiday for borrowers severely affected by the COVID crisis, BPNG suspended loan-loss provisioning for affected loans during this period. A total of K806 million is expected to be paid out the members from their superannuation savings. The amendments to Superannuation Act will allow its members to withdraw up to 20 percent of their contribution or a maximum of K10,000.

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


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Paraguay

Background. The first case of COVID-19 was confirmed in Paraguay on March 7th, 2020. The first confirmed cases were imported, though community and local transmissions quickly took off. Most cases in the past three months were imported from Brazil, although community transmission started picking up significantly in August. After reaching a peak in September, the average number of daily new cases has been coming down gradually. The number of deaths is about 1,600 (230 per million), with 74,000 total confirmed cases as of November 19. Starting March 12, the government implemented a series of measures to prevent the spread of the virus, including border closure and suspension of school, all activities that involve groups of people, as well as public and private events. The country implemented a total quarantine from March 20 to May 3, 2020.

Reopening of the economy. On June 15, 2020, Paraguay moved into the third stage of re-opening, under the country’s phased plan labeled “Smart Quarantine”. It allows the rehabilitation of commercial stores and shopping centers, corporate offices, general construction works, and sports in gyms at fresh air. Stage three also allows the reopening of restaurants. The main remaining restrictions are border closures, cancellation of large public events, face mask requirements, and limited seating and extended sanitary protocols for restaurants, gyms, religious services, and public offices. On July 20, the country moved to phase 4 of the reopening, which allows reopening of hotels under strict protocol, religious services with up to 50 persons and some further relaxation on public and private event protocols. On October 3, the government officially lifted phase 4, though restrictions remain such as social distancing, mask-wearing in public spaces, sanitary protocols, limited night-time circulation, and others. On October 15, Paraguay opened three border posts with Brazil, for circulation of cars only, at limited timetables, and a week later the airports of Asunción and Ciudad del Este officially reopened, with a limited number of flights. Physical-presence school classes will remain suspended until end-2020.


Key Policy Responses as of November 19, 2020

Fiscal
  • The government has lowered VAT on medical supplies to 5 percent and eliminated import tariffs on them. On March 23rd, 2020, the government submitted to congress a package of emergency spending measures of around $945 million (2.5 percent of GDP). The package includes additional health-related spending of $500 million, $400 million measures to support the vulnerable population, and $45 million emergence funding for small enterprises. The government obtained authorization from Congress to borrow up to an additional U.S. $1.6 billion (4 percent of GDP) from IFIs and through bond issuances. On April 23, the government successfully issued U.S.$1,000 million in international sovereign bonds. The 10-year bond was seven times oversubscribed at an interest rate of 4.95 percent.For the remainder of 2020 and 2021, the government is proposing an Economic Recovery Plan totaling $2,300 million, focusing on investment, social spending, and financing for the private sector.

Monetary and macro-financial
  • Since early March, the central bank has lowered the policy rate by 325 basis points, to 0.75 percent. The interest rate for the central bank’s overnight liquidity facility window has also been reduced, by 200 basis points, from 4.5 percent to 2.5 percent. The Central Bank has also reduced the minimum reserve requirements on domestic and foreign currency deposits, freeing up $959 million in the process for banks to make new loans. In addition, a National Emergency Special Credit Facility (FCE) was created to channel up to $760 million in liquidity support to SMEs. The government has also allowed banks to automatically refinance loans to private sector companies that are in repayment difficulties, and postponed collection of taxes and user fees for 2 months.

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

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


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Peru

Background. The first case of COVID-19 was confirmed in Peru on March 6th. The number of new COVID19 cases and deaths peaked in mid-August, but the per capita fatality rate remains amongst the highest in the world. The fourth (and last) phase of economic reopening started on October 1st, which includes the resumption of international commercial flights to some destinations, and easing of capacity restrictions for retail stores and restaurants to 60 and 50 percent, respectively. Land borders reopened on November 1st, and lockdowns in four regions have been lifted.


Key Policy Responses as of November 20, 2020

Fiscal
  • The government approved 3 billion soles (0.5 percent of GDP) to attend the health emergency and approximately 7 billion soles (1.1 percent of GDP) in direct transfers to support vulnerable households during the national lockdown period. An additional cash transfer to vulnerable households of approximately 6.4 billion (0.9 percent of GDP) was announced in late July. The government also approved a three-month extension for the income tax declaration for SMEs and is granting flexibility to enterprises and households in the repayment of tax liabilities. These tax measures are estimated to provide a temporary relief in the order of 2.0 percent of GDP. The government has also approved the creation of an 800 million soles (or 0.1 percent of GDP) fund to help qualified SMEs to secure working capital and/or refinance debts and has announced an expansion of that program to around 0.5 percent of GDP. The government has announced a postponement of households’ payments of electricity and water and a subsidy for electricity payments of 800 million soles (0.1 percent of GDP). On October 7, the government launched a program to issue guarantees partially backing loan restructurings for households and SMEs. The cost of the program is estimated at about 5.5 billion soles (0.8 percent of GDP). A new wage subsidy program was launched in late October, covering between 35 to 55 percent of the wage bill of those firms that reported a fall in sales of at least 30 percent during April/May, and who recall furloughed workers or create new jobs. The program is expected to benefit some 350,000 people.

Monetary and macro-financial
  • The central bank has cut the policy rate by 200 basis points, bringing it to ¼ percent, and is monitoring inflation developments and its determinants in order to increase the monetary stimulus if necessary. In addition, the central bank has reduced reserve requirements, provided liquidity to the financial system through repo operations, and has approved a package of 60 billion soles (over 8.8 percent of GDP) in liquidity assistance (backed by government guarantees) to support lending and the payments chain. The superintendence of banks has issued a notification allowing financial institutions to modify the terms of their loans to households and enterprises affected by the Covid-19 outbreak without changing the classification of the loans. These operations have to satisfy well defined conditions, including a maximum modification period of six months.

Exchange rate and balance of payments
  • The central bank has been intervening since late February to mitigate disorderly conditions in the foreign exchange market, with most of the intervention taking place in March-April. International reserves remain significant, at over 35 percent of GDP.


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Philippines

Background. The Philippines reported its first cases of confirmed COVID-19 on January 30, 2020. Starting on August 19, the government moved Metro Manila and other high-risk areas from a “modified enhanced community quarantine” to a “general community quarantine,” which allows more businesses to reopen and mass transportation to resume in phases. International travel restrictions largely remain in place, but domestic flights are allowed under limited capacity. Schools in the country have reopened from October 5. Hotels in areas under general community quarantine and modified GCQ can now accept guests at full capacity to allow the tourism industry to recover.

Financial market volatility has subsided recently, with the peso/US$ exchange rate staying stable. Meanwhile, real GDP in the first three quarters of 2020 contracted by 0.7 percent, 16.5 percent, and -11.5 percent respectively, on a year-on-year basis.


Key Policy Responses as of November 19, 2020

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

Fiscal
  • The government launched a PHP 595.6 billion fiscal package (about 3.1 percent of 2019 GDP) for vulnerable individuals and groups, which includes the following measures that had been implemented during the first half of 2020: (1) PHP 205 billion cash aid program (1.1 percent of 2019 GDP) for 18 million low-income households; (2) almost PHP 57 billion social protection measures for vulnerable workers, including for displaced and overseas Filipino workers (0.3 percent of 2019 GDP); (3) over PHP 58 billion on COVID 19 related medical response (0.3 percent of 2019 GDP); and (4) PHP 120 billion (0.6 percent of 2019 GDP) credit guarantee for small businesses and support to the agriculture sector. Financial assistance will also be provided to affected micro-, small-, and medium-size enterprises (MSMEs) and vulnerable households through specialized microfinancing loans and loan restructuring. The “Bayanihan II” Act, which has been signed into law on September 11, is expected to provide additional fiscal support (about 0.8 percent of 2019 GDP) to vulnerable households and to workers and businesses in hard-hit industries, such as agriculture, transportation, and tourism.

Monetary and macro-financial
  • The Bangko Sentral ng Pilipinas (BSP) has reduced its policy rate five times in 2020 by a cumulative 200 bps to 2.00 percent, with the latest cut of 25 bps to become effective on November 20. Earlier BSP had lowered the reserve requirement ratio for commercial banks by 200 bps to 12 percent, effective from April 3. At the same time, to ensure the availability of sufficient short-term liquidity in the financial system, the BSP also made purchases of government securities in the secondary market.

    Meanwhile, to support the government’s programs to counter the impacts of COVID 19, the BSP purchased PHP 300 billion worth government securities (about 1.5 percent of 2019 GDP) through a repurchase agreement with the government, which was fully settled in September. A fresh provisional advance amounting to PHP 540 billion was also approved in October. In addition, the BSP also remitted PHP 20 billion as dividend to the government even though it is no longer required to make dividend payments to the government under the newly amended BSP charter.

    The BSP has also announced a series of regulatory relief measures for the banking sector, including: (1) a temporary relaxation of requirements on compliance reporting, penalties on required reserves, and single borrower limits; (2) easier access to the BSP’s rediscounting facility; (3) a temporary relaxation of provisioning requirements (subject to the BSP approval), and (4) a relaxation of prudential regulations regarding marking-to-market of debt securities. These relief measures are intended to encourage banks, in turn, to provide financial relief to their borrowers (e.g., temporary grace period for loan payments). To encourage extension of loans to enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed loans to MSMEs to be counted as part of banks’ compliance with reserve requirements, temporarily reduced their credit risk weights to 50 percent, and assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corporation. Also, loans to certain large enterprises that were critically impacted by the pandemic (but not part of a conglomerate) will now be recognized as forms of alternative compliance with banks’ reserve requirements. Finally, the BSP increased the limit on banks’ real estate loan share from 20 percent of their total loan portfolio (net of interbank loans) to 25 percent.

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


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Poland, Republic of

Background. Poland reported its first confirmed COVID-19 case on March 5, 2020. A second wave firmly established itself in October, accelerating in recent weeks, surpassing the first wave by a large margin. Beginning in March, the government introduced containment measures including closures of schools, universities, restaurants, and all non-essential retail trade and service outlets, as well as bans on large gatherings, border controls, and travel restrictions. Following a quarter-on-quarter (q/q) contraction of 0.3 percent in Q1 2020, GDP contracted a further 9.0 percent q/q in Q2, led by declines in private consumption and fixed investment. After a strong rebound in activity beginning in May, high-frequency indicators suggested that the rebound leveled off in August/September, resulting in a 7.2 percent q/q GDP growth in Q3 2020.

Reopening of the economy and additional containment measures. On April 16, the government outlined a four-stage plan to reopen the economy. Starting on April 20 a larger number of people was allowed in shops and at religious gatherings, and public parks and forests were re-opened. The second phase of the lockdown easing plan was launched on May 4 with the re-opening of hotels and shopping malls (with limitations on the number of persons), the opening of daycares and pre-schools (as of May 6), as well as softening quarantine rules for cross-border workers and students. The third phase was launched on May 18, entailing reopening of restaurants, hairdressers and cosmetic salons, and permission for outdoor sport events with up to 50 persons with no audience. Grades 1-3 in primary schools opened on May 25 with strict sanitary rules, with a maximum number of children allowed in class. The fourth stage started on May 30, with the opening of cinemas, playgrounds, and gyms, all with stricter sanitary regimes than normal. Outdoor events are allowed with up to 150 people, with social distancing or face masks. Internal EU borders were opened on June 13, in with line EU recommendations.

In response to the second wave of the pandemic, the authorities initially tightened restrictions on a regional basis, grouping countries into “yellow” and “red” zones based on the local severity of the outbreak. By October 24, the entire country had been placed in a “red” zone. Following a further acceleration of cases, additional restrictions were announced on November 4 (to be in effect from November 6 to 29). The restrictions include the closure of shopping malls (except pharmacies, food, and services) and tighter limits in smaller retail stores. Hotels can be opened only for business travel. Restaurants are open for takeout/delivery only, remote learning has been implemented for children at all grades, social gatherings of over 5 people have been banned, wedding receptions are not permitted, religious service attendance will face limits, and public transport is limited to 50 percent of seats. Water parks, swimming pools, and gyms are closed. Cultural services are to be closed, including cinemas and museums. The government has also created some benchmarks to assess when a full lockdown should be triggered.


Key Policy Responses as of November 19, 2020

Fiscal

The fiscal policy response to the first wave of the pandemic has been sizeable, estimated at PLN 116 billion (5.2 percent of GDP). New credit guarantees and micro loans for entrepreneurs estimated at PLN 74 billion (3.3 percent of GDP) were also approved. Additionally, the Polish Development Fund is financing a PLN 100 billion (4.5 percent of GDP) liquidity program for businesses. Most of the measures have expired by now, except for the PFR liquidity loan program for large firms. Key measures include:

  • Additional funds for hospital equipment and supplies;
  • Wage subsidies for employees of affected businesses and self-employed persons. Businesses, regardless of their size, may apply for a three-month subsidy in the event of work stoppages or reduced working time. This subsidy covers social insurance contributions, and it ranges from 50 to 90 percent of the minimum wage for each employee, depending on recorded decrease in turnover in 2020. The subsidy includes furloughed employees.
  • Increased guarantees from the national development bank (BGK) for enterprises. A new Liquidity Guarantee Fund in BGK will be established offering guarantees for loans taken by medium and large companies;
  • Additional loans for micro-firms;
  • Postponement or cancellation of social insurance contributions. For micro firms with up to 9 employees social insurance contributions are covered by the budget for 3 months. For companies employing from 10 to 49 employees, 50 percent of social insurance contributions is paid by the budget. Possible deferral, payment in installments, or cancellation of taxes. The self-employed and employees working on civil law contracts can receive a one-time benefit.
  • Deduction of this year’s losses for 2021 tax settlement (tax returns for 2019 might be corrected in order to deduct the losses of 2020 from the 2019 income);
  • An allowance for parents of young children related to school closures;
  • A “solidarity benefit” for those who lost jobs after March 15, paid for three months (June-August);
  • An increase in the unemployment benefit by 39 percent during the first 90 days of unemployment;
  • To support the local tourism industry and families with children, a tourism voucher has been introduced, providing each child entitled to Family 500+ benefits with a one-time PLN 500 voucher to be spent at hotels or tourist events in Poland.
  • Establishment of a new fund (COVID Fund) dedicated to combat the negative impact of the pandemic with the balance sheet size of PLN 100 bn (revenues and expenditures at PLN 100 bn). The Fund is supervised by the Prime Minister but flows from the fund will be transferred to various ministers and other institutions involved in combating negative consequences of pandemic. Revenues are raised through the issuance of bonds by BGK (bonds are guaranteed by the State Treasury).
  • Financial support of the investment tasks managed by local governments (under new government resolution up to PLN 12 bn will be dedicated to strengthening investments processes in local governments as a Governmental Fund for Local Investments). The support will be transferred to projects worth at least PLN 400000. The aim of new mechanism is to revive public investment in local government subsector. Financing will be ensured by the COVID Fund and as a result its balance sheet might be extended by additional PLN 12 bn (on the revenue and expenditure side). The local government could spend these funds until end of 2022.
  • Interest rate subsidies for bank loans granted to provide financial liquidity to entrepreneurs affected by the COVID-19. The new fund in BGK was established (Subsidy Fund) with the purpose to support companies affected by pandemic through paying subsidies to lower their interest rate payments on turnover loans granted by banks. Fiscal cost of new mechanism for 2020 budget will be up to PLN 0.3 bn.
  • The Polish Development Fund is providing liquidity loans and subsidies for micro, small/medium, and large enterprises. The total value of the program equals PLN 100 billion. Up to 70 percent of the financing may be non-returnable, upon fulfilling the relevant conditions related to maintaining employment, continuing business activity, and the level of lost sales.
  • Foreign workers permits are extended to stay in Poland and work.

Additional support for public investment in road and railway infrastructure. As well as PLN 1 bn to support operational situation of companies managing airports.

In response to the second wave of the pandemic, the authorities announced on November 4 additional fiscal measures to support the economy. The estimated cost of such support is not yet clarified, and parliamentary approval is pending. The key measures include:

  • Co-financing of fixed costs for SMEs in the industries most affected by the restrictions. Subsidies under the PFR Financial Shield of up to 70 percent of fixed costs not covered by revenues, provided that revenues decreased by 30 percent compared to the same period in 2019.
  • Write-off of subsidies from the PFR Financial Shield for SMEs. This would be available for sectors subject to sanitary restrictions, conditional on a cumulative drop in revenues from March 2020 to March 2021 by at least 30 percent.
  • Extension of the Financial Shield program for large Companies until March 31, 2021 (applications) and June 31, 2021 (payments). Change in the rules for calculating the damage due to COVID-19 in preferential loans from the current March - August 2020 to March 2020 - March 2021, in accordance with the original shape of the program.
  • Continuation of de minimis guarantees for SMEs and liquidity guarantees for large companies, which requires coordination with the European Commission on the possibility of subsidies to cover installments for loans with maturity of 6 years for industries affected by the restrictions.
  • Continuation of subsidies to jobs in the form of standstills and reduced working time.
  • Extension of the standstill benefit for self-employed persons in the industries subject to restrictions.
  • Exemption from social security contributions for industries affected by the restrictions.
  • Co-financing of a change in the scope of activities under grants for business; increasing the amount of the subsidy from 6 to 8 times the average salary and extending it by co-financing not only new activities, but also changes in the scope of current activities for industries affected by the restrictions.
  • Second chance policy: Co-financing by the Industry Development Agency (ARP) of costs related to the restructuring of enterprises.
  • Co-financing of leasing in transportation sector.
  • The voucher of PLN 500 for all teachers to cover expenses for the IT equipment necessary to provide remote teaching.
Monetary and macro-financial
  • The National Bank of Poland (NBP) reduced its policy interest rate by 140 bps to 10 bps, with rate cuts on March 17 (50 bps), April 8 (50 bps), and May 28 (40 bps), since March 17. The NBP has re-introduced repo (fine-tuning) operations to provide liquidity to banks, reduced the required reserve ratio from 3.5 to 0.5 percent, and changed the interest rate on required reserves to the level equal to the policy interest rate. The NBP has also begun purchases of Polish Treasury securities in the secondary market, and on April 8 expanded eligible securities to include those guaranteed by the State Treasury. The NBP has also introduced a program to provide funding for bank lending to enterprises. Through November 18 the NBP had purchased PLN 105.5 billion (4.6 percent of GDP) in Treasury and in government guaranteed securities in the secondary market.

    In addition, the 3 percent systemic risk buffer for bank capital requirements has been repealed. The Polish Financial Supervisory Authority (PFSA) announced measures related to provisions and reclassification of loans to existing SMEs/micro enterprises to allow d