Policy Responses to COVID19

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 196 economies. Last updated July 31, 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 strict lockdown measures, which were subsequently extended twice. Daily movements were restricted to only those deemed essential. The government also released over 5,300 prisoners to reduce the risk of mass infections in penitentiaries.  

The pandemic has hit hard the economy as trade and transportation have been disrupted and domestic activity slowed sharply, imperiling the livelihood of thousands of Afghan families. 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. Border closures and panic-buying led to a temporary spike in prices of some foodstuffs, which abated after private wholesalers boosted supply at the government’s request coupled with good harvests in May and opening of borders in early June.

Reopening of the economy: On May 28, the government began partial easing of the lockdown in Kabul and other major cities for workers but retained restrictions on movements and mass gatherings. On July 22, wedding halls were allowed to open in Kabul.

To avoid further outbreak of coronavirus, the government announced new working hours for government and non-government organizations, in two shifts following even and odd days of the week, from 7 am till 1 pm. Workers in the financial sector are exempted from the guideline. On July 12, working hours of government organizations were extended and set from 8 am to 4 pm, with employees working in two shifts, on even and odd days.

Public and private schools and universities are set to gradually reopen after August 5.

On May 17, Pakistan re-opened its Torkham and Chaman borders points with Afghanistan, followed by full restoration of bilateral trade and transit at all border crossings to pre-Covid-19 status by July 13. At end-June, the authorities announced the resumption of domestic and international flights and exports to Europe via the air corridors. On July 15, trade with India through Wagah border post in Pakistan resumed.

Key Policy Responses as of July 30, 2020

Fiscal

• The Government established an Emergency Committee for COVID-19 Prevention to assess the situation and initiate relevant actions. 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 i) establishing testing labs, including at border crossings; ii) setting up special wards to boost hospitalization and care capacity; and iii) procuring the most critical medical supplies.

  Parliament has recently approved draft budget amendments that allocate about Afs 22 billion (1.4 percent of GDP) for a health package, including purchases of additional hospital beds, measures to expedite the supply of agricultural commodities, a short-term employment program, and bread distribution to the vulnerable households. Overall, during the year, the authorities envisage spending up to 2.8 percent of GDP for pandemic-related spending, with about 15 percent directed to health. With the support of the World Bank, other development partners, and humanitarian agencies, the authorities have announced a social relief package—through cash transfers and, if impractical, in kind—to support food security among socially vulnerable households. On April 29, the government started providing free bread to the needy and poor people in Kabul, and later extended to other cities. The program, was ended in late June. In May, the government waived electricity bills of less than Afs 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. To ease tax compliance, the government extended filing deadlines for the first and second quarter of the fiscal year by 45 days.

Monetary and Macro-financial

• The authorities increased the frequency of Financial Stability Committee meetings, enhanced the monitoring of early signs of liquidity stress, and reviewed banks’ business continuity plans. Da Afghanistan Bank (DAB) has suspended administrative penalties and fees, with no retrospective applications for breaches/noncompliance during the period of suspension. In addition, DAB postponed the IFRS-9 implementation to June 2021, and froze loan classifications at the pre-pandemic cutoff of end-February. The latter was phased out on July 1.

Exchange rate and balance of payments

• DAB remains focused on price stability and is committed to exchange rate flexibility, limiting its foreign interventions to preventing excessive volatility. With domestic demand subdued, there have been no exchange rate pressures, and the Afghani has remained broadly stable to the US$. DAB has engaged money-service providers, who play a systemic role in financial intermediation, including in foreign currency, to ensure uninterrupted services.

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Albania

Background. The first confirmed COVID-19 case was reported on March 9, 2020. Due to its proximity and close links to Italy, Albania adopted some of the toughest lockdown measures in Europe. The parliament adopted on April 18th amendments to the penal code, legislating harsh punishments for those breeching the lockdown or quarantine. The state of natural catastrophe which enabled the government to use extended powers for its three months duration ended on June 23rd.

In a sign of solidarity with its neighbor and main trading partner, Albania sent teams of doctors and nurses to help fight against the COVID-19 pandemic in north Italy, one of the worst hit areas in the world. 

Reopening the economy. On June 1st, 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 22nd and airlines have resumed flights on a lighter schedule since mid-June. There are no quarantine requirements for incoming visitors and tourists. Due to an increased number of cases since restrictions were lifted, Albania is not included in the list of third countries with which travel restrictions to the EU were lifted on July 16th.

Most businesses are opened, including bars and restaurants for outside sitting.  However, the reopening led to a spike in new infections, with the number of active cases and victims rising fast. Gradual reopening started since mid-April based on a strategy prepared by the Ministry of Health, which factors in new number of cases, hospitalization and patients needing intensive care. The government wants to avoid a second lockdown and has called on citizens to abide to physical distancing measures. The use of masks indoors became mandatory on July 15th. Large gatherings continue to be banned and cinemas, theaters, night clubs and swimming pools remain closed. Wedding parties are not allowed, and funerals are restricted to family members. Public transport was allowed to resume on June.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has adopted two support packages for people and businesses affected by the COVID-19 pandemic of a combined size of Lek 45 billion (2.8 percent of GDP) consisting of budget spending, sovereign guarantees and tax deferrals. The first package adopted on March 19th through a normative act had support measures of Lek 23bn (1.4 percent of GDP) through a combination of spending reallocations, spending increases and sovereign guarantees to support affected businesses. The key measures are: (i) additional funding for health sector in the amount of Lek 2.5 billion  (ii) Lek 6.5bn for the support of small businesses/self-employed that are forced to close activities due to the COVID-19 pandemic by paying them minimum salaries (up to two in the case of family businesses with unpaid family members), doubling of the unemployment benefits and social assistance layouts. (iii) Lek 2bn of defense spending reallocated toward humanitarian relief for the most vulnerable, (iv) Lek 11bn (0.6 percent of GDP) sovereign guarantee fund for companies to access overdrafts in the banking system to pay wages for their employees for up to 3 months with an interest rate capped at 2.85 percent for a maturity of up to 2 years. The government will bear the interest costs. Starting in April, cabinet ministers and lawmakers will receive half of their salaries for the next three months with the savings going to the Anti-Covid 19 social support fund. The second package adopted on April 15th includes (i) Lek 7bn (0.4 percent of GDP) fund to pay for a one-off transfer of Lk40,000 to employees of small businesses affected by the pandemic not covered in the first package, employees of large businesses laid off due to the pandemic, and employees in the tourism sector; (ii) a sovereign guarantee of Lek 15 billion (0.9 percent of GDP) to provide loans for working capital for all private companies that were tax-compliant and solvent before the pandemic. The government will guarantee 60 percent of the loans, and interest are capped at 5 percent. As of July 30th,, 94% 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 21 percent.

  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.

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 31st, enabling clients to ask banks to defer loan installments without penalties. On May 28th, 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 25th, the Bank of Albania cut its key policy rate-the weekly repo, by 50 basis points to a new historic minimum of 0.5 percent. The Governor announced that the banking sector is liquid and well capitalized, and the central bank stands ready to provide unlimited liquidity for as long as needed.

  The Bank of Albania suspended dividend distribution for 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 30th, 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. However, faced with a resurgence in the daily number of cases, new restrictions to mobility, retail activities and social events have been announced in several provinces on June 29. International borders remain closed.

Key Policy Responses as of July 30, 2020

Fiscal

• On July 14, the government announced the preparation of a national socio-economic recovery plan, which will be discussed with all economic stakeholders on August 16 and 17. 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 loweredthe reserve requirement ratio from 10 percent to 8 percent, and its main policy rate by 25 basis points to 3.25 percent.

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

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

Exchange rate and balance of payments

• The authorities announcedseveral measures to cut the import bill by at least USD 10 bn (6 percent of GDP). Authorities banned exports of several products, including food, medical and hygiene items.

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Angola

Background. The first COVID-19 case was reported on March 21, while community transmission started on April 27. Plans for a gradual removal of remaining restrictions by end-July were postponed due to the recent increases in community transmission, and positive cases. Authorities extended the sanitary restrictions in Luanda and Kwanza-Norte until August 9; expanded the testing activities to hospitals, informal markets, and public institutions; made the use of masks mandatory; postponed sine die the resumption of school activities and international flights; and are considering reinstating the confinement measures, and a new lockdown. The World Bank is providing financing for medical supplies and equipment. The UN is also providing technical and financial support (a US$12.5 million grant). The African Development Bank committed US$1.04 million for COVID-19 research projects.

Key Policy Responses as of July 29, 2020

Fiscal

• The National Assembly approved a package of revenue and expenditure measures to fight the COVID-19 outbreak and minimize its negative economic impact. Additional health care spending, estimated at US$40 million, was announced. About 250 Cuban doctors arrived in Angola, at the expense of the Angolan authorities (total cost of about US$80 million). 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. Until July 28, 76 companies have carried out about Kz 85 billion in such operations.

Exchange rate and balance of payments

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

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Argentina

Background. The first confirmed COVID-19 case was reported on March 3, 2020. The authorities have adopted sweeping measures to prevent a rapid growth in infections, involving a full closure of borders and a nation-wide quarantine, beginning on March 20. The pandemic and the containment measures have had a significant economic impact, with a GDP loss of between 0.75 and 1 percent of GDP in Q1-2020. Capital Flow Management Measures (CFMs) that were already in place since August 2019 have largely protected Argentina so far from the impact of capital outflows.

Reopening of the economy. The government’s policy of moving from strict lockdown to a gradual reopening of the economy is contingent on the speed of contagion, defined as the length of time it takes for the number of reported cases to double. On May 8, with the doubling of contagions rising above 25 days, the government announced a gradual reopening aimed at raising regional mobilization from 50 to 75 percent in all districts, except for the Buenos Aires metropolitan area. On May 23, restrictions in the Buenos Aires metropolitan area were tightened in response to an acceleration in infections and, in early June, the mandatory lockdown was extended to other selected large cities. Amidst a continued surge in infections, on June 26 restrictions on mobility were tightened further in the capital and the surrounding Buenos Aires province. On July 17, the government announced a loosening of lockdown restrictions in the Buenos Aires metropolitan area and a phased reopening of activities, with a reassessment of the situation on August 2.

Key Policy Responses as of July 30, 2020

Fiscal

• Announced measures (totaling about 5.0 percent of GDP, 3.0 percent in the budget and 2.0 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 have helped limit outflows in the wake of the pandemic. The exchange rate has depreciated by over 15 percent vis-à-vis the US dollar since early March, in line with most regional peers.

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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 August 12, 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. Since early June, the government declared wearing a face mask in all open public spaces mandatory and imposed fine on those not doing so.

Key Policy Responses as of July 30, 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. So far, the authorities have adopted 22 support packages and allocated over 73 billion AMD ($137.9m) to those.

Monetary and macro-financial

• The Central Bank of Armenia (CBA) reduced the policy rate by another 50 bps to 4.5 percent on June 17. The interbank market has been active, and the central bank has easily met liquidity needs so far and provided a few FX swap operations to assure sufficient liquidity in dram and in FX. The CBA undertook few foreign exchange sales to limit excessive dram volatility around the beginning of April, although since then the dram has strengthened, and the CBA has been able buy some FX. The CBA has not used macroprudential policies actively yet. The CBA’s authorities are supervising banks’ liquidity positions and will act swiftly if required to safeguard financial stability.

Exchange rate and balance of payments

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

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Aruba

Background. As of July 29, Aruba reported 18 new Coronavirus cases after being free of active infections since May 29, and having reported 101 positive cases and 3 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 through mid-June. On May 4, some non-essential businesses, such as selected retail stores, food trucks, museums and art centers, and construction activities were permitted to operate with a maximum of 15 people allowed. On May 18, the shelter in place and ban on gatherings were lifted, and shopping malls, churches and cinemas reopened. On May 25, schools reopened under specific precautionary protocols, and open-air restaurants with outside seating, beauty salons, barbershops, and gyms were allowed to operate. The existing curfew was lifted on May 28.

On June 1, spa, saunas, and massage services reopened, and lottery kiosks, other lottery games, and restaurants with inside seating could remain open with specific operating hours. On June 10, bars and nightclubs resumed activity and indoor sporting activities as well as business and social gatherings were permitted. Since June 27, Casinos are open and sport events are allowed until 11PM. On June 15, travel 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.  

Key Policy Responses as of July 29, 2020

Fiscal

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

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. Australia has reported 16,303 confirmed cases of COVID-19, including 5,609 active cases and 189 deaths, as of July 30, 2020. There were 747 new cases in the last 24 hours, the majority from Victoria. Over 4.2 million COVID-19 tests have been conducted across Australia. More than 6.7 million Australians have downloaded the COVIDSafe app to speed up contacting people exposed to coronavirus. 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. Overseas travels are banned, and any arrivals in Australia are quarantined for 14 days. In the first quarter of 2020, real GDP contracted by 0.3 percent from the previous quarter, and high-frequency indicators point to a steeper contraction in the second quarter.

Reopening of the economy. States and Territories have been easing regional restrictions to varying degrees since the National Cabinet announced a three-step plan on May 8 to relax COVID-19 restrictions. Schools have reopened. Restaurants and entertainment venues have reopened with restrictions. Retail shopping, including for nonessential items, has largely reopened under some restrictions. Restrictions on public gatherings and domestic travel have been gradually eased. However, a recent COVID-19 outbreak in Melbourne triggered a return to Stage 3 stay-at-home restrictions for metropolitan Melbourne from July 9 for six weeks, and face coverings are mandatory for all of Victoria from August 3.

Key Policy Responses as of July 23, 2020

Fiscal

• At the Commonwealth level, fiscal stimulus, consisting of expenditure and revenue measures worth A$164 billion (8.6 percent of GDP), has been put in place through FY2023-24, and the majority of which will be executed through FY2020-21. Measures include sizable JobKeeper wage subsidies (4½ 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 under the JobMaker program, 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).

  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$9.4 billion (0.5 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$32.9 billion (1.7 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

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

  The Australian Prudential Regulation Authority (APRA) has provided temporary relief from its capital requirement, allowing banks to utilize some of their current large buffers to facilitate ongoing lending to the economy as long as minimum capital requirements are met. APRA also announced on March 30 that it is deferring its scheduled implementation of the Basel III reforms in Australia by one year to January 2023. 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.

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 continued to climb up with the effective reproductive rate of slightly above 1. A pickup in the infection rate has prompted the authorities to reintroduce mandatory mask wearing in shops, banks, and post offices, effective on July 24, 2020. During the initial outbreak, the authorities progressively tightened containment measures between mid-March and mid-April. Initially targeted to travel to and from Italy and self-quarantine for people with symptoms, the measures progressed to bans on large gathering in public spaces, replacing schools, and university classes with home learnings, and isolation of several ski resorts. By March 16, leaving home was banned by law with limited exceptions, restaurants and shops not delivering daily products were closed, and enforced by administrative and police measures, and a number of communities and regions were declared risk areas and put under quarantine. For all judicial and administrative procedures, the clock was put on hold to avoid hardship due to missed deadlines.

Reopening of the economy. A gradual re-opening of the economy has started after April 13, from small shops, construction and garden centers, while other stores and hairdressers were allowed to open at the beginning of May. By mid-May when religious services, outdoor sports, museums, libraries, and archives reopened, and the Bundesliga was allowed to restart. 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 July 24, 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 (until May) with the possibility to extend it by another three months (to August). Under this provision working hours may be reduced to up to 10 percent, at 80 to 90 percent of regular pay. Employers only pay the hours worked, while the rest is paid from the budget. From April 2, households could delay rent payments to their landlords until end-2020. Households and SMEs may also delay their debt servicing by 3 months. Funding for short-term work was increased from € 3 to € 5 billion on April 13, to € 10 billion on April 30, and again to € 12 billion on May 19 while the time frame for the submission of applications extended. The authorities are rolling out new fiscal measures including tax relief measures for the hospitality sector of € 500 million and support to non-profit organizations of € 700 million open for 6 months. 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) to include stimulus measures. On the expenditure side measures include investment in climate protection, affordable housing, health, and digitalisation 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.

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 of 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).

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities have increased spending on public health (AzN 8.3 million or .01 percent of GDP) and created a COVID Response Fund for public health needs (AzN 114 million or 0.14 percent of GDP). The government transferred AzN 20 million (.02 percent of GDP) to the Fund, with additional contributions coming from the public and private sectors. Ten modular hospitals are expected to be built (one of which has been completed) adding 2,000 beds at an estimated cost of AzN 15.3 million. 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 (4.1 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. 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.

Monetary and macro-financial

• On March 19, the CBA left the refinancing rate unchanged at 7¼ percent, but raised the floor of the interest rate corridor (within a de facto floor system) by 125 bps to 6¾ percent.

  On May 1, the CBA lowered the ceiling of the interest rate corridor by 100 bps to 8 percent. The authorities have extended the blanket deposit guarantee until December 4, 2020. The guarantee covers all manat (foreign currency) deposits within a 10 (2½) percent interest rate cap.

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

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

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

B

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The Bahamas

Background. The COVID-19 pandemic comes on the heels of the devastation caused by Hurricane Dorian in September 2019. The Bahamas has so far reported 434 confirmed cases of COVID-19 with 11 deaths (as of July 29).The Bahamas reopened its borders 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. All incoming visitors were asked to present a COVID-19 RT-PCR Negative (Swab) Test upon arrival, with results no more than 10 days old. However, following the reopening, confirmed cases more than quadrupled, leading the government to issue a new order for travel procedures and restrictions on July 22. All international travelers are allowed in but must at their own expense quarantine for 14 days at a government facility and at the end of the 14 days period submit a negative PCR test. Grand Bahama has emerged as a hotspot and its borders were closed to travelers from all countries, with a full lockdown enforced on the island. For the other islands, weekend lockdowns and nightly curfews during weekdays were reinstated.

Key Policy Responses as of June 29, 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 July 29, 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.

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Bangladesh

Background. Bangladesh 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.

Reopening of the economy. On May 28, the authorities announced that closures and movement restrictions would be gradually lifted starting May 31. Beyond the domestic impact of the health crisis, the two main channels through which the Bangladesh economy will be impacted are remittances and exports of ready-made garments (RMG). Remittances represent over 5 percent of GDP ($16.4 billion in FY 19), and a majority of migrant workers are based in Gulf countries that are affected by the abrupt decline in oil prices. The RMG sector accounts for more than eighty percent of the country’s exports. The industry has been hit by the cancellation or postponement of several billion US dollars in orders from major retailers in importing countries. A new concern for the authorities stems from historic monsoon floods which have 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 and emergency outlays.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has introduced a series of fiscal measures to contain and mitigate the impact of the COVID-19 outbreak. At end-March, the Ministry of Finance issued a revised budget for FY20 including additional resources to fund the Ministry of Health’s COVID-19 Preparedness and Response Plan and expanding existing transfer programs that benefit the poor. Increased allocation has been made to the Open Market Sale (OMS) program to facilitate the purchase of rice at one-third of the market price, and the Ministry of Disaster Management and Relief is distributing food supplies at the district level. On March 31, the Ministry of Finance announced a Tk. 50 billion (about USD 588 million) stimulus package for exporting industries to be channeled through a refinance scheme operated by Bangladesh Bank. Loan proceeds will be used to pay worker salaries, primarily through mobile financial services, and the scheme is expected to benefit close to 4 million workers for a three-month period. Exporting firms that have laid off workers will not qualify for the loans. The Ministry of Finance will also subsidize interest payments on up to Tk. 500 billion in working capital loans by scheduled banks to businesses. On April 15th, the Prime Minister announced the allocation of Tk. 21.3 billion under a housing scheme for the homeless, Tk. 7.6 billion for poor people having lost their jobs as a result of the pandemic, Tk. 7.5 billion to provide health insurance for government employees most at risk, and a Tk. 1 billion bonus payment for government doctors and health workers treating COVID-19 patients. The 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 presented on 11 June includes higher allocations for health, agriculture, and social safety net programmes. As a precautionary measure, the government has decided that until further notice, funds from the budget for low-priority development projects will not be released. The government has approached international financial institutions seeking budget support, and similar requests have been addressed to bilateral development partners.

Monetary and macro-financial

• The focus of Bangladesh Bank (BB) is to ensure that there is adequate liquidity in the financial system to support the operations of financial institutions, and it has announced that it will buy treasury bonds and bills from banks. The repo rate was lowered from 6 percent to 5.75 percent effective March 24th and was further reduced to 5.25 percent effective April 12. BB proposed a more expansionary monetary stance in its FY2020-2021 Monetary Policy Statement through another cut in the repo rate from 5.25 percent to 4.75 percent on July 29th. The CRR was initially reduced from 5 percent to 4.5 percent (daily-basis) and from 5.5 percent to 5 percent (bi-weekly basis), with a further reduction to 3.5 percent and 4 percent, respectively, from April 15. Recently, 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 was raised to $5 billion, with the interest rate now fixed at 2 percent and the refinancing limit increased. BB has created several refinancing schemes amounting to a total of Tk 380 billion, a 360-day tenor special repo facility and a credit guarantee scheme to support exporters, farmers, SMEs and to facilitate the implementation of the government stimulus packages. To further support farmers, BB also announced an agriculture subsidy program that will take effect for 15 months until mid-2021. In addition, BB has taken measures to delay non-performing loan classification, waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services.

Exchange rate and balance of payments

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

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Barbados

Background. 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 development and procurement of a vaccine.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Belarus

Background. 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) and 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). In some regions such as Minsk, there has also been a cancelation of public events, and recommendations for remote work and remote tertiary education activities, and for extra sanitary and social distancing precautions in schools and businesses, including hotels and restaurants. In order to facilitate travel abroad, the Ministry of Health has developed a certificate of the absence of Covid, 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 is resuming some international flights, restrictions on transit truckers were lifted, self-isolation rules for travelers returning from many European countries were cancelled. In addition to the impact of the Covid pandemic, Belarus faces adverse consequences from the gradual loss of oil price subsidies from Russia, the current oil-price shock and its negative impact on the price of Belarus’ exports of refined products.

Key Policy Responses as of July 30, 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 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 by 75 basis points (as of May 20). See also: https://www.nbrb.by/press/10042; https://www.nbrb.by/press/10060; http://www.nbrb.by/press/10167 (Russian only)

Exchange rate and balance of payments

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

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Belgium

Background. Belgium registered the first confirmed COVID-19 case on February 4, 2020.  The minority government—which had been granted enhanced executive powers until June 30, 2020—has implemented a range of measures to reduce the spread of the coronavirus, including closures of schools and all non-essential activities, a ban on all gatherings, limiting movement to essential needs, ban of non-essential travel abroad. The economy has contracted by 3.6 percent and 12.2 percent (q/q) in the first and second quarters of 2020, respectively.

Reopening of the economy. The government has been implementing a phased reopening plan conditional on health outcomes. On this basis, manufacturing and business services sectors were reopened on May 4, followed by shops on May 11 and May 18. Schools also started to gradually reopen as of May 18. Hospitality, cultural, and non-contact sports activities (without audience) as well as religious services were allowed to resume as of June 8. As of July 1, recreational activities and venues (e.g., swimming pools, wellness centers, casinos, cinemas, indoor playgrounds, etc.) and events with an audience of up to 200 (400) persons indoors (outdoors) were reopened while shopping restrictions have been relaxed. Restrictions on domestic travel and travel within the EU/Schengen area have largely been lifted, though restrictions remain in place for a number of countries where Covid-19 risks are considered high. However, due to the recent rise in the number of new cases, the government decided, on July 23 and 27, to put the 5th phase of reopening on hold and further decentralize decision-making regarding localized restrictions. It also imposed new preventive measures that came into effect on July 29.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has put in place a package of fiscal measures to address the crisis, detailed in their Stability Program and the July 2020 Monitoring Committee Report, with an estimated budget impact of €16.4 bn (about 3.4 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 measures allowing losses in 2020 to be offset against income tax liabilities (backward and forward); and (v) additional support to affected firms and households provided by subnational governments. A reinsurance scheme for short-term trade credit insurance, other socio-economic measures further support these efforts. In June, measures have been adopted to extend existing support schemes until August or end-2020, provide additional support to hard-hit sectors and vulnerable groups, and extend and modify the bank guarantee scheme to improve access, in particular for SMEs.

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) reducing the counter-cyclical bank capital buffer to 0 percent (an increase to 0.5 percent was to become effective by June) and signaling that it will remain unchanged until at least mid-2021 as part of forward guidance; (ii) a ban on short-selling stocks between March 18 and May 18; and (iii) postponement of debt repayment due to banks and insurers by affected households and companies to September 30, 2020. In parallel with the modification to the bank loan guarantee scheme, the debt service moratorium on bank loans will be extended 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 borders and the international airport to passenger transit, closed schools, and implemented mandatory quarantines. They also declared a national state of emergency and nighttime curfew during April, under which people were not allowed to leave their homes except for buying essential goods, attending medical appointments, or to work in essential services. The national state of emergency was later extended until end-June, although with less stringent regulations. These measures we effective to contain the pandemic, with only 28 cases and 2 deaths reported as of July 1, 2020.

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

Reopening of the economy. The national state of emergency was recently extended until June, but with more businesses now allowed to open and public transportation resuming. The tourism industry is planning to open to foreign tourists from mid-August.

Key Policy Responses as of May 22, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Benin

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

Reopening of the economy. The authorities have announced measures to gradually start reopening the economy, Middle schools, high schools and universities resumed their activities on May 11, 2020, while the kindergartens and day-care centers will remain closed until the start of the forthcoming school year. Public transportation, places of worship and bars resumed their activities on June 2, 2020. Finally, the cordon sanitaire was lifted on May 6, 2020, once the government’s mass screening plans were put in place. For this purpose, the authorities installed laboratories in each of Benin’s 12 departments and started a nationwide screening program. Since the start of the program, the authorities have conducted over 67,000 coronavirus tests throughout the country.

Key Policy Responses as of July 16, 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 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Benin amounted to 1.5 percent of GDP. 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.

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. As of July 30, active cases seem to have flattened, with no evidence of community transmission and no death so far. The economic impact of COVID-19 has been substantial, driven by the adverse impact on the tourism sector.

Reopening of the economy. 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 July 30, 2020

Fiscal

• The government announced a National Resilience Fund for mitigating COVID-19 linked 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 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.

Monetary and macro-financial

• 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.

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.

Links

Standard Operating Procedures (Monetary measures phase II). July 13, Royal Monetary Authority

Press Release Comprehensive National Response to the Challenges of the COVID-19 Pandemic Phase II, June 26. ROYAL GOVERNMENT OF BHUTAN PRIME MINISTER’S OFFICE

Notification of Fiscal Measures, Phase II. Public Notification “Monetary Measures in response to COVID-19”, April 14, 2020 Royal Monetary Authority

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Bolivia

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

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

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

Key Policy Responses as of May 20, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Bosnia and Herzegovina

Background. 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. Restaurant and cafes throughout the country are open, along with most other businesses. There are still social distance restrictions in place. Grocery stores and pharmacies are open, and masks are required indoors. Masks or scarves are no longer required when social distancing measures can be observed. Masks should be worn inside and 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. For other non-resident foreign nationals, there is still an entry ban, though some with special circumstances (e.g. For a business meeting, to a funeral, for medical treatment, or in the company of a BiH-citizen spouse) may enter. Special documentation and/or a negative COVID test may be required.

Key Policy Responses as of July 30, 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 restrictions on May 22 after 7 weeks of lockdown. Since end-June, the country has recorded a resurgence of cases. 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.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

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

Exchange rate and balance of payments

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

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Brazil

Background. The first confirmed case was reported on February 26, 2020. As of July 30, the case fatality rate is at 3.5 percent. Hospital occupancy rates remain generally elevated, but have declined for instance in Sao Paulo and Rio de Janeiro (the most affected states). While several states are reopening (or have reopened) non-essential businesses, restrictions were tightened in a few locations this week due to rising ICU occupancy rates. The federal government reopened, for 30 days, 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. President Bolsonaro was diagnosed with Covid-19 on July 7.

Key Policy Responses as of July 30, 2020

Fiscal

• To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures adding up to 11.8 percent of GDP, of which the direct impact in the 2020 primary deficit is estimated at 7.3 percent of GDP. Congress declared a state of “public calamity” on March 20, lifting the government’s obligation to comply with the primary balance target in 2020. The government has also invoked the escape clause of the constitutional expenditure ceiling to accommodate exceptional spending needs. Emergency measures are to be included in a separate (so called ‘war’) 2020 budget, not bound by the provisions of Brazil’s Fiscal Responsibility Law and the constitutional golden rule. The fiscal measures include temporary income support to vulnerable households (bringing forward the 13th pension payment to retirees, expanding the Bolsa Familia program with the inclusion of over 1 million more beneficiaries, cash transfers to informal and unemployed workers, and advance payments of salary bonuses to low income workers), employment support (partial compensation to workers which are temporarily suspended or have a cut in working hours, as well as temporary tax breaks and credit lines for firms that preserve employment), lower taxes and import levies on essential medical supplies, and new transfers from the federal to state governments to support higher health spending and as cushion against the expected fall in revenues. Financial assistance states and municipalities – with a temporary stay of debt payments– 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. The National Treasury responded to pressures in the interest rate futures market by announcing a program for the simultaneous auctions (buying and selling) of government securities.

Monetary and macro-financial

• The central bank lowered the policy rate (SELIC) by 200bps since mid-February, to the historical low of 2.25 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 will remain in place for the next six months. The five largest banks in the country agreed to consider requests by individuals and SMEs for a 60-day extension of their maturing debt liabilities.

Exchange rate and balance of payments

• The exchange rate has depreciated by 16 percent since mid-February and by 24 percent since end-2019. The central bank has intervened various times in the foreign exchange market since mid-February (both with spot and derivative contracts sales), by a total of 40 USD billion (about 12 percent of gross reserves). The central bank is resuming repo operations of Brazilian sovereign bonds denominated in US dollars, having released US$9 billion into the money market thus far.

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Brunei Darussalam

Background. Brunei Darussalam reported its first confirmed case of COVID-19 on March 9, 2020. There have been no new cases reported, and no active cases since June 16. 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 active testing/tracking of cases has enabled early isolation and treatment, with significant resources being channeled to the health sector. So far, 434 individuals are still undergoing mandatory isolation centers at monitoring centers provided by the government. As of July 30, a total of 40,202 laboratory tests for COVID-19 has been conducted since January.

Reopening of the economy. Brunei started relaxing COVID-19 restrictions since May 16, in phases. In Phase 1, the plan is to gradually lift physical and social distancing measures for premises such as sports facilities, food courts and markets. Brunei entered Phase 2 on June 15, enabling economic activities such as fitness centers and driving schools to increase their occupancy from 30 to 60 percent of premise capacity. With the COVID-19 situation under control, Brunei entered Phase 3 of the de-escalation plan on July 6, permitting mass gatherings of up to 50 people in places of worship, further relaxing operating capacity (e.g. in eateries, driving schools), including level 1 re-opening of cinemas. Phase 4 of the de-escalation plan came into effect on July 27, bringing the maximum number of persons permitted at mass gathering to 100. Travel restrictions however, remained in place for non-essential travels. MOH continues to carry out monitoring and enforcement patrol operations on business premises, especially food centers to ensure compliance with directives issued.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

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

Exchange rate and balance of payments

• No measures.

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Bulgaria

Background. Close to three months after the gradual reopening of the economy, daily new COVID-19 cases stay at substantially higher levels compared to the first wave of the pandemic. The extraordinary epidemic situation, which replaced the state of emergency introduced in mid-March, has been extended until August 31. During the first wave of the outbreak, the government initially implemented a range of containment measures, including social distancing and travel restrictions. As the emergency epidemic situation has been prolonged much more than initially anticipated, recently the government announced a new set of social and economic measures.

Preliminary data suggest a significant economic impact from the pandemic. The Bulgarian economy grew at 0.3 percent in Q1-2020, compared to 0.8 percent in the previous quarter. Registered unemployment was close to 195,000 since the start of the emergency situation (i.e. over March 13 – July 26, 2020), notwithstanding the recent improvement of the newly employed persons. Meanwhile, the budget remained in surplus during the first half of the year despite a large COVID-related policy package. This partly reflects reprioritization of expenditures and delay in implementation of the measures.

Reopening of the economy. The government has re-introduced mandatory mask wearing in response to increased number of cases, but maintained other relaxation measures, including the lifting of some travel restrictions, increased accessibility to open spaces and sport and recreation activities, reopening of open-air restaurants while securing minimum distance between tables, reopening of kindergartens and nurseries (but not schools), and reopening of shopping malls.

Key Policy Responses as of July 30, 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. 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 (over 1.2 percent of 2019 GDP). The measures will be extended until end-September 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) allocation of BGN 318.3 mln for pension supplement of BGN 50 for all pensioners for 3 consecutive months (0.3% of 2019 GDP); xi) state subsidy of 35 euros per seat for tour operators who use air carriers (0.05% of 2019 GDP); xii) additional expenditure in the health and social care sectors (0.4% of 2019 GDP) xiii) foreign investment promotion (0.01% 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% of 2019 GDP).

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 extended deadline for requests until 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

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Burkina Faso

Background. The first confirmed COVID-19 case was reported on March 11, 2020. The government has adopted several containment measures, including social distancing, a nationwide curfew, closure of schools and universities, cancelation of major public events, closure of terrestrial borders, suspension of commercial flights, quarantine of the affected cities and the mandatory nationwide use of masks. 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. Some urban markets and venues of religious worship were allowed to reopen on April 20 and May 2, respectively. The quarantine of cities not exceeding one positive case of COVID-19 was suspended on May 4. This gradual reopening is subject to continued social distancing guidelines, mandatory use of masks, and regular disinfection and body temperature control (mosques and churches), among other measures.

Key Policy Responses as of July 30, 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 and are contemplated 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. An emergency response plan for the health sector has been prepared and expired in June. For the post-June period, a COVID-19 response plan has been prepared which includes both health-related measures and measures to support the social and economic recovery. The plan will be regularly updated to reflect local and global developments.

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

Monetary and macro-financial

• The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. 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 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount outstanding 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 may be refinanced by 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.

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. The recent increase in the number of cases is the result of a large-scale testing campaign that the new government started on July 6, 2020.

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

Burundi’s health care system is extremely weak. The authorities’ 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 July 16, 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.

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.

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 July 30, 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 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 arrivals into Cambodia need to obtain a visa at a Cambodian diplomatic mission abroad, a health certificate before departure to Cambodia, and sufficient travel insurance—this stipulation has been extended to June 30. Returning migrant workers are to self-isolate for 14 days. Schools, casinos, and entertainment venues are closed and the government has banned public events with more than 50 participants. New Year celebrations were cancelled. Domestic travel restrictions were lifted on 16 April. The crisis has hit the Cambodian economy very hard during the first quarter of 2020, through exports of garments and textiles and tourism. The authorities are gradually lifting restrictions on movement.

Key Policy Responses as of July 8, 2020

Fiscal

• Additional fiscal resources to the health sector of around USD 60 mil USD (around 0.2 percent of 2019 GDP) are expected. The government announced in March a package of tax and tariff concessions, expenditure support, and credit support. Tax exemptions have recently been extended, notably to tourism and airlines. Social assistance is being strengthened, including grants to households and subsidies for wages and health and employment insurance, and a “cash for work” program for the unemployed. Social protection to poor and vulnerable groups (e.g. disabled) is to be extended.

  Other spending will be rationalized, including capital spending The government will disburse special low-interest loans through specialized SME and agriculture banks, in addition to packages issued to SMEs and rice producers. Temporarily laid-off garment workers are to receive income support.

Monetary and macro-financial

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

Exchange rate and balance of payments

• Cambodia continues to maintain managed floating system. Previous suspension of white rice exports has been lifted.

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Cameroon

Background. The first cases were reported on March 6. Cameroon continue to record daily increases in the number of COVID-19. 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 July 29, 2020

Fiscal

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

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

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

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

Monetary and macro-financial

• On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. 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. Coronavirus has been spreading across Canada, with more than 110,000 cases and more than 8,000 deaths as of July 15. Canada is also being hit by the sharp decline in global oil prices. Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus, including travel restrictions, social distancing, and declarations of states of emergency and closures of non-essential businesses in some provinces.

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

Key Policy Responses as of July 22, 2020

Fiscal

• Key tax and spending measures (15 percent of GDP, $317 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 $212 billion (10 percent of GDP) in direct aid to households and firms, including wage subsidies, payments to workers without sick leave and access to employment insurance, an increase in existing GST tax credits and child care benefits, and a new distinctions-based Indigenous Community Support Fund; and iii) around $85 billion (4.0 percent of GDP) in liquidity support through tax deferrals. More information here.

Monetary and macro-financial

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

  Other measures in the financial sector include: i) OSFI, the bank regulator, lowered the Domestic Stability Buffer for D-SIBs to 1 percent of risk weighted assets (previously 2.25 percent); ii) under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC); iii) the federal government announced $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 cases of Covid-19 has been rising sharply over the last few weeks. 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. While the number of new cases remains high, the president has announced some reopening measures to enhance the restart of the economic activity. Restaurants, bars and places of worship have been allowed to re-open. Moreover, international travels are expected to resume gradually, and most travel restrictions have been lifted. 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 July 30, 2020

Fiscal

• The response plan for the health sector that was prepared in strong collaboration with the WHO, with an estimated cost of 27 billion of FCFA (1.9 percent of GDP). 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. The government has requested the help of its development partners to finance this plan, through grants and loans. In addition to the health sector plan, the authorities are envisaging 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. A draft supplementary budget law is currently under discussion.

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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Chad

Background. The first confirmed COVID-19 case was reported on March 19. Chad has experienced a drop in the number of new cases since the second half of May, except for a surge on July 24, whereby they increased by 26 cases. 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. The curfew period (10PM-05AM) was extended in July 20, by two weeks, a state of medical emergency has been extended on July 2 for three months, giving more execution power to anti COVID-19 measures. The authorities have also limited travel from and into N’Djamena since May 8. Additionally, 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 has 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 (iii) the suspension of intercity buses has been lifted for one month. Worship places will also reopen on June 25. The resumption of travel flights is scheduled as of August 1, 2020.

Key Policy Responses as of July 29, 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) a solidarity fund for the vulnerable population amounting to CFAF 100 billion.

Monetary and macro-financial

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

Links

• Launching of the Youth Entrepreneurship Fund

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Chile

Chile reported its first confirmed COVID-19 case on March 3, 2020. In response to COVID-19, the authorities have implemented a range of measures, including declaration of state of catastrophe (extended 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 July 28, 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. As of July 30, Curaçao has 4 active COVID-19 cases. From the beginning of the pandemic, the authorities reported 29 positive cases and 1 death. Following the first case on March 13, Prime Minister Rhuggenaath declared the state of emergency and announced travel restrictions, quickly followed by a border closure. As the number of cases increased, the government introduced a curfew on March 28 followed by a full lockdown on March 30.

Reopening of the economy. All local restrictions have been gradually lifted, and the authorities are gradually reopening the borders to international travel. On June 15, they allowed travel from several low-risk countries in the Caribbean. On July 1, the authorities opened the borders to the Netherlands, Belgium, Canada, China, France, Italy, Spain and Germany—designated as medium-risk countries—with a combined limit of 10 thousand visitors. Travelers from medium-risk countries are allowed to travel to Curaçao without having to quarantine, provided they meet certain conditions, including undergoing a compulsory coronavirus PCR test, which must return a negative result. Both low-risk and medium-risk lists are periodically updated. As of July 30, the low-risk list comprised 22 countries and territories in the Caribbean, including the Bahamas, Barbados, the Eastern Caribbean Currency Union, Jamaica, Trinidad and Tobago; and the medium-risk list comprised 21 countries including Canada, China, Cuba, Guyana, Hong Kong, 11 EU countries, Switzerland, Taiwan, Turks and Caicos, the United Kingdom and Uruguay. All travelers are required to fill in a passenger locator card.

Key Policy Responses as of July 30, 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 in the second quarter included the payroll subsidies (with the maximum coverage reduced from 80 to 60 percent), support for the self-employed, job loss benefits and food vouchers. Financing for the third quarter is being discussed. The total spending under Alivio 2 in 2020 will be determined by available financing.

Monetary and macro-financial

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

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

Exchange rate and balance of payments

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

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China, People’s Republic of

Background. China has been hit hard by the outbreak with over 84,165 confirmed COVID-19 cases and 4,634 deaths as of July 30, 2020 (mainland). The government imposed strict containment measures, including the extension of the national Lunar New Year holiday, the lockdown of Hubei province, large-scale mobility restrictions at the national level, social distancing, and a 14-day quarantine period for returning migrant workers. Reflecting these containment measures, the economy contracted by 6.8 percent (yoy) in Q1.

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

Key Policy Responses as of July 30, 2020

Fiscal

• An estimated RMB 4.6 trillion (or 4.5 percent of GDP) of discretionary fiscal measures have been announced. Key measures include: (i) increased spending on epidemic prevention and control, (ii) production of medical equipment, (iii) accelerated disbursement of unemployment insurance and extension to migrant workers, (iv) tax relief and waived social security contributions, and (v) public investment. The overall public sector expansion is expected to be significantly higher, reflecting the effect of improvements of the national public health emergency management system, additional support through state-owned enterprises, and automatic stabilizers.

Monetary and macro-financial

• The PBC provided monetary policy support and acted to safeguard financial market stability. Key measures include: (i) liquidity injection 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. A ceiling on cross-border financing under the macroprudential assessment framework was raised by 25 percent for banks, non-banks and enterprises. Restrictions on the investment quota of foreign institutional investors (QFII and RQFII) were removed.

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Hong Kong Special Administrative Region

Background. Hong Kong SAR has reported 3,152 confirmed COVID-19 cases and 25 deaths as of July 30, 2020. In view of a renewed outbreak, the government re-imposed some stricter containment measures in July after some loosening in May and June. The new measures included (i) requiring mask-wearing in all public places including on public transport, (ii) closing schools early for the summer break and suspending face-to-face classes by tutorial centers until 16 August, (iii) prohibiting public gathering of more than 2 people, (iv) re-introducing social distancing measures related to restaurants, including prohibiting dine-in services between 6 pm and 5 am, (v) closing cultural and leisure facilities and selected social gathering establishments and businesses, and (vi) requiring passengers flying from “high-risk” countries to have negative COVID-19 testing results before arriving in Hong Kong SAR. Meanwhile, some quarantine and cross-border control measures introduced earlier remained in place, including (i) 14-day compulsory quarantine for travelers from overseas countries and areas and Mainland China, (ii) temporary entry ban on Hong Kong SAR non-resident from overseas countries, and (iii) reduction and partial suspension of cross-border transport and border control point services.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

  Key measures to provide financial relief include (i) the introduction of low-interest loans for SMEs with 100 percent government guarantee (HK$ 50 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 July 29, 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. Arrivals from Mainland China (except Xinjiang and Liaoning) 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 and Taiwan POC must present a negative NAT certificate and undergo 14 days of quarantine at one of the officially designated hotels. Arrivals from Xinjiang and Liaoning must present a negative NAT certificate obtained within the last the 3 days, or will be sent to quarantine at a designated hospital to perform NAT until a negative NAT result is obtained.

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 July 29, Macao residents who wish to enter and stay in Guangdong province are free from a 14-day quarantine as long as the traveler has a negative NAT certificate, 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.

Key Policy Responses as of June 29, 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. 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.

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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 has been in place since March 25. This is currently scheduled to last until at least August 31st , including mandatory confinement for those over 70 years old. Other measures to contain virus transmission have included travel bans, border closures, and a suspension of classes.

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 1st, although local jurisdictions (including Bogota) have been slower to ease restrictions.

Key Policy Responses as of July 29, 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 8.2 and 5.1 percent of GDP for 2020 and 2021 respectively. Additional budgetary support for health has been announced , along with faster direct contracting for services associated with the emergency response and payments to health providers for ICU availability, new credit lines providing liquidity support to the coffee sector, the education sector, public transportation sector, health 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, additional taxes for public sector workers (to help fund the response), 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 150 bp and has implemented several measures to boost liquidity in both the financial market and foreign exchange rate markets. These include: (i) an expansion of their liquidity overnight and term facilities in terms of amounts, applicable securities and eligible counterparts, (ii) a program to purchase securities issued by credit institutions, and (iii) TES purchases in the secondary market. The Central Bank also lowered the reserve requirement applicable to savings and checking accounts from 11 to 8 percent and the one applicable to fixed-term savings accounts (less than 18 months) from 4.5 to 3.5 percent.

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

Exchange rate and balance of payments

• To provide liquidity in FX markets, the central bank has auctioned FX swaps (in US dollars), but suspended this program on June 30 due to recent 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 agreement with the IMF has been renewed for two more years.

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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. Comoros is already feeling a severe impact from the Coronavirus pandemic as visitor arrivals have stopped, weighing on activity in the services sector. Remittances through exchange houses increased during the last two months.

Reopening of the economy. The economy has gradually started to open. Air travel is scheduled to restart in August. Schools and religious ceremonies have already opened. 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 July 30, 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. It also announced measures to distribute food and cash to the 150,000 households in the country. Import taxes on food, medicines, and items related to hygiene were reduced by 30 percent. The government announced a fund to support employees associated with airport operations.

Monetary and macro-financial

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

Exchange rate and balance of payments

• The authorities intend to monitor inflation developments and continue preserving the peg against the euro.

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Congo, Democratic Republic of

Background. The Democratic Republic of Congo declared its first case of COVID-19 on March 10, and the virus continues to spread 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. The government has announced plans to gradually deconfine the Gombe business district in Kinshasa and end mandatory confinement of workers in mining sites. On June 18th, a new 9-month multi sectoral response plan against the pandemics (PMUAIC-19) was officially launched. The plan includes actions to strengthen the health system, stabilize the economy, and reinforce security and social protection.

Key Policy Responses as of July 30, 2020

Fiscal

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

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No specific policy responses have been set to date.

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Congo, Republic of

Background. Congo, as most of oil producers, is being hit by two shocks—the potential spread of COVID-19 and the sharp decline in oil prices. The 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.

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.

Key Policy Responses as of July 22, 2020

Fiscal

• The overall cost of the response plan to the COVID 19 epidemic has been estimated at US$170 million (100 billion XAF), equivalent to 1.6 percent of 2020 GDP, to date the government has made available to the Ministry of Health the amount of US$1.4 million. The EU, WFP, France are getting together to provide support for the poorest segments of the population with combined support amounting to about 3 billion XAF as of now. Other UN agencies have provided about $8 million to support covid19 efforts.

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

Monetary and macro-financial

• On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The MPC also supported BEAC’s management’s intent to propose to reduce haircuts applicable to private instruments accepted as collateral for refinancing operations, and to postpone by one-year principal repayment of consolidated central bank’s credits to member states, but these possible additional measures are not effective yet. 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 March 6. In response, the government has implemented a range of measures to contain the spread of coronavirus, including declaration of a state of yellow alert and a national emergency, restrictions and bans on non-essential private and public vehicle circulation, international travel restrictions, mandatory quarantines for close contacts and those who enter the country, closures of schools, churches, beaches, national parks, bars, clubs and casinos, entry restrictions for foreign truck drivers, increased testing, and the conversion of a rehabilitation center into a hospital specializing in COVID-19 treatment. 2020Q1 GDP increased by 0.6 percent y/y. A monthly indicator of economic activity so far points to Q2 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 slowed down the re-opening of the economy in districts that have a high number of new infections; localized vehicle circulation restrictions and business closures have therefore been re-introduced . The border will open to international tourists from countries that have controlled the pandemic on August 1.

Key Policy Responses as of July 29, 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; and (vi) authorization for complementary pension operators to provide partial funds to employees affected by COVID-19.

Exchange rate and balance of payments

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

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Côte d’Ivoire

Background. 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 26th and international flights on July 1st.

Key Policy Responses as of July 16, 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 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount for such special T-Bills issued by Cote d’Ivoire amounted to 1.5 percent of GDP. 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 may be refinanced by 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.

Exchange rate and balance of payments

• No measures.

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Croatia

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

Reopening of the economy: On April 23, the government announced a gradual easing of containment measures in three phases, but subject to a review after each stage. Beginning April 27, some retailers (except shopping malls), libraries, museums, galleries, service-based activities not requiring close client contact (e.g., tailors, photoshops, locksmiths) reopened. Public transportation in cities and suburbs and boat connections for islands that do not have ferries resumed. Beginning May 4, service industries where close contact with people is unavoidable (e.g., hairdressers, beauticians) 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.

Key Policy Responses as of July 30, 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.

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 (four 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.

  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.

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 with daily new cases fewer than 15 since April 29. Since March, the government implemented a range of measures to limit the spread of coronavirus, including travel and mobility restrictions, a 14-day mandatory quarantine for travelers to Cyprus, and closure of schools, hotels and businesses.

Reopening of the economy. With daily new infections remaining in the single digit since end-April, the government has started implementing lifting of restrictions in four phases. The first phase started on May 4, allowing reopening of construction sites, retail stores and public sector under social distancing and health guidelines. The second phase started on May 21, allowing reopening of public schools and open-air restaurants as well as free movement within the country. The third phase 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 42 countries. From June 24, the maximum number of persons at gathering has been increased gradually.

Key Policy Responses as of July 30, 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.

  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 had declared a state of emergency and a nationwide quarantine limiting free movement and international travel to contain the spread of the virus. It further implemented a range of measures to support the population, jobs and businesses. GDP fell by 2 percent in Q1-2020 compared to a year earlier.

Reopening of the economy. The list of permitted activities, including the reopening of shops and restaurants, has been gradually expanded since end-April. The state of emergency expired on May 17, yet several restrictions are retained. International borders were partially reopened on May 11, but, with some exceptions, all persons must provide negative Covid-19 test results to enter the country. These restrictions were removed for Czech citizens traveling to most of the EU and some non-EU European countries, and also for citizens of a large part of the EU and some non-EU European countries traveling to the Czech Republic, starting June 15. On May 25, most business restrictions and the requirement to wear face masks in public were lifted (with some exceptions, e.g. wearing face masks in public transport which were lifted on July 1, the Prague metro system excluded). On the same date, primary and vocational school classes were partially reopened at limited class sizes and on a voluntary basis for pupils. Events were phased in starting with a size limit of 300 people on May 25 to 1,000 people by June 22. As of July 25, the wearing of face masks for events above 100 people was reinstated and the threshold for mass events lowered to 500 people due to a resurgence in new infections.

Key Policy Responses as of July 30, 2020

Fiscal

• The government announced a fiscal package of CZK 233.7bn (€8.8bn, 4.2 percent of GDP). Until end-August, the government contributes 80 percent of wages (incl. SSC) to employers if (i) employees are sent into quarantine; or (ii) employers’ businesses have been closed or reduced as a result of the crisis management or emergency measures taken by the Government. A contribution of 60 percent of wages (incl. SSC) is paid to employers due to obstacles to work on the part of the employer caused by the current epidemiological situation and related measures to prevent the spread of the disease both locally and abroad. Between June and August, the government will waive social security contributions paid by employers (24.8%) with a maximum of 50 employees (if certain conditions are met). This support will be provided concurrently with the wage compensation. 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). 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 state will further cover 50% of rents of businesses after mandating a reduction of 30%, while tenants will have to cover the remaining 20%. The government has also approved a bonus for workers in social services and the health-care system of CZK 16.5bn in total. The government approved grants for tourism (e.g. spas, hotels, etc.) in total of CZK 4.3 bn. The government further pledged close to CZK 500bn (EUR 18.9bn, 9¼ percent of GDP) in potential guarantees. Advance payments on personal and corporate income tax were suspended for Q2 2020 and penalties waived for failing to pay property tax and file income tax returns on time. The government approved a moratorium on bank loans (subject to certain criteria and limitations) of up to six months. Interest is still accrued, and loan duration will be extended.

Monetary and macro-financial

• The Czech National Bank (CNB) lowered the policy rate by 50 bps on March 16, and 75 bps on March 26 and May 7, respectively, to 0.25 percent. It also increased the frequency of repo operations from one to three times a week and reduced the countercyclical capital buffer rate by 75bps to 1 percent, effective April 1, 2020, and on June 18, further to 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 has reported its first confirmed cases of COVID-19 on February 27, 2020. In March, the government has implemented a range of measures to contain the spread of the Covid-19 virus, and to support people, jobs and businesses. These include closure of all borders; prohibition of events with more than 10 people; closure of schools, universities and daycare centers; closures of entertainment, hospitality and public leisure facilities; sending home non-essential public employees and asking all private businesses to keep employees home when possible.

Reopening of the economy. The authorities announced a careful and gradual lift of some containment measures (April 6). 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.

Key Policy Responses as of July 16, 2020

Fiscal

Monetary and macro-financial

• The Danmarks Nationalbank (DN) increased the policy rate by 15bps to -0.6 percent. The standing swap line with ECB was activated and its size was doubled to EUR 24 billion. It will remain in place as long as needed. In addition, the DN reached an agreement with the Federal Reserve to establish a USD 30 billion swap line that will stand for at least 6 months. The DN announced the launch of an ‘ extraordinary lending facility ’ which will make full-allotment, 1-week, collateralized loans available to banks at -0.5 percent interest rate on March 20. The DN on March 19, 2020 expanded this facility to include 3-month variable rate loans which will be available on March 27, 2020 and weekly thereafter. The DN also increased the interest rate on the previously announced 1-week loans to -0.35 percent. On March 24, the DN announced the auction of USD liquidity. The Danish authorities decided on March 12, 2020 to preemptively release the countercyclical capital buffer and cancel the planned increases meant to take effect later. The Danish Financial Stability Authority (DFSA) also announced a case by case relaxation of regulation on the LCR requirement . Banks and insurance companies are urged by the DFSA not to pay out dividends or buy back shares.

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 had its first confirmed COVID-19 case on March 18, 2020. The government has implemented various prevention measures, including restrictions of air, land, and sea borders, interruption of passenger flights and trains to (and from) Djibouti; suspension of visa issuance; confinement of non-essential employees, and steps to encourage social distancing (including school closures and cancellation of public gatherings).

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

Reopening of the economy. The government has started to gradually relax containment measures from May 17. Transport, retail, services, construction and public administration are allowed to re-open. Wearing a mask is mandatory in public spaces as well as other hygiene measures such as hand washing and regular sanitization of spaces receiving the public. Other sectors will gradually be reopened in the next months, with boarders and international travel expected to be reopened starting in September. The government continues to target those who have potentially been in contact with people who have tested positive. The government recently announced that starting July 17, the borders will, once again, be officially opened.

Key Policy Responses as of July 30, 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. As of July 29, 2020, the number of COVID-19 cases stood at 66,182 (1,123 fatalities; 33,947 recovered). The authorities declared a national emergency, introduced a country-wide curfew, closed schools, borders, and non-essential businesses, suspended public activities and mass gatherings, and introduced teleworking arrangements for public servants. Social distancing measures are strictly enforced, more than 1,600 businesses closed for violating them and the curfew. The state of emergency formally ended on June 30th.

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.

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

Reopening of the economy. On May 17, the President announced a plan to reopen the economy in four phases, which started on May 20 with the reopening of most small businesses, as well as public transportation operating at up to 50% capacity.

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

As of Wednesday June 17th, it was expected that DR would move to the third phase, however, due to the increase in the new confirmed cases from the date of the de-escalation, the government decided to remain in phase 2.

On July 20, 2020 the authorities approved a new state of emergency for 45 days, due to recent developments of COVID-19 in the country. Beginning July 21st, curfews were reinstated with differentiated times across provinces.

Key Policy Responses as of July 29, 2020

Fiscal

• The original economic measures announced by President Medina amounted to RD$32 billion (about US$576 million, or ¾ percent of GDP). These include higher social spending: (i) the Quédate en Casa program (RD$17 billion), subsidizing the most vulnerable households, including informal workers. Coverage under the existing program Comer es Primero, paying RD$5,000 (about US$90) per month increased from 0.8 to 1.5 million households; 452,817 families will receive additional transfers of RD$2,000 (about US$36) per month; (ii) the newly created Employee Solidarity Assistance Fund (FASE) (RD$15 billion), which will benefit about 754,000 families of formal workers who were laid-off with a monthly transfer up to 70 percent of wages (minimum of RD$5,000, RD$8,104 on average). On May 17, the government announced an extension of Quédate en Casa and FASE for one month, until the end of June. Also, a new program called Pa’ti is introduced support for independent workers, providing RD$5,000 a month to each beneficiary in May and June, with an additional allowance made available for healthcare workers, the military and police officers, amounting to RD$2.4 billion. 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 June 23, the President announced increasing 2020 budgetary spending by another RD$150 billion (3.5 percent of GDP, to RD$ 1.07 trillion). To cover financing gaps, the authorities have mobilized loans and commercial credit lines from the IMF[1], World Bank[2], the Interamerican Development Bank, Latin American Development Bank, and the Central American Bank for Economic Integration; and raised private donations for healthcare needs. The government also placed domestic debt in the amount of US$ 0.7 billion (in 4 series), with the maturities of 10-20 years at an interest rate of 10-10.875 percent.

  [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 the monetary policy rate cut (from 4.5 to 3.5 percent per annum), reduction of the 1-day REPO facility rate (from 6.0 to 4.5 percent), and the overnight deposit rate cut (from 3.0 to 2.5 percent). Banks were allowed to cover reserve requirements with public and BCRD bonds up to RD$22.3 billion (about ½ percent of GDP), which is equivalent to a 2 percent reduction in the reserve requirement rate and a release of RD$30.13 billion (US$553.7 million; about ? percent of GDP) to the economy. These resources will be used for credit to households and businesses at an interest rate capped at 8.0 percent. On April 16, the Monetary Board lessened the criteria to access these resources by allowing financial intermediaries to lend to any economic sector and extended the maturity of the loans from 1 to 4 years. The BCRD has also made available liquidity for loans to small businesses and personal microcredits. The first window amounts to RD$15 billion accessible through Banco de Reservas. It will be available for 3 years and loans would carry an interest rate of up to 8 percent. At the same time, the BCRD released RD$5.7 billion from the reserve requirement (about 0.5% of reserve requirements) for new loans, refinancing of previous debt and debt consolidation for small businesses and personal microcredit under loans for 4 years at an interest rate of up to 8 percent. Liquidity measures include easing other REPO operations for RD$50 billion (about 1 percent of GDP) to provide funds to the financial system, and provisions of U.S. dollar liquidity (US$0.622 billion, roughly 3/5 percent of GDP) through REPO operations and allowing banks to use public bonds towards reserve requirements on foreign currency deposits. Interest rate on these REPOs was lowered from 1.8 percent to 0.9 percent. In addition, the BCRD made arrangements with the Federal Reserve for a liquidity facility worth US$1-US$3 billion through short-term repos. 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. On July 22, 2020, the Monetary Council of the Central Bank announced new expansionary measures: a new Rapid Liquidity Facility to provide funds for up to RD$60,000 million for productive sectors, consumption loans and small and medium firms. Admissible collateral to access this facility are private and public debt, as well as loans with ratings A and B. In addition, the maximum amount for REPO operations was increased from RD$50,000 million to RD$60,000 million, providing additional resources to financial institutions, while extending its maturity for up to 360 days. Moreover, the interest rate on REPO operations for up to 90 days was lowered from 5.0% to 4.5%, while the interest rate on operations for up to 180 and 360 days was set to 5.0% and 5.5%, respectively.

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$6.7 billion, or about 8 percent of GDP, as of July 23, 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 July 16, 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 government reopened the borders on June 4; a combination of screening, testing, monitoring and other protective measures, both for visitors and returning nationals, have been put in place. In addition, the Tourism Authority has announced the resumption of activities of several regional and international air carriers (from the US, Canada and the UK) to the island expected in July and August. The state of emergency has been extended to July 31, but the curfew window was reduced to 11pm-5am daily.

• 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, an expansion of the public assistance and provision of grants and loans to enterprises. St. Lucia received its first commercial flight since the lockdown on July 10, and American Airlines is now running a daily flight from Miami to Castries through July and August. The PM announced that 1,500 tourism workers (out of more than 20,000) are now back at work.

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Ecuador

Background. As of June 29, Ecuador has reported 55,665 confirmed cases and 7,651 deaths. The Government responded with series of measures to protect the population and support the economy. These include closing schools and universities, public spaces and non-critical commercial activities, halting public transport, and imposing curfew. Ecuador has shut all its borders since March 18th. On March 22nd, the Government requested the joint commandment of the armed forces to manage the province of Guayas as a zone of national security, with the objective to enforce confinement measures, in the province concentrating the largest share (70 percent) of confirmed cases in the country.

Reopening of the economy. 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.

Key Policy Responses as of June 29, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Egypt, Arab Republic of

Background. According to the WHO, 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 has started to draw up plans to ‘coexist’ with COVID-19 in the long term, saying there is currently ‘no end in sight’ to the outbreak. Since the last week of April 2020, shopping malls and retail outlets have been allowed to open on weekends until 5 pm, while restaurant customers have been allowed to place takeaway orders in-store. Egypt relaxed some restrictions in the first week of May, including resuming work at car licensing units at traffic departments, real estate registry offices, and some court services. Starting May 4, 2020, hotels have been allowed to operate at 25 percent capacity until June 2020 and at 50 percent capacity thereafter. Egypt’s Health Ministry has published a 3-stage plan for coronavirus management that contains required procedures in preparation for the gradual return of normal life in the country. Starting June 1, 2020, nighttime curfew is one hour shorter – from 8pm to 5am instead of 6am. Starting July 2020, there will be a gradual re-opening of the economy – air travel will resume, restaurants and cafes will open with 25 percent capacity, stores will close at 9 pm while restaurants and cafes will close at 10 pm, public parks and beaches will remain closed until further notice, public transportation will operate between 4 am and midnight, places of worship will be open for daily prayers but main prayers like Friday prayers and masses will not be allowed, cinemas, theaters, and entertainment venues will operate with 25 percent capacity.

Key Policy Responses as of July 29, 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 also 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 has reduced the policy rate by 300bps. 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 7000 positive cases (191 deaths, 4115 recovered) as of July 1, 2020. The government has implemented a range of measures to contain the spread of the virus, including travel restrictions, closure of schools, universities and the non-essential public sector, social distancing, and closure of restaurants. It has also transformed a convention center into a hospital specialized in the treatment of COVID-19 patients. On March 21, 2020, the government issued a nationwide stay-at-home order and closed all non-essential businesses. 2020Q1 y/y growth is not yet available.

Reopening of the economy. 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. The opening schedule foresees the entire economy to be open by August 21.

Key Policy Responses as of July 1, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Equatorial Guinea

Background. The first confirmed COVID-19 case was reported on March 14, 2020. Although official reporting on cases has been irregular since late April, the government was proactive in implementing substantial preventive measures at an early stage. As of June 15, these measures have been loosened to a large extent, in a first of four stages of normalization. The loosening lifted the stay-at-home order and closing of the airspace and allows most businesses to reopen though with capacity restrictions (those drawing the largest agglomerations of crowds, e.g. bars/discos, remain closed). As additional preventive measures, the use of masks is mandatory in public and movement restrictions between the different districts of the country remain in place.

Key Policy Responses as of July 29, 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). 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). Meausures 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 to the second half of 2020, identifying savings to non-wage current expenditures, 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 July 28, 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. As a result, the rate of morbidity has slowed to 1.8 tests per 1,000 and the proportion of positive results at just 0.2 percent.

Reopening of the economy. The Government is rolling out the exit strategy approved on April 27, 2020. After being in place for 68 days, the emergency situation ended on May 18. Shopping centers and restaurants reopened on May 11; ferry links between Tallinn and the Finnish capital, Helsinki partly reopened for work-related traffic on May 14; schools reopened on May 15 with most of the learning remaining online; Baltic states now allow travel among the three nations but travelers from outside the region need to undergo 14-day quarantine. However, children’s playrooms, casinos, slot machine halls and entertainment facilities including bowling alleys, billiard halls and adult clubs will remain closed. Gyms and swimming pools restarted operations on May 18. 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. 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, including Luxembourg, Romania, Bulgaria, Sweden, Portugal, Spain, Croatia, and Russia. 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.

Key Policy Responses as of July 30, 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 has declared a national state of emergency, and implemented containment measures, including suspension of private and public gatherings of 20 people or more, schools closures, suspension of non-essential travel within cities for all citizens, closure of borders to all but goods, cargo, returning citizens, and legal residents, and mandatory self-isolation for residents/citizens coming from abroad. On March 27, a partial lockdown went into effect, and a month later the Manzini region, where a third of the population resides, went into full lockdown. The authorities in collaboration with the WHO have built domestic detection capacity. Economic activity has been affected by the closure of some ports of entry with South Africa and developments in South Africa. While the exchange rate against the US$ depreciated by 28 percent in the first quarter of 2020, it has appreciated by 2 percent in the second quarter.

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 on June 19. Schools have reopened since July 6, and the government issued new guidelines for religious and social gatherings. More businesses including casinos, gyms, cinemas, and public transportation have been allowed to operate under established WHO and health guidelines since July 13.

Key Policy Responses as of July 30, 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 to the most vulnerable, benefiting over 300,000 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. Revenue measures to mitigate the impact of the virus include: (i) taxpayers projecting losses will file loss provisional returns and no payment will be required; (ii) extension of returns filing deadlines by 3 months before penalties kick-in; (iii) payment arrangements for taxpayers facing cash flow problems; (iv) waiver of penalties and interest for older tax debts if principal is cleared by the end of September 2020; and (v) up to E90 million (0.13 percent of GDP) in tax refunds for SMEs that have complied with tax obligations, retain employees, and continue to pay them during this period. The authorities have reduced the price of fuel twice and postponed the planned increase in water and electricity prices. For more information see http://www.gov.sz/.

Monetary and macro-financial

• The Central Bank of Eswatini has: (i) reduced the discount rate by a cumulative 275 basis points to 3.75 percent; (ii) reduced the reserve requirement to 5 percent (from 6 percent); (iii) reduced the liquidity requirement to 20 percent (from 25) for commercial banks and to 18 percent (from 22) for the development bank; (iv) encouraged greater use of electronic payments; and (v) encouraged banks to consider loan restructuring and repayment holidays. Banks have announced that those individuals and companies that need short term financial support or relief can approach them and each application will be assessed on a risk-based approach. For more information see https://www.centralbank.org.sz/.

Exchange rate and balance of payments

• No measures.

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Ethiopia

Background. The first confirmed case was reported on March 14, 2020. Authorities have closed borders, closed schools, ordered the shuttering of nightclubs and entertainment outlets, announced social distancing measures, and called in retired and in-training medical personnel. In addition, all people entering Ethiopia from another country are subject to a mandatory 14-day quarantine at designated hotels at the traveler’s expense. The authorities postponed the elections, which were scheduled for August 29, for as long as 12 months. On April 8, the Prime Minister declared a state of emergency under Article 93 of the constitution, which allows it to impose more stringent measures. Among them, most states have banned inter-regional public transport and public gatherings. Layoffs by private employers have also been forbidden. The international border with Djibouti remains fully open to transport of commercial goods.

Ethiopia is highly exposed to the shock through the large contribution of air transportation to exports: the national carrier, Ethiopian Airlines, which has the largest fleet in Africa, 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. There are currently no plans for reopening or relaxing of containment measures described above, though Ethiopian Airlines has started to resume flights to about half of previously suspended destinations.

Key Policy Responses as of July 29, 2020

Fiscal

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

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

  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 24th, 2020, COVID-19 has spread across the European Union (EU) with a severe impact. After reaching a peak of more than 35,000 new daily cases in early April, the infection rate in the EU has come down significantly and there are now fewer than 5,000 daily cases for the past two weeks. In the euro area, real GDP contracted by 3.6 percent in Q1-2020 compared to Q1-2019. In the EU, it dropped 3.2 percent over the same period. Most European countries have taken several containment measures ranging from lockdowns and travel restrictions to school closures and bans on large gatherings for an extended period. As the numbers of new cases and deaths have moderated, some countries have started easing lockdown restrictions. On May 20, the European Commission proposed country-specific recommendations providing economic policy guidance to all EU Member States, with a focus on the most urgent challenges brought about by the pandemic and on relaunching sustainable growth.

Reopening of the economy. The European Commission presented guidelines for exit strategies and called for a common framework across member states. The criteria include: (i) sustained reduction and stabilization of new cases, (ii) sufficient health system capacity such as adequate hospital beds, pharmaceutical products, and equipment, and (iii) appropriate monitoring capacity to quickly detect and isolate infected individuals as well as to trace contacts. The Commission 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 July 30, 2020

Fiscal

• 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 over €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 ECB decided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020 under the existing program (APP), and (ii) temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) between June 2020 and June 2021, with interest rates that can go as low as 50 bp below the average deposit facility rate. More recently, the ECB introduced a new liquidity facility (PELTRO), which consists of a series of non-targeted Pandemic Emergency Longer-Term Refinancing Operations carried out with an interest rate that is 25bp below the average MRO rate prevailing over the life of the operation. The PELTROs commenced in May will mature in a staggered sequence between July and September 2021. 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 Supervision allowed 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. 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 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.

Exchange rate and balance of payments

• No measures.

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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. The number of active cases started declining mid-April and the last active COVID-19 patient (excluding border quarantine cases) was cleared on June 4. The repatriation of Fijian citizens in July led to a resurgence of border cases – all quarantined in government-designated facilities as of July 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.

Key Policy Responses as of July 30, 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. 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.

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 between January 1 and March 20, 2020, before returning to its end-2019 level since early June. 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$2,111.0 million (7.7 months of retained imports) as of July 30, 2020.

• 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. Finland continues to experience a slowdown in the spread of COVID-19 with an estimated reproduction rate now below 1. In response to the crisis, in addition to measures announced by the euro area, the Finnish government announced a package of fiscal, liquidity and regulatory measures which – combined with existing automatic stabilizers – would constitute an impulse of nearly 30 percent of GDP. On March 16, the government invoked the Emergency Powers Act, which was used to close borders, restrict domestic movements, and expand service obligations of essential personnel. In response, unemployment climbed to nearly 12 percent in March.

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

Key Policy Responses as of July 30, 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.

Monetary and macro-financial

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

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

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. Both cases and deaths have been on a decline since mid-April, although a few localized clusters with outbreaks have emerged and 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 5.8 percent in Q1-2020 compared to the previous quarter.

Reopening of the economy.  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. Limits on large gatherings will remain and the use of masks is obligatory for public transport and closed public spaces. A digital contact tracing application was launched by the government on June 2.

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities have legislated in April an increase in the fiscal envelope devoted to addressing the crisis to €110 billion (nearly 5 percent of GDP, including liquidity measures), from an initial €45 billion included in an amending budget law introduced in March. This adds to an existing package of bank loan guarantees and credit reinsurance schemes of €315 billion (close to 14 percent of GDP). Key immediate fiscal support measures include (i) streamlining and boosting health insurance for the sick or their caregivers; (ii) increasing spending on health supplies; (iii) liquidity support through postponements of social security and tax payments for companies and accelerated refund of tax credits (e.g. CIT and VAT); (iv) support for wages of workers under the reduced-hour scheme; (v) direct financial support (solidarity fund) for affected microenterprises, liberal professions, and independent workers; and (vi) postponement of rent and utility payments for affected microenterprises and SMEs; (viii) additional allocation for equity investments or nationalizations of companies in difficulty; (ix) facilitating granting of exceptional bonuses exempt from social security contributions; and (x) extension of expiring unemployment benefits until the end of the lockdown and preservation of rights and benefits under the disability and active solidarity income schemes. The authorities announced a gradual phasing-out of support measures starting in June, except for industries that still face opening restrictions (e.g. tourism, which will benefit from targeted exemptions from taxes and social security contributions, and the reduced-hour scheme and the solidarity fund until end-2020). They have also announced additional support plans for the hardest-hit sectors (e.g. incentives to purchase greener vehicles and green investment support for the auto and aerospace sectors). A third budget amendment increasing the fiscal package to €135 billion has been announced and is expected to be legislated later in the coming weeks.

   

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.

• Links

  Coronavirus Support Measures in France

  Coronavirus Infection Evolution in France.

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Gabon

Background. Gabon, as all oil exporters, is being hit by two shocks—the global impacts of COVID-19 and the 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 from Libreville and a reduced night curfew from 8pm till 5am. Schools have not reopened and public gatherings are still not approved, though. Travelers departing to the countryside from the two main cities (Libreville and Franceville) must show a negative Covid-19 test. Travelers flying abroad must take the test if the destination country requires it, whereas all passengers arriving in Libreville’s airport have to 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. Accordingly, authorities have established a comprehensive-testing strategy and launched on May 29th a field lab capable of realizing 10,000 tests per day. With the equivalent to more than 3.5 percent of its population tested; Gabon has the highest rate of testing per capita of sub-Saharan Africa.

Key Policy Responses as of July 30, 2020

Fiscal

• The recently approved Amended Budget Law indicat 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 infections have since increased, albeit, at a slow rate until recently. The President declared a state of emergency starting 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 only allowed to carry half of their licensed passengers. All public gatherings including funerals were limited to a maximum of 10 people. Notwithstanding, there has been a recent surge in the number of confirmed COVID-19 cases with significant community transmission involving a large number of healthcare workers, largely due to illegal border crossings from Senegal, which has relaxed its lockdown measures and poor implementation of COVID-19 protocols at health centers. In May, the authorities conducted extensive voluntary testing operations at the community level in and around the Greater Banjul Area (Bakau) after detecting a few cases there.

The imposition and extension of the state of public health emergency have not been smooth sailing. The National Assembly declined to approve a second 45-day extension of the state of 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 the executive powers to extend the state of emergency 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 (on June 10, July 1, and July 7) to make subsequent extensions 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 approvals, the Gambia Bar Association, and Parliament in particular questioned the legitimacy of such extensions. The Attorney General and Minister of Justice presented a motion at the National Assembly (NA) on around July 13 for a 45-day extension of the public 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 laws ending July 22, 2020. The President had, since its expiration on June 22, lifted the state of public health emergency in order to “reduce the hardship faced by households across the country and in consideration of other broader issues.” The presidency, which also urged the public to observe strict social distancing rules, has now imposed a mandatory wearing of facemasks in all public places, including inside taxis and other public transports, markets and schools. It has also empowered the Minister of Health to take any restrictive measures required to contain the disease.

Tourism—a key driver of foreign exchange and trade has halted and is experiencing difficulties. Interest rate on T-bills increased and remained elevated but have eased recently on the back of measures taken by the central bank to support market liquidity and a decline in inflation. Remittances from official channels have remained exceptionally high so far in part due to a reduction of private transfers through informal channels which have migrated to formal channels (banks and money transfer operators) and remittances by the Gambian diaspora in response to COVID-19. Meanwhile, a supplementary appropriation bill was recently approved by the National Assembly to accommodate the health emergency and social support spending as well as facilitate the recovery through infrastructure spending and support to the tourism sector.

Reopening of the economy. The announcement on Wednesday July 22 of the lifting of the state of the public health emergency also culminated in the full reopening of the economy which first started with a gradual easing of emergency powers that helped a partial reopening 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 full reopening of markets up to 6pm, the opening of Mosques and Churches, and the opening of schools for Grade 9 and 12 students who are preparing for their sub-regional junior and senior secondary school leaving certificate exams. In response to the easing of emergency restrictions especially in Senegal, which registered more than 9,805 confirmed cases and at least 198 Covid-19 related deaths, and the possibility of increases in cross-border infections, The Gambian authorities reiterated their resolve to protecting the country’s international borders (air, land and sea) and enhance cross-border monitoring and control. The government has since built testing centers across all regions, increased the number of Quarantine Centers, and planned to soon embark on a mass country-wide testing campaign. This plan was seriously affected by the overwhelming recent surge in the number of cases associated with a large number of healthcare workers and some high-level 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. Brussels Airlines brought 150 passengers on June 22 and had since its second flight on July 3 weekly ad-hoc flights to Gambia.

Key Policy Responses as of July 30, 2020

Fiscal

• • In mid-March, the authorities prepared a US$9 million (0.5 percent of GDP) COVID-19 action plan, for which they have already obtained grant financing. The government has reallocated 500 million dalasi (0.6 percent of GDP) from the current budget to the Ministry of Health and other relevant public entities for containment measures to prevent and control the spread of the COVID-19 outbreak. The government has also launched a student relief fund to support Gambian students abroad and a GMD 800 million (US$15.8 million) nation-wide food distribution program to benefit 84 percent of the households. In addition, 2000 tons of fertilizer will be distributed to support the needs of farmers. These actions that benefit from the technical support of partners including WFP and FAO, are subject to enhanced oversight by the National Assembly. The supplementary appropriation approved by the NA in July includes GMD 546 million relief package to various sectors, including the municipal councils, public entities, the tourism sector, the media, and additional food assistance to be delivered through WFP. RCF and CCRT financing from the IMF (see below) helped to cover some of these additional costs.

  Donor agencies, including the UNDP, WFP, WHO, FAO, UNICEF, UNFP and UNICEF, have focused financial assistance (about $1.5 million cumulatively, so far) to strengthen social assistance support for programs aimed at vulnerable groups impacted by COVID-19 by improving communication, safeguarding nutrition and ensuring food security. The WFP provided technical support and training on targeting, design and distribution of the government food relief program, and it is also working on a food distribution program. On April 2, The World Bank (WB) approved a US$10 million grant for the COVID-19 Response and Preparedness Project to enhance case detection, tracing, prevention, and social distancing communication as well as the provision of equipment to isolation and treatment centers. The WB is accelerating the rollout of its Social Safety Net project to help mitigate the impact of COVID-19 on the most vulnerable population. The European commission provided, at end-April, a Euro 9 million COVID-19 support to Gambia and intends to provide euro 5.5 million additional 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 had extended, by two months that expired at end-May, the filing of the 2019 annual tax return and the payment of final 2019 tax, as well as for the filing of the first quarter 2020 declaration and the payment of the first quarter installment. It has also revised down its annual revenue target by about 2.2 percent of GDP however, the revenue performance thus far point to a much less revenue loss.

Monetary and financial

• • Domestic financial conditions have tightened since end-2019. The average yield on the most utilized 364-day T-bills went above 11.5 percent in late May before declining on July 28 to about 7.99 percent (49 bps higher than end-2019). Encouraged by the drop in headline inflation from 7.7 percent at end-2019 to 5.1 percent in June 2020, the central bank (CBG) during its monetary policy committee meeting of May 28, reduced the monetary policy rate by 2 percentage points to 10 percent resulting in a cumulative reduction of 2.5 percentage points since end-2019. The Bank also reduced the reserve requirement from 15 to 13 percent, thus, releasing close to D700 million (US$14 million or 0.7 percent of GDP) liquidity to the banks. The CBG has used GMD 855 million of retained earnings to increase its statutory capital and pay some of the central government 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 communication 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. The CBG successfully completed a remote IMF 2020 safeguard assessment mission, which found good progress made by the CBG since the last assessment in 2017. The 2019 CBG audit is about to be completed with a clean opinion. The CBG has also prepared a strategic plan based on the 2019 FSSR recommendations that it will implement along with the recommendations of the 2020 safeguards assessments mission in the near term.

Exchange rates and balance of payments

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

  On April 15, the Executive Board of the IMF approved a US$21.3 million for The Gambia under the Rapid Credit Facility (RCF), which could be on-lent to the Treasury. The RCF support supplements earlier financing from the IMF under a US$47.1 million Extended Credit Facility (ECF) arrangement approved on March 23, 2020. To accommodate the worsened BOP outlook, the IMF also agreed to modify the performance criteria on net usable international reserves and net domestic assets of the central bank under the ECF-supported program. The Gambia has also benefited from debt relief under the catastrophe containment window of the Catastrophe Containment and Relief Trust (CCRT) approved on April 13, 2020. The first tranche of US$2.9 million (corresponding to debt service due to the Fund in the first six months of 2020) has been already approved for delivery. The total debt relief can be extended up to US$10.8 million if resources are identified to extend the initiative for 24 months. The Gambia is also seeking debt service deferral under the G20 initiative that could provide between US$2.19 million from the creditors already endorsing the initiative to close to US$6.68 million if the plurilateral and private creditors endorse the initiative.

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Georgia

Background. Georgia reported its first confirmed COVID-19 case on February 26, 2020. The last weeks marked acceleration of active cases, especially in one municipality; government conducted active testing in that location and resolved to lock down one of the villages of that municipality, where the incidence of cases is the highest. In parallel, the control increased at open air markets, where contagion was also observed. . Earlier in year, on May 22, 2020, parallel to the decreasing number of the active COVID cases, the government ended the national state of emergency and accelerated the pace of opening the economy. During the two months that the country lived under the state of emergency and curfew (March 21 to May 22, 2020), strict containment measures were imposed, 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 in late May). Various forms of economic activity, including tourism, came to a standstill during the state of emergency. Since the reopening, the recovery in economic activity has been slow as borders remain closed and international travel is broadly banned. On July 1 the EU listed Georgia among 15 safe countries and announced readiness to accept the Georgian citizens in the wake of the coronavirus pandemic. Georgia reciprocated by opening the international travel to the citizens of limited number of countries on the condition that they travel to Georgia with direct flights, namely: Germany, France; Latvia; Lithuania and Estonia. Accordingly, limited number of international flights from the abovementioned countries will likely to resume in August. The visitors will have to provide additional information online and agree to take PCR test upon arrival. The citizens of all other EU countries can travel to Georgia and stay in quarantine for 14 days upon arrival, at their own expense. The Georgian government continues negotiations with other countries on further steps to restart international travel. The regular international flights are now expected to resume in September. 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 for 2 weeks.

Reopening of the Economy. On April 24, the government presented a timeline for opening the economy in 6 stages, conditional on the trends of COVID19 statistics. It was planned to keep a 2-week gap between the stages, but the improving COVID19 statistics and steady decline in the number of the active cases of COVID 19, allowed the government to open the economy quicker. The first stage commenced on April 27, 2020 as the passenger cars, taxies, online trade, deliveries and open air-markets became operational. Starting from May 5: construction, production of construction materials, carwash, computer and equipment repair shops, parks are open. Since May 11, all shops that have their own entrance from ground (other than malls, apparel and footwear shops) are open; all kinds of production and publishing services are also operational. The beauty parlors and aesthetic medical centers also opened faster than initially planned (May 18th). Tbilisi and other big cities are now open for intercity travelers. The public transport, including metro, 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: wearing face masks is mandatory inside the shops and while using public transport. The sports halls and swimming pools resumed their operations from July 7th. Similar to the hotels, to become operational, they also need a prior authorization from the ministry of health. Effective July 13, outdoor cultural events and indoor rehearsals are allowed. Public outdoor gatherings of less than 200 people is also allowed. Domestic tourism opened on June 15th;.

Key Policy Responses as of July 23, 2020

Fiscal

• On June 24, 2020, the parliament approved an amendment to the state budget 2020 that envisages to fund the relieve measures listed in the ‘Anti-Crisis Economic Action Plan’ of the Government unveiled on April 24. The supplemental budget envisages fiscal deficit to increase to 8.5 percent of GDP. The initiatives are included in the approved budget are described below:

  The pandemic negatively affected the private sector, the citizens, the businesses. The government designed the anti- crisis plan with the following measures, totaling to GEL 3.4 billion:

  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: over the course of 6 months: (1) salaries up to 750 GEL will be fully exempt from income tax; for the salaries below 1500 GEL per month, the first GEL 750 will be exempt from income tax (GEL 250 million) will be forgone.

  3. One-time assistance of GEL300 to the self-employed (GEL 75 million). Government extended the application deadline for state compensation for self-employed up to August 1, to ensure that social assistance reaches the seasonal workers abroad, among others.

  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 will be 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 Georgians from different parts of the world. Total cost: GEL 45 million.

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

  11. Improvement of healthcare infrastructure to accommodate COVID patients. Total cost GEL 60,0 million.

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

  13. Interest subsidy will be 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.

  14. Touristic enterprises will be 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 was 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 extended to 1 September 2020 for car importers.

  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 above 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.

  On July 24, 2020, the Prime Minister of Georgia asked the Ministry of Finance to design new, additional anti-crisis measures that would help population cope with the economic stress posed by COVID 19. According to the information on the official web page of the government of Georgia, so far 686 thousand people benefited from the government’s economic benefits package.

Monetary and macro-financial

• The National Bank of Georgia (NBG) announced measures to support capital and liquidity in the banking sector. Banks have been asked to evaluate the quality of the loan portfolio; on-site inspections have been suspended; and a moratorium on fines was introduced where a breach emerged due to the crisis. The NBG reduced its policy rate by 50 bp in on April 29 and by 25 bps on June 24, 2020. Next MPC meeting will be held on August 5. The NBG has allowed office operations of currency exchange booths and other payment service providers, among others, 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 Georgian Lari has depreciated by 11 percent vis-à-vis the U.S. dollar since March 6th.

Exchange rate and balance of payments

• NBG has sold $ 270 million in the foreign exchange market, 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 and a ban on public gatherings. Since early-April, new cases have been steadily decreasing and are currently stabilized at relatively low levels, with limited local outbreaks.

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. 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).

Key Policy Responses as of July 16, 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.

  At the same time, through the newly created economic stabilization fund (WSF) and the public development bank KfW, the government is expanding the volume and access to public  guarantees for firms of different sizes, 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 €63bn in state-level loan guarantees.

Monetary and macro-financial

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

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

Exchange rate and balance of payments

• No measures.

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Ghana

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 large decline in oil prices.

Reopening of the economy. The partial lockdown was lifted on April 23 following aggressive contact tracing, expansion of treatment and isolation centers, enhanced testing capacity, better understanding of the virus contagion dynamics, increased capacity to produce sanitizers and medicines, and severe impact of the lockdown on the most vulnerable. Stage One of the process of easing restrictions began on June 5. Religious services for fewer than 100 congregants are allowed, provided social distancing restrictions are met. Starting June 15, schools and universities re-opened to allow final year junior high, senior high and university students to resume classes ahead of exams, again with smaller class sizes and other social distancing restrictions in place. Ghana’s border, by air, land and sea, remains closed until further notice for human traffic.

Key Policy Responses as of July 30, 2020

Fiscal

• The government committed a total of GHc 11.2 billion to face the pandemic and its social and economic consequences in 2020. About GHc 600 million will be used to support preparedness and response, and about GHc 10.6 billion under its Coronavirus Alleviation Programme will be used to promote selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), support of SMEs and employment, and as guarantees and first-loss instruments, build or upgrade 100 district and regional hospitals, and address availability of test kits, pharmaceuticals, equipment, and bed capacity.

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

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

Monetary and macro-financial

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

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

Exchange rate and balance of payments

• No measures

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Greece

Background. 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 delay the spread of coronavirus, including (i) a national lockdown that restricts all but essential movement and economic activity, (ii) school closures, (iii) domestic travel restrictions, (iv) travel bans on visitors from high-risk countries, and (v) quarantines for international visitors and Greek nationals returning from abroad.

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

Key Policy Responses as of July 30, 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.

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

Exchange rate and balance of payments

• No measures.

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

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Guatemala

Background. Guatemala reported its first confirmed COVID-19 case on March 13, 2020. On March 13th, the government declared a State of Calamity, which was extended through August 5th. A set of measures were announced, over the following weeks, seeking to make the quarantine endeavor more effective.

Reopening of the economy. On July 26, the government announced another set of measures aimed to facilitate the re-opening of the economy, including: the vehicle restriction on automobiles circulation to specific dates of the week has been eliminated; the curfew is now effective from 9 at night to 4 in the morning of the following day, it previously ran from 6 to 5. Locomotion and assistance to work and activities in the public and private sectors were resumed. As of August 1, the Executive Branch and its dependencies have a different work schedule, working between 7:00 a.m. to 3:00 p.m. and, Private sector entities that do not have established hours must carry out their activities from 9:00 a.m. to 5:00 p.m. from August 1. The government began implementing a differentiated re-opening of the economy based on municipalities’ performance on pre-established indicators through an alert board system of four colors (red, orange, yellow, and green).

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• Banco de Guatemala lowered its policy rate by 75 basis points to 2 percent on March 18 and stands ready to secure liquidity provision facilities, including by acting as lender of last resort. To support the financial sector, the Monetary Board eased through year-end credit regulations to facilitate loan restructuring for borrowers facing temporary liquidity constraints, the result of COVID-19, the sine-qua-non condition to qualify for the facility.

  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. Banguat has reduced its 2020 GDP growth rate to a contraction of 2.5 percent from a previous reduction of 0.5 percent.

  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 will use the proceeds to finance programs serving the most vulnerable population and strengthen resources for the COVID-19 emergency. An initial bond issuance for GTQ 3.5 billion (USD 470 million) took place on April 24. An additional issuance for GTQ 1 billion (USD 135 million) took place on June 24. The most recent issuance for GTQ 1.5 billion (USD 203 million) took place on July 17. Thus far, 55 percent of the total bond issuance authorized by Congress has been purchased by Banguat.

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

Exchange rate and balance of payments

• No measures.

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Guinea

Background. 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. Starting April 18, wearing a face mask is mandatory in public places.

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

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 extended the state of emergency for 30 days and 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. The authorities plan to make systematic screening available in workplaces.

On July 15, Guinea further extended the state of emergency by 30 days and relaxed the curfew in Conakry and nearby areas to midnight to 4am.. International commercial flights began to resume gradually on July 17.

Key Policy Responses as of July 30, 2020

Fiscal

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

  In addition, a COVID-19 economic response plan was announced on April 6, 2020. The Plan aims at strengthening infrastructure in the health sector, protecting the most vulnerable, and supporting the private sector, notably small and medium enterprises. The authorities estimate the cost of the Plan at about USD 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. Planned measures include: 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 and flights to Bissau interrupted. Schools remain closed. A state of emergency was declared on March 28 and extended seven times until August 24, although somewhat eased since May 26. The curfew and the suspension of international circulation were lifted and public transportation is allowed at low capacity. Wearing mask in public space is mandatory. Guinea-Bissau is fighting the pandemic in the midst of a political crisis related to the result of the December 2019 presidential election. It 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 July 30, 2020

Fiscal

• The government has increased monthly health expenditure by CFAF 222 million (US$ 0.4 million) to purchase medicine, food, services, and equipment for hospitals. Authorities also took emergency health measures of CFAF 485 million (US$ 0.8 million or 0.06 percent of GDP) to supply the Ministries of Health, Home Affairs and Defense. The authorities are seeking support from multilateral donors to finance additional expenses. The government has also provided some assistance to households. CFAF 525 million (US$ 0.9 million or 0.06 percent of GDP) are used to distribute 20,000 bags of rice and 10,000 bags of sugar throughout the country. The authorities are seeking international financial support to complement its assistance program.

Monetary and macro-financial

• The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis 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 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount outstanding 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 may be refinanced by 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.

Exchange rate and balance of payments

• No measures.

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Guyana

Background. Guyana reported its first confirmed COVID-19 case on March 13, 2020. The government has announced containment and mitigation measures (including imposing staying home order, bans on public gatherings, except for essential services, mandatory social and physical distancing for essential services, curfews, domestic and international travel restrictions, closure of schools and borders, mandatory quarantine for those infected or exposed to the disease, providing tests to suspected infection cases, and additional supplies to medical professions, and raising public awareness). The National Covid-19 Task Force has created a special emergency unit to enforce control measures. Most recently, 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.

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 were allowed to 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 will end on July 31.TSocial 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. The planned opening of the airspace was postponed until August 1, after a sharp rise in the number of cases. During phase 3, the national curfew is from 8pm to 6am except for regions 5 and 6. Food services and restaurants are 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) are allowed to operate at a 75 percent passenger capacity, and private sector construction, clothing, shoe and bookstores are allowed to resume operations.

Key Policy Responses as of July 30, 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 programme 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.

Monetary and macro-financial

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

Exchange rate and balance of payments

• The Bank of Guyana maintains an accommodative monetary stance.

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Haiti

Background. The COVID-19 pandemic comes at a time of economic contraction and considerable macro-economic imbalances. Haiti reported its first confirmed cases of COVID-19 on March 20, 2020. Tourism had already declined sharply in 2018-2019 due to the political instability and social unrest. The main economic impact from COVID-19 will come through remittances, which represent about 30 percent of GDP and are expected to drop with the income shock in the United States and other source markets.

Reopening of the economy. The state of health emergency that had been declared by the Government on April 19th over the spread of COVID-19 has been lifted eon 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. The country’s ports, airports and borders will continue to be closed until then, after which most of the measures are expected to be eased gradually. 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 July 30, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Honduras

Background. 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, including main government and business hubs Tegucigalpa and San Pedro Sula, has however been delayed to July 29 due to new spikes in cases and deaths.

Key Policy Responses as of July 29, 2020

Fiscal

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

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

  The authorities are accommodating an estimated 1.5 percent of GDP decline in tax revenues as a result of the recession caused by the pandemic. In addition, Congress approved reduced advance payments in corporate income tax to provide cash flow relief to companies for about 0.5 percent of GDP, as well as a temporary VAT exemptions for medical supplies with estimated cost of 0.1 percent of GDP. There is also a one-off income tax credit (10 percent of salary expenses) for companies maintaining pre-crisis employment levels. Beyond these measures that will impact the fiscal deficit in 2020, Congress has approved deferrals to the second half of 2020 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 a 1-month freeze in prices of goods in the basic consumption basket, as well as 1-month free access to emergency telecommunications services related to the Covid-19 crisis—these measures do not have a budgetary cost.

Monetary and macro-financial

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

  Second-tier public development bank Banhprovi will provide L6,875 mn (1.1 percent of GDP) in guarantees to cover potential losses on new loans to SMEs and other companies, with varying coverage of commercial banks’ exposures on the loans covered by the guarantee scheme. The bank 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. Since May 4, the economy has been gradually reopening. Stores, malls, museums, churches, were allowed to reopen, outdoor seating is permitted in restaurants, students returned to schools and daycares in June, and summer camps are now open. Ordinary health services are gradually being restarted. Religious ceremonies as well as civil marriages and funerals can also be held. Sports may be conducted in closed doors, including training. Music and dance events with less than 500 participants may be held. The state of emergency was lifted by June 18. Social distance rules are expected to still be heeded everywhere and masks are required in shops and public transport. On July 15, a color-coding system was introduced with respect to travel from abroad, classifying countries based on the pandemic situation. Some of the emergency measures will remain in place and the government will be able to declare a health crisis for a period of up to six months (extendable indefinitely) without parliamentary authorization.

Key Policy Responses as of July 29, 2020

Fiscal

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

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

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 from 0.90 to 0.60 percent, while the interest rate corridor remained unchanged (-0.05 to 1.85 percent). A quantitative easing program was also launched, consisting of buying government securities on the secondary market, and the mortgage bond purchase program is being re-started. On 4 May, the MNB launched its government securities and mortgage bonds purchase program as a part of Quantitative Easing strategy to strengthen monetary policy transmission. On April 7, a new SME lending program was also announced (FGS GO!) with increased amounts and increase in the interest rate subsidy. 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. The corporate bond purchase program (BFGS) remained in place but maturities of eligible bonds were extended and amount per business group was increased. The MNB intends to sterilize liquidity injected through both the FSG GO! and BFSG programs through a preferential deposit facility bearing a 4 percent interest rate. Further changes to these programs were announced on July 15, which allow banks to significantly expand lending activity.

  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.

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

Exchange rate and balance of payments

• The exchange rate has been adjusting flexibly.

I

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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 July 30, 97 percent of the 1,872 domestic confirmed COVID-19 cases have recovered. Ten have died. Yet, a recent increase in domestic infections has taken place. 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 drop in external demand and containment measures is partially being offset by Iceland’s use of its available policy space. GDP growth fell to -1.2 percent (y/y) in Q1 from a 4.9 growth in Q4 (y/y).

Reopening of the economy. Containment measures had been gradually relaxed since May 4, including reopening schools, personal services venues, gyms, bars, and swimming pools, as well as increasing to 500 (from 20) the size of social gatherings. Starting on June 15, individuals arriving to Iceland could choose between a 14-day quarantine or taking a COVID-19 detection test. Over 60 thousand passengers have since arrived. In line with Schengen area guidelines, Iceland has recently allowed 12 countries from outside the area to enter the country. It also exempted from testing passengers from four countries with low infection rates. In response to the recent increase in domestic infections, containment measures have been tightened, including lowering back the maximum size of social gatherings to 100 individuals and enforcing a two-meter social distancing rule.

Key Policy Responses as of July 30, 2020

Fiscal

• Three packages of fiscal measures have been approved by parliament to ease the strain on households and firms and, looking forward, to help the economy recover. Key measures to support households and firms include tax cuts, deferrals, and loss offsets; increased unemployment benefits, child allowances, quarantine grants, state contributions to firms’ dismissal costs to prevent bankruptcies of viable firms and protect workers’ rights; and state-guaranteed bridge loans to companies. Key measures to restart the economy include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage tourism in Iceland. On June 16, parliament approved simpler temporary rules for financial restructuring of companies. 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 flexibly, while preventing disorderly market conditions. Between January 1 and July 24, the CBI intervened in the foreign exchange market, selling about €180 million and, more recently, buying about €60 million. As of end June, international reserves stood at US$7.3 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, now extended for the third time to May 31. Prior to this announcement, numerous containment measures had already been imposed, varying in intensity across the country, including travel restrictions; 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. High frequency indicators point to a sharp decline in economic activity.

Reopening of the economy. On April 15, with a view to supporting economic activities, the government announced several relaxation measures in geographical areas designated as non-hotspot, with effect from April 20, 2020. On April 29, the government permitted inter-state movement of stranded people, including migrant workers, managed by the nodal authorities who are designated by the states. Some graded relaxations in economic activities have been allowed in geographic areas designated as orange and red zones on May 4 and domestic air travel restarted on May 25. On May 12, the PM announced a relief package of around 10 percent of GDP, including previously announced monetary and fiscal measures. On May 30, the central government issued ‘Unlock 1’ guidelines paving the way for a phased re-opening of most activities across the country and limiting the lockdown only to containment zones for a month until June 30. However, states have been empowered to prohibit certain activities if they deem it necessary.

Key Policy Responses as of July 30, 2020

Fiscal

• India’s fiscal support measures can be divided into two broad categories: (i) direct spending and foregone or deferred revenue (about 1.9 percent of GDP); and (ii) below-the-line measures designed to support businesses and shore up credit provision to several sectors (about 4.9 percent of GDP). The key direct-spending measures are: in-kind (food; cooking gas) and cash transfers to lower-income households; insurance coverage for workers in the healthcare sector; and wage support and employment provision to low-wage workers. An additional 150 billion rupees (about 0.1 percent of GDP) will be devoted to health infrastructure. 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 27, 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 end-September. The RBI has provided relief to both borrowers and lenders (now extended 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 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 the limit for the central government’s WMA for the remaining part of first half of the FY 2020/21 has been revised up to 2.0 trillion. 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.

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. Indonesia has recently begun easing some containment measures under a “new normal.” 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, on July 16 the Jakarta Governor announced the extension of large-scale social restrictions until the end of July. No domestic travel ban is expected to restrict movements related to the upcoming Eid al-Adha celebrations, scheduled for July 31, 2020.

Indonesia’s growth slowed in the first quarter of 2020 to 3 percent y/y (from 5 percent in Q4:2019) or -2.5 percent q/q, saar, mostly driven by reduced consumption and investment as containment measures were stepped up in late February. External pressures eased in April and May, although some volatility remains. Year-to-date, the rupiah has depreciated by about 5 percent vis-à-vis the U.S. dollar, reversing most of the 19 percent depreciation through late March; equity prices have declined by 19 percent, up from a 40 percent drop in late March; and the yield on rupiah denominated 10 year government bonds declined marginally by 23 bps to 6.8 percent, down from a 132 bps spike in late March.

Key Policy Responses as of July 30, 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 fiscal packages comprise (i) support to the health care sector to boost testing and treatment capability for COVID-19 cases; (ii) increased benefits and broader coverage of existing social assistance schemes to low-income households such as food aid, conditional cash transfers, and electricity subsidy; (iii) expanded unemployment benefits, including for workers in the informal sector, (iv) tax reliefs, including for the tourism sector and individuals (with an income ceiling); and (v) permanent reductions of the corporate income tax rate from 25 percent to 22 percent in 2020-21 and 20 percent starting in 2022. In addition to tax and spending measures, the fiscal packages include capital injection into SOEs and interest subsidies, credit guarantees, and loan restructuring funds for micro, small, and medium enterprises (MSMEs).

Monetary and macro-financial

• Bank Indonesia (BI) reduced the policy rate by 100 bps cumulatively in February, March, June, and July 2020, to 4 percent. BI also announced other measures to ease liquidity conditions, including: (i) lowering reserve requirement ratios for banks; (ii) increasing the maximum duration for repo and reverse repo operations (up to 12 months); (iii) introducing daily repo auctions; (iv) increasing the frequency of FX swap auctions for 1, 3, 6 and 12 month tenors from three times per week to daily auctions; and (v) increasing the size of the main weekly refinancing operations as needed. BI also adjusted macroprudential regulation to ease liquidity conditions and support bond market stability. A Presidential decree has expanded BI’s authority to maintain the stability of the financial system in presence of the COVID-19 shock, including by facilitating BI liquidity assistance to banks, allowing BI to purchase government bonds in the primary market, 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 COVID-19 response and economic recovery efforts during 2020. 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, (iii) BI will act as buyer of last resort for long-term local-currency bonds to finance other spending. BI is 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.

Exchange rate and balance of payments

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

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Iran, Islamic Republic of

Background. Iran reported its first confirmed COVID-19 cases on February 19, 2020 in the city of Qom. By July 16, it has reported over 260,000 cases and almost 14,000 deaths. 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, except with Turkmenistan, to revive regional trade, while mosques and schools reopened respectively on May 12 and May 16. On May 26 all businesses and major religious sites were opened. The Purchasing Managers’ Index in May and June suggests that industries have started to recover.

Second wave: A “second wave” of virus cases is now hitting Iran which faces a shortage of medical personnel and hospital beds. Following this, the government has instituted mandatory mask-wearing and has announced new restrictions for one week in Tehran. Based on this order, all schools and universities, restaurants, cafes, cultural facilities and beauty salons will be closed and a third of government employees in Tehran will work remotely.

Key Policy Responses as of July 30, 2020

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.

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.

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Iraq

Background. The COVID-19 crisis intensified in Iraq following the end of Ramadan. 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. The number of daily new cases remains high, at close to 3000. 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, although some of these measures have begun to be eased. A nationwide lockdown and curfew were first introduced on March 22. The curfew was subsequently relaxed at the start of Ramadan, however a sharp increase in new cases led to the reimposition of the curfew in late May. On June 14, Iraq began to partially lift the curfew measures again, however a total curfew is in place during the Eid al-Adha holiday, from July 30 until August 9. In late June, the World Health Organization launched a COVID-19 awareness campaign, focused on the heavily affected areas of Baghdad.

The containment and mitigation measures will have a significant negative impact on non-oil activity, predominantly from 2020 Q2 onwards. Non-oil GDP is projected to contract 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 throughout the year, reflecting both a lower profile for oil prices and a decline in production, following the OPEC+ agreement.

Reopening of the economy. On June 14, the curfew restrictions began to be eased, however a total curfew is in place during the Eid al-Adha holiday until August 9. Restrictions on border crossings are beginning to be eased, malls and shopping centers are permitted to reopen with the mandatory wearing of face masks and social distancing rules, and airports reopened on July 23.

Key Policy Responses as of July 30, 2020

Fiscal

• The Cabinet has directed the Ministry of Finance to provide an additional 50 billion Iraqi dinars ($42 million) from the contingency reserve to the Ministry of Health. 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 the next 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. Q1 2020 GDP growth surprised on the upside with 4.5 percent growth year-on-year, driven by export growth and strong performance of pharmaceutical and IT sectors. Economic data releases for April-May 2020 indicated large decline in economic activities, especially in services. High-frequency indicators in June and July pointed towards a robust pick-up in economic activity as the economy reopens.

Reopening of the economy. The authorities have started a five-phase reopening on May 18. Phase (1) included the return of outdoor workers, and small groups of family and friends were permitted to meet in the open; in phase (2) effective as of June 8, small retail outlets and marts where social distancing is possible reopened. With declining infections and increased testing, the authorities have accelerated the initial reopening plan: in phase (3), which took effect on June 29, most businesses have reopened with social distancing measures put in place; in phase (4) effective as of July 20, envisages a continued phased return to work across all sectors. The final phase will take effect on August 10 and allows for larger social gatherings and return to work across all sectors. Schools and colleges will reopen at the beginning of the next academic year in September and October.

Key Policy Responses as of July 29, 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. 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, which runs until April 2021. 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. The scheme will close to new claimants from September 17, 2020.

  III. 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.

  IV. Measures to support SMEs include but not limited to: (a) The Restart Grant for Enterprises ( €550 million); (b) Waiver of commercial rates for the six months to end-Sep 2020, at a total cost of €600 million; (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.

  V. Measures to supports Hospitality and Tourism sector includes: (a) Stay and Spend Incentive through a tax credit; (b) €10 million Restart Fund for the Tourism sector; (c) €10 million Performance Support Scheme for the culture sector to assist planning for events in the context of Covid-19.

  VI. Tax measures includes but not limited to: (a) a €440 million VAT rate reduction 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 by 6.9 percent (on an annualized basis) in the first 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.

Key Policy Responses as of July 30, 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.

Monetary and macro-financial

• Key monetary policy measures include: (i) the announcement of government bond purchases up to NIS 50 billion (NIS 23.4 billion as of end-June), (ii) repo operations to provide shekel liquidity to the banks (NIS 1.5 billion as of end-June), (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 and renewed and expanded in July, and (vi) launched a plan to purchase corporate bonds on the secondary market for up to NIS 15 billion. The Bank of Israel has taken measures to ease financial conditions for households and companies by: (i) reducing bank’s regulatory capital requirement by one percentage point; (ii) increasing the loan-to-value cap on residence-backed loans (from 50 to 70 percent); (iii) eliminating the additional 1 percent capital requirement on housing loans, (iv) allowing banks to calculate the debt-payment to income ratio for mortgage loans using pre-crisis income, under certain circumstances (v) raising the cap (from 20 to 22 percent) on the banks’ loan portfolio allocated to construction companies; and (vi) allowing commercial banks to increase customers’ overdraft credit facilities and suspend restrictions on accounts of customers with checks returned due to insufficient funds. 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 (NIS 4.5 billion as of end-June).

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Italy

Background. Net inflows of COVID-19 cases have become negative. As of July 29, the number of active cases has been stable at about 12,500, number of hospitalized patients and those in intensive care units is also declining. About 35,000 people have died.

Reopening of the economy. 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.

Key Policy Responses as of July 30, 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). On July 30, the Parliament has approved the government request for a further €25 billion (1.6 percent of GDP) deficit deviation, which will likely be used for the third support package (to be approved in early August) aiming to extend income support for families.

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. As of July 29, 2020, Japan has reported 33,244 confirmed COVID-19 cases and 1,001 deaths. In response to the outbreak, the authorities have taken several measures targeted towards health and containment efforts. Japan expanded entry bans on an additional 15 countries as of April 29; as a result, this brings to a total of 90 countries currently subject to Japan’s entry ban which will restrict the entry of foreigners who have visited COVID-19 affected countries and regions within the last 14 days. 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. Japan is in talks to ease the border restrictions for foreign visitors from Australia, New Zealand, Vietnam and Thailand. On July 15, following the recent rise in new infections, Tokyo raised the COVID-19 alert level to the highest, and called for residents to avoid nonessential travel outside Tokyo and refrain from visiting nightlife and dining establishments that have not taken sufficient measures to prevent infections.

Key Policy Responses as of July 29, 2020

Fiscal

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

  On May 27, the Government of Japan announced the second FY2020 draft supplementary budget (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 largest contributor to the Fund’s concessional lending facilities. In early April, Japan pledged an additional US$100 million contribution to the IMF’s Catastrophe Containment and Relief Trust as immediately available resources to support the Fund’s capacity to provide grant-based debt service relief for the poorest and most vulnerable countries to combat COVID-19. In order to provide emergency financing for broader emerging markets and developing countries to meet their prospective imminent needs, on April 16, Japan announced that it is aiming at doubling its contribution to the Poverty Reduction and Growth Trust (PRGT) from the current SDR 3.6 billion. Japan made available the first SDR 1.8 billion immediately. Japan calls on other member countries to follow quickly, and Japan will match an additional SDR 1.8 billion with their contributions.

Monetary and macro-financial

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

  At its April 27 monetary policy meeting, the BoJ announced additional measures to maintain stability in financial markets and support credit provision. The BoJ decided to purchase a necessary amount of JGBs without setting an upper limit on its guidance on JGB purchases. In addition, it raised the maximum amount of additional purchases of commercial paper and corporate bonds, lifting the upper limit of commercial paper and corporate bond holdings to ¥20 trillion (US$186 billion) in total. The special funds-supplying operations have been scaled up by expanding the range of eligible counterparties and collateral to private debt (including household debt), as well as by applying a positive interest rate of 0.1 percent to the outstanding balances of current accounts held by financial institutions at the BoJ that correspond to the amounts outstanding of loans provided through this operation. On May 22, the BoJ introduced a new fund-provisioning measure to support financing of mainly small- and medium-sized enterprises, providing funds against loans such as interest-free and unsecured loans made by eligible counterparties based on the government’s emergency economic measures. The 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 reported its first confirmed COVID-19 case on March 2, 2020. At the onset of the global epidemic, the authorities implemented a range of measures to try and limit the spread of the virus. Measures included the suspension of all international flights, the closure of all schools and universities, the closure of restaurants and archeological sites, the cancelation of all public events and gatherings, and quarantines. On March 17, the defense law was activated to enforce strict curfews, close businesses, and place restrictions on the movement of people within the country to counter the epidemic. The authorities also launched a public communication and awareness campaign to inform the public on examination and treatment facilities. The number of medical and nursing staff was increased in hospitals. The government has allowed only food and dairy industries and some export-oriented industries such as pharmaceuticals, potash and phosphates to continue some of their operations.

Reopening of the economy. A phased-out easing of the 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 and schools remain closed and a curfew continues to be in effect at night. On July 15, the Ministry of Education announced that schools will reopen on September 1 for the new academic year. Strict distancing measures are still being implemented, with penalties imposed on establishments and individuals that do not adhere to public safety measures put in place to combat the spread of the virus. The Ministry of Health and local companies developed the “Aman” (“Safety”) application, which alerts users when they come into contact with someone who has COVID-19. 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.The authorities will seek to capitalize on Jordan’s successful containment of the virus to enhance the Kingdom’s position as a regional hub for medical tourism and will offer assistance to countries in the region by providing pharmaceutical products and medical supplies. The authorities are also committed to further develop advanced agricultural and food processing industries and to spur regional cooperation to shield the region from a looming food shortage crisis. On July 21, the Government announced the gradual reopening of airports to international flights from and to countries with low COVID-19 cases. Travelers to Jordan will be asked to provide proof of a recent negative COVID test, and to download the Aman application to prove they resided in a low-case country for at least 14 days prior to entering Jordan. Travelers will need to be tested for COVID at the airport when arriving to Jordan.

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.

Key Policy Responses as of July 30, 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.

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

K

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Kazakhstan

Background. Kazakhstan reported its first confirmed COVID-19 case on March 14, 2020. The number of confirmed cases has been more than doubled compared with end-June due to methodology changes, i.e., now the reported number includes non-symptomatic cases. A state of emergency was announced by President Tokayev in mid-March to contain the spread of the coronavirus, which was lifted on May 11 followed by a gradual ease of quarantine measures. Quarantine measures have been re-imposed in early July as the number of confirmed cases was trending up, and it is expected to last until at least mid-August. The daily number of confirmed cases seems to have stabilized at around 1,500. Overall growth in the first six months was -1.8 percent (yoy, preliminary) despite strong performance in January and February. The President announced a significant anti-crisis package (9 percent of GDP) in two rounds in March. Policy actions have included some trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, access to medical care for the uninsured (from April 1 to July 2), and targeted assistance. Further supportive measures are under discussion in case of an even worse economic fallout. The authorities are also updating their medium-term strategy in light of the pandemic.

Reopening of the economy. The authorities started to re-open the economy since mid-May when the state of emergency was lifted. Enterprises in selected sectors have resumed work with strong sanitary and epidemiological measures. Shopping malls, hotels, cafes, and restaurants reopened in major cities including Nur-Sultan. Domestic flights and passenger trains have also resumed operations, international ones have also resumed gradually, starting from countries with relatively low risks of COVID-19. Road passenger transportation resumed in early June; passengers are required to wear protective masks and the vehicles should be disinfected at end-points of the routes. Restrictions on food exports, which were introduced during the state of emergency to ensure domestic food supply, were lifted on June 1. However, recent pickup in confirmed cases has led to the reintroduction of the quarantine, initially planned for two weeks starting July 5 and later extended to mid-August. This could slow down or even reverse the reopening of the economy.

Key Policy Responses as of July 29, 2020

Fiscal

• The anti-crisis package includes cash payments to the unemployed and self-employed, an increase in pension and social benefits, additional health spending, and support for employment and business. Subsidized lending of KZT 1 trillion (1½ percent of GDP) is being provided under State Program “Economy of Simple Things,” along with actions to help small and medium-sized enterprises (SMEs) finance working capital (KZT 600 billion). KZT 1.8 trillion is allocated to support employment under an “Employment Roadmap” program, including some large-scale projects to modernize the transportation infrastructure. Selected enterprises and individual entrepreneurs are also eligible for new tax incentives. Further measures recently announced to restore economic growth include: a subsidized mortgage program for households with a segment targeting youth specifically, tax incentives to agriculture and hard-hit sectors (civil aviation, tourism) and other promotion measures (such as free domestic flights for children under 14), 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 are developing new measures to support the economy and vulnerable population, including cash transfers to individuals who have lost jobs due to the quarantine and the possibility of extending tax concessions beyond early October for vulnerable individuals and businesses.

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. A pilot biometric information center has been launched to help banks identify customers in order to provide remote banking services.

Exchange rate and balance of payments

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

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Kenya

Background. The first confirmed COVID-19 case was reported on March 14, 2020. The government has 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. Domestic flights commenced on July 15th, 2020, while international flights will commence from August 1st, 2020. Quarantine measures will remain for all international arrivals. Places of worship have opened with a maximum of 100 people for one hour.

Key Policy Responses as of July 30, 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 July 2, 2020. Travel restrictions have been in place since January and borders have been closed on March 21, except for delivery of essential goods (quarantine requirements apply at all ports). A press release to prevent speculations and panic was released on March 17 and government task forces have been formed to address commodity and cargo buffers; communication and awareness; isolation centers and containment efforts; and border control. A state of public emergency has been declared and schools suspended on March 28.

Key Policy Responses as of July 2, 2020

Fiscal

• No measures.

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Korea

Background. Korea has reported 14,269 confirmed COVID-19 cases and 300 deaths as of July 30, 2020. The authorities have implemented comprehensive testing and tracking, which has enabled early isolation and treatment while minimizing widespread mobility restrictions. The number of new cases has averaged below 50 per day in the last week. Real GDP in Q2-2020 declined by -3.3 percent in quarterly terms and -3.0 percent in year-on-year terms.

Key Policy Responses as of July 30, 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.

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 3.0 trillion). To augment available funding for SMEs, the BOK increased the ceiling of the Bank Intermediated Lending Support Facilityby a total of KRW 10 trillion (about 0.5% of GDP) and lowered the interest rate to 0.25 percent (from 0.5-0.75 percent).

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

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

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

Exchange rate and balance of payments

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

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Kosovo

Background. The first confirmed COVID-19 cases were reported on March 13, 2020. Number of new cases increased significantly during last four weeks and this trend continues these days. 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 5.000 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.

Due to the increase to the number of new cases, set of new measure been undertaken by the government; 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 suspended, 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 are 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.

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 are allowed to work only if they have open space or take away service. Restriction measures for cafe bars and restaurants been extended to four more municipalities as of July 13 and as of July 27 these restrictions are applied to 5 more municipalities.

Key Policy Responses as of July 30, 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 and 48 percent of this package been executed as of June 30. Ministry of Finance has approached IFIs (e.g., IMF, WB, EU and EBRD) and other bilateral donors for financial support. Ministry of Finance has started making payment to workers as been planned under fiscal package where 89 million euro been paid so far. The process of midyear budget review been adopted by the government and in two days to be adopted by the assembly. Adoption of this review will allow the government to make execution of remaining part of the package. Midyear budget review includes also additional budget to address some sectors affected by covid-19. New law on economic recovery been adopted by the government and soon this law to be sent for assembly approval.

Monetary and macro-financial

• The Central Bank of Kosovo (CBK) together with the Kosovo Banking Association decided to suspend the payment of loan instalments for businesses and individuals starting from March 16 until April 30 and then extended to three months until mid-June and later one this was extended for mid-August. 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. 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 expected resumption plan of commercial flights starting on August 1st with capacity of no more than 30 percent would also be during the third phase. The fourth 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. 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 July 30, 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. In addition, the CBK implemented the following measures:

  (i) Committed to provide liquidity if needed;

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

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

  (iv)Instructed 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.

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. After reopening the economy, the epidemiological situation has significantly deteriorated, and new COVID-19 cases has been on upward 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. Due to the recent increase in COVID-19 cases, the authorities have reintroduced some temporary restrictions by limiting working hours of public transport, café, restaurants, supermarket and shopping centers in Bishkek and Dzhalah-Abad. In addition, a temporary ban of gatherings is imposed in Dzhalah-Abad. The authorities will strictly monitor compliance with sanitary and epidemiological standards.

Key Policy Responses as of July 30, 2020

Fiscal

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

Exchange rate and balance of payments

• The National Bank of the Kyrgyz Republic (NBKR, the central bank) has already sold $227 million of foreign exchange reserves so far (about 60 percent more than total FX interventions for the whole year of 2019) and the KGS has depreciated by 10.2 percent vis-a-vis the US$ 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 26 percent in January-May compared to the same period last year).

L

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Lao P.D.R.

Background. Lao P.D.R. has 20 confirmed cases of COVID-19 as of July 29, 2020. A nationwide lockdown is now being gradually lifted. On June 10, the government announced that the last patient has fully recovered and discharged from hospital. Most businesses can resume activities, but night markets, eatery spots, cinemas, casinos must abide by strict 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, however, entertainment venues remain closed. 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. Large gatherings, including for traditional ceremonies and celebrations are now allowed. 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, in place to address the economic impact of the crisis, met on July 13 to discuss possible renewals of the measures and policy responses in place for the past three months. 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 July 29, 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 an allowance of 500,000 kip per worker who currently participates in the Social Security Scheme. Of the 170,000 members, close to 80,000 will benefit from this scheme through June.

  Cuts in administrative expenses by at least 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. More recently, 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.

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 there is still a possibility of resurgence given the small increase over the last week. The government has imposed strict containment measures after declaring a state of emergency, including the shutdown of most international passenger services from March 17 onward, closure of school and banning the gathering of more than 2 people in public indoor and outdoor areas. The Q1-2020 year-on-year growth was -1.5 percent.

Reopening of the economy. The state of emergency ended on June 10 with new laws regulating COVID-19 recovery in force. From July 1, face masks are no longer mandatory in public transport, although the wearing remains recommendatory. The space between customers in public catering establishments has been reduced from four square meters to three square meters. From August 1, visitors at cultural events have to keep a distance of one meter from each other. Gathering in the outdoor events will be allowed for up to 3,000 people provided that the epidemiological situation remains under control. The guidance for the phased reopening can be found on the government website. The 14-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 will be registered, and the violators of self-quarantine regulations will be 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.

Key Policy Responses as of July 30, 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

Background. Lebanon’s underlying economic situation is challenging, with high public debt, current account deficit, and funding needs. The spread of COVID-19 is contributing to the economic recession. Lebanon reported its first confirmed COVID-19 case on February 21, 2020. 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 two weeks 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. In addition, the government would impose stricter quarantine measures on incoming travelers.

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.

Key Policy Responses as of July 29, 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. The first confirmed COVID-19 case was reported on May 14, 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.

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 started going back to work but work in shifts and 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 July 30, 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 to 1.5 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. 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 has depreciated substantially since the Covid-19 outbreak.

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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. In a related development, the Ministry of Education has announced plans for the in person resumption of academic activities between mid-August – mid- November 2020, for the completion of the academic year.  

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 July 31, 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, when an infected man had returned from a trip to Saudi Arabia via Tunisia. Infections and deaths from COVID-19 have increased exponentially over the past 2 months. Confirmed cases in Libya have surpassed neighboring Tunisia which has almost double the total population. While the number of positively identified Coronavirus cases and deaths have increased substantially in recent weeks, the true spread of the disease in Libya may still be understated because 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. The country’s borders have been closed, large public gatherings banned, and travel restrictions instituted, including between cities. Meanwhile, the Government of National Accord (GNA) continues to repatriate Libyan citizens from other hotspots in the region. Earlier in the week of June 29, two flights landed in Mitiga International Airport arriving from Alexandria, Egypt, carrying 200 passengers. Of these passengers, 92 persons were quarantined in a hotel in Tripoli, under the supervision of the NCDC.

On March 29, the GNA freed some 470 inmates from local and regional prisons to reduce the risk of COVID 19 infections in Libyan detention centers. Also, on March 29, it was announced that all court proceedings would be suspended until the end of April. The authorities in the Eastern region of the country have ordered a dusk-to-dawn curfew. In the week of April 6, they also reported their first positive COVID 19 case of a patient who had returned from travel to Tunis.

So far, the continued civil war has had a severe social and economic impact than COVID-19. Libya’s economy is contracting sharply because of the steep drop in oil prices and the collapse of oil production of more than 90 percent due to the conflict. Water supply to Tripoli and surrounding areas that was shut off in early April as a result of the ongoing fighting has since been restored. The combination of civil war and an accelerating pandemic could prove devastating. In response, the United Nations has renewed its calls for a ceasefire to address this extraordinary threat to the health and safety of the Libyan people. On this front there appears to be some initial progress with the resumption of ceasefire talks, which have come after forces loyal to Field Marshall Khalifa Haftar were pushed out of the important Al Watiya airbase in Western Libya and the outskirts of Tripoli. Meanwhile, fierce fighting continues in and around the central coastal city of Sirte between militias supporting the Government of National Accord (GNA) and Haftar’s forces, with a further intensification of hostilities expected in the coming few days and weeks.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Republic of Lithuania

Background. Lithuania 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. Since April 15, the government has started easing containment measures, with the opening of certain non-food stores and services businesses, outdoor activities, libraries, and museums, and by April 30 a wider range of leisure activities, the provision of health services, and full trading in marketplaces and public places. Gradual easing continued with the planned opening of kindergartens and preschools, a wider set of health care services, indoor restaurants and cafes, and outdoor group events as of May 18. As of June 1, professional sports games, including international competitions resumed, the allowed capacity of public events increased, 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 16 per 100 thousands population. Restrictions on customer flow and other health and safety requirements and guidelines are being established for a variety of activities. By July 16, the limit of indoor events will be increased from 200 to 400 people. The government has also announced a COVID-19 management strategy to coordinate efforts in containing the virus and in preparation for possible future outbreaks over the next two years.

The government lifted the national quarantine on June 16 but maintains a national state of emergency regime and temporarily maintain some controls on internal and external border crossings.

Key Policy Responses as of July 30, 2020

Fiscal

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

  Various schemes and measures have been introduced since then. The government is establishing a with a target value of 1 billion euros (2.1 percent of 2019 GDP), consisting of 100 million euros in public contributions, 400 million euros from bond issuances, and possible contributions from international financial institutions and private investors. The objective of the fund is to provide liquidity to medium and large businesses through direct loans or investments in equity and debt securities through the end of 2020. The government has also allocated 56 million euros to provide SMEs with interest compensation for deferred loans or finance lease payments. An additional 50 million euros has been allocated to a new facility to provide soft loans of up to 500,00 euros to eligible SMEs, and a new financial instrument for businesses to form portfolios from risky business loans and leasing transactions has been announced. The government has also allocated 50 million euros to another financial instrument for SMEs facing working capital shortages to obtain loans or leases from a broader range of financial institutions. Further, the government can subsidize up to 50 percent of rental costs for businesses whose activities are banned by government decree if the property manager agrees to a 30 percent discount, and now offers an 80 percent subsidy for the rental costs of tenants in publicly owned properties. For micro-enterprises with 1 to 9 employees, the government has allocated 100 million euros to provide grants of up to 200,000 euros over three years, depending on the sector and the amount of taxes paid by the enterprise in 2019.On April 30 t The government has also allocated 3 million euros for salary increases of around 15 percent for health care workers.

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

  On 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.

  Starting from July 1, the government has increased financial support to the agricultural sector through the Agricultural Loan Guarantee Fund. Dairy farmers affected by the COVID-19 pandemic and quarantine will receive additional state aid of 18.5 million euros. On July 30, the European Commission approved a state aid for the Lithuanian poultry and egg sector for an additional 20 million euros.

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.

Key Policy Responses as of July 23, 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.

Monetary and macro-financial

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

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

Exchange rate and balance of payments

• No measures.

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Madagascar

Background. The first confirmed COVID-19 cases were reported on March 20. The national state of emergency first declared on March 23, has been extended several times and adopted a range of containment, including travel restrictions (on international flights and internal public transportation), a 15-day quarantine period for people in contact with the infected ones, closure of schools and public offices (except for critical public services), a ban on public gatherings bigger than 50 people, mandatory wearing of face masks, and increased testing. While the curfew is still maintained in the capital city, it has been relaxed elsewhere. Facing a severe impact from the global pandemic, the economic activity has contracted significantly in the first quarter of 2020. The authorities’ immediate priority is to ensure the health of the population and preserve macroeconomic stability. Following the activation of their national contingency plan, the authorities are beginning to take measures to increase health spending, help the most vulnerable, support the private sector, and preserve the stability of the financial sector. 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.

Key Policy Responses as of July 30, 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

Background. 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).

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

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Malaysia

Background. Malaysia is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. The first COVID-19 confirmed cases was reported on January 25, 2020. A strict Movement Control Order (MCO), introduced on March 18, has been effective until May 4.

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. Schools started gradually reopening from June 24, with all students are expected to return by July 22. Borders remain closed and overseas travel restricted until at least August 31.

Key Policy Responses as of July 30, 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.

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, 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 until April 30; on April 28, the suspension was extended through June 30. SC also waived annual licensing fees for capital market licensed entities. On April 16, SC announced regulatory relief measures for public listed companies. On April 10, 2020, the Companies Commission of Malaysia announced measures to enhance protection of distressed companies against liquidation.

  (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 (currently scheduled to expire 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 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. The first confirmed COVID-19 case was reported on March 7, 2020. Maldives’ economy is also very dependent on tourism, with tourism receipts representing about 60 percent of GDP. The government declared a Public Health Emergency on March 12, 2020, and it was extended, by a fifth time on July 14, to August 7. 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, guesthouses will be opened for tourists in August.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• The Maldives Monetary Authority (MMA) has been in close contact with the banks to discuss the impact on the domestic financial system and has identified the measures that can be taken through the financial institutions to reduce economic disruptions and loss of jobs and output. The announcedmeasures include: (i) reduction of the minimum required reserves (RR) up to 5 percent as and when required (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).

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 COVID-19 pandemic has hit at a time when the country is facing a challenging security situation in the northern and central regions. The outbreak reached Mali relatively late, with first confirmed cases on March 24. The number of total cases continues to rise, but the spread of the pandemic has slowed with the number of new daily registered cases falling from around 45 in mid-June to around 5 at end-July (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 9th 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 school reopening for other students is tentatively scheduled for September 1st. On July 24, the Prime Minister signed a decree putting an end to the pandemic-related containment restrictions. Air borders and land borders will reopen starting from July 25 and July 31, respectively. Normal working hours are set to resume in public administration starting from August 1st.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has updated its medical response plan to prevent the spread of COVID-19 and strengthen its medical care capacity, in collaboration with the World Health Organization, now costed at about 0.5 percent of GDP (including bonuses to health workers). The government is also working with the World Bank to enhance its medical care capacity, notably in terms of medical equipment (respirators, quarantine facilities, etc.). The government unveiled a package of social measures to support the most vulnerable households. These measures include the setup of a special fund to provide targeted income support to the poorest households, a mass distribution of grain and food for livestock to poorest households, the supply of electricity and water free of charge to the poorest consumers for the months of April and May 2020, a 3-month exemption from VAT on electricity and water tariffs, and a 3-month exemption from customs duties on the import of basic food (rice and milk). A package of economic measures was also announced to ease liquidity constraints on ailing firms, including an 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). 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 preemptive steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. 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 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-bills issued by Mali amounted to CFAF 88 bln (0.8 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 may be refinanced by 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.

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 peak in April and remained at low levels, while new infections appear to rise recently.

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.

Key Policy Responses as of July 23, 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.

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 July, 27, no COVID-19 case had been confirmed in the Marshall Islands. The government responded with swift precautionary measures early on. Travel restrictions from affected countries have been imposed since January 24. 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 August 5. 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 July 30, 2020

Fiscal

• The Government has approved a 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.

  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 legal tender.

Exchange rate and balance of payments

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

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Mauritania

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 July 10, 2020 all the remaining restrictions were removed, except for the closure of borders and suspension of the international commercial flights. The curfew was completely lifted throughout the country; the restaurants and cafés were reopened; interregional movements of people and domestic flights also resumed.

Key Policy Responses as of July 30, 2020

Fiscal

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

  Reopening of the economy. On May 7, 2020 the government took the following measures to relax the containment and reopen the economy: (i) the opening of most of the businesses, but restaurants will only operate for carry-out meals; (ii) the relaxation of the curfew that will now take place from 11pm to 6am, instead of from 9pm to 6am; (iii) the authorization for collective prayer on Friday, but with clear guidelines on social distancing, masks wearing, and hands washing. However, following the recent spike in new infections, the Friday collective prayer was suspended again on May 14, 2020, while the curfew was set from 8pm to 6am, effective from May 26, 2020.

Monetary and macro-financial

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

Exchange rate and balance of payments

• No measures.

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Mauritius

Background. Mauritius reported its first cases on March 18, 2020. No deaths have been recorded since late April. 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.

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 remain 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.

Key Policy Responses as of July 30, 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. Respectively, amounts of Rs8.2 billion (1.8 percent of GDP) and Rs2.4 billion (0.5 percent of GDP) have been disbursed from March to June. 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 is expected to be disbursement throughout the month. 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.

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 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 modestly in the domestic foreign exchange market to prevent disorderly fluctuations and maintain FX liquidity in the financial system. BOM has sold US$172 million to banks since March 18, 2020. In addition, BOM conducted swap transactions with commercial banks for a total of US$100 million under its support program for import oriented businesses. Furthermore, it has also provided the State Trading Corporation Ltd (STC) with FX for a total of US$55 million since 26 March, 2020. BOM will continue to provide FX to the STC until June 30, 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$16.7 billion (1.6 percent of 2020 GDP), the 10-year dollar credit spread widened from 132 bps to 423 bps at peak on April 28th but has since declined to 239 bps for the sovereign and from 377 bps to 704 bps for Pemex after peaking at 1188 bps, while the peso has depreciated by 14 percent relative to the US$ (as of July 30th, 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 week of July 27- August 2, eighteen states are in the ‘red’ category with maximal restrictions, while the other fourteen are in the orange category.

Key Policy Responses as of July 30, 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.

  In his speech to the nation on April 5th, President López Obrador outlined the Government’s priorities to combat the economic effects of COVID-19. Besides higher health expenditure, the plan includes the following measures: 1) frontloading two bimesters payments of the old-age and disability pensions; 2) accelerating procurement processes and VAT refunds; 3) lending to firms and workers in both formal and informal sectors; 4) providing liquidity support by development banks (64.5 billion pesos). Specifically:

  The Ministry of Economy is granting loans with optional repayments to 1 million SMEs that maintain employees on payroll, self-employed and domestic workers (25 thousand pesos per loan), and another 1 million loans to family businesses previously registered in the Welfare Census (25 thousand pesos per loan). The government is providing subsidized unemployment insurance for 3 month to workers that hold a mortgage with the Housing Institute (7.3 billion pesos). Moreover, additional resources are allocated to social spending related to infrastructure, security, education, and other areas (50 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 35 billion pesos), personal loans at a low rate (3 billion pesos) and a deferral program of monthly payments (0.5 billion pesos) by the National Fund Institute for Workers’ Consumption (FONACOT).

  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 0.5 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 200 basis points since the pandemic outbreak, from March through June 2020. It has also introduced measures to support the functioning of the financial system amounting to up to 750 billion pesos, or 3.3 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 will be provided in exchange for conventional repo collateral as well as banks’ corporate loans, which would free up liquidity in the banks’ balance sheets.

  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

Background. • As of July 16, 2020, there are no confirmed COVID-19 cases in the Federated States of Micronesia (FSM), but the country’s health system has limited capacity for handling an outbreak (see U.S. Department of State travel advisory for the FSM). FSM implemented a public health emergency on January 31, 2020, and recently extended it to July 31, 2020. The national and state governments have introduced travel restrictions; banning or requiring 14-day self-quarantine in a COVID-19-free area prior to entry into the FSM; and restricting residents from traveling abroad. The state of Chuuk closed schools.

Key Policy Responses as of July 16, 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. A National Public Health Emergency is in place from May 16, following on from the expiration of the National State of Emergency on May 15.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• The National Bank of Moldova decreased the base rate applied to the main short-term monetary policy operations by 2.25 percentage points to 3.25 percent, decreased the required reserve ratio in local currency by 6.5 percentage points to the level of 34.0 percent, while the required reserves ratio in freely convertible currencies increased by 1.0 percentage point to the level of 21.0 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. The first confirmed COVID-19 case was reported on March 10, 2020. The authorities declared the state of high alert on February 13 and quickly implemented a broad range of measures including a travel ban from high-risk countries, temporary suspension of coal exports to China, social distancing, public events cancellations and school and university closures.

Key Policy Responses as of July 23, 2020

Fiscal

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

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

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

Monetary and macro-financial

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

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

Exchange rate and balance of payments

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

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Montenegro

Background:  The first confirmed COVID-19 case was reported on March 17, 2020. After several COVID-free weeks (the Prime Minister had announced on May 25 that Montenegro was the first coronavirus-free country in Europe), the virus returned in mid-June and the government declared an epidemic in the entire country on July 22.  Since the resurgence of the virus, containment measures have been tightened, including mask and physical distancing requirements, limitations on public and private gatherings, and the continued closures of night clubs. With the rise in cases, the EU removed Montenegro from its safe list of countries on July 15, and non-essential travel by Montenegrin citizens to the EU member states is not allowed.

Reopening of the economy: A phased reopening of the economy began in 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. Previously imposed special measures on the northern municipalities of Montenegro were removed on July 27.

Key Policy Responses as of July 30, 2020

Fiscal

• A third package of economic measures was 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 July 30, the Central Bank announced 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.

  This follows the announcement of May 20 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.

Links

• Containment measures in force

  List of countries for which entry into Montenegro is allowed (in Montenegrin)

  Third package of economic measures

  Banking sector moratorium for priority sectors (announced July 30, 2020)

  Banking sector moratorium (announced May 20, 2020)

  Banking sector dividends

  Reduction in fees for withdrawal of reserve requirement liquidity

  Reduction in the reserve requirement rate

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Morocco

Background. Morocco reported its first confirmed cases of COVID-19 on March 2, 2020. The government created an emergency committee chaired by the Minister of Finance in charge of monitoring the situation. The authorities declared a state of health emergency until August 10, 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 have 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.

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities have created a special fund dedicated to the management of the pandemic, of about 2.7 percent of GDP financed by the government and by voluntary contributions from public and private entities which will be tax deductible. This fund will cover the costs of upgrading medical facilities and support businesses and households impacted by the pandemic. Businesses with less than 500 employees made temporarily idle and experiencing a reduction in turnover of more than 50 percent can defer social contribution payments until June 30. Their employees who become temporarily unemployed and are registered with the pension fund will receive 2,000 dirhams a month and can put off debt payments until June 30. In April, almost 1 million workers from 134,000 companies were eligible to these transfers. Companies and households can also defer income tax payment until September 30, 2020. In addition, the government has decided to accelerate payment to its suppliers to support businesses.

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

Monetary and macro-financial

• The central bank reduced the policy rate by 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. 17,500 companies have benefitted from this facility, for a total outstanding amount of DH 9.5 billion.

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

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

Exchange rate and balance of payments

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

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

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Mozambique

Background. Mozambique reported its first COVID-19 case on March 22, 2020.

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. This has been extended three times (now until July 30). 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 on July 27th, if hygiene conditions are met. About 25 % of secondary schools and 70 % of teacher training colleges currently meet the conditions.

Key Policy Responses as of July 16, 2020

Fiscal

• The government has increased the budget allocation for health, from about MT 2 billion (or about 0.2 percent of GDP) to about MT 3.3 billion (0.3 percent of GDP). In addition, the government 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.

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 7.5 percent against the US dollar since early March 2020.

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Myanmar

Background. The first confirmed COVID-19 case was reported on March 24, 2020. The economy has been deeply affected by the outbreak, with sharp declines in tourist arrivals, supply chain disruptions for the garment sector, and losses for SMEs, which have resulted in large layoffs and factory closures. In response, the government has announced measures to limit the spread of the virus including travel restrictions (including quarantine requirements, suspension of visa issuances and international flights), closure of several land borders, and bans on mass public gatherings. A National Central Committee on Prevention, Control and Treatment of 2019 Novel Coronavirus has been established to coordinate the authorities’ response. A second committee, the Control and Emergency Response Committee on COVID-19, was setup on March 30 to help with stricter administrative measures to control the spread of the virus including quarantining migrant workers coming from neighboring countries. The Myanmar government has developed the COVID-19 Economic Relief Plan (CERP) consisting of seven goals, 10 strategies, 36 action plans and 76 actions that cover a range of emergency fiscal and monetary measures. The CERP seeks to mitigate the inevitable economic impact posed by COVID-19 while establishing a foundation to facilitate Myanmar’s rapid economic recovery. All instructions (excluding some relaxations) relating COVID-19 prevention and control have been extended to August 15, 2020. Restrictions on visa issuances and international passenger flights have also been extended to August 31.

Key Policy Responses as of July 30, 2020

Fiscal

• Measures include: (i) the allotment of MMK 300 million (US$0.2 million) to the Ministry of Health and Sports for additional health related expenditures; (ii) income and commercial tax payments due in the second and third quarters of the fiscal year have been made extendable to end of the fiscal year, and an exemption for the 2 percent advance income tax on exports to the end of the fiscal year has been announced; and (iii) a COVID 19 Fund worth MMK 100 billion (US$70 million, 0.1 percent of GDP) has been established at the Myanmar Economic Bank to provide soft loans to affected business (particularly the priority garment and tourism sectors and SMEs) at reduced interest rates. Households without a regular income are being provided with food during the long holidays and electric bills up to 150 units each for April, May and June, and 75 units for July are exempted. The Ministry of Hotels and Tourism announced that fee for renewal license of hotels and tourism businesses will be exempted for one year up to end of March 2021. Starting April 20, the customs department has reduced duties for businesses operating with the Myanmar Automated Cargo Clearance System. The National Food Reserve has been allocated 38 billion kyat. Government expenditure is being reprioritized to provide space for potential Covid-19 related spending. The COVID-19 Economic Relief Plan (CERP) includes the immediate waiver of specific goods tax, customs duty and commercial tax on critical medical supplies and products related to the prevention, control and treatment of COVID-19. The Ministry of Labour, Immigration and Population will provide 40 percent of the social security fees for about 1.3 million insured workers from factories and workshops that are temporarily suspended for health inspections. Up to 10 percent of FY 2019/20 initial budget expenditure (excluding those implemented by foreign loans and grants) of each ministry will be re-allocated to fight against COVID-19. Further tax relief on additional salary and wage expenses and additional expenditures for capital equipment during Income Year 2019-2020 was granted by an order of the President Office on June 12. Additional 100 billion kyat from re-appropriation of ministries’ budget was allocated to COVID-19 Fund for providing soft loans to COVID-19 affected businesses.

  To address urgent financing needs, on June 26, the IMF approved US$ 356.5 million emergency assistance for Myanmar under the Rapid Credit Facility and the Rapid Financing Instrument to support the CERP.

Monetary and macro-financial

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

Exchange rate and balance of payments

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

N

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Namibia

Background. Namibia reported its first case of COVID19 on March 14, 2020. Cases have increased rapidly recently, but the total number 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. A targeted International Tourism Revival Initiative will be conducted between 15 July – 15 August 2020.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• The central bank reduced the policy rate by 25 basis points on June to 4 percent on June 17, 2020 (225 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 July 30, 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.

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

Key Policy Responses as of July 30, 2020

Fiscal

• • While mitigation measures have not been needed, containment efforts have been sizeable and expenditures on keeping the national airline and other SOEs afloat have been significant at about 5.5 percent of 2019 GDP. Initial estimates from the health and immigration department suggest an estimated AUD 3.5 million for health expenditures and isolation costs per 500 individuals (approximately 4 percent of the population), AUD 5.1 million on liquidity injections to Nauru Airlines, an estimated AUD 0.5 million in budget support to SOEs in managing inventory from limited freight and cargo services. The authorities have reprioritized expenditures and drawn down on cash buffers and general reserves to support the fiscal measures, including necessary medical expenditures. Apart from containment and mitigation, the government has also used its cash buffers for the repatriation of Nauruans abroad. As of Jult 30, 2020, the authorities have implemented a testing regime for COVID-19 and reduced the mandated time in quarantine, alleviating some of the budgetary implications of containment. The ADB has approved a US$5 million policy-based grant to support public investment management, fiscal sustainability in Nauru ; and to help the Government of Nauru improve the management of public expenditure and national infrastructure, as well as the governance of state-owned enterprises (SOEs).

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Nepal

Background. Nepal’s first confirmed COVID-19 case was on January 23, and the country continues to see a gradual increase in the number of confirmed cases. Containment measures imposed included a nationwide lockdown (until June 12), a ban on domestic and international flights (until July 21), and a closure of land border crossings. Nepal’s Central Bureau of Statistics estimates that growth in FY2019/20 will be 2.3 percent, down from 7.1 percent in FY2018/19 (fiscal year ends July 15)—this estimate combines actual data through mid-April and projections for the rest of the FY.

Reopening of the economy. The government began easing the lockdown on June 12, allowing shops to open. Government, private offices, and banks have reopened from June 15, with government staff working in shifts. Private vehicles are allowed to operate on an alternating odd-even license-plate-number basis, corresponding to the calendar date. The government announced on July 20 that the national lockdown will be lifted. Services, such as hotels and restaurants, will resume operations from July 30. All flights and transportation will be resumed from August 17. Tourism activities including travel, trekking, mountaineering will also resume operations from August 17. However, recreational activities including parties, seminars, and other public gatherings continue to be restricted. Educational institutions, recreational centers, religious centers, gyms, libraries, museums, and zoos will be closed until further notice.

Key Policy Responses as of July 30, 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. 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 increase their loans to priority sectors, such as agriculture, energy, tourism, and micro, small and mid-size enterprises, to 40 percent from 25 percent by 2024.

Exchange rate and balance of payments

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

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The Netherlands

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

Reopening of the economy. The Dutch government has laid down a progressive easing of the lockdown measures under strict conditions. From May 11, childcare services and primary schools were allowed to reopen, as well as some businesses (including for example hairdressers and nail stylists). Starting on June 1st, secondary schools and more businesses (e.g. restaurants and cafes, cultural institutions) also reopened. Further restrictions have been lifted from July 1st. For example, gatherings of more than 100 people in a closed space are allowed, and no limit on occupancy is imposed on cinemas, cafés and restaurants. Social distancing requirements however remain in place (including maintaining a 1.5 meters distance between persons from different households, and wearing face masks in public transportation). The authorities continue to communicate on safety measures to be followed while stressing the importance of remaining alert, especially as the number of infections is on the rise again in some regions (particularly in North-Holland and South-Holland).

Key Policy Responses as of July 30, 2020

Fiscal

• A series of fiscal measures, have been introduced since the start of the pandemic to contain the economic impact of the outbreak. With the lockdown measures being progressively lifted, the government announced on May 20th a new package of measures aiming to support businesses as they gradually restart their activities, and to extend until October some of the measures already in place. Total spending measures are estimated at about 36.6 billion euros (4.9 percent of GDP) in 2020, and cover (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 are estimated at 27 billion euros (or 3.6 percent of GDP). Also, public guarantee schemes (estimated to exceed 33 billion euros, or 4.4 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. 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. 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 have agreed that there will be no mortgage foreclosures until July 1st.

Exchange rate and balance of payments

• No measures.

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New Zealand

Background. As of July 30, New Zealand had 1,559 confirmed and probable cases of COVID-19 and 22 deaths. On March 25, 2020, New Zealand moved to Alert Level 4 restrictions after domestic transmission of the virus was found. The authorities declared a state of emergency and implemented strong containment measures including the closure of all non-essential businesses, cancellation of all events and gatherings, closure of schools, and cancellation of discretionary domestic air travel. This followed the closure of all borders and entry ports to non-residents on March 19, with returning citizens and residents required to self-isolate, and since April 10 to enter into two weeks of supervised quarantine. New Zealand’s economy contracted by 1.3 percent q/q in Q1, 2020, and high-frequency indicators point to a steeper contraction in Q2.

Reopening of the economy. The country moved to Alert Level 1 on June 8, lifting restrictions on personal movements, gathering, workplaces, and services, but people are encouraged to maintain records of where they have been for contact tracing. This follows a gradual reopening through Alert Levels 3 (April 28) and 2 (May 13), successively lifting lock-down restrictions and social distancing requirements. Schools reopened fully on May 18, while bars reopened on May 21. The borders remain closed to all but New Zealand residents, who must isolate in dedicated facilities for 14 days upon entry.

Key Policy Responses as of July 30, 2020

Fiscal

• With the FY2020-21 budget and previous fiscal packages, the government has announced fiscal measures amounting to a total of NZ$62.1 billion (21.3 percent of GDP) through FY2023-24, of which NZ$20.5 billion were targeted to be disbursed by end-June. The total amount includes the NZ$50 billion COVID-19 Response and Recovery Fund, of which NZ$14 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 lump sum 12-week wage subsidy to support employers severely affected by the impact of COVID-19 (NZ$14.9 billion or 5.1 percent of GDP); (iv) income relief payment to support people who lost their jobs (NZ$3.1 billion or 1 percent of GDP); (v) a permanent change in business taxes to help cashflow (NZ$2.8 billion or 1.0 percent of GDP); (vi) infrastructure investment (NZ$3 billion or 1 percent of GDP); (vii) a temporary tax loss carry-back scheme (NZ$3.1 billion or 1.1 percent of GDP); (viii) support for the aviation sector (NZ$0.6 billion or 0.2 percent of GDP); and (ix) tourism recovery package (NZ$0.4 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 (NZ$5.2 billion). In addition, on March 28 the government announced temporary removal of tariffs on all medical and hygiene imports needed for the COVID-19 response.

Monetary and macro-financial

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

  The RBNZ has been providing liquidity in the FX swap market and re-established a temporary US dollar swap line (US$30 billion) with the U.S. Federal Reserve. The RBNZ has established a new Term Auction Facility (TAF), which allows banks access to collateralized loans of up to 12 months, and announced a corporate facility in which the RBNZ will offer up to NZ$500 million per week in open market operations with banks against corporate paper and asset-backed securities for 3 months. The RBNZ also introduced a Term Lending Facility (TLF), a longer-term funding scheme for banks at 0.25 percent for up to 3 years duration, available to use for six months from May 26. Access to the TLF is linked to each banks’ lending under the Business Finance Guarantee Scheme (see below) and will require approved eligible collateral. The RBNZ has reduced bank’s core funding ratio requirement to 50 percent from 75 percent to help banks make credit available.

  To further support the stability of the financial system, the start date for a regulatory change requiring higher capital for banks has been postponed for 12 months, to July 2021 (to support up to about NZ$47 billion of additional lending), with other regulatory initiatives in the pipeline also put on hold for at least six months. The RNBZ has also agreed with the banks that during this period there will be no dividend payments on ordinary shares and redemption of non-CET1 capital instruments. The RBNZ has removed, effective as of May 1, mortgage loan-to-value ratio (LVR) restrictions for the next 12 months.

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

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

Exchange rate and balance of payments

• The exchange rate has been allowed to adjust flexibly.

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Nicaragua

Background. 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.

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 plan to open borders on August 1. The two-week mandatory quarantine of foreign visitors remains in place.

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 July 23, 2020

Fiscal

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

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

Monetary and macro-financial

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

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 has been increased to 2500 per day. 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 remain 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 July 1, the phase 2 has been extended for another four weeks (until July 27).

Key Policy Responses as of July 15, 2020

Fiscal

• Contingency funds of N984 million ($2.7 million) have been released to Nigeria’s Center for Disease Control, and an additional N6.5 billion ($18 million) was distributed for purchasing more testing kits, opening isolation centers and training medical personnel. Grant of N10 billion ($28 million) was released to the Lagos State to increase its capacity to contain the outbreak. Import duty waivers for pharmaceutical firms will be introduced. Regulated fuel prices have been reduced, and an automatic fuel price formula introduced to ensure fuel subsidies are eliminated. The President also ordered an increase of the social register by 1 million households to 3.6 million to help cushion the effect of the lockdown. 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. 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. They have also unveiled a 2.3 trillion naira stimulus package which focuses on job-intensive projects including in agricultural, road, and housing sectors—a bulk of which is to be financed 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 100 basis points in May 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. As of April 16, N42.6 billion was received, including $50 million grant from the European Union.

Exchange rate and balance of payments

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

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North Macedonia

Background. The first confirmed case in North Macedonia was reported on February 26. The number of new daily cases picked up in June and continues to be relatively high. After a strict lockdown, the government is taking measures to gradually reopen the economy including entry into the country, but important social-distancing restrictions remain in place to slow down contagion. Reflecting the impact of the containment measures, growth slowed to 0.2 percent year-on-year in the first quarter.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

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

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Norway

Background. The first confirmed COVID-19 case was reported on February 26,2020. 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.

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 50 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, conditional on the infection rate and the containment measures in place.

Key Policy Responses as of July 30, 2020

Fiscal

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

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

  Revenue measures: (i) lowering of reduced VAT rate from 12 to 6 percent; (ii) deferral of various tax payments 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 first confirmed COVID-19 case was reported on February 24, 2020. 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 is set to be in force until August 8.

Key Policy Responses as of July 29, 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 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.

Exchange rate and balance of payments

• No measures.

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Pakistan

Background. The first confirmed COVID-19 case was reported on February 26, 2020. COVID-19 continues to spread rapidly in Pakistan. Starting on March 23, both the federal and provincial governments have been implementing measures to contain and mitigate the spread of the virus. These included selective quarantines, border closures with neighboring countries, international and domestic travel restrictions, school and university closures, banning of public events, social distancing measures, and varying levels of lockdown across the country. The government has been repatriating migrant workers stranded abroad, many of whom have tested positive for the coronavirus. The near-term economic outlook has worsened notably, and growth is estimated at –0.4 percent in FY 2020. A gradual recovery is expected in FY 2021 as the economy reopens.

Reopening of the economy. Since mid-April, the federal government, in coordination with provinces, has been gradually easing lockdown arrangements, by allowing ‘low-risk industries’ to restart operation and ‘small retail shops’ to reopen with newly developed Standard Operating Procedures. In addition, restrictions on domestic and international movements have been lifted (e.g. domestic flights, train services, and international flights have resumed). Educational institutes are expected to restart on September 15. ‘Selective’ lockdown arrangements remain in place, through the closure of shops on weekends and the sealing of specific areas of high risk.

Key Policy Responses as of July 30, 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. FY 2021 budget also includes further actions. Key measures include: (i) elimination of import duties on emergency health equipment; (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), which has been fully executed; (iv) accelerated tax refunds to the export industry (PKR 100 billion), out of which 65 percent have already been disbursed, 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, almost fully executed to date), 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 FY 2021 budget includes further increases in health and social spending, tariff and custom duty reductions on food items, a PKR 70 billion allocation for ‘COVID-19 Responsive and Other Natural Calamities Control Program’, a PKR 30 billion housing package to subsidize mortgages, as well as the provision of tax incentives to the construction sector (retail and cement companies) to address the acute employment needs generated by the lockdowns.

  Since the onset of the crisis, provincial governments have been also implementing supportive fiscal measures through June 2020, consisting of cash grants to the low-income households, tax relief and additional health spending (including a salary increase for healthcare workers). 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 FY2020/21 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 that aim at: (i) supporting hospitals and medical centers to purchase equipment to detect, contain, and treat COVID-19 (28 hospitals, PKR 6.1 billion, to date) (ii) stimulating investment in new manufacturing plants and machinery, as well as modernization and expansion of existing projects (27 new projects, PKR 11billion, to date); (iii) incentivizing businesses to avoid laying off their workers during the pandemic (1,900 firms , PKR 123 billion, to date).

  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 of the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year (with a total of PKR 605 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. More recently, the SBP has 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.

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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, 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.

Key Policy Responses as of July 30, 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. As of July 28, 2020, Panama had 62,223 cases of COVID-19 (1,349 fatalities; 36,181 recovered) – it has the highest number of deaths per 1 million people in Central America and the second-highest number of infections per 1 million people in the Americas (after the US). 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 7pm-5am 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). At present, the government is evaluating the reopening of Tocumen Airport for humanitarian flights, with Copa’s regular flight resumption postponed until September 4. All labor contracts of closed businesses were suspended. On July 14, the government formalized a reduction of working hours up to 50 percent per month.

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 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. The authorities plan a gradual reopening of the economy in six “blocks”, by activity type:

Block 1: local e-commerce/online retailers, hardware stores, technical service providers (plumbers, electricians, air conditioning, pool maintenance), and artisanal fishing and industrial aquaculture;

Block 2: public works and non-metal mining, industry, churches, parks;

Block 3: retail and wholesale trade, professional and administrative services, private construction;

Block 4: hospitality and airline travel;

Block 5: education, non-essential transport, and recreation;

Block 6: all other activities and mass gatherings.

Block 1 opened on May 13. Reopening of Block 2 began on June 1 but paused on June 8 in light of a surge in new COVID-19 cases as the government re-imposed movement restrictions in the Panama City metropolitan area and Panama Oeste region. Block 3 reopening will take place at different dates in different areas of the country, depending on the severity of the epidemic. The provinces of Coclé, Herrera and Los Santos were allowed to resume retail trade, services and construction activity after registering a decrease in the number of infections, with hotels and restaurants reopening only in Los Santos. Industrial and construction operations initially resumed on June 8 but were ordered to close again on June 10. Schools have reopened through end-December for a combination of online learning and a staggered and gradual return to classrooms. The copper mine, which was originally included in the last block, may be opened earlier (date TBA), as it has already made adjustments required to reopen (including physical distancing, creation of COVID-19 committees, installation of laboratories to process tests and reinforcement of medical equipment). No definite reopening date was announced for other sectors. The Panamanian Association of Business Executives (Apede) objects the gradual reopening plan and lobbies

Key Policy Responses as of July 28, 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 $133.7 million to purchase medical supplies; (ii) an augmentation in social spending, including payments to affected workers and small business owners through the “Panama Solidarity Plan” with in-kind transfers including 600,000 bags of basic food supplies distributed as of April 27, and several programs (such as Opportunity Banking, Guarantee Fund, and the Soft Loan program) jointly valued at US$ 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) 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 for homes of up to US$70,000 (reinforced with US$80 million from the Panama Savings Fund). The Government will extend the electricity subsidy for three months, starting July 1, estimated at a cost of more than US$250 million.
• Revenue side: (i) tax relief through extended income-tax filing deadlines (originally until July 17, with a proposal to extend through December 31, 2020). MEF is also proposing a 10 percent discount to individuals and entities who declare and pay their tax obligations in the next three months, 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; (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.

Monetary and macro-financial

• The Superintendency of Banks of Panama (SBP) allowed banks to use the accumulated dynamic provisioning (about US$1.3 billion or 2 percent of GDP) to absorb the impact of credit losses. It allowed banks to undertake voluntary loan restructuring with troubled borrowers (banks can adjust existing loan conditions, grant grace periods, reduce interest rates, and eliminate some fees) and requested banks not to charge interest on the unpaid interest. To provide relief to borrowers affected by the pandemic, banks agreed to extend grace periods on 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 natural 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 statements to their banks about 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. In addition, Caja de Ahorros finalized agreements with Citi and BBVA for credit lines (guaranteed by MIGA) to finance a US$400 million fund, to be used for preferential housing loans, as well as loans to SMEs affected by the COVID-19 pandemic.

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

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

Key Policy Responses as of May 22, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

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

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Paraguay

Background. The first case of COVID-19 was confirmed in Paraguay on March 7th, 2020. The first confirmed cases were imported, though community and local transmissions quickly took off. Most cases in the past two months were imported from Brazil, although community transmission appears to pick up again. 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. Physical-presence school classes will remain suspended for the rest of the school year until December 2020. 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. However, the populous capital Asunción, Central Department, and the Department bordering Brazil will remain in phase 3 for three more weeks.

Key Policy Responses as of July 29, 2020

Fiscal

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

Monetary and macro-financial

• Since early March, the central bank has lowered the policy rate by 3255 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 $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 cases remains elevated, although it is down from the end-May peak. On June 30th, the government lifted the national lockdown (in place since March 16th), but lockdown restrictions remain in place for: (i) the most affected provinces; and (ii) specific age groups (over 65 and under 14 years) nationwide. Other restrictions, such as the closure of national borders and nightly curfews (from 10 pm to 4 am) also remain in place. Inter-provincial travel (by air and roads) among the provinces not in lockdown resumed on July 15th. In addition to the distortions associated with the domestic outbreak, the decline in copper (and other commodity) prices has reduced the country’s external and fiscal revenues.

Key Policy Responses as of July 30, 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). The government’s approved fiscal support package is of over 7 percent of GDP.

Monetary and macro-financial

• The central bank has cut the policy rate by 200 basis points, bringing it to ¼ percent, and is monitoring inflation developments and its determinants in order to increase the monetary stimulus if necessary. In addition, the central bank has reduced reserve requirements, provided liquidity to the financial system through repo operations, and has 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. On June 1, 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. Cebu City, which had been under “enhanced community quarantine” from June 16 to July 15, has now transitioned to a less restrictive “modified enhanced community quarantine.” International travel restrictions largely remain in place, but domestic flights are allowed under limited capacity.

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

Key Policy Responses as of July 29, 2020

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

Fiscal

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

Monetary and macro-financial

• The Bangko Sentral ng Pilipinas (BSP) has reduced its policy rate four times in 2020 by a cumulative 175 bps to 2.25 percent and lowered the reserve requirement ratio for commercial banks by 200 bps to 12 percent, effective from April 3.

  To support the government’s programs to counter the impacts of COVID 19, the BSP purchased PHP 300 billion worth government securities (about 1.5 percent of 2019 GDP) through a repurchase agreement with the government, made secondary market purchases of government securities, and remitted PHP 20 billion as dividend to the government even though it is no longer required to make dividend payments to the government under the newly amended BSP charter. The BSP has also announced a series of regulatory relief measures for the banking sector, including: (1) a temporary relaxation of requirements on compliance reporting, penalties on required reserves, and single borrower limits; (2) easier access to the BSP’s rediscounting facility; (3) a temporary relaxation of provisioning requirements (subject to the BSP approval), and (4) a relaxation of prudential regulations regarding marking-to-market of debt securities. These relief measures are intended to encourage banks, in turn, to provide financial relief to their borrowers (e.g., temporary grace period for loan payments). To encourage extension of loans to enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed loans to MSMEs to be counted as part of banks’ compliance with reserve requirements, temporarily reduced their credit risk weights to 50 percent, and assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corporation.

Exchange rate and balance of payments

• The BSP has relaxed documentary and reporting rules for FX operations (March 27).

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Poland, Republic of

Background. Poland reported its first confirmed COVID-19 case on March 5, 2020. The outbreak in Poland has slowed, with a low number of new cases daily. 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. GDP contracted 0.4 percent quarter-on-quarter in Q1 2020, led by declines in private consumption and fixed investment. Data releases, including retail sales and industrial production, indicated that output contracted further in April. High-frequency indicators in May and June pointed towards a robust pick-up in economic activity as the economy reopened.

Reopening of the economy. On April 16, the government outlined a four-stage plan to reopen the economy. Starting on April 20 a larger number of people was allowed in shops and at religious gatherings, and public parks and forests were re-opened. The second phase of the lockdown easing plan was launched on May 4 with the re-opening of hotels and shopping malls (with limitations on the number of persons), the opening of daycares and pre-schools (as of May 6), as well as softening quarantine rules for cross-border workers and students. The third phase was launched on May 18, entailing reopening of restaurants, hairdressers and cosmetic salons, and permission for outdoor sport events with up to 50 persons with no audience. 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.

Key Policy Responses as of July 29, 2020

Fiscal

New budgetary measures have been legislated, estimated at PLN 104 billion (4.6 percent of GDP). New credit guarantees and micro loans for entrepreneurs estimated at PLN 75 billion (3.3 percent of GDP) were also approved. Additionally, the Polish Development Fund will finance a PLN 100 billion (4.5 percent of GDP) liquidity program for businesses. Key measures include:

1. Additional funds for hospital equipment and supplies;
2. 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.
3. 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;
4. Additional loans for micro-firms;
5. 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.
6. 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);
7. An allowance for parents of young children related to school closures;
8. A “solidarity benefit” for those who lost jobs after March 15, paid for three months (June-August);
9. An increase in the unemployment benefit by 39 percent during the first 90 days of unemployment;
10. 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.
11. 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).
12. 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. Approximately 60 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.
13. Foreign workers permits are extended to stay in Poland and work.

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 July 29 the NBP had purchased PLN 103 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 distributing the impact of credit losses over a longer period. Some flexibility has been granted in how banks meet capital and liquidity requirements, and the PFSA is accepting the treatment of a BGK guarantee as fulfillment of the “special collateral” condition. The PFSA has adopted a flexible approach for the approval process of long-term guarantee measures under Solvency II for the insurance sector. The PFSA has also recommended a reduction in the risk weight for properties of borrowers that are not used for rentals, which would reduce bank capital requirements. Additionally, the Polish Banking Association has recommended voluntary deferral of loan payments for affected borrowers for up to three months. Banks have also increased limits for contactless credit cards.

Exchange rate and balance of payments

• No information on foreign exchange intervention has been disclosed.

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Portugal

Background. The first confirmed COVID-19 case was reported on March 2, 2020. First-quarter GDP declined by 3.8 percent compared to the previous quarter, suggesting a significant impact on economic activity. The government has responded with a range of measures to support the economy and jobs which are detailed below.

Reopening of the economy. Many sectors of the economy have now reopened, including stores, restaurants/cafes, public-facing government services and school for certain age groups. Social distancing measures and the use of masks on public transport are mandatory.

Key Policy Responses as of July 30, 2020

Fiscal

• Key fiscal measures include: i) additional resources for virus-related health and education spending; ii) over €600 million per month (0.3% GDP) in financial support for those temporarily furloughed by their employer, followed by additional support once businesses reopen (over €700 million); iii) up to €13 billion (6.8% GDP) of state-guaranteed credit lines for medium, small and micro enterprises in affected sectors, operated mainly through the banking system; and iii) €7.9 billion (3.7% GDP) of (within-year) tax and social security contribution deferrals for companies and employees. Additional financial support is also provided for: the self-employed affected by the virus; the unemployed; people forced to stay home to care for children, and; those sick or in isolation due to the virus.

Monetary and Macro-Financial

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

  The Portuguese government has approved a moratorium on bank loan repayments for families and companies affected by the coronavirus outbreak until end-March 2021. The Banco de Portugal (BdP) has relaxed some aspects of its macroprudential measures for consumer credit and postponed the phase-in period of the capital buffers for ‘Other Systemically Important Institutions’. In addition, BdP has announced a series of measures directed to less significant banks 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; a recommendation to restrict dividend distributions until January 1, 2021; an extension of deadlines of some reporting obligations; and rescheduling of on-site inspections and the stress test exercise.

Exchange rate and balance of payments

• No measures.

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Qatar

Background. Qatar is being impacted by two shocks—the spread of COVID-19 and the sharp decline in hydrocarbon prices. The authorities are putting in place policies to address these. The first confirmed COVID-19 case was reported on February 29, 2020. Measures implemented to contain the spread of the virus include: travel restrictions (suspension of all international passenger flights, a 14 day quarantine for all returning Qatari citizens, and suspension of public transportation); suspension of public and private schools (replaced with distance learning) and home services; closure of non-essential businesses (excluding groceries stores and pharmacies); banning all public gatherings and dining in cafes and restaurants; and cancellation of routine medical and dental appointments (except Well-baby, Vaccination Clinics, and Urgent Radiology and Ultrasound). These measures have been complemented by required teleworking for 80 percent of private sector employees and vulnerable groups (older than 55, pregnant women, and those with chronic illness), reduced working hours in the public sector, public health awareness campaigns, intensified food inspections to ensure health compliance, more testing for COVID-19 (including a drive through station), and disinfection of 12 thousand square meters in the Industrial Area. Home delivery medical services have been expanded to contain the spread of COVID-19. The private sector is providing meals and hygiene baskets to workers in quarantined areas. A 150-bed hospital for quarantined workers has been set up in the Industrial Area, where there has been a high concentration of COVID-19 cases. Starting May 17, 2020 all citizens and residents are required to wear a facemask when out in public. Starting May 22, 2020 all citizens and residents are required to install the Ehteraz App on their mobile phones before leaving their residence, which will help track COVID-19 transmission chains, help prioritize testing, and provide COVID-related updates.

Reopening of the Economy. The authorities have conducted widespread COVID-19 testing in the Industrial Area and are providing free healthcare to those affected, including by transporting 6,500 workers to a precautionary quarantine facility. Following these measures, the authorities fully opened the Industrial Area on May 6 (after closure since mid-March and partial opening since late April), though under strict and specific entry and exit regulations, where only employers and employees are allowed to enter or exit, and goods and materials may only enter or exit with an application to relevant authorities. Entry and exit regulations are implemented, in part, by the use of a mobile application. As of May 12, 2020, restaurants and cafés are allowed to resume the activity of delivering or handing over orders to customers outside the business place, with those establishments located in malls only allowed to process delivery orders and not hand over orders to customers both inside and outside the workplace. Exchange houses and bank branches inside commercial malls have been reopened, subject to maintaining enhanced security and health measures. Masks are no longer necessary for outdoor sports activities and exercise, so long as 3 meters distance is maintained between persons and the activities take place near residences. Private sector working hours have been increased from six to eleven hours per day (Sunday to Thursday). The maximum number of people allowed in a vehicle has been increased from two to four. On June 8, the government announced a 4-phase plan to reopen the economy. Phase 1 began on June 15, where some mosques, stores in malls and selected parks were allowed to open. Phase 2, which started on July 1, allowed for a partial opening of restaurants, museums, libraries and wholesale markets. In addition, international flights resumed to more than 60 destinations and are expected to expand to 75 destinations by the beginning of August. On July 2, employees of the private sector resumed working from office, while 50 percent of public sector were allowed to continue working-from-home. Phase 3 will start on August 1 and permit the resumption of flights from low-risk countries as well as the full-reopening of shopping malls. Economic activity will be back to normal in phase 4 starting on September 1.

Key Policy Responses as of July 30, 2020

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

Fiscal

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

Monetary

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

Macro-Financial

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

Exchange rate and balance of payments 

No measures.

• See Link

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Romania

Background. The first case of COVID-19 was reported on February 26, 2020. The government has implemented a range of measures to delay the spread of coronavirus and to support people, jobs, and businesses. This includes declaring national emergency, increased testing, social distancing measures, including the closure of schools and entertainment as well as travel and domestic movement restrictions, and capping prices of fuel and utilities. The Q1 2020 GDP growth slowed to 2.4 percent year-on-year, but remained stronger so far than most other EU countries.

Reopening of the economy. The gradual reopening started on May 15th. In a first stage, hairdressers, libraries, dentist practices, small shops and museums were reopened, and people can leave their homes without a sworn statement regarding the purposes of traveling (still required for travel outside cities). The second round of relaxation measures was implemented on June 1st, by lifting restrictions for travel outside cities, resuming international vehicle and train transportation, allowing outdoor sports competition (without public) and outdoor concerts under special conditions, opening terraces and beaches. Starting June 15th, international travel to certain countries has been resumed without mandatory quarantine/self-isolation upon return, shopping malls (except food areas and cinemas), gyms and kindergartens have been opened. Restaurants and bars will remain closed. After May 15, it is compulsory to wear masks in enclosed spaces in public, such as shops and in public transport. Schools remained closed for the remainder of the school year, except eight- and twelve-grade students who are facing graduation exams. . The national alert period which started May 15th has been extended to August 16th. Following the increase in the number of new cases, new prevention measures will become effective as of August 1st:, including mandatory wearing of masks in certain open spaces and limited hours for outdoor restaurants and clubs.

Key Policy Responses as of July 30, 2020

Fiscal

• Key tax and spending measures announced so far about 2 percent of 2019 GDP include (i) additional funds for the healthcare system, (ii) covering partially the wages of parents staying home for the period the schools are closed, and (iii) measures to support businesses including covering in part the wages of self-employed and workers in danger of being laid off for an initial period of one month, deferral of utilities payments for SMEs. In addition, the government has provided RON15 billions of guarantees—equivalent to 1.5 percent of GDP—for loan guarantees and subsidized interest for working capital and investment of SMEs. A new guarantee scheme of about RON 1.5 billion  (0.15 percent of GDP ) was adopted to support the procurement of work equipment by SMEs. Other measures include faster reimbursement of VAT, suspending foreclosures on overdue debtors, suspending tax authorities’ control, discounts for paying corporate income taxes, postponement of property tax by three months, exempting the hospitality industry from the specific tax for 90 days.  See also: https://www.mfinante.gov.ro/pagina.html?categoriebunuri=covid19&pagina=acasa (Romanian only). On July 1st , the government announced the continuation  of the previously adopted measures by three more months, as well as a new stimulus package. See also:  https://gov.ro/ro/obiective/strategii-politici-programe/planul-national-de-investitii-i-relansare-economica&page=1 (Romanian only).

Monetary and macro-financial

• Key measures include: (i) reducing the monetary policy rate by 0.75 percentage points to 1.75 percent; (ii) narrowing the corridor defined by interest rates on standing facilities around the monetary policy rate to ±0.5 percentage points from ±1.0 percentage points; (iii) providing liquidity to credit institutions via repo transactions (repurchase transactions in government securities); (iv) purchasing government securities on the secondary market; and (v) operational measures to ensure the smooth functioning of payment and settlement systems. The repo transactions stand at around RON 29 billion in the period from March to June, while the total volume of government securities purchased on the secondary market exceeded lei 4 billion as of June 2020. See also: https://bnro.ro/page.aspx?prid=17958 and https://bnro.ro/Regular-publications-2504.aspx. In addition, the Government has issued legislation that banks will defer loan repayments for households and businesses affected by COVID-19 for up to nine months. The European Central Bank has set up a euro repo line with Romania’s central bank worth a maximum of €4.5 billion ($5.1 billion). See also: https://www.bnr.ro/NBR-measures-in-the-context-of-the-COVID-19-epidemic–21313.aspx .

Exchange rate and balance of payments

• Foreign exchange intervention has been undertaken to smooth excessive volatility and stabilize the exchange rate in order to protect financial stability (see IMF Annual Report on Exchange Arrangements and Exchange Restrictions, June 2020.

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Russian Federation

Background. The first confirmed cases were reported on January 31, 2020. The authorities started preemptive containment at end-December 2019. They progressively closed the border with China and European countries; mandated self-quarantine for people arriving from other countries and people at risk; closed schools, theaters, and sports facilities; and encouraged remote work. GDP grew by 1.6 percent in Q1 of 2020, compared to a year earlier. On March 30, the authorities announced an open-ended quarantine in Moscow requiring non-essential businesses to close and people to remain indoors. The central government has asked regional authorities to implement containment policies commensurate with the extent of infection in their regions. The COVID-19 shock is compounded by a steep fall in oil prices and the associated instability in financial markets. The authorities have adopted an action plan to support households and businesses and stand ready to take further measures.

Reopening of the economy. The federal government has announced a three-stage reopening plan but it is up to regional governors to decide when and how to proceed. During the first stage of reopening, people will be allowed to walk and exercise outdoors, and small shops and service-sector establishments will reopen. The second stage will allow schools and larger shops and service-sector businesses to open. In the third stage, parks, hotels, restaurants, and all shops will reopen. Criteria for lifting restrictions in specific regions include infection rates, the availability of hospital beds, and testing capacity. As of July 30, all the regions are in various stages of reopening, with Moscow entering the third stage. The reopening is conditional on safety guidelines, including social distancing and disinfection. Seventy four of 85 regions have reopened for domestic tourism While most regions have re-opened restaurants, customers are spending about 30 percent less than before the pandemic. Retail trade is back to pre-crisis levels, but large shopping malls are struggling, with about a third still closed. Overall, 3.8 percent non-food shops and 7.5 service outlets stay closed due to restrictions.. The authorities are designing a contingency plan for retailers against a potential second wave. Industrial enterprises and construction sites are back in business nationwide. The government has prepared a RUB 5 trillion National Economic Recovery Plan to navigate the economy through reopening and on to a steady growth path.

Key Policy Responses as of July 30, 2020

Fiscal

• Key measures include: (i) increased compensation for frontline medical staff as well as health and safety inspectors; (ii) individuals under quarantine to receive sick leave benefits and sick leave pay to equal at least the minimum wage until the end of 2020; (iii) for those who lost a job after March 1, 2020, including for sole proprietors, the standard unemployment benefit to equal the minimum wage for five months; the minimum unemployment benefit to be tripled until end-August; and eligibility to be extended by 3 months; (iv) all children up to 3 years of age to receive an additional lumpsum benefit for 3 months, starting in April; all children 3-15 years of age eligible for a one-time lumpsum benefit; all children under 16 years of age eligible for another one-time lumpsum benefit; all families with children to get an additional lumpsum benefit for each child for up to 5 months if a parent loses job (for up to 3 months for parents who lost their jobs before March 1); (v) interest rate subsidies for SMEs and systemically important enterprises; (vi) tax deferrals for most affected companies on most taxes; (vii) deferrals on social contributions for SMEs in affected sectors for 6 months; (viii) social contributions by SMEs on wages in excess of the minimum wage permanently reduced; social contributions and CIT permanently reduced for IT firms; (ix) a tax holiday on all taxes (excluding VAT) and social contributions for Q2 for SMEs, sole proprietors, and NGOs providing social services; (x) registered self-employed will be refunded their taxes for 2019 and get a partial refund on their 2020 taxes; eligibility age to register as self-employed lowered from 18 to 16; (xi) sole proprietors will get a partial refund on their social contributions; (xii) deferrals on rent payments to all levels of government until the end of the year plus zero rent to the federal government for three months for SMEs in affected sectors; (xiii) budget grants for SMEs in affected industries to cover salaries at the rate of one minimum salary per employee for two months plus subsidized and forgivable loans for all enterprises in affected industries to pay minimum wages for 6 months; (xiv) zero import duties for pharmaceuticals and medical supplies and equipment; (xv) guaranteed loans to SMEs and affected industries; (xvi) subsidies to airlines, airports, automakers, and others; and (xvii) expanded eligibility for subsidized mortgage lending. The total cost of the fiscal package is currently estimated at 3.4 percent of GDP.

Monetary and macro-financial

• On July 24, the CBR cut the policy rate by 25 bps to 4.25 percent. The Central Bank of Russia (CBR) started selling FX reserves from the National Welfare Fund on March 10, reflecting the fall in oil prices below the reference price under the fiscal rule and later for the purchase of Sberbank by the government. It also increased the limit on its FX swap operations. The CBR has temporarily introduced a long-term refinancing instrument (one month and one-year repos).

  The CBR has introduced temporary regulatory easing for banks intended to help corporate borrowers, and more favorable treatment for FX loans issued to certain sectors. Forbearance as regards provisioning for restructured corporate and SME loans will apply to all sectors, not only those affected by COVID. The CBR has introduced a new RUB 500bn facility for SME lending (in addition to the already allocated 150 billion rubles to provide loans to SMEs to support and maintain employment). Another 50 billion rubles will be allocated for similar purposes to borrowers who do not have SME status. From July 27 , the interest rate on CBR loans aimed at supporting lending to SMEs, to support and maintain employment, will be reduced from 2.5 to 2.25 percent.

  Banks have been allowed to value securities at their March 1 prices. FX operations can also be valued at the exchange rate of March 1, except for those on open forex positions. The Deposit Insurance Fund contribution will be reduced from 0.15 percent to 0.1 percent through end-2020. Also, the CBR approved measures to ease liquidity regulations for systemically important credit institutions. A set of measures was taken to protect retail borrowers suffering from the pandemic. Parliament approved a law that guarantees the possibility for affected citizens and SMEs to receive deferrals of loan payments for up to six months. The CBR recommended banks to pursue the same approach to retail loan restructuring as stipulated in the law (fast approval or rejection, restructuring from the application date, no penalties during the consideration period). Banks are allowed not to classify such loans as restructured for loss provisioning purposes until September 30, 2020. Measures for households include the cancelation of add-ons to risk weights for mortgage loans issued before April 1.

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

  Further regulatory changes to support lending include new credit risk assessment methods and lower risk weights in mortgage lending that would free about Rub 300 bn (around 0.3 percent of GDP) of banking sector capital. Lower risk weights will be applied to subordinated bonds (including perpetual bonds) of largest non-financial corporations – the risk coefficient is reduced to 100 percent from 150 percent. To stimulate conversion of problem loans of systemic enterprises into capital the risk coefficient on such equity will be lowered to 100 percent from 150 percent. Higher risk coefficients for bank holdings of NFC capital are postponed for one year. Lower risk coefficients at70 percent for loans to medical and pharmaceutical companies is extended till end-2020. To promote high-tech exports, the risk coefficient on loans to non-commodity exporters guaranteed by EXCAR is reduced to 0 from 20 percent.

Exchange rate and balance of payments

• No measures beyond FX sales mentioned above.

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Rwanda

Background.The first confirmed case was reported on March 14, 2020. Rwanda continues to record daily increases in the number of COVID-19 infections. The government has implemented a range of containment measures in response to the pandemic including border closure, suspension of domestic travel, cancellation of public gatherings, institution of teleworking, closure of schools, places of worship and non-essential businesses, and mandatory wearing of face masks.

Reopening of the economy. A gradual easing of lockdown measures was introduced on May 4, with selected businesses allowed to resume operations while adhering to health guidelines. Domestic movement restrictions were partially relaxed but strict physical distancing measures mandated in public buses. Bars remain closed, and schools will only re-open in September. Steps to reopen the economy include the lifting of restrictions on interprovincial travel, with motorcycle taxis permitted to resume transportation of passengers except in a few areas under lockdown, the reopening of places of worship, and the resumption of selected outdoor sports activities and charter flights. Commercial flights are expected to resume on August 1, with a requirement for all passengers to test negative for COVID-19 within 72h prior to arrival and again upon arrival.

Key Policy Responses as of July 30, 2020

Fiscal

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

Monetary and macro-financial

• On March 18, the central bank announced liquidity support measures: (i) an extended lending facility worth RWF 50 billion (0.5 percent of GDP) available to liquidity-constrained banks for the next six months. Under this facility, banks can borrow at the policy rate and benefit from longer maturity periods; (ii) Treasury bond purchases through the rediscount window for the next six months; and (iii) lowering of the reserve requirement ratio by 100 basis points, from 5 to 4 percent, effective from April 1. Loan repayment conditions were also eased for impacted borrowers, and charges on electronic money transactions waived for the next three months. The central bank is also working closely with the Minister of Economy and Planning to provide support to microfinance institutions. On April 30, the central bank cut the policy rate by 50 basis points to 4.5 percent. Charges on electronic money transactions were reinstated on June 22.

Exchange rate and balance of payments

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

• Links

  Ministry of Health

  Rwanda Biomedical Center

  Office of the Prime Minister

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Samoa

Background. No confirmed cases of COVID-19 have been reported in Samoa. The government is taking full precautions and preventive measures to control the transmission of COVID-19, including preparation of the health system to treat and care for patients. Social distancing measures are also in effect. The government declared a State of Emergency on March 20 and instructed the public to avoid mass gatherings (of five or more people), and unnecessary travel. The amended State of Emergency Orders was signed into law on March 26, which gives police officers the legal authority to enforce the Emergency Orders to the full extent of the law. Samoa implemented travel restrictions to protect citizens of the country on January 24, among the first countries in the world to do so and has gradually tightened the rules.

On April 24, the IMF Executive Board approved the disbursement of US$22 million in emergency financing under the Rapid Credit Facility (RCF) to help Samoa address urgent balance of payments needs created by COVID-19.

Press Release: https://www.imf.org/en/News/Articles/2020/04/24/pr20189-samoa-imf-executive-board-approves-us-million-disbursement-address-covid-19-pandemic

Reopening of the economy. The government issued the amendments of the Emergency Orders on May 13 and May 20, to gradually lift lockdown restrictions. Currently most businesses are under normal operations. Social distancing measures still apply for dining at restaurants, and public and village gatherings are permitted only on limited occasions. Social gatherings in public places remain closed until further notice. On July 28, the government extended the State of Emergency Orders until August 30.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has put together the first phase of the fiscal and economic response package, amounting to 66.3 million Samoan tala (about 3 percent of GDP). The package, approved by parliament on April 7, 2020, is centered around the mission of “Support the private sector so they can feed the nation,” and includes: (i) expenditure to cover the immediate medical response; (ii) assistance to the private sector; and (iii) assistance to individuals and households. The government has been stepping up its efforts to increase the level of preparedness and prevention. Temporary quarantine facilities have been established in key areas. There is a dire need for testing kits, medical consumables, as well as other clinical equipment and medication, to prepare for the confirmation/arrival and treatment of COVID-19. The support for the private sector includes: a temporary exemption on import duties on most commonly bought food items for households; duty concessions to be applied to an expanded list of agricultural and fishing materials; a grace period of three months to be applied for all loan payments; and a six-month moratorium on pension contributions for the hospitality sector. Support for citizens includes: establishment of the Emergency Price Control Board to keep wholesale and retail prices in check and bring them down, if necessary; provision of financial assistance to members of the National Provident Fund in the form of a refund of their loan payments for March 2020; and a temporary reduction of utility bills (both electricity and water) for six months through September 2020.

  On June 30, Parliament approved the FY2021 budget, including the second phase of the fiscal and economic response package that amounts to 83.1 million Samoan tala (about 3.8 percent of GDP). The budget is centered around the mission of “Weaving a prosperous and secure future for Samoa together,” and includes a similar set of measures as in the first stimulus package. It provides a dividend payout by Samoa National Provident Fund, a benefit of 50 tala per citizen for a national ID registration, a special one-off pension payment, unemployment benefit, financial support for utility bills, and paid training for the hospitality sector. The health sector continues to be a priority sector for the government in light of the COVID19 pandemic, and the package finances construction and upgrade of rural hospitals. The government will continue to assist remote education services.

Monetary and macro-financial

• The Central Bank of Samoa (CBS) continues to maintain an accommodative monetary policy. The CBS will encourage commercial banks to reduce interest rates, and/or associated bank fees and charges. The CBS will also make sure to maintain ample liquidity in the banking system to support businesses and stands ready to activate its lending facilities for the financial institutions. The proposed fiscal and economic response package includes provision of a three-month grace period to be applied for all loan payments. To compensate part of the losses in interest income, local commercial banks will receive payments from the government.

Exchange rate and balance of payments

• No measures.

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San Marino

Background. The first case of COVID-19 was reported on February 28, 2020. San Marino has been severely hit by the outbreak with one of the highest rates of infection and deaths per capita in the world. It was declared COVID-free on June 26.. The government imposed strict containment measures, including the lockdown of the entire country, suspension of all construction and retail activities except for essential services related to the provision of food and health, and reduction of the number of active employees by 50 percent on the premise in the manufacturing sector

Reopening of the economy. The lockdown measures have been relaxed in phases subject to safety guidelines. People were first allowed to move within the territory and in the neighboring regions. Retail and wholesale were the first activities to reopen on May 6. Restaurants, bars (for dine-in), hairdressers and other personal services that involve closer personal interaction reopened on May 18. Swimming pools and sports centers have reopened on May 31, museums and other cultural centers have reopened on June 15. The government has lifted the health emergency declaration as of July 1st. The government will require the population to go through voluntary serological screening and subsequently molecular test in case of positive IgG or IgM.

Key Policy Responses as of July 16, 2020

Fiscal

• The key measures approved by the government include: i) suspension of payment deadlines for government tax and non-tax obligations, utility bills, and other dues to provide liquidity to the private sector; ii) temporary freeze of all non-essential government spending and reduction in public sector wage bill to redirect spending to the health sector; and iii) extension of supplemental wage scheme to support workers displaced by COVID-19 containment measures; iv) deferral of income tax payment; v)minimum guaranteed income for poorer households; vi) other measures to support businesses, including tax credits, tax payments postponement and rescheduling; vii) an economic recovery fund, financed initially through a temporary solidarity levy applied on pensions (above 1500 euros). Measures related to social protection will remain in place until December 2020, subject to reassessment every two months.

Monetary and macro-financial

• The government allows individuals and firms affected by the COVID-19 crisis to defer payments of loan principals to banks until March 2021. Commercial banks are providing loans with reduced rates to individuals and firms who are impacted by the COVID-19 outbreak. Through the end of the year, the government provides guarantees on loans with reduced rates to households (90 percent for loans up to 10,000 euros and 3 years maturity) and firms (70 percent for loans up to 500,000 euros and 6 years maturity) to support liquidity.

Exchange rate and balance of payments

• No measures.

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São Tomé and Príncipe

Background. The first confirmed COVID-19 cases were reported on April 6, 2020. The daily new infection has now dropped to about 1. With the help of WHO a field hospital was established in mid-April and a lab started to function in mid-June. The state of emergency first declared on March 17 was downgraded to situation of calamity on June 16, when the first of the three phases of transitioning to reopening by end-July started. On July 1, the second phase of the transition starts. The country reopened hotels, restaurants, and to commercial flights, extended the operation of commerce and public service to normal hours, and started in person classes at universities and for 12th grade.

Key Policy Responses as of July 15, 2020

Fiscal

• Key measures include:

  (i).Implementation of the health contingency plan prepared in coordination with the WHO and increased health spending (on medicine, equipment, staffing, and treatment centers) to protect against COVID-19;

  (ii).Expansion of social assistance to the most vulnerable, including expansion of the WB-supported cash-transfer program, and increased support to the disadvantaged (the elderly, disabled and abandoned children);

  (iii).Protecting small businesses and employment, in particular through salary contributions and state-guaranteed loans;(iv)

  (iv).Financial assistance to workers who lost their jobs in both the formal or informal sectors.

  (v)Implementation of automatic stabilizers.

  (vi)Where supply chains are disrupted, the state will procure seeds, feedstock, and other essential inputs to be sold to farmers at market price.

  (vii)Introduction of a solidarity tax on public servants whose salaries are relatively unaffected by the shock.

Monetary and macro-financial

• The Central Bank of Sao Tome (BCSTP) has reduced the policy rate and minimum cash reserve requirement, and temporary easing of some prudential ratios over three months to ensure adequate provision of liquidity in the market.

  Encouraged commercial banks to reduce some banking fees and grant a temporary moratorium on debt services to fundamentally sound businesses affected by the crisis. They are also working on options to increase liquidity to banks so that they will be able to grant credit to the economy.

Exchange rate and balance of payments

• No measures.

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Saudi Arabia

Background. Saudi Arabia has been hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The first confirmed case was reported on March 2, 2020. The authorities have implemented a range of measures to limit the spread of the virus encompassing curfews; travel restrictions (including on international flights and internal public transportation and taxis); suspending prayers at mosques; closing all schools, universities, and shopping malls; suspending employee attendance at government and private workplaces (except for critical staff); and increasing testing. Further, early in April, the Ministry of Hajj called on countries to delay their bookings for the 2020 Hajj season. Mid-April, the authorities announced strict company guidelines including temporary housing accommodation for expatriate workers to help control the spread of the virus and on April 22 a repatriation program called “Auda” (or return) was launched online to facilitate the return of expatriates. On May 12, the government announced the building of two makeshift hospitals in Makkah to accommodate any potential surge in COVID-19 cases. High frequency indicators such as the PMI show a sharp slowing of activity in March-April and some recovery thereafter.

Reopening of the economy. On April 26, the authorities ordered a partial lifting of the curfew in all regions, except in Makkah and previously isolated neighborhoods. This was interrupted by a 5-day nationwide full lockdown and curfew during the Eid holidays from May 23 to May 27. On May 26, the authorities announced a 3-phase plan for removing coronavirus-related restrictions. During the first phase which extended from May 28-30, movement within and between all cities (except Makkah) in private cars as well as activities in retail and wholesale shops and malls were allowed. During the second phase which extended from May 31 to June 20, private sector employees were allowed to go back to offices with minimal staff and strict observance of coronavirus precautionary measures, domestic flights, railways and other public transport were allowed to resume, curfew hours were reduced to 8:00pm to 6:00 am in all regions except Makkah, prayers in mosques, including Friday prayer, were allowed to resume (except for mosques in Makkah), and restaurants and cafes allowed to reopen, although the ban on social gatherings of more than 50 people is maintained. On June 21, the all clear phase started. Curfew restrictions were completely lifted and domestic travel started to return to normal throughout the country, while bans on international travel and religious pilgrimages were maintained. On June 22, the Saudi authorities announced that only a “very limited” number of people who are living in the kingdom will be allowed to take part in the 2020 Hajj pilgrimage. On July 5, a Royal decree extended the validity of visit visas and expired residency, and exit and entry visas for expats for an additional period of 3 months free of charge. On July 23, the authorities announced the opening of land borders with Kuwait, Bahrain and the UAE so that Saudi citizens could enter without a prior authorization.

Key Policy Responses as of July 30, 2020

Fiscal 

• A SAR 70 billion ($18.7 billion or 2.8 percent of GDP) private sector support package was announced on March 20. The package includes the suspension of government tax payments, fees, and other dues to provide liquidity to the private sector and an increase in available financing through the National Development Fund. The government has  made budgetary reallocations (SAR 47 billion) to increase the resources available to the Ministry of Health to fight the virus. The authorities announced spending cuts in non-priority areas amounting to SAR 50 billion (2 percent of GDP) to accommodate some of these new initiatives within the budget envelope. Further, on April 3, the government authorized the use of the unemployment insurance fund (SANED) to provide support for wage benefits, within certain limits, to private sector companies who retain their Saudi staff (SAR 9 billion, 0.4 percent of GDP) and eased restrictions on expatriate labor mobility and their contractual arrangements. On April 15, additional measures to mitigate the impact on the private sector were announced, including temporary electricity subsidies to commercial, industrial, and agricultural sectors (SAR 0.9 billion). On May 10, the Ministry of Finance announced new fiscal measures to raise more non-oil revenues, rationalize spending and maintain the budget envelope. These measures consist of additional cuts and delays in capital spending, removal of cost-of-living allowances for public sector workers effective June 1, and increasing the VAT from 5% to 15% effective July 1. At the end of May, the Saudi customs authority announced an increase of custom duties for an extensive range of imported goods (around 3000 items), which came into effect on June 20. On June 16, The Saudi Industrial Development Fund (SIDF) announced initiatives totaling SAR 3.7 billion to support 536 private sector industrial enterprises impacted by the coronavirus pandemic. A new tourism development fund was also announced on June 21. On July 1, the Ministry of Environment, Water and Agriculture announced it will offer 94 agricultural investment opportunities to the private sector in the near term and on July 2, the authorities announced the extension of private sector (COVID related) support measures that would have expired end-June, including continuing the payment of wage benefits to Saudis working in the private sector through SANED, and further delaying the payment of some taxes and duties. On July 14, the Ministry of Finance launched a SAR 670 million program to help businesses defer loan payments due this year.

Monetary and macro-financial 

• The Saudi Arabian Monetary Authority (SAMA) reduced its policy rates twice in March, lowering its reverse repo and repo rates by a combined 1.25 pp to 0.5 and 1 percent respectively. The Governor has announced that the central bank stands ready to supply liquidity if needed. On March 14, SAMA announced a SAR 50 billion ($13.3 billion, 2 percent of GDP) package to support the private sector, particularly SMEs, by providing funding to banks to allow them to defer payments on existing loans and increase lending to businesses. The central bank will also cover fees for private sector stores and entities for point-of-sale and e-commerce transactions for 3 months. SAMA has also instructed banks to delay payments of loans extended to all Saudi employees by three months without extra fees, to provide financing needed by customers who lose their jobs and to exempt customers from various banking fees. On June 1st, SAMA announced the injection of SAR 50 billion into the banking sector through deposit placements to support banking liquidity and private sector credit.

Exchange rate and balance of payments

• No measures.

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Senegal

Background. A first positive case was reported on March 2nd. The daily increase of positive cases hovers around 100 since early May. Senegal conducts about 1100 tests per day. The government has declared a national state of emergency in March and adopted strict containment measures, including suspension of international air travel, closure of borders, limits on inter-regional travel, bans on public gatherings, school closures, and a curfew.

Reopening of the economy. The President lifted the state of emergency and curfew on June 30. International air travel has resumed, while some restrictions such as land border closure remain in place. Containment measures and the sudden stop of travel and tourism contribute to a significant economic slowdown, exacerbated by declining export demand and lower remittances. The government is preparing a National Economic Recovery Program to support the recovery.

Key Policy Responses as of July 30, 2020

Fiscal

• The government implements a resilience package of up to 7 percent of GDP anchored in a revised budget. It consists of four main pillars: (i) improving the health system, (ii) strengthening social protection, (iii) stabilizing the economy and the financial system to support the private sector and employment, and (iv) securing supplies and distribution for key foodstuffs, medicine and energy products.

  Health system: The government has allocated FCFA 78,7 billion (0.5 percent of GDP) to improve testing, treatment, and prevention. It is envisaged to hire 1500 additional health workers in the next 18 months, especially in rural districts.

  Social protection: One million households receive food aid (FCFA 69 billion) and utility payments for (for water and electricity) for poorer customers were suspended for a 2-month period (FCFA 18,5 billion).

  Stabilizing the economy: Hard-hit sectors such as tourism and transport will receive direct support of about FCFA 100 billion and access to additional financing through a credit guarantee fund totaling FCFA 200 billion. The government will contribute up to FCFA 70 billion to this fund. An expedited payment of unmet obligations helps further strengthen firms balance sheets (FCFA 200 billion instead of the FCFA 121 billion foreseen in the initial budget). On the tax side, the deadline for paying suspended tax obligations was extended from 12 to 24 months to improve the liquidity of firms. Their balance sheets will also profit from a partial write-off of tax debt. Tax rebates are envisaged for companies that keep their workforce and salaries above a certain level.

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 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount outstanding of such special T-Bills is equivalent to 1.3 percent of GDP. Senegal has been recently allowed to issue the equivalent of 0.7 percent of GDP of new 3-months Covid-19 T-Bills that may be refinanced by 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 as initially planned.

Exchange rate and balance of payments

• No measures.

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Serbia

Background. Serbia reported its first confirmed COVID-19 case on March 6, 2020. The government declared a national state of emergency on March 15 and adopted several containment measures. These included closing borders, prohibiting movement of citizens during the weekends and between 5pm and 5am during weekdays (total ban for senior citizens), suspension of public transport and all activities in parks and public areas intended for recreation and sports, closing education centers and shopping malls (except grocery stores and pharmacies). GDP growth in Q1 reached -0.6 percent (s.a. qoq)—5 percent in yoy terms.

Reopening of the economy. Since April 21, containment measures have been gradually relaxed (with protective measures in place), including the reopening of green markets, fitness centers, hairdressers, parks, bars, coffee shops, and restaurants; and allowing outdoor sports and recreation activities. Inter-city and urban public transportation resumed on May 4. On May 7, the state of emergency was lifted, abolishing the ban on movement of citizens, including senior citizens. Shopping malls reopened on May 8 and kindergartens on May 11 and commercial flights have resumed since in mid-May. Since May 15, both Serbian and foreign citizens are allowed to enter the country presenting a negative PCR testing not older than 72 hours (Serbs could alternatively stay in quarantine for 14 days). As of May 22, a negative test is no longer required to enter Serbia. On May 15, a gradual resumption of commercial flights started. As of June 1, outdoor sports competitions with public are allowed, with safety measures in place, as well as outdoor public gatherings with a maximum of one thousand people. As of June 5, there are no more restrictions on the number of people allowed in outdoor public gatherings and events. For indoor gathering and events, the maximum number of attendees has been increased from 100 to 500.

New containment measures. In response to a new wave of infections which started in late June, new measures have been implemented. On July 1: mandatory use of masks in public transportation and indoor spaces and stricter measures in municipalities where state-of-emergency is declared. These include limiting the number of people in outdoor and indoor gatherings; banning sport and entertainment events; limited hours of operation for restaurants and bars; and closure of swimming pools, spa and wellness centers. Additional measures came into effect on July 17: a nationwide ban on gathering of more than 10 people in public spaces indoors and outdoors; mandatory distance of 1.5 meters in public spaces.

Key Policy Responses as of July 30, 2020

Fiscal

• A first package of fiscal measures amounted to about RSD 390bn (7 percent of GDP). Key measures include: (i) 10 percent wage increase for public healthcare sector (RSD 13bn) and increased healthcare spending (about RSD 60bn); (ii) one-off payment to all pensioners (RSD 7bn); (iii) universal cash transfer of EUR 100 to each citizen over 18 years old (about RSD 71bn); (iv) three-month deferment of labor taxes and social security contributions for all private companies, to be repaid in 24 installments starting from 2021 (RSD 100bn); (v) deferment corporate income tax advance payment during the second quarter of 2020 (RSD 21bn); and (vi) wage subsidies, including payment of minimum wages for all SME employees and entrepreneurs for three months (RSD 93bn) and payment of 50 percent of the net minimum wage for three months for employees in large private sector companies and for employees who are currently not working (RSD 4bn). Other measures include a 3-month moratorium on enforcement and interests on tax debt under rescheduling agreements and 10 percentage points reduction of the interest rate on tax debt. A state guarantee scheme for bank loans to SMEs has been approved (RSD 240bn), as well new loans to SMEs from the Development Fund (RSD 24bn).

  A second round of measures was adopted in late July, including wage subsidies for SME employees for another two months (RSD 36 billion), and deferment of labor taxes and social security contributions for all private companies for an additional month (RSD 30 billion).

Monetary and macro-financial

• On March 12, the National Bank of Serbia (NBS) cut the key policy rate from 2.25 percent to 1.75 percent and narrowed the interest rate corridor from ±1.25pp to ±1pp relative to the key policy rate. On April 9, the NBS cut the policy rate from 1.75 percent to 1.5 percent. On June 11, it cut the policy rate again to 1.25 percent. It has also provided liquidity (both in dinars and euros) to banks through additional EUR/RSD swap auctions and repo purchase auctions and outright purchases of dinar government securities, and reduced the FX swap interest rates (NBS deposit facility rate plus 10 bp for dinars and 0 percent for euros). Moreover, the NBS introduced a 3-months moratorium on all repayments under bank loans and financial leasing agreements. In May, local-currency denominated corporate bonds became eligible for open market operations (OMOs) and as collateral for banks to receive daily liquidity loans and short-term liquidity from the NBS. On June 11, the NBS relaxed the loan-to-value (LTV) cap for first-home buyers mortgage loans, increasing the limit from 80% to 90%.

  In July, the NBS set up a repo line arrangement with the ECB to address possible euro liquidity needs of Serbian financial institutions. Under this repo line, the ECB provides euro liquidity (up to EUR 1 billion) to the NBS in exchange for adequate euro-denominated collateral. Moreover, a new 2-month moratorium was introduced, relieving debtors of repaying their liabilities during August and September.  

Exchange rate and balance of payments

• The NBS has intervened heavily in the foreign exchange market to maintain a relatively stable exchange rate during the crisis period.

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Seychelles

Background. Although Seychelles reported no new cases since mid-April and all 11 positive cases (no deaths) recovered by early May, 70 sailors from Western African countries tested positive after arriving in Seychelles to join a fleet of Spanish tuna fishing boats in late June. The government has adopted containment measures, including social distancing, travel bans on visitors from high-risk regions, screening at ports of entry, and school closures. Given that about 30 percent of the GDP directly or indirectly relates to tourism sector, the disruption to global tourism can have an adverse impact on the economy. Inflation has been contained so far as lower oil prices offset the impact of a depreciating rupee and supply side disruptions.

Reopening of the economy. Mandatory work-from-home was lifted on April 30. On May 18, all schools were reopened. On June 1, the country reopened its border to passenger flights, limited to chartered flights only from low-risk countries. Some commercial flights from low-risk countries are expected to be allowed starting in August.

Key Policy Responses as of July 22, 2020

Fiscal

• The government has announced a measure to subsidize wages for companies facing distress caused by COVID-19, whose fiscal cost is estimated up to about 5 percent of 2020 GDP. A revised 2020 budge was approved by the National Assembly in late April.

Monetary and macro-financial

• The Central Bank of Seychelles (CBS) reduced the policy rate by 100 bps to 4 percent on March 23. On the same day, it announced that a credit facility of approximately $28 million will be set up to assist commercial banks with emergency relief measures to assist businesses and individuals struggling with the financial impact of the pandemic. The CBS also announced that commercial banks, the Development Bank of Seychelles (DBS) and the Seychelles Credit Union have agreed to consider a moratorium of six months on the repayment of principal and interest on loans to assist businesses in impacted sectors. The National Assembly has allowed the Central Bank to provide (i) a limited credit to government up to SCR 500 million, preferably through purchase of securities, and subject to central bank Board approval; and (ii) extending the maturity of credit to commercial banks to 3 years. The CBS is also considering easing reserve requirements. The CBS will continue to monitor potential market stress and any emerging risks to the financial sector and the economy. The CBS cut the policy rate by 100 bps again to 3 percent, effective of July 1.

Exchange rate and balance of payments

• No measures.

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Sierra Leone

Background. Since the first COVID-19 case in late March, the cumulative number of cases has increased steadily (to over 1,500 in July) and testing capacity remains severely constrained. At the onset of the pandemic, the Government acted decisively to implement prevention and containment measures, including the President declaring on March 24 a 12 month national state of emergency. Since late June, the Government has been progressively easing restrictions.

1. Border controls and closure. Mandatory quarantine on entering the country and closure of land borders. A 3-month suspension of passenger flights has been in place since March; Lungi International Airport will re-open on July 22.
2. Social distancing. Closed education institutions on March 31; schools will be reopened for six weeks starting July 1, for children taking final examinations. Discourage gatherings of more than 100 people; restrict use of public beaches; shorten opening hours for entertainment industry; limit number of passengers on public transport; require face masks in public. In Freetown, a special bus service transports health workers to/from work. Places of worship were allowed to re-open on July 13.
3. Lockdown. The partial lockdown—in place since April—restricted non-essential inter-district travel, reduced public working hours (9am to 4pm); and imposed a national evening curfew (9pm to 7am). The country also implemented two full lockdowns (April 5 7 and then May 3–5) during which all were required to stay home. The Government lifted restrictions on inter-district travel on June 23 and has since also shortened the curfew (now 11pm to 5am).

Key Policy Responses as of July 16, 2020

Fiscal

• The government’s fiscal response focuses on addressing containment needs, critical health needs, and the socio-economic impact of the crisis. The Health Response Plan is being formulated in collaboration with development partners, including the World Bank via a $7.5 million health system support operation approved in early April. On April 22, the government announced plans to introduce incentives for healthcare workers, including a risk allowance, as well as plans to recruit 4,000 additional health workers. The authorities’ Quick Action Economic Response Program (QAERP) seeks to mitigate the broader socio economic impact by: ensuring a stable supply of essential commodities and food; providing support to small and medium enterprises; and scaling up social protection and public works for the most vulnerable. The IMF disbursed $143 million in emergency assistance in early June and the World Bank’s budget support of $101.6 million was disbursed in mid-July.

Monetary and macro-financial

• The central bank held an emergency Monetary Policy Committee meeting on March 18. They decided to: (i) reduce the monetary policy rate (mostly signaling) by 150 bps from 16.5 percent to 15 percent, effective March 19; (ii) create a special credit facility (Le 500 billion) to support production, procurement and distribution of essential goods; and (iii) extend the reserve requirement maintenance period from 14 to 28 days to ease tight liquidity. Rates were held constant at the most recent MPC meeting in July.

Exchange rate and balance of payments

• Following the March 18 MPC meeting, the central bank announced its intention to provide FX resources to ensure the importation of essential goods. The exchange rate has been allowed to adjust.

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Singapore

The first confirmed COVID-19 case was reported on January 23, 2020. Safe distancing measures were considerably intensified in April to break the trend of increasing local transmission. In view of a significant decrease in community transmissions, the Government has announced a three-phased approach to resume activities starting June 2 (see https://www.gov.sg/article/ending-circuit-breaker-phased-approach-to-resuming-activities-safely). Community infection rates have remained generally stable and Phase Two commenced on June 19. Real GDP contracted by 0.7 percent in 2020Q1 on an annual basis. The real GDP flash estimate for 2020Q2 suggests a contraction of 12.6 percent on an annual basis.

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities have announced 5 packages of measures on February 18, March 26, April 6, April 21, and May 26 amounting to S$92.9 billion (19.7 percent of GDP). Funds to contain the outbreak are about S$800 million (mainly to the Ministry of Health). The Care and Support Package provides support to households, including a cash payout to all Singaporeans (higher for families with children under 20), and additional payments for lower-income individuals and the unemployed. The Stabilization and Support Package provides support to businesses, including wage subsidies, support to cover rental costs, an enhancement of financing schemes, and additional support for industries directly affected and the self-employed. The authorities have increased their contingencies funds for unforeseen expenditure needs and also set aside loan capital of S$20 billion to help businesses and individuals facing cash flow challenges with loan obligations and insurance premium payments. Other economic resilience measures include support to R&D investment, a national stockpile of health supplies, and a program on food resilience.

Monetary and macro-financial

• On February 14, the Monetary Authority of Singapore (MAS) welcomed the announcements from banks and insurers in Singapore to support their customers facing financial difficulties due to the impact of the COVID-19 outbreak, while adhering to prudent risk assessments. On March 31, the MAS and the financial industry announced a detailed package of measures to help individuals and SMEs facing temporary cashflow difficulties. The package has three components: (i) help individuals meet their loan and insurance commitments; (ii) support SMEs with continued access to bank credit and insurance cover; and (iii) ensure interbank funding markets remain liquid and well-functioning. A second package announced on April 30 extends the scope of relief for individuals to a broader set of loan commitments.

  On March 19, the MAS announced the establishment of a US$60 billion swap facility with the US Federal Reserve. The MAS is drawing on this facility to provide USD liquidity to Singapore banks through weekly auctions held every Monday since late March. On July 30, MAS announced that the swap facility has been extended to end-March 2021.

  On March 30, the MAS adopted a zero percent annual rate of appreciation of the policy band and reduced the mid-point to the prevailing level of the S$NEER, with no change to the width of the band.

  On April 7 the MAS announced that it will adjust selected regulatory requirements and supervisory programs to enable financial institutions to better deal with issues related to the pandemic.

  On April 8, 2020, the MAS announced a S$125 million support package to sustain and strengthen financial services and FinTech capabilities. The package, funded by the Financial Sector Development Fund, has three main pillars: (i) supporting workforce training and manpower costs; (ii) strengthening digitalization and operational resilience; and (iii) enhancing FinTech firms’ access to digital tools.

  On July 29, the MAS called on locally-incorporated banks headquartered in Singapore to cap their total dividends per share to 60 percent of the FY2019 level and offer shareholders the option to receive dividends in scrip (as shares) instead of cash.

Exchange rate and balance of payments

• No announcement.

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The Kingdom of the Netherlands—Sint Maarten

Background. As of July 30, Sint Maarten reported 47 active COVID-19 cases, following a spike in new infections in late July. In total, there were 126 positive cases and 15 deaths. The authorities began implementing the measures and travel restrictions to control the spread of COVID-19 on March 6. Nevertheless, the first case was diagnosed on March 17. On March 22, the borders were closed for all passenger traffic. On March 30, a night curfew was implemented and the border between Sint Maarten and Saint Martin closed and jointly patrolled with the French government. As the number of cases grew, the authorities declared a State of Emergency and a full lockdown on April 5. A phased reopening of the local businesses started on May 10. Due to a spike in the number of new cases, a restriction of traffic across the border between Sint Maarten and Saint Martin will be re-introduced starting July 31 in order to slow down the spread of the virus.

Reopening of the economy. The government lifted the state of emergency and allowed all businesses to reopen. The authorities began their phased reopening to international travel in three stages. The first stage (from mid-June) allowed travel from several Caribbean countries. The second stage (July 1) allowed travel from Canada and Europe (Schengen Area), all the Dutch Caribbean islands, French Caribbean islands, St. Kitts & Nevis, Antigua & Barbuda, British Virgin Islands, and Dominica. The authorities are planning to allow travel from the United States from August 1.

Key Policy Responses as of July 30, 2020

Fiscal

• On April 19, the authorities published the Sint Maarten Stimulus and Relief Plan (SSRP) that elaborated fiscal measures for the second quarter of 2020. The direct relief measures included (i) a payroll support program (covering up to 80 percent of the payroll of qualifying businesses, (ii) income support for sole proprietors, vendor license holders, bus and independent taxi drivers (up to NAf 1,150 per person per month); (iii) job loss benefits (NAf 1,150 per person per month), and (iv) soft loans to SMEs (NAf 33 million). The SSRP also envisaged additional spending in the health sector (NAf 56.4 million) comprising additional healthcare expenses, liquidity support for the social security fund and the hospital. Finally, it included a food voucher program and a food box program for the most vulnerable groups, meals for the elderly and psycho-social care (NAf 9.3 million in total). In order to cover the loss of fiscal revenue and the fiscal support measures in the second quarter of 2020, Sint Maarten requested financing in amount of NAf 258 million from the Netherlands. The Netherlands provided NAf 124 million for the second quarter, of which NAf 29 million is conditional on adjusting the payroll subsidy (reducing maximum coverage from 80 to 60 percent), which is being implemented. Given available financing, measures implemented in the second quarter included the payroll subsidy, income support for sole proprietors, job loss benefits and the food vouchers. Financing for the third quarter is under negotiation. The total size of support in 2020 will depend on available financing.

Monetary and macro-financial

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

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

Exchange rate and balance of payments

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

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Slovak Republic

Background. The fist confirmed COVID-19 case was reported on March 6, 2020. The government implemented a range of measures to delay the spread of COVID-19 since March 13, including social distancing, closing schools and entertainment and hospitality premises, limiting international travel, and promoting the widespread use of face masks. GDP declined by 5.2 percent q/q in 2020Q1 (3.7 percent y/y).

Reopening of the economy. The Slovak Republic started to gradually ease containment measures on April 22. The limited number of new cases allowed for a subsequent acceleration of reopening plans, with the national emergency ending on June 13 and most containment measures now lifted. Elementary schools and pre-schools reopened on June 1, while secondary schools reopened in the last week of June. Mass events up to 500 people are allowed from June 10. Starting July 1, the cap increased to 1,000 people with sports events with more than 1,000 people allowed provided every second seating row is empty. International travel is also being relaxed: the airports in Bratislava and Košice resumed flights from mid-June, and the compulsory two-week quarantine for Slovaks arriving from about 30 countries has been lifted.

Key Policy Responses as of July 29, 2020

Fiscal

• Measures introduced by the new coalition government include (i) wage compensation for affected businesses and self-employed, and subsidies to individuals without income; (ii) enhanced unemployment benefits, and sickness and nursing benefits; (iii) deferral and waiver of employers’ health insurance and social security contributions for affected companies and self-employed; (iv) easing of the administrative burden on businesses and relaxing labor code requirements; (v) deferral of payroll and corporate tax payments for businesses whose revenues decline by more than 40 percent; (vi) allowing companies to include loss carryback since 2014; and (vii) higher medical spending. These measures are estimated to amount to EUR 1.7 billion, or 1.8 percent of 2019 GDP. To ease liquidity pressures, the government introduced a state guarantee scheme, estimated to amount to EUR 500 million per month, covering both SMEs and large firms. Individuals, self-employed and SMEs are also allowed to defer loan repayments for up to 9 months, while a rent payment moratorium was imposed until June 30.

Monetary and macro-financial

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

  The National bank of Slovakia (NBS) has implemented the following measures as part of a coordinated approach with the ECB and the European Banking Authority (EBA): i) banks may partially meet Pillar 2 requirements using capital instruments that do not qualify as common equity tier 1 (CET1) capital; ii) banks may, in duly justified cases, temporarily operate below the level of capital defined by the capital conservation buffer; iii) banks will also, where justified, be temporarily exempted from full compliance with the LCR. The NBS decided to reduce the CCyB rate from 1.5 to 1.0 percent as of Aug 1, 2020, repealing its previous decision to increase the rate to 2.0 percent. The NBS also lowered the capital buffer for systemically important institutions for one of the systemically important banks (Postova Banka) from 1 percent to 0.25 percent, effective January 1, 2021.

Exchange rate and balance of payments

• No measures.

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Republic of Slovenia

Background. Covid-19 pandemic has significantly affected Slovenia, a small country with a population of 2.1 million. The first case was confirmed COVID-19 on March 4, 2020. While infections became contained in May, Slovenia is experiencing a second wave in end-July. Real GDP grew by 2.4 percent in 2019 but contracted by 3.4 percent (seasonally adjusted) in 2020:Q1. The authorities projected the 2020 growth at about -8 percent (Stability Program 2020). Since March, the authorities have implemented a range of measures to delay the spread of coronavirus and cushion the adverse impact on people and businesses. These include border checks, increased testing, shutting down schools, public transit, restaurants and non-essential stores, and providing economic stimulus.

Reopening of the economy. With progress in containing the infections and in random testing for monitoring, the government started the gradual reopening with safety rules. This began with limited inter-city travel and some public transit for the industry in mid-April, then broadened to some services, and expanded to the full reopening of public transit, schools, and some sport activities later in May. In the process, the government issued detailed guidelines on protective measures. On May 15, Slovenia became the first EU country to declare the end of epidemic in country, although some anti-COVID-19 restrictions remained in place. As of June 8, citizens of 17 EU and non-EU countries may enter Slovenia without restrictions, although several countries were excluded based on updated epidemiological assessments later. In late June, the authorities tightened measures against a second wave of infections, including the mandatory use of masks, limits on large gatherings, and starting a contact tracking app.

Key Policy Responses as of July 29, 2020

Fiscal

• As part of an economic stimulus package of € 1 billion (2.2 percent of GDP) announced on March 9, the authorities have adopted some tax and spending measures, including (i) tax deferrals for up to 24 months or tax payments in installments in 24 months; (ii) wage subsidies for suspended workers due to pandemic-related closures and quarantined people (about €50 million); (iii) government guarantees and credit lines available for financial support to the affected businesses, particularly SMEs (€600 million). In addition, the government issued a decree to cut electricity prices to ease the pandemic impact. An approved emergency bill also granted the government more discretion in using budget funds, including for health spending. On April 2, Parliament approved a new economic stimulus package of € 3 billion (6.7 percent GDP) that also consolidated some earlier measures. Measures include selective tax exemptions and co-financing of social contributions, increased wage subsidies, temporary income support for vulnerable groups, health worker bonuses, as well as credit lines and loan guarantees. On April 28, Parliament adopted another stimulus package of € 2 billion (4.5 percent of GDP), which focused on providing guarantees to businesses and included amendments to the previous package to relax the conditions and expand to more beneficiaries. On May 29, Parliament adopted the third package of about € 1 billion to support economic recovery, including subsidies for shortened work time, vouchers for tourism, and liquidity loans. On June 28, the government adopted an emergency bill to address the second wave of cases, including an extension of the furlough support scheme and a legal basis for the tracking app.

Monetary and macro-financial

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

  Key Slovenia measures include: (i) affected firms and individuals are allowed to obtain deferrals of bank loan repayments for up to 12 months; (ii) Bank of Slovenia (BoS) extended all ECB measures to all banks and savings banks in Slovenia; (iii) BoS restricted profit distribution at banks and savings banks; (iv) BoS reduced the maximum level of allowed bank account fees, with higher reduction for the more disadvantaged groups; and (v) BoS allowed banks to temporarily exclude income declines caused by the epidemic when calculating creditworthiness.

Exchange rate and balance of payments

• No measures.

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Solomon Islands

Background. Solomon Islands has no confirmed COVID-19 cases and deaths as of July 16, 2020. COVID-19 preventative measures implemented by the government include suspension of all commercial international flights, no entry of non-citizens, and strict mandatory quarantine for all returning passengers. In addition, the government has declared a state of emergency until July 25, scaling down public services to essential services only, closing schools and temporarily suspending some services as well as restricting domestic travel.

On June 1, the IMF Executive Board approved the disbursement of US$28.5 million in emergency financing under the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) to help Solomon Islands address urgent balance of payments needs stemming from the COVID-19 pandemic.

Press Release: https://www.imf.org/en/News/Articles/2020/06/01/pr20229-solomon-islands-imf-executive-board-approves-disbursement-to-address-the-covid-19-pandemic

Reopening of the economy. On April 24, the Prime Minister confirmed that COVID-19 tests can be done in country after the arrival of medical testing equipment funded by its donor partners. On May 8, the Prime Minister made the order to reopen business entities except for night clubs within the emergency zone, Honiara. On May 20, the emergency zones, including the capital Honiara, went into a mock lockdown for 36 hours to test their capabilities in case of future needs. By May 25, all schools had reopened. On May 26-27, after confirming its in-country COVID-19 testing capability, the government began repatriating its stranded nationals from Australia, New Zealand, Vanuatu and Fiji with repatriation continuing into June and July. Quarantine facilities have been established within close proximity to the Honiara International Airport and in the western province of Gizo. The national carrier, Solomon Airlines, announced on June 11, the suspension of all international flights until August 31 but it will continue to operate government approved cargo and charter flights as needed.

Key Policy Responses as of July 16, 2020

Fiscal

• COVID-19 has had a significant negative impact on government finances, as a result of additional COVID-19 related spending pressures and lower revenue trends over the last four months. The government has adopted a COVID-19 economic stimulus package of SI$319 million (about 2.6 percent of GDP), to be financed by both government and donors. The package aims to provide social assistance to vulnerable households and firms, as well as supporting economic recovery. These includes ongoing payroll support for non-essential public servants; employment support for youth and women; subsidies for copra and cocoa; capital grants to businesses to support investment in productive and resource sectors; tax and utility relief for affected businesses in specific sectors; equity injection to government owned companies; and advancing planned infrastructure investment. On June 8, the new Development Bank of Solomon Islands (DBSI) was officially launched. On June 15, the cabinet revoked the decision on half-pay for non-essential public servants that started on March 31. Any salary that was withheld will be repaid when officers are recalled to duty.

  On April 25, the government issued its first covid-19 domestic development bond of SB$120 million to finance its COVID-19 economic stimulus package. Two state owned enterprises (Solomon Islands Ports Authority and Solomon Islands Electricity Authority) have provided dividend payments to support the government’s COVID-19 preparedness and response plan. The government is receiving funds and medical supplies from several countries, including Australia, China, New Zealand, the United States, and development partners (including the World Bank and the Asian Development Bank) to support its COVID-19 response. In addition to the disbursement under the RCF/RFI, the IMF has provided debt service relief through its Catastrophe Containment and Relief Trust (CCRT).

Monetary and macro-financial

• The Central Bank of Solomon Islands (CBSI) has confirmed its commitment to continuing an expansionary monetary policy stance and is also prepared to buy government bonds in the secondary market as part of its stimulus measures. The bank will be rolling out an export-import facility to assist businesses with opportunities for competitive financing. The bank has reduced its stock of Bokolo Bills and relaxed some commercial banks’ prudential guidelines. Effective June 15, the CBSI has reduced the cash reserve requirements from 7.5% to 5% to ensure additional liquidity support. The government is encouraging commercial banks to grant a three to six-month grace period for all loan repayments.

Exchange rate and balance of payments

• No measures.

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Somalia

Background. Somalia recorded its first confirmed COVID-19 case on March 16, 2020. In early March, the authorities have established a COVID-19 response coordination committee led by the Prime Minister and, in coordination with the WHO and the UN, the Ministry of Health has taken measures to contain the spread of the outbreak and to strengthen health systems, including restricting large meetings and gatherings; closing schools and universities; closing borders suspending international and domestic flights; and intensifying communication through various channels including radio, TV and social media. As of April 15, they imposed an evening curfew. As Somalia faced the COVID-19 health crisis, the authorities and international health experts recognized that, given the country’s very weak health infrastructure and large vulnerable population, including internally displaced, Somalia would be ill-prepared to cope with any significant outbreak. In response, Somalia’s partners and the Ministry of Health have launched a Country Preparedness and Response Plan (CPRP) to address the immediate humanitarian and socio-economic consequences. These joint efforts focus on averting large-scale community spread through risk communication; testing; contact tracing; distribution of PPE to health workers; undertaking measures to mitigate risks to Internally Displaced Populations, refugees, asylum seekers and host communities; and minimizing risks in detention places. As a result, recent data appear to suggest that daily rate of infection is slowing down.

Reopening of the economy. As daily rate of infection is slowing, the Somali authorities have started a phased approach to reopening the economy. Domestic flights have resumed on July 5 and public schools are scheduled to start reopening as of August 15.

Key Policy Responses as of July 16, 2020

Fiscal

• The authorities have sought donor support to respond to the crisis and offset the impact of revenue losses. Effective April 15, they introduced a three-month tax holiday on some specific basic commodities (including rice), reduced consumption tax on some additional basic goods by 50 percent and lifted restrictions on imports of rice from Vietnam. In late June, Cabinet approved a revised 2020 supplemental budget that reflects substantial donor support and allows for additional transfers to federal member states and the Banadir region to help them respond to the impact of the pandemic, as well as the flooding and locust invasion that are also hitting the country.

Monetary and macro-financial

• The Central Bank is releasing funding-for-lending support for medium and small enterprises through commercial banks., initially for $2.9 million with more in the pipeline and . encouraging commercial banks to use excess liquidity to support lending. To better monitor financial and liquidity conditions, the Central Bank has increased the frequency and granularity of data collection, including employing one-off surveys. It is also identifying an emergency response group and developing a crisis communication strategy. In coordination with international partners, it is exploring measures to ease the inflow of current transfers, including remittances.

Exchange rate and balance of payments

• No measures. See support for remittance inflows above.

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South Africa

Background. South Africa reported its first confirmed COVID-19 case on March 5, 2020. The government has declared a national state of disaster and adopted containment measures, including social distancing, travel bans on visitors from high-risk countries and quarantine for nationals returning from those countries, screening at ports of entry, school closures, screening visits to homes, and introduction of mobile technology to track and trace contacts of those infected. On April 27, a delegation of 217 infectious disease experts arrived at the request of the government to support its health response to Covid-19. A nationwide lockdown was put in place from midnight March 26, with only critical workers and transport services, the banking sector, essential food and medicine production, and retail, operating. On May 1 2020, a phased lifting of the lockdown began, allowing a few sectors to resume operation and others only partially. On May 13, a further relaxation of the lockdown was announced effective June 1. On May 24, it was specified that the June 1 relaxation would be broader than previously announced. Most economic activities reopened under strict health and social distancing practices except for high risk ones (i.e. restaurants, bars, taverns, accommodation, domestic air travel, conferences, events, entertainment, sporting activities, and personal services). The sale of alcohol was allowed on a restricted basis while the sale of tobacco remains banned. Remote work is still encouraged where possible. Starting June 8, schools have started to reopen and on June 17, restrictions on sit down restaurants, hotels, conference centers, casinos, non-contact sports, and personal care services were relaxed under strict adherence to health protocols. On July 12, in response to a growing number of Covid-19 cases, a curfew and an alcohol ban were reintroduced and the wearing of facemasks in public was made mandatory. The national state of disaster was extended to August 15. On July 23, it was announced that, starting on July 27, public schools will be closed for one month with minor exceptions. Net capital outflows (bonds and equities) since the beginning of the pandemic have amounted to $7.9 billion (2.8 percent of GDP); the sovereign’s dollar credit spread has increased more than 50 percent to 297.8 bps; and the rand has depreciated by about 12 percent vis-à-vis the US dollar.

Key Policy Responses as of July 29, 2020

Fiscal

• The government is assisting companies and workers facing distress through the Unemployment Insurance Fund (UIF) and special programs from the Industrial Development Corporation. Additional funds are available for the health response to Covid-19, workers with an income below a certain threshold are receiving a small tax subsidy for four months, and the most vulnerable families are receiving temporarily higher social grant amounts for six months. A new 6-month Covid-19 grant was also created to cover unemployed workers that do not receive grants or UIF benefits and the numbers of food parcels for distribution was increased. Funds are available to assist SMEs under stress, mainly in the tourism and hospitality sectors, and small-scale farmers operating in the poultry, livestock, and vegetables sectors. A new loan guarantee scheme is helping companies with turnover below a certain threshold to get bank financing for the payment of operating expenses as of May 12. Allocations are also being made to a solidarity fund to help combat the spread of the virus, with assistance of private contributions, and support municipal provision of emergency water supply, increased sanitation in public transport, and food and shelter for the homeless. The revenue administration is accelerating reimbursements and tax credits, allowing SMEs to defer certain tax liabilities, and has issued a list of essential goods for a full rebate of customs duty and import VAT exemption. A 4-month skills development levy tax holiday is also being implemented.

Monetary and macro-financial

• The central bank (SARB) reduced the policy rate several times since the pandemic started: 100 bps to 5.25 percent on March 19, another 100 bps to 4.25 percent on April 14, 50 bps to 3.75 percent on May 21, and 25 bps to 3.5 percent on July 23. On March 20, it announced measures to ease liquidity conditions by: (i) increasing the number of repo auctions to two to provide intraday liquidity support to clearing banks at the policy rate; (ii) reducing the upper and lower limits of the standing facility to lend at repo-rate and borrow at repo-rate less 200 bps; and (iii) raising the size of the main weekly refinancing operations as needed. On March 23, the government announced the launch of a unified approach to enable banks to provide debt relief to borrowers. On March 25, the SARB announced further measures to ease liquidity strains observed in funding markets. The program aims to purchase government securities in the secondary market across the entire yield curve and extend the main refinancing instrument maturities from 3 to 12 months. On March 26, the SARB issued guidelines on modalities to provide debt relief to bank customers. On March 28, it announced temporary relief on bank capital requirements and reduced the liquidity coverage ratio from 100 to 80 percent to provide additional liquidity and counter financial system risks. On April 6, the SARB issued guidance on dividend and cash bonuses distribution to ensure bank capital preservation. Effective May 11, the SARB returned the number of repo auctions to once a day and, on May 12, announced a series of prudential priority measures for co-operative financial institutions on prudential matters, supervisory activities, as well as governance and operational issues.

Exchange rate and balance of payments

• The SARB announced it will continue its longstanding practice of not intervening in the foreign exchange market.

Other economic measures

• On March 19 and 27, the Department of Trade and Industry introduced regulations against price gouging and export control measures on essential goods respectively. The government has also outlined measures for Covid-19 emergency procurement including the specifications of the health essentials it will purchase and the maximum prices for the personal protective equipment it will procure.

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South Sudan, Republic of

Background. The Republic of South Sudan reported its first case of COVID-19 on April 4, 2020. The pandemic is progressing, and the first Vice President tested positive for coronavirus along with some other high-ranked government officials but recovered recently. The government announced various precautionary measures, including (i) international flight suspension (with few exceptions for planes bringing in health-related cargo, such as medicine and medical equipment, and essential/critical food items; (ii) land border restrictions; (iii) passenger bus prohibitions; (iv) evening curfews; (v) social distancing; and (vi) a mandatory 14-day quarantine period for any traveler arriving from a virus-affected country. The government also encouraged businesses to allow their employees to telework and warned the business community against increasing prices and hoarding essential goods and commodities. However, lockdown measures were partially lifted on May 7. Concurrently, South Sudan is affected by the sharp decline in the international price of oil—the mainstay of the economy.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has allocated a COVID-19 fund of USD8.0 million. Of which, USD5.0 million was allocated to the Ministry of Health to combat the pandemic. The government has also redirected USD7.6 million from the World Bank’s grant of USD105 million for the UNICEF and ICRC, a third party implementing agency of the grant, to purchase items for pandemic prevention and treatment.

Monetary and macro-financial

• On April 24, 2020, the Bank of South Sudan (BSS) cut the Central Bank Rate by 2 percentage points, from 15 percent to 13 percent, and reduced the Reserve Requirement Ratio from 20 percent to 18 percent.

  On July 7, 2020, the BSS introduced additional measures to mitigate the impact of the pandemic. It further cut the Central Bank Rate by 3 percentage points, down to 10 percent, further reduced the Reserve Requirement Ratio to 10 percent, and suspended the recent regulation of higher minimum paid-up capital for commercial banks. BSS also reiterated that the South Sudanese Pound (SSP) is the only legal tender of domestic debt payments and also encouraged banks to restructure loans if needed. (Circular No. SDR/S/4/2020).

Exchange rate and balance of payments

• No measures.

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Spain

Background. Spain has been heavily affected by the COVID-19 outbreak, with the first infection case detected on February 25, 2020. After reaching a peak on March 25, the daily new infection numbers had been declining and were stabilized at relatively low levels in recent weeks, though with sporadic local outbreaks. A state of emergency took effect on March 14, initially for 15 days and then was repeatedly extended until June 21, with restrictions on movement to essential purposes only, limited commercial, cultural, recreational, hotel and restaurant activities, and reduced operation of public transport. From March 30-April 9, 2020, all non-essential activities were halted. Temporary restrictions were in place from May 15-24 on entries through ports and airports from Schengen countries, with only Spanish citizens, residents, cross-border workers, and health and elder care professionals allowed to enter. A 14-day quarantine for all people arriving from abroad was in place from May 15 to June 21, with a few exceptions. In the first quarter of 2020, the Spanish economy shrank by 4.1 percent from the same period last year as measures to contain the outbreak induced an unprecedented decline in private consumption and plunge in investments.

Reopening of the economy. The state of emergency was lifted on June 21, allowing for the first time since March 14 unconstrained mobility across all provinces and reopening of EU borders. Schools remain closed until September, except for graduating classes, but there are arrangements in effect for children with working parents. Social distancing requirements, capacity limitations, and hygiene measures at workplaces remain in place, including mandatory use of masks in closed spaces and on streets when a safety distance of 1.5 meters cannot be maintained. Several regions reintroduced restrictions on certain public venues in response to reemergence of local outbreaks.

Key Policy Responses as of July 30, 2020

Fiscal

• Key measures (about 3½ percent of GDP, €36 billion, subject to changes in the usage and duration of the measures) include budget support from the contingency fund to the Ministry of Health (€1.4 billion); advance transfer to the regions for the regional health services (€2.8 billion); additional funding for research related to the development of drugs and vaccines for COVID-19 (€46 million); entitlement of unemployment benefit for workers temporarily laid off under the Temporary Employment Adjustment Schemes (ERTE) due to COVID-19, with no requirement for prior minimum contribution or reduction of accumulated entitlement (€18 billion); increased sick pay for COVID-19 infected workers or those quarantined, from 60 to 75 percent of the regulatory base, paid by the Social Security budget (€1.4 billion); an extraordinary benefit for self-employed workers affected by economic activity suspension (€3.8 billion); introduction of a new means-tested “minimum vital income” (about €3 billion annually); strengthened unemployment protection for workers under permanent discontinuous contracts who cannot resume work but are not qualified for unemployment benefits (€99 million); extension of unemployment benefit to cover workers who were laid off during the probation period (since March 9), as well as those who were switching jobs but with the new offer falling through (€42 million); expansion of ERTE to cover workers and companies with significant activity reduction in sectors considered essential; a temporary monthly allowance of about EUR 430 for temporary workers whose contract (at least two months’ duration) expires during the state of emergency and are not entitled to collect unemployment benefits (€17.6 million); a temporary subsidy for household employees affected by COVID-19 with an amount equal to 70 percent of their contribution base (€3 million); new rental assistance programs for vulnerable renters and additional state contribution to the State Housing Plan 2018-21 (€400 million); additional budgetary funds of €300 million and further budget flexibility for the provision of assistance to dependents; transfer of €25 million to autonomous communities funding meals for children affected by the school closure; extension of the social benefit for energy provision; subsidy for vehicle renewal under the MOVE II program (€100 million); and additional fund to support industrial R&D (€50 million). Further measures include exemptions of social contributions for impacted companies that maintain employment under the ERTE (€2.2 billion); exemption of contributions for self-employed that receive the extraordinary benefits (about 1 billion or more depending on the duration); tax payment deferrals for small and medium enterprises and self-employed for six months, with the first four months exempt from interest; extension of the deadlines for filing tax returns and self-assessment to May 30 for SMEs and self-employed; flexibility for SMEs and self-employed to calculate their income tax and VAT installment payment based on the actual profit in 2020 (€1.1 billion); zero VAT rate on purchases of medical material essential to combat the COVID-19 until July 31, 2020 (€1 billion); reduction in VAT on digital publications from 21 to 4 percent (€24 million); 50 percent exemption from employer’s social security contributions, from February to June 2020, for workers with permanent discontinuous contracts in the tourism sector and related activities; a 6-month suspension of social security contributions for the self-employed (for the period May-July) and companies (for the period April-June) in selected industries (€352 million); deferral of social security debts for companies and the self-employed (€340 million); no surcharge for late payment of tax debts for companies obtaining financing through the Instituto de Crédito Oficial (ICO) Guarantee Lines; more flexibility for workers to access savings from their pension plans; budget flexibility to enable transfers between budget lines and for local governments to use budget surplus from the previous years for supporting measures in the area of housing; modification of spending ceilings for certain lines of ministries and subnational governments; centralization of medical supplies; and an emergency management process for the procurement of all goods and services needed by the public sector to implement any measure to address COVID-19.

Monetary and macro-financial

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

  In addition, the government of Spain has extended up to €100 billion government guarantees for firms and self-employed, covering both loans and commercial paper of medium-sized companies that participate in Spain’s Alternative Fixed Income Market (MARF); launched a new Instituto de Crédito Oficial (ICO) line of guarantees to promote investment activities particularly in the areas of environmental sustainability and digitization (€40 billion); created a state rescue fund to support strategic business (€10 billion); and introduced (i) €2 billion public guarantees for exporters through the Spanish Export Insurance Credit Company, (ii) guarantees for loan maturity extensions to farmers using the special 2017 drought credit lines, (iii) a line of guarantees to provide financial assistance on housing expenses for vulnerable households (€1.2 billion), as well as (iv) additional loan guarantees for SMEs and self-employed through the Compañía Española de Reafianzamiento (€1 billion). Other measures include additional funding for the ICO credit lines (€10 billion); expansion of ICO credit lines for the tourism sector (€200 million); loans for the industrial sector to promote digital transformation and modernization (€123.5 million); temporary authorization of ICO to participate as a buyer of new commercial paper issued at MARF; three-month moratorium on mortgage payments for the most vulnerable, including households, self-employed and homeowners who have rented out their mortgaged properties; moratorium on rent payments for vulnerable tenants whose landlord is a large public or private housing holder  ; moratorium on non-mortgage loans and credits, including consumer credits, for the most vulnerable; suspension of interest and repayment of loans granted by the Secretariat of State for Tourism for one year with no need for prior request; deferred repayment of loans granted to businesses by the Ministry of Industry, Trade, and Tourism; enhanced capacity of the mutual guarantee societies of the autonomous communities; deferral of payments on certain loans granted by the Institute for the Diversification and Saving of Energy (IDAE);  adoption of a mechanism for renegotiation and deferment of business premises rent; reduced notary fees for novation of non-mortgage loans; ban of short-selling Spanish shares in the stock market from March 16-May 18; authorization for special government screening of FDI in strategic sectors; adoption of a new macroprudential liquidity tool empowering the National Securities Market Commission to modify requirements applicable to management companies of Collective Investment Schemes; empowering the Consorcio de Compensación de Seguros to act as a reinsurer of credit insurance risks; and time-bound changes to corporate resolution frameworks in order to reduce insolvency cases. Furthermore, the Bank of Spain will apply to the banks it supervises the flexibility provided by the legal system in relation to the setting of transition periods and the intermediate minimum requirements for own funds and eligible liabilities (MREL) targets; and banks will be allowed to apply expert judgement for the credit-risk classification of forborne exposures.

Exchange rate and balance of payments

• No measures.

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Sri Lanka

Sri Lanka reported its first COVID-19 case in late January. New cases continue to be confirmed, but do not appear to be on an upward trend. The authorities have suspended arriving international flights and ships, excluding repatriations. The nation-wide curfew imposed since March 20 has been relaxed from June 6. As of late July, there have been net capital outflows of around US$500 million (0.6 percent of GDP) since mid February, mostly from the domestic treasury securities market. The Sri Lankan currency has also depreciated by around 2.3 percent against the US dollar since that time. Sri Lanka’s EMBIG spread has more than doubled since mid-February.

Key Policy Responses as of July 30, 2020

Fiscal

• The government has allocated up to 0.1 percent of GDP for containment measures, as well as US$5 million (0.01 percent of GDP) to the SAARC COVID-19 Emergency Fund. The President has announced cash payments totaling around 0.25 percent of GDP for vulnerable groups. The 2020 H1 payment deadlines for income tax, VAT and certain other taxes were extended until end-Dec. Income tax arrears of SMEs have been partially waived off, more relaxed payment terms have been approved and legal actions against non-payers have been frozen. Other measures announced include tax exemptions for masks and disinfectant, additional energy subsidies, as well as concessional loans and food allowances for the poor. The President has also established a Task Force on Economic Revival and Poverty Eradication and a special fund for containment, mitigation and social welfare spending, inviting local and foreign tax-free donations. In late April, import duties on gasoline and diesel were increased to mitigate weak revenue collections, but this was reversed in late June.

Monetary and macro-financial

• The Central Bank of Sri Lanka (CBSL) has reduced monetary policy rates by 200 basis points since March. The required reserves ratio of commercial banks has been lowered by 3 percentage points, the liquidity coverage and net stable funding ratios have been reduced to 90 percent and the interest rate on CBSL advances to banks has been lowered by 650 bps. Commercial banks cannot declare dividends, share buy backs or increase payments to directors until end-2020. There is a debt repayment moratorium, including a six month moratorium on bank loans for the tourism, garment, plantation and IT sectors, and SMEs, with CBSL providing refinancing and concessional lending facilities of 1 percent of GDP, partially supported by a CBSL guarantee. In addition, the construction sector is eligible to borrow from banks with government guarantees. There will be a three-month moratorium on small-value personal banking and leasing loans. The interest rate on credit cards will be capped, for transactions up to a certain amount, with a reduction in the minimum monthly repayment. Financial institutions are also requested to reschedule non-performing loans, while capital conservation buffers and loan classification rules have been relaxed. In addition, state-owned institutions will invest in treasury securities to stabilize the money market rate at 7 percent.

Exchange rate and balance of payments

• The Sri Lankan authorities have introduced measures for a period of six months, aimed at restricting capital outflows, through suspension of outward investment payments. There are also import restrictions of certain goods, including some agricultural produce and ethanol, as well as prohibiting commercial banks facilitating imports of vehicles. Outward remittances have been suspended, while inward remittances will be exempted from certain regulations and taxes. On July 24, CBSL and the Reserve Bank of India entered a US$400 million swap under the Framework on Currency Swap Arrangement for SAARC countries.

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Sudan

Background. As of July 15, 2020, the steep rise in the number of new cases appears to have flattened. Several containment measures were put in place, including shutting-down borders, closing airports for passenger travel, closure of schools, prohibition of mass gatherings and suspension of prayer gatherings inside mosques in Khartoum state, and imposing daily curfew varying from 12 to 18 hours in different states. People returning from abroad were encouraged to observe a one-month quarantine. The economic impact from COVID-19 included increased price of basic foods, rising unemployment and falling exports, exacerbating the macroeconomic challenges the country was already facing. The negative supply shock combined with continued monetization of the fiscal deficit has increased the inflation to 136 percent as of June 2020.

Reopening of the economy. While the minister of health favored an extension in lockdown, the authorities in the Sudanese capital Khartoum announced easing of lockdown from 5:00 am to 6:00 pm and gradual return for work and movement as of July 8, with full commitment to necessary precautionary measures. The border with Egypt was also partially opened facilitating the return of about 2,000 Sudanese citizens stranded in Egypt due to border closure. The Sudanese authorities also announced the resumption of flights to/from Egypt, the United Arab Emirates and Turkey starting July 14, 2020, following a 4 month ban.

Key Policy Responses as of July 16, 2020

Fiscal

• The authorities have prepared a Multi-hazard Emergency Health Preparedness Plan guided by the WHO, which has identified priority areas to tackle the outbreak of COVID-19. According to the plan, the financing needs to cope with COVID-19 related health care is about $150 million. So far, domestic private sector has pledged to contribute $ 2 million to help the government, the government reallocated $3 million and UN and international partners are expected to donate $9 million. The US government has also announced a donation of $8 million, while the European Union announced a support package of EUR 70 Million. On April 9, the Islamic Development Bank was also reported to provide $35 million to Sudan, while the World Bank has announced a package of US$ 35 Million from its Headquarters based trust funds.

  The Minister of Finance announced measures to provide further support to people affected by the pandemic. Thirty (30) billion SDG have been allocated to support Sudanese health system, while 8.5 billion SDG have been earmarked to support the informal sector and families affected by the lockdown measures in Khartoum. Ministry of Trade and industry is also budgeted to spend SDG 10 billion to deliver essential commodities to local cooperatives, while SDG 4.5 billion have been allocated for unemployment benefits for employees previously working in the informal sector.

  While not directly related to COVID-19, the international community also pledged support of US$ 1.8 billion for the authorities’ broader macroeconomic and reform agenda during a Partnership Conference held in Berlin, Germany on June 25, 2020. While much of the funds will go to humanitarian assistance and projects, a sizable portion will support a Quasi Universal Basic Income (QUBI) program, which will cost US$ 228 million in 2020.

Monetary and macro-financial

• The government has drafted regulations on forbearance of loan repayments for three months to ease the pressure on private sector.

Exchange rate and balance of payments

• No specific measures are taken to deal with COVID-19.

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Suriname

Background. Suriname has had a second surge of COVID cases having eradicated the disease. As of July 1, there are 517 cases, 13 deaths, and 529 persons in quarantine. Despite this, Suriname is relaxing lockdown measures to include: curfew from 8pm to 5am; companies and organizations may maintain their normal opening hours except: hotels, casinos, places of worship, covered vegetable, fruit, meat and fish markets, brothels and bars; social distancing must be maintained and masks worn; gyms remain closed and contact sports remain prohibited; restaurants are open for pickup and delivery only; residents of old people’s and children’s homes may have 1 visitor per day; domestic flights of persons and goods are allowed under strict guidelines; meetings may not exceed 5 persons; and national borders remain closed. Schools are expected to reopen July 6, but teachers’ unions are not in agreement. New expanded measures for sealing the border were announced April 29, 2020 due to outbreaks in French Guiana along the eastern border of Suriname. Most government offices have limited hours or have closed completely. Suriname has received aid from Cuba in the form of medicine and 50 health professionals who are in the country to assist. The Pan-American Health Organization (PAHO), The Netherlands, and Brazil have also provided resources.

Key Policy Responses as of July 1, 2020

Fiscal

• SRD 5 million has been promised to a provisional COVID-19-related budget for health services. There are also funds being made available for Surinamese stranded abroad who cannot repatriate because of the ban on incoming flights.

  On April 8, the government passed the COVID-19 Exceptional Condition Act that is in force for 3 months and may be extended for another 3 months. The Act supersedes all prior law and consists of the following measures: provides 400 million SRD for health-related spending, converts all current government debt to the Central Bank to long-term debt and removes barriers to further monetary financing, removes the law on the public debt limit, allows the government to exceed the budget without having to inform the parliament, gives the government control over all media with regard to the crisis and allows the government to prosecute media for any news it deems as fake, grants the government power to take any unused private land or building for use to address the crisis.

  On May 11, the Minister of Finance announced two funds: one of SRD400 million to support unemployment, pensions, and assistance for children and one of SRD 300 million to support local production.

Monetary and macro-financial

• On May 20, the central bank announced that it would lower the domestic currency reserve requirement from 35% to 27.5%. The central bank has also instructed banks to provide loans to persons or businesses affected by COVID at an interest rate of 7.5%, below market lending rates. On the regulatory side, commercial banks may now grant 3 to 6 months deferral of payments to companies, institutions and individuals who are affected by COVID. If necessary, specific measures will be taken for each institution aimed at temporarily alleviating the solvency and liquidity requirements, but also tightening up the governance. In cases where an institution has temporarily deviated from the generally applicable guidelines, additional actions and reporting obligations will be imposed.

Exchange rate and balance of payments

• No measures.

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Sweden

Background. The first confirmed COVID-19 case was reported on January 31,2020. The government has implemented a range of measures to mitigate the spread of coronavirus including travel restrictions and social distancing measures. In addition, many secondary schools and universities have switched to distance learning. Some of these restrictions have been eased recently: secondary schools will return to regular instruction, and travel restrictions have been lifted.

Key Policy Responses as of July 16, 2020

Fiscal

• Based on the authorities’ estimates, the announced fiscal package including capital injections amounts to SEK 544 billion to SEK 832 billion (10.8 to 16.6 percent of 2019 GDP, respectively) depending on uptake (the debt and deficit impact may deviate from these amounts). Measures include (i) additional expenditures on wage subsidies for short-term leave, increase in transfers to relevant agencies to deal with the coronavirus outbreak and its repercussions, temporary payment of sick leave (also for sole traders), loans to SMEs, more funding to the media, cultural and sports sectors and for education and training, temporary rent subsidies to vulnerable sectors, temporarily more generous unemployment benefits, expanded active labor market policies, expansion of education, initiatives for green jobs and summer jobs for young people, temporary reduction of employers’ social security contributions, increased testing for COVID-19, additional general grants to municipalities and regions, temporary grants to businesses based on their loss of turnover to cover their fixed costs, more funding to train health workers, supplementary housing allowances to families with children, infrastructure investment, extra support to regional public transport, measures to prevent Covid-19 fraud, aid to regional airports, capital injections to SAS and state-owned enterprises (airport operator Swedavia and education and matching firm Lernia), increases in appropriations to public aviation and maritime agencies, and temporary compensation for people belonging to a risk group (SEK 267 billion); (ii) deferral of a maximum of three month worth of payments of companies’ social contributions, VAT and payroll taxes for a period of up to 12 months (SEK 27 billion if uptake similar to GFC, and SEK 315 billion if fully used by all firms), deferral of annual VAT for 2019 (SEK 7 billion) and deferral of SME taxes (SEK 13 billion); and (iii) credit guarantees for Swedish airlines, expansion of the Export Credit Agency’s credit guarantee framework and the Export Credit Corporation, state credit guarantees for loans to companies (in total SEK 230 billion). To support the international response, Sweden will contribute SEK 40 million to the WHO’s Contingency Fund for Emergencies.

Monetary and macro-financial

• Key monetary measures include: (i) reduction of the lending rate for overnight loans by 55 basis points to 0.2 percent (while leaving the repo rate unchanged at 0 percent); (ii) lending of up to SEK 500 billion to companies via banks; (iii) introduction of a new lending facility whereby banks can borrow unlimited amounts (given adequate collateral) with 3-month maturity; (iv) increase of purchases of securities of up to SEK 500 billion this year and next (where securities may include government and municipal bonds, covered bonds and securities issued by non-financial corporations); (v) the establishment of a swap facility of USD 60 billion between the Riksbank and the US Federal Reserve (mutual currency arrangement); (vi) the possibility for banks to borrow in US dollars against collateral of up to USD 60 billion (vii) easing rules for the use of covered bonds as collateral; and (viii) temporarily recognizing all credit institutions under the supervision of the Swedish FSA as counterparties, enabling them to access the new lending facility.

  Key macro-financial policies include (i) easing of countercyclical capital buffer by 2.5 percentage points; (ii) the possibility for banks to temporarily breach the liquidity coverage ratio (LCR) for individual currencies and for total currencies; (iii) suspension of amortization requirement through August 31, 2021 (banks and borrowers may agree to reduce or suspend amortization payments temporarily); and (iv) extension of the phase-in period for the banks to comply with the new minimum requirements for own funds and eligible liabilities (MREL) until 2024 (from 2022). Furthermore, the Swedish FSA has urged supervised banks and credit institutions to refrain from paying dividends.

Exchange rate and balance of payments

• No measures.

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Switzerland

Background. With over 33,000 confirmed cases (cumulative) and 1,688 deaths as of July 15, Switzerland has been one of the countries in Europe hit hard by COVID-19. The number of active and new cases has decreased sharply, but has also risen modestly since mid-June with somewhat greater mobility and more testing. On March 16, the Federal Council (FC) declared a national state of emergency, closing all shops, restaurants, bars and entertainment facilities and schools (with exceptions for food stores and pharmacies), prohibiting public gatherings of 5 people or more, and recommending that all citizens stay home. Some heavily-affected cantons imposed tighter restrictions on activities. The government also introduced controls at all its borders, with entry restrictions in place for citizens of both Schengen and non-Schengen countries. The drag from the containment and mitigation measures was exacerbated by external spillovers but partially mitigated by the authorities’ supportive policies. The economy contracted by 2.6 percent quarter-on-quarter in 2020Q1, worsening in Q2.

Reopening of the economy. Since mid-April, the authorities have followed a well-articulated 3-phase plan to gradually reopen the economy, making adjustments depending on developments. Activities and businesses such as medical and dental practices and hair salons resumed operations from April 27. A further easing on May 11 reopened primary and secondary schools, shops and markets, travel agencies, museums and libraries, and restaurants, bars and pubs, and allowed activities such as exams at educational institutions and some sports. By late-May/early-June, the number of new cases had declined sharply. Religious services, originally scheduled to resume on June 8, were allowed from May 28. On May 27, the FC decided to ease most of remaining restrictive measures from June 6, including permitting events with up to 300 people, and announced that the national state of emergency would conclude on June 19. Events with more than 300 but less than 1,000 people were allowed again starting from June 22, but those for 1,000+ people will remain prohibited until the end of August. Border restrictions have also been gradually loosened from May 11, in consultation with neighboring countries. On June 15, Covid-19 related entry restrictions were lifted for all EU/EFTA states and the United Kingdom. On July 6, the restrictions on the admission of workers from some third countries (i.e. outside the EU and EFTA) were lifted. On July 1, following a similar decision by the EU, Switzerland decided to reopen the borders to 13 non-EU countries and 5 EU countries outside the Schengen area from July 20. The lists of countries with which Switzerland has open borders and of high-risk locations with mandatory quarantine for arrivals to Switzerland are periodically reviewed. However, in view of the increasing volume of people travelling and the rising number of new infections since mid-June, the FC decided on July 1 to make masks compulsory on all public transport from July 6, and some cantons have reintroduced certain restrictions, such as limiting public events to 100 people.

Key Policy Responses as of July 30, 2020

Fiscal (federal level)

• The FC announced a series of federal-level support packages amounting to CHF73 billion (10.4 percent of 2019 GDP). A March 13 package (CHF10 billion) included up to CHF8 billion for partial unemployment compensation, CHF1 billion for financial aid to particularly-affected firms, CHF580 million for loan guarantees for SMEs, and the rest for loss compensation for cancelled events. A second package (March 20, CHF32 billion) included: (i) extension of short-time work allowances and simplification of the application process; (ii) a guarantee program up to CHF20 billion to support bridging loans to SMEs (details); (iii) temporary, interest-free deferral of social-security contribution payments for affected companies; (iv) extended payment periods for taxes and payables to federal suppliers without incurrence of interest on arrears; and (v) compensation for loss of earnings for self-employed people (SE) and for some employees affected by official measures to combat the coronavirus (e.g., parents who need to take care of children with closing of schools).On March 25, additional measures of around CHF600 million per month were introduced. An April 3 package doubled the size of the loan guarantee program to CHF40 billion. On April 8 and 16, the short-time work program was twice expanded to cover on-call workers and more SE, respectively. On April 22, the FC extended the loss compensation for SE to May 16, even if they had reopened their businesses on an earlier date; and expanded the loan guarantee program for startups. On April 29, the FC announced CHF1.9 billion credit support to airlines and aviation-related businesses. As of mid- July, the take-up of bridge loans under the federal guarantee program and assistance to self-employed has been lower than budgeted.

  Currently the focus of the government has shifted from providing emergency lifeline to the economy to fine-tuning various support measures and ensuring policy continuity as the country transitions back to a more normalized situation. On July 1, the government announced that it would: (i) provide additional financing help to public transport and rail freight companies; (ii) extend the revenue compensation for self-employed persons to mid-September; (iii) extend the maximum period of receiving short-time work compensation from 12 months to 18 months; (iv) scale back Covid-19 related financial support to international sports organizations; and (v) legislate a new law to regulate the bridge loan guarantee program beyond the period of national emergency.

Monetary and macro-financial

• To address liquidity bottlenecks, the FC on March 18 ordered a debt enforcement standstill from March 19 to April 4. The Swiss National Bank (SNB) activated a U.S. dollar liquidity swap line with the U.S. Federal Reserve, lowered the interest rate, offered a new 84-day maturity , and increased the frequency of the 7-day maturity operations from weekly to daily (reduced to 3 times per week since July 1). In addition, the SNB announced on March 19 that starting April 1, the threshold factor for exempting sight deposits from negative interest rates would be raised from 25 to 30. On March 25, the SNB introduced a new COVID-19 refinancing facility that would operate in conjunction with the federal government’s guarantees for corporate loans, allowing banks to obtain liquidity from the SNB. This facility was subsequently revised to allow use of loans guaranteed by cantons as a collateral. The SNB’s request for deactivation of the countercyclical capital buffer was approved by the FC on March 27. On July 1, the SNB adjusted the rate calculation for its liquidity-shortage financing facility, effectively lowering the borrowing cost from this facility. Through end-July, the SNB has maintained its policy rate at -0.75 percent. On the supervisory front, the Swiss Financial Market Supervisory Authority (FINMA) introduced a temporary exclusion of deposits held at central banks from the calculation of banks’ leverage ratio (extended on May 19, 2020 to until January 1, 2021). FINMA emphasized that the capital released from this relaxation should be used to support liquidity provision and is not to be distributed as dividends or other similar distributions related to 2019.

Exchange rate and balance of payments

• The SNB has increased its interventions in the FX market to limit appreciation of the Swiss franc. Sight deposits held at the SNB have increased by around CHF100 billion (or 14.3 percent of 2019 GDP) since early February, a proxy for the total amount of Swiss franc liquidity injected through FX interventions, repo operations, and the Covid-19 refinancing facility.

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Tajikistan

Background. Tajikistan reported its first confirmed COVID-19 case on May 1, 2020. The authorities have instituted a high-level task force and taken a range of measures to contain the spread of the virus, including border closures, travel restrictions, and suspending prayers at mosques. On June 5, Tajikistan President issued a decree on Countering the Socio-Economic Impact of COVID-19.

The COVID-19 pandemic has had a severe human and economic impact in Tajikistan. Trade and transportation disruptions have led to a sharp drop in remittances and government revenues and created urgent balance of payments and fiscal financing needs.

Reopening of the economy. On June 6, the government presented a reopening plan. Accordingly, bazaars, cafes, beauty and hairdressing salons, and barber shops along other businesses are expected to resume operations in Tajikistan starting on June 15. All businesses must adhere strict cautionary measures, including regular disinfection of premises and observance of social distancing. While restrictions on public transport will be removed and intercity travel remains open, international flights are not expected to resume until further notice.

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities are seeing a decline in revenues and higher spending. The authorities have requested disbursement under IMF Rapid Credit Facility instrument. On May 6, The IMF Executive Board approved a disbursement of US$189.5 million for budget support to help Tajikistan. Discussions with other development partners, including the World Bank and Asian Development Bank are ongoing on financial support to Tajikistan. The authorities are concerned about debt sustainability and are preparing consolidation measures that can be implemented over the medium term.

  The Government is providing VAT exemptions on essential imports, lump-sum assistance equivalent to minimum wage to vulnerable households and other socially disadvantaged groups. Health workers are to receive supplemental pay, while tariff increases on electricity, water, and communal services have been postponed until end of 2020. Government is providing free medical care to citizens placed under medical care and COVID-19 patients, as well as sick leave and compensation benefits. Government is providing grain, seed and fuel to farms to boost food security, and time-bound tax holidays and relief to targeted industries and small businesses until September 1, 2020. Anti-COVID measures also include financial support to SMEs and subsidizing food for population. Recently, Tajikistan was granted a debt relief around USD50 million under G20 DSSI initiative. These funds were also included to anti-COVID envelop under supplementary budget currently being discussed in the Parliament.

Monetary and macro-financial

• The NBT has taken measures to ease monetary and liquidity conditions and adopted an Action Plan to address effects of pandemic on the banking sector. It allowed a one-off 5 percent exchange rate depreciation in March and greater exchange rate flexibility to align the official rate with the market rate is also envisaged. The policy rate was cut by 100 basis points to 11.75 percent in April. On the face of mounting pressures, it lowered reserve requirements, relaxed enforcement of prudential requirements, and provided foreign exchange liquidity. It is also promoting the use of electronic payments to facilitate remote transactions.

  Prices of staple goods have pushed headline inflation around outside of the NBT’s target range in April – May, slowing to 8.4 percent in June. The Presidential decree mandated the Government to administer prices of key consumer goods and medical supplies.

  The NBT has relaxed enforcement of prudential requirements to ease banking pressures and maintain credit. In April, the NBT recommended the banks to review loan terms to support borrowers facing temporary difficulties. It also recommended banks to waive penalties for businesses and individuals that face hardships in repaying their loan obligations between May and October 2020. To accommodate these the NBT temporarily (until September) waived supervisory sanctions against those banks that are providing adequate loan loss provisions and as a result fail to meet capital adequacy ratio and liquidity ratio. Banks have already restructured over 60 thousand loans and these loans are being tracked separately. Despite a temporary waiver of penalties, credit institutions are required to ensure that established prudential requirements are met. The NBT has recommended that credit institutions not pay dividends or bonuses to shareholders, but keep these profits to boost capital. Credit institutions are exempt from paying fees for the settlement system and have been asked to avoid non-essential expenditures. To reduce the impetus for dollarization, the income tax rate for interest income on domestic currency deposits was lowered till end-December 2020 by 5 percent.

  In April, required reserve ratios were lowered from 3 percent to 1 percent and from 9 percent to 5 percent for local currency and foreign exchange deposits, respectively. Government plans to disburse preferential loans to food and medical supply producing companies through the Fund for State Support to Entrepreneurship. Interest rate on bank deposits have been lowered from 12 to 6 percent from July 1 to December 31, 2020. The NBT recommended the banks to consider restructuring (i.e extending maturity) loans that face temporary hardship.

   

Exchange rate and balance of payments

• The NBT allowed a one-off 5 percent depreciation of somoni to adjust the official exchange rate with cash market rate. Foreign exchange liquidity has been provided to banks.

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Tanzania

Background. The first confirmed cases was reported on March 17, 2020. Since early May, the authorities have not reported new cases. The authorities banned large gatherings (except for worship), suspended attendance to schools and educational institutions, cancelled international flights, and mandated the wearing of face masks in Dar Es Salaam.

Reopening of the economy. On May 18, 2020, the authorities lifted the suspension of international flights into and out of Tanzania. Effective June 1, 2020, the authorities allowed the opening of upper-secondary and tertiary schools and the resumption of sport activities and events. On June 29, 2020 all other educational institutions reopened. As a result, all the restrictions due to Covid-19 have been lifted by July 2020.

Key Policy Responses as of July 30, 2020

Fiscal

• Thus far, the government spent $8.4 million specifically related to deal with the effects of COVID-19. In addition, the government has received grants and will use contingency reserve of US$3.2 million to fund additional health spending to mitigate the risks of the pandemic.

  To support the private sector, the authorities indicated that they expedited the payment of verified expenditure arrears with priority given to the affected SMEs, paying US$376 million in March 2020. The government has also expanded social security schemes by US$32.1 million to meet the increase in withdrawals benefits for new unemployed due to COVID-19.

  In addition, the government has granted VAT and customs duties exemptions to imported medical equipment and medical supplies.

Monetary and macro-financial

• On May 12, the Bank of Tanzania (BoT) reduced the discount rate from 7 percent to 5 percent and reduced collateral haircuts requirements on government securities.

  Effective June 8, the BoT Statutory Minimum Reserves requirement is reduced from 7 percent to 6 percent. In addition, the BoT will provide regulatory flexibility to banks and other financial institutions that will carry out loan restructuring operations on a case-by-case basis.

  Lastly, the daily transactions limit for mobile money operators was raised from about US$1,300 to US$2,170 and the daily balance limit was raised from US$2,170 to US$4,340.

Exchange rate and balance of payments

• No measures.

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Thailand

Background. The first confirmed COVID-19 case was reported on January 13, 2020. Recent cases have been identified upon entry to the country and no reported local transmission since late May. A state of emergency, instituted on March 26, has been extended to end-August. International flights transporting Covid-19 passengers are banned from transiting through Thailand. Covid-19 led to a 1.8 percent contraction, year-on-year, in Q1-2020 GDP.

Reopening of the economy. Easing of Covid-19 containment measures entered the fifth phase on July 1. In phase 5, schools and high-risk entertainment venues, such as pubs and massage parlors, reopened; and 40 long-distance and tourism trains resumed services. The ban on international flights has been partly lifted to allow entry of foreigners with residence permit or whose spouses or children are Thai citizens; some medical patients; school and university students and their guardians; and investors and invited VIPs. The mandatory 14-day quarantine does not apply to diplomats, but they must get tested at the airport. Thailand’s medical tourism and wellness program is expected to go ahead. The first group, medical tourists, have begun arriving. More than 100,000 migrant workers from nearby Myanmar, Cambodia and Laos will be allowed entry starting in August. Plans for a travel bubble plan for leisure travelers expected in August has been postponed in view of renewed outbreaks in some of the countries in the region.

Key Policy Responses as of July 30, 2020

Fiscal

• Cabinet has approved a fiscal package with phases I, II, and III amounting to at least 9.6 percent of GDP or THB 1.5 trillion including: i) health-related spending; ii) assistance for workers, farmers, and entrepreneurs affected by Covid-19 (includes THB 5,000 per month per person for three months to about 14 million non-farm workers outside the social security system and 10 million farmers); iii) support for individuals and businesses through soft loans and tax relief; (iv) lower water and electricity bills, and social security contributions; and (v) measures to support local tourism with THB 22 billion in subsidies for tourists and THB 100 bn in soft loans for SMEs in the sector. While part of this would be financed within the original FY 2020 budget or by reallocating funds from other financial assets to soft loans, 5.3 percent of GDP or THB 1 trillion in additional borrowing has been authorized. Parliament is deliberating a THB 3.3 trillion budget bill for the 2021 fiscal year.From July 15 until end-October, there is also a tourism subsidy package, “We Travel Together,” covering up to 40 percent of certain travel costs for up to 5 million domestic tourists who must register. 4.65 million registrations have been received so far and 1 percent of the trips have already taken place.

Monetary and macro-financial

• The policy rate has been reduced by 75 bps from 1.25 to 0.50 percent during 2020 and the contribution from financial institutions to the FIDF was reduced from 0.46 to 0.23 percent of the deposit base to provide space for future decreases in lending rates. In addition, measures to help businesses include: (i) soft loans by the Bank of Thailand (BOT) to financial institutions amounting to THB 500 billion for on-lending to SMEs; the government covers the first 6 months of interest and guarantees up to 60-70 percent of these loans; (ii) relaxation of repayment conditions for businesses including a loan payment holiday of 6 months for SMEs; and suspension of principal and reduction of interest on the debts to SFIs.

  Measures to support stability in the financial sector include: (i) a Corporate Bond Stabilization Fund (BSF) established for the BOT to provide bridge financing of up to THB 400 billion to high-quality firms with bonds maturing during 2020-2021, at higher-than-market ‘penalty’ rates; (ii) BOT purchase of government bonds to ensure the normal functioning of the government bond market; (iii) reduction in BOT bond issuances; and (iv) a special facility to provide liquidity for mutual funds through banks.

Exchange rate and balance of payments

• The BOT has provided some liquidity in the FX market thereby avoiding disorderly market conditions while also allowing the exchange rate to adjust.

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Timor-Leste

Background. The Democratic Republic of Timor-Leste has 24 confirmed case of COVID-19 as of July 30, 2020, with no active case reported for more than two weeks. On March 27, the President declared  a State of Emergency, effective from March 28 to April 26. On April 27 the government extended it until end-May. Containment and mitigation measures include: (i) suspending collective passenger transport, obligating all individuals to wear masks and to wash their hands before entering commercial or service establishments, and maintaining social distance; (ii) closing all schools and training facilities; (iii) restricting international travel, including the prohibition of entry of foreigners into national territory; (iv) imposing compulsory isolation to all those infected with the new Coronavirus; (v) prohibiting meetings or demonstrations involving the agglomeration of more than five people and any social, cultural and sporting events; (vi) limiting public administration to essential public services; and (vii) extending validity of licenses, authorizations, visas and residence permits, and other administrative acts and documents.

Reopening of the Economy. The Timorese authorities have started to lift some of the measures in June. On July 1, the government lifted the state of emergency. As of July 22, 80 percent of schools (both high school and primary school) have reopened since June.

Key Policy Responses as of July 30, 2020

Fiscal

• On April 20, the government approved a stimulus package (US$150 million, about 10.5 percent of GDP) to manage economic and financial risks from the COVID-19 including: (i) cash transfers with a monthly basic income to over 214,000 households, worth US$100 per month per household, lasting for 3 months; wage subsidies (60 percent of the wage cost) for formal sector employees (for 30,000 workers); (ii) the purchase of three months emergency supply of rice; (iii) maintaining transportation channels for movement of essential goods and medical/emergency goods; (iv) waiving for three months (for low-income households) the payment of electricity (up to US$15 per month), water bills, property rental payments owned by the government and social security contributions;(v) provide stipends to over 4,200 Timorese students studying overseas; and (vi) deferral of tax payments for two months.

Monetary and macro-financial

• On April 29, the authorities decided to extend access to the Credit Guarantee System to micro-enterprises, increasing the type of economic activities eligible for the program. On May 11, the authorities introduced a moratorium on the fulfillment of capital and interest obligations arising from credit agreements, which delayed maturity by three months and reduced debtors’ interest payment obligation to 40% of the original amount with the remaining 60% financed by the government.

Exchange rate and balance of payments

• No measures.

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Togo

Background. The first confirmed COVID-19 case was reported on March 7, 2020. The number of active cases has been trending upward . Given its position as a regional transportation hub (serving as a base of a pan-African airline company) and strong trade ties with Asia, Togo is particularly exposed to the COVID-19. In order to contain the outbreak, Togo has taken a series of measures including closing land borders and airspace to flights from countries with high infection rates. Entries for non-citizens from countries with high infection rates are banned. Nationals and permanent residents are subject to a mandatory quarantine for 14 days upon entry. Official travels to risky countries and gatherings of more than 100 people are banned until further notice. Furthermore, all sport or cultural events have been adjourned.

Reopening of the economy. The curfew affecting Lomé and its surroundings was lifted on June 9. Schools have been reopened for students that are participating in examinations.

Key Policy Responses as of July 30, 2020

Fiscal

• The National Assembly has authorized the Government to rule by decrees for a period of 6 months to accelerate the decision-making process. Togo was one of the first African countries to respond to the crisis, developing and quickly implementing the most urgent components of a comprehensive, multi-year response plan that aims to protect lives, livelihoods, and future growth prospects. This comprehensive economic and social resilience plan seeks to upgrade the health system, contain the economic fallout of the crisis, and provide targeted support to vulnerable households and firms. It is comprised of measures targeting:

  Health: To prevent the spread of the virus, the President declared a health state of emergency on April 1 that is currently extended to August 16. This triggered the implementation of a set of containment and mitigation measures, including strengthening laboratory diagnostic capacity, equipping treatment centers, improving drug availability, and the launch of a vast program to rehabilitate hospitals and to provide health centers with standard infrastructure to screen and treat people with COVID-19. Imports of medical equipment and other products used exclusively in the fight against COVID-19 have been exonerated from taxes and duties. The estimated costs of the total multi-phase health plan are CFAF 110 billion ($187 million; 3.3 percent of GDP), of which CFAF 20.8 billion ($34 million; 0.6 percent of GDP) for the immediate COVID-19 response and the remainder for the strengthening of the health system.

  Social objectives: A new mobile cash-transfer program, NOVISSI, aiming to support informal workers was launched in April. Eligible applicants receive a state grant of at least 30 percent of the minimum wage, with payouts from CFAF 10,500 ($18) to CFAF 20,000 ($34). Based on program data, 65 percent of the beneficiaries are women. The Novissi program was revised in late June with eligibility limited to workers in specific districts recording a high contagion rate. In total, 1.4 million individuals have registered and close to 600,000 have received a NOVISSI payment at a total cost of CFAF 11.4 billion ($19 million; 0.3 percent of GDP) so far. The Government has also subsidized water and electricity use for groups paying social tariffs for three months. The total cost is estimated at CFAF 6.6 billion ($12 million; 0.2 percent of GDP).

  Economic recovery: The Government has adopted a series of tax policy and administrative measures to prepare the country for the future economic recovery. The standard VAT rate of 18 percent has been reduced to 10 percent for firms in the hospitality and catering sectors. Tax audits and penalties for the late payment of taxes due in the second quarter of 2020 have been suspended. For companies already audited, penalties will be reviewed considering the impact of COVID-19. Businesses that cannot submit their tax declarations on time will be supported by new submission deadlines. Small- and medium-sized enterprises benefit from special procedures that allow them to pay taxes in tranches and enjoy more flexibility regarding outstanding taxes due. Small-scale farmers have received vouchers for the purchase of inputs with the total cost estimated at CFAF 5.5 billion ($10 million; 0.2 percent of GDP). 

  Financing for the response is severely constrained. Relative to the original budget for 2020, revenue collections are expected to fall by CFAF 170 billion ($305 million; 5.1 percent of GP) in the baseline scenario, but a revenue shortfall of up to 8 percent of GDP is conceivable in a worst-case scenario. The decline is attributed to both slower economic growth and the tax measures in response to the pandemic. The Government estimates that expenditures under the multi-year COVID-19 response program could be as high as CFAF 400 billion ($680 million; 11.8 percent of GDP). To meet these needs, the Government has established a national solidarity fund, to include contributions from the state budget, development partners, and voluntary donations from the private sector and the Togolese diaspora. The IMF has already provided significant financing, approving an ECF disbursement (with an augmented quota) of US$131 million, while bilateral donors have focused on providing project support. The solidarity fund is still underfinanced.

  Heads of states of the West-Africa Economic and Monetary Union (WAEMU) have declared a temporary suspension of the WAEMU growth and stability pact (setting six convergence criteria, including the 3 percent of GDP fiscal deficit limit) to help member-countries cope with the  fallout of the Covid-19 pandemic. As a result, member countries are allowed to raise their overall fiscal deficit temporarily and use any additional external support provided by donors in response to the Covid-19 crisis. The declaration by the heads of states sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial

• The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks’ demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted of a full allotment strategy at a fixed rate of 2.5 percent (the minimum policy rate) thereby allowing banks to satisfy their liquidity needs fully at rate about 25 basis points lower than before the crisis. 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 announced: (i) an extension of the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month “Covid-19 T-Bills” to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued by Togo amounts to 3.2 percent of GDP. 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 as initially planned.

Exchange rate and balance of payments

• No measures.

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Tonga

Background. As of July 30, 2020, there have been no reported COVID-19 cases in Tonga. Nevertheless, the economy is being hit hard by a sharp slowdown in partner countries, which are an important source of remittances and tourism for the economy, and the containment measures that have been imposed. The Government of Tonga has been introducing increasingly restrictive containment measures since January 2020. In March 2020, it declared a state of National Emergency and toughened measures for incoming travelers (including international cruise ships and yachts passengers) before prohibiting all passengers flights into the country. Other preventive measures include a national lockdown, a national curfew, the closure of non-essential businesses and public facilities, movement restrictions and the prohibition of public gatherings.

Reopening of the economy. The authorities started easing restrictions on April 12, 2020, by lifting the national lockdown, and domestic restrictions were further eased on June 11, for example by further reducing curfew hours and removing the prohibition on contact sports. The state of National Emergency and the border closure, however, have been extended until August 4 and September 12, respectively.

Key Policy Responses as of July 30, 2020

Fiscal

• Based on an initial assessment of the overall impact of COVID-19 on the economy, the Government of Tonga announced an Economic and Social Stimulus Package of 60 million Tongan pa’anga (5.3 percent of GDP) for FY2020 on April 2, 2020. This package was intended to provide short-term assistance to all affected sectors in response to the COVID-19 pandemic. Over a third of the funds were to be directed to the health sector, while the rest were to support the other sectors, including tourism, transport, agriculture, education and security. In addition, the Government of Tonga announced a 3-month moratorium on Government Development Loans & TC Gita Recovery Loan Fund, deferral of retirement contributions and hardship allowances for laid-off employees (up to 3 months), needs-based financial assistance, tax and duty relief during the pandemic, and assistance with the payment of utility bills by public enterprises. The FY2021 budget, approved by Parliament on June 22, envisages a deficit of 37.4 million Tongan pa’anga (some 3½ percent of GDP) for FY2021. Spending on health has been identified as one of the top priorities for the government, accounting for 21 percent of the total budget of 589.6 million Tongan pa’anga.

Monetary and macro-financial

• On March 19, 2020, the National Reserve Bank of Tonga (NRBT) Board approved the provision of liquidity support to the banking system. It also committed to easing exchange control requirements if needed. Monetary policy, which has been accommodative given low inflation and slow economic recovery, remained on hold. The NRBT is also meeting weekly with banks to ensure there is clear communication, enhanced preparedness and best practices. It is supporting banks in their effort to mitigate the negative impact of the COVID-19 virus on the economy as well as provide essential financial services to households and businesses. Commercial banks are assisting their customers affected by the COVID-19 virus on a case by case basis and depending on individual customers’ circumstances by: (i) reducing or suspending the principal loan repayments to interest only loan repayments; (ii) restructuring loans to businesses that have reduced business hours, in affected sectors such as tourism and related industries like transportation and to individuals who have been laid off; (iii) extending the terms of loans to reduce repayments; (iv) reducing loan interest rates on a case by case basis; and (v) providing access to short-term funding, if required. The NRBT is also building awareness and expectations through press releases.

Exchange rate and balance of payments

• The exchange rate remains pegged against a basket of currencies (within a ±5 percent monthly adjustment limit). No new exchange restrictions have been announced. International reserves remained relatively constant at around 7.4 months of imports from the beginning of the year until end-May 2020 – before rising sharply to 8.2 months of imports (543.8 million Tongan pa’anga) by end-June 2020 – due to the inflow of budget support and grants from international donors and import compression.

Links

http://www.gov.to/category/covid-19-press-release/

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Trinidad and Tobago

Background. Trinidad and Tobago is being hit by two shocks, the spread of COVID-19 and the sharp decline in oil prices. The first confirmed case was reported on March 12, 2020 and the number of positive cases has increased slightly in recent months. The government has adopted containment measures, including border closures, travel restrictions, school and university closures, and limits on social gatherings.

Reopening of the economy. The government has put in place a six-phase reopening plan starting May 10. As of June 22, all economic activities resumed, including sporting activities, malls, restaurants (in-house dining), cinemas, casinos, bars, gyms, amusement parks, zoos, and beaches, while public servants returned to work on a flexible basis. Educational institutions were reopened for examinations only, while schools will remain closed until September. The country’s borders will remain closed until further notice.

Key Policy Responses as of July 30, 2020

Fiscal

• The fiscal package of March 23 includes (i) salary relief for up to 3 months to workers who are temporarily unemployed or have reduced income; (ii) VAT and income tax refunds to individuals and SMEs; (iii) liquidity support to individuals and small businesses via credit union loans at reduced interest rates and long repayment periods; (iv) grants to hoteliers to upgrade of their facilities; (v) food, rental and income support for low-income vulnerable groups; and (vi) import duty and VAT waivers on imports of certain medical and emergency supplies. On March 26, the Prime Minister announced that the Ministry of Health will receive additional funding to deal with COVID-19, including spending on medical equipment and supplies, human resources, and infrastructure.

Monetary and macro-financial

• On March 17, the central bank reduced the policy rate by 150 bps to 3.5 percent, and the reserve requirement on commercial bank deposits by 300 bps to 14 percent. As a result, commercial banks have reduced the prime lending rate to an average of 7½ percent, from 9¼ percent previously. Additionally, commercial banks agreed to provide a 1-month moratorium on mortgages and installment loan payments, without any penalty; and to waive penalty interest on overdraft facilities. Several banks have offered automatic deferrals for a period of up to 6 months on loans or credit card payments due. Other government housing institutions have provided similar relief to their customers with 2 to 6 months payment deferrals. Money lenders allowed deferred payments and reduced interest rates. Credit cards have reduced interest rates and increased credit limits.

Exchange rate and balance of payments

• The government has established a special foreign exchange window, through the Exim Bank to ensure the uninterrupted supply of basic items such as food and pharmaceuticals for 3 months.

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Tunisia

Background. Tunisia reported its first confirmed case on March 2, 2020. Thanks to a proactive action from Tunisian authorities in taking the necessary sanitary steps by declaring national state of emergency and adopting confinement measures, the pandemic is still contained, the number of daily contaminated cases is low, and a large part of which are imported cases. Tunisia has begun on June 4, 2020 a strategy of complete deconfinement and the opening of borders has been done on June 27, 2020. The COVID-19 shock comes at a time when Tunisia is already facing persistent macroeconomic imbalances.

Reopening of the economy. On April 29, the national security council announced several measures to ease economic restrictions by adopting a three phases plan depending on the activity sector. The first is from May 4 and concerns the most affected sectors, i.e individuals and craftsmen, manufacturers especially export firms, with the condition of adopting some sanitary measures. The second step will begin May 24 and concerns hypermarkets, cafes and other individuals for which the social distancing would be hard to establish, and the third phase is from June 4 would be the total deconfinement. During this transition period, only 50 percent of the public sector will get back to business. On June 27, 2020 Tunisia has started easing the international restrictions and opening frontiers progressively, by establishing three types of countries lists, classified according to the pandemic risk, and specified measures that should be taken accordingly.

Key Policy Responses as of July 9, 2020

Fiscal

• A 2.5 billion TND emergency plan ($0.71 billion or 1.8 percent of GDP) was announced on March 21. The package includes the postponement of CIT payments, other taxes and social contributions, VAT exemptions, VAT refund procedures and reimbursement acceleration, rescheduling taxes and custom arrears, and others in order to provide liquidity to the private sector, limiting layoffs and protecting the most vulnerable population especially in the informal sector. The plan also includes an expansion of the budget allocation for health expenses as well as the creation of a 100 TND Million fund for the acquisition of equipment for public hospitals. From the social side, this also includes cash transfers for low income households, disabled and homeless people (450 TND million for three months). The plan also includes a support for those who will be on temporary unemployment because of the COVID19 shock (300 TND million).

Monetary and macro-financial

• The CBT has reduced its policy rate in March by 100 bps. On March 20, the CBT announced a package to support the private sector, by asking banks to defer payments on existing loans and suspend any fees for electronic payments and withdrawals. The central bank has also asked banks to postpone credit reimbursement by employees for a period of 3 or 6 months, depending on the net revenue level. Besides, the government announced a set of financial measures including the creation of investment funds (600 million TND), a state guarantee for new credits (500 million TND), the activation of a mechanism for the state to cover the difference between the policy rate and the effective interest rate on investment loans within a cap of 3 percent.

Exchange rate and balance of payments

• No measures.

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Turkey

Background. The first case of COVID-19 was reported on March 11, 2020. The government adopted multiple containment measures to address the pandemic including: social distancing, curfews, travel bans along with quarantines for returning nationals, and the closures of schools/universities, stores, and entertainment venues. The Health Minister announced that the government will launch nationwide coronavirus antibody tests on June 15, covering some 153,000 randomly selected people across all 81 provinces, GDP rose by 4.5 percent y-o-y over the first quarter of 2020, slowing down from 6.0 percent y-o-y over the last quarter of 2019.

Reopening of the economy. On May 4, following reported improvements in Covid-19 statistics, the government announced a phased approach to lifting lockdown measures from May to July. In the first phase, certain retail shops opened from May 11, while plans were announced regarding universities and the judiciary resuming their activities in mid-June. In late May, the authorities announced their intention to lift most of the COVID-related restrictions, effective from June 1, including: removal of travel restrictions between 15 major cities, reopening of restaurants, cafes, sporting facilities and government institutions, and the resumption of domestic flights. On June 10, a new reopening measures were announced, including the phased resumption of international flights, with plans to fly to 40 countries by the end of June; curfews on people aged below 18 and over 65 were eased; and opening times for restaurants, cafes, and similar businesses were extended. Primary and secondary schools will start the 2020-2021 education year on Aug 31. On June 12, Turkey opened all of its land borders, with the exception of Iran. All those entering Turkey will undergo medical screening upon entry into the country. In mid-June, the authorities announced some targeted measures in response to an uptick of reported Covid-19 cases, including: the mandatory use of face masks in public areas in Istanbul, Ankara and Bursa, and the reinstatement of limited weekend curfews (related especially to nationwide high school and higher education entrance exams). On June 25, restrictions on travel for tourism purposes by citizens aged 65 were eased. On June 30, the nationwide ban on layoffs was extended by one month, following the expiration of the current ban on July 17. Turkey and Russia have agreed to resume flights as of Jul 15.

Key Policy Responses as of July 30, 2020

Fiscal

• A TL100 billion package was announced. This consists of TL75 billion ($11.6 billion or 1.5 percent of GDP) in fiscal measures, as well as TL 25 billion ($3.8 billion or 0.5 percent of GDP) for the doubling the credit guarantee fund. Key support measures included (i) raising minimum pension and cash assistance to families in need, (ii) increased employment protection by loosening short-term work allowance rules (iii) reduced/postponed taxes for affected industries (eg. tourism), and also for citizens over 65 or with chronic illnesses, (iv) extension of personal and corporate income tax filing deadlines, (v) easing of households’ utility payments to local governments, (vi) a ban on layoffs, initially, for three months, with a state subsidy for affected staff, (vii) state payment of two-thirds of workers’ salaries in affected firms, (viii) debt relief for local governments’ earmarked revenues, (ix) 32,000 additional medical staff hired and performance payments maximized, (x) allowances of social assistance and solidarity foundations increased, including accelerating support for farmers, (xi) direct support to Turkish Airlines and other affected entities, and (xii) Turkey Wealth Fund (TWF) given new rights to buy stakes in distressed firms, (xiii) TWF was assigned to inject a core capital of 0.4 percent of GDP into three state banks, funded by issuance of Treasury bonds. In June the authorities indicated that with additional policy measures, total measures to counter the effect of the Covid-19 pandemic rose to over TL 498 billion (US$ 72 billion or 10.8 % of GDP), including deferred loan repayments. The Banking and Insurance Transaction Tax rate on real persons’ foreign exchange and gold purchases was raised to 1% from 0.2%, and the withholding tax on interest income on banks’ commercial bonds was raised to 15% from 10%, according to a statement in the Official Gazette on May 24. On June 19, a new law raised the upper limit of the Treasury’s special-purpose domestic government bond issuance to 5 percent of the 2020 budget revenue forecast (previously the limit was 3 percent). On June 30 , the short-work allowance system that provides income support to employees of fully or partially closed businesses due to force majeure was extended by one month.

Monetary and macro-financial

• The CBRT has lowered the policy rate by a cumulative 250bps to 8.25 percent as of July 23.  A package of financial measures was introduced at the onset of the Covid-19 pandemic. Specifically, liquidity facilities were augmented, including with longer-term instruments and at discounted rates. The reserve requirements on foreign currency deposits were reduced by 500 bps for banks meeting lending growth targets. A new TL lending facility for SMEs in the export sector was set up. Exporters’ inventory financing is being supported by extending maturities for existing and new export rediscount credits. A second package of CBRT measures (March 31) allowed for an increase in outright purchases of sovereign bonds, and broadened the pool of assets for use as collateral in CBRT transactions. A third package of measures of CBRT increased the upper limit for CBRT’s funding through Open Market Operations and regulated the primary dealer banks outright sovereign bond sales to the CBRT to maintain market depth, strengthen the monetary policy transmission mechanism and support the Primary Dealership system. The bank regulator announced forbearance measures, primarily to limit the accounting impact of TL depreciation and fall in securities’ prices. The LTV limit on mortgages was raised from 80 to 90 percent. The minimum payment for individual credit cards was reduced to 20 percent, and banks postponed repayments on credit card loans for housing, consumer and vehicle purchases. Bank regulator implemented a new regulatory ratio incentivizing banks support for the real economy and government financing Public banks granted firms affected by the crisis a 3-month moratorium on bank loan repayments (principal and interest). Debt enforcement and bankruptcy proceedings (except in alimony cases) have been suspended. Firms’ dividend payments limited to 25 percent of 2019 profits. Exporters will be provided with inventory financing, and reimbursement of rediscount credits have been extended by 90 days.

  On May 20, the CBRT announced that the overall limit of the bilateral swap agreement between Turkey and Qatar was increased from US$ 5 billion to US$ 15 billion equivalent. On May 29 the BRSA amended the calculation of the Asset Ratio (AR), imposed on banks to be effective as of May to encourage domestic lending through long term funding.  On June 1, Public deposit banks Ziraat Bank, Halkbank and Vakifbank launched new retail loan campaigns for house purchases and consumer spending. On June 3, the withholding tax on returns from FX mutual funds was raised to 15 percent from 10 percent for real persons and zero for legal persons, and the Capital Markets Board (SPK) imposed some limitations on the portfolio composition of FX mutual funds. On June 5, the CBRT announced the reallocation of TL 20 billion of the TL 60 billion TL rediscount credit facility for exporters towards advance loans for investment in support strategic projects. On June 9, BRSA raised the upper limit on instalment plans for credit card purchases of services from airlines, travel agencies and hotels to 18 months from 12 months. In June, the Capital Markets Board lifted the ban on short-selling transactions for the top 30 shares on Borsa Istanbul (BIST). On July 10, the CBRT reduced the remuneration rate – the annual rate of interest that it pays on the Lira ira required reserves, by 1.0 pp to 5.0 percent. On July 10, the BRSA loosened the macro-prudential restrictions on credit card spending by low-income households and those households in arrears for credit card repayments. On July 18, the CBRT raised the reserve requirement ratios for all types and maturities of foreign exchange liabilities by 300bps for all banks. On July 28, the BRSA exempted international development banks from some of the restrictions on access to lira liquidity.

Exchange rate and balance of payments

• No measures.

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Turkmenistan

Background. According to official media, there have been no diagnosed cases of COVID-19 as of July 30, 2020. In January 2020, the Extraordinary Commission on combatting the spread of disease was set up. The authorities adopted a wide range of measures to prevent a COVID-19 outbreak, including closure of borders, flight cancellations and rerouting, and mandatory COVID-19 testing for arriving travelers. Starting from March 19, Turkmen citizens and citizens of other states were not allowed to enter Turkmenistan without a certificate of absence of COVID-19. From March 20 to April 20, foreign nationals were barred from crossing the state border of Turkmenistan. The authorities imposed restrictions on internal movement, closed roads between some provinces, and restricted rail transportation. Starting from March 24, 2020, all sports events and athletes’ training were cancelled in Turkmenistan, and gyms and sports clubs were shut down in Ashgabat, although the latter measure was reversed on April 1. School holidays were extended by one week till April 6.

On July 16, the following additional measures were taken:

• Wearing of masks was made mandatory in all the public places. People were encouraged to stay home. Some major shopping and some banquet and weddings halls were closed for ten days.
• The media educated people about the importance of wearing masks, social distancing, and healthy lifestyle to boost immunity.
• Hand sanitizers, nose gel, and anti-bacterial wet wipes were made available free of cost at the entrance of every market, shop and office. Temperature of visitors was measured at the entrance of every shopping center and at entry/exit points of urban areas.
• Intercity bus and train services were suspended for ten days.
• Mobile vans of healthcare services visited remote and rural areas to provide medical masks and sanitary supplies at subsidized rates.
• Air in some areas was disinfected through aerial sprays. The cargo at all the road, rail, and air points was fumigated and disinfected before entering the territory of Turkmenistan.
• Some major shopping centers are closed for ten days. Some banquet and weddings halls are closed for ten days. People are encouraged to stay home.

In consultation with the WHO, the authorities issued guidelines for preventing the spread of COVID-19 in March 2020. A WHO mission visited Turkmenistan during July 6-15, 2020. The mission inspected the healthcare facilities in several provinces and held meetings with the healthcare and other officials. The head of mission, Ms. Smallwood, underscored that even though there were no COVID-19 cases registered in Turkmenistan, the country should continue taking measures to prevent the spread of the virus.

According to the official press, starting in March 2020, medical institutions were provided with the necessary supplies and protective equipment. The authorities launched a respiratory virus awareness campaign and a COVID-19 hotline. On May 22, the president signed a decree approving Preparedness and Response Plan to Acute Infectious Disease.

The authorities stepped up efforts to digitalize government services, expand e-commerce, and facilitate online and phone payments by SMEs and SOEs through banks.

Key Policy Responses as of July 30, 2020

Fiscal

• State budget spending is being revised, including to increase health spending for preventing an outbreak of COVID-19 and to provide support to businesses (possibly through tax relief, bank loans, and assistance in providing raw materials) affected by the containment measures.

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• The President approved the list of goods subject to customs duties and the magnitude of such duties. Custom duties on selected goods were raised to protect domestic suppliers. In addition, starting from March 24, 2020, only Turkmen freight carriers were allowed to transport cargo in Turkmenistan.

  In April 2020, special regime was established for essential and high-priority imports and projects, which covers foreign currency rationing and transportation arrangements. A commission was set up for the purchase of essential supplies, medicines, construction equipment, etc. The commission was authorized to screen and ration requests to convert local currency into foreign currency for imports.

  Exchange restrictions on current international payments and transactions were tightened. From May 15, Turkmen companies engaged in exports are required to surrender 100 percent of their foreign currency income at the official exchange rate, instead of 50 percent previously.

  On May 22, the president signed a decree on the establishment of the Reserve Currency Fund. According to the decree, the holder of the Fund will the Central Bank of Turkmenistan. The Fund will accumulate currency earnings of the ministries, industry departments, their subordinate enterprises, institutions, and all legal entities with public shareholding.

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Tuvalu

Background. As of July 30, Tuvalu has no reported cases of COVID-19 within its borders. Tuvalu has established a COVID-19 National Taskforce that will act as an Advisory body to Cabinet and provide updates on a regular basis. The Taskforce has recommended, and Cabinet approved, a 14 days quarantine period for anyone traveling into the country that has transited or originated their travel in a high risk country. Quarantine is being observed in Fiji, or if someone was to slip through the net, they would be isolated in Tuvalu for 14 days to observe the same 14 days quarantine period. The State of Public Health Emergency, which was first declared on March 20, 2020, was extended for six month on March 26, 2020.

Key Policy Responses as of July 30, 2020

Fiscal

• The Government has released Tuvalu’s strategic COVID-19 Economic and Financial Relief Package on May 6, 2020. The document lays out measures to respond to the health and other risks and serves as a reference to mobilizing external support for accessing the COVID-19 facilities. The document includes the Talaaliki Plan, which forms a worst-case scenarios of (i) food, fuel and other essential imported goods become unavailable; and (ii) an outbreak (i.e., one confirmed case) of COVID-19 in the country.

  The Government has approved AUD 189,000 under the first supplementary appropriation as a Coronavirus contingency fund on March 24, 2020. These budgets are allocated for COVID-19 responses such as specialized medical equipment, enhanced laboratory capabilities, upgrading of health facilities and increased surveillance measures to address the coronavirus threat, and for a support the private sector and lifelines of the capital and outer islands.

Monetary and macro-financial

• No measures.

Exchange rate and balance of payments

• No measures.

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Uganda

Background. Coronavirus positivity rates are low compared to neighboring countries and the number of active cases remains limited, albeit rising. Testing capacity has increased, and hospital are currently not under strain. Schools are closed, all commercial flights are suspended, and the country remains closed to international passenger travel. Several measures are in place to mitigate the transmission from neighboring countries through Uganda’s porous borders. To contain pressure on hospitals, the authorities have identified additional space for patient management and recruited additional staff/ volunteers to assist with the management of the pandemic. Funding for scaling up testing is being mobilized.

Reopening of the economy. Uganda has gradually relaxed one of the most stringent lockdowns in the region that started in late May by: (i) allowing the movement of private cars, albeit with a limit in place on number of passengers; (ii) reopening sequentially merchandise shops; (iii) relaunching public transport with strict regulation on passenger capacity and obligation to wear masks; and (iv) shortening the curfew to 9.00 PM–5.30 AM.

The Consultative Meeting of the East African Community (EAC) heads of state held on May 12th agreed on a harmonized regional response to the COVID-19 pandemic that includes: (i) adopting a harmonized system for certification and sharing of test results; (ii) establishing a regional mechanism for testing and certifying truck drivers and the adoption of an EAC digital surveillance and tracking system for drivers and crew; (iii) supporting agro-processing and value chains; and (iv) establishing special purpose financing schemes for SMEs.

Key Policy Responses as of July 22, 2020

Fiscal

• The authorities have used part of their Contingency Fund in the FY2019/20 budget to finance the Ministry of Health Preparedness and Response Plan from January with approximately $1.3 million to June 2020. Two supplementary budgets have increased the spending envelope for critical sectors and vulnerable groups by about US$370 million. In addition, the government has announced the following measures:

• i. accelerating import substitution and export promotion by providing additional funding to the Uganda Development Bank (UDB), recapitalizing the Uganda Development Cooperation (UDC) and accelerating the development of industrial parks;
• ii. increasing agriculture production and productivity by boosting funding for agriculture inputs and entities that support the sector;
• iii. increasing households’ incomes by providing additional funding to SMEs;
• iv. delaying payment of CIT for corporations and SMEs; deferring payment of PAYE by affected sectors such as tourism and floriculture; waiving interest on tax arrears; expediting payment of outstanding VAT refunds and reducing domestic arrears;
• v. providing additional funding to the health sector, food to the vulnerable in the urban areas, social insurance (by continuing the Social Assistance Grants for Empowerment (SAGE) Scheme); introducing a tax exemption on items destined to medical use and expanding labor-intensive public works programs in the Roads and Water and Environment sectors.

On the 29th of June, the World Bank approved a US$300 million budget support under the Uganda COVID-19 Economic Crisis and Recovery Development Policy Financing supporting reforms to provide immediate relief to individuals and businesses most affected by the pandemic.

Monetary and macro-financial

• The Bank of Uganda (BoU) reduced its policy rate to 7 percent, following two consecutive 100 basis points reduction in April and June. In addition to providing liquidity to banks through reverse repos for a longer period, the BoU committed to providing exceptional liquidity assistance for a period of up to one year to financial institutions that might need it and putting in place a mechanism to minimize the likelihood of sound business going into insolvency due to lack of credit. The BoU waived limitations on restructuring of credit facilities at financial institutions that may be at risk of going into distress and has also worked with mobile money providers and commercial banks to ensure they reduce charges on mobile money transactions and other digital payment charges. All Supervised Financial Institutions (SFIs) were directed to defer dividend payments and bonuses for at least 90 days effective March 2020 to ensure capital adequacy. Other measures include purchases of Treasury Bonds held by microfinance deposit taking institutions and credit institutions to ease liquidity pressures and exceptional permission to SFIs to restructure loans as needed on a case by case basis.

Exchange rate and balance of payments

• Bank of Uganda has announced that it stands ready to intervene in the foreign exchange market to smooth out excess exchange rate volatility and has done so in late March when the exchange rate overshot temporarily.

  Uganda secured US$491.5 million in emergency financing from the IMF on May 6, 2020 under the Rapid Credit Facility, of which 70 percent will be devoted to boosting international reserves and thus preserving macroeconomic stability and the rest to support health spending and the vulnerable population. On June 29, the World Bank approved a US$300 million budget support operation (see Fiscal section).

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Ukraine

Background. The first confirmed COVID-19 case was reported on March 3, 2020. As the number of the new cases has been rising in June, international travel to most destinations for Ukrainian citizens has been banned. Starting in mid-March, daycare, schools and universities were closed, and domestic and international travel restrictions were imposed. Subsequently, restrictions were expanded to cover virtually all establishments which had physical interactions with clients. Citizens were required to carry identification papers and wear facial masks when outside. All people coming from abroad should go through a mandatory observation for 14 days, which was later changed into a self-isolation requirement. People over 60 were required to self-isolate. The government has also banned export of certain medical essentials, such as facial masks, personal protective equipment and ethyl alcohol, as well as some essential food stuffs.

Reopening of the economy. The government has extended the quarantine until August 31st, but part of the restrictive measures have been softened starting May 11th. On May 11th beauty salons, most shops, museums, and outdoor terraces in restaurants were allowed to reopen, provided that certain sanitary norms are observed. Subways in large cities were opened on May 25th. The national railway operator was allowed to resume certain domestic and international routes. People over 60 are no longer required to self-isolate. Restaurants and cafes are now allowed to operate, including indoor seating, and sanitary requirements for religious gatherings were relaxed. Regions with better epidemiological situations are eligible for more relaxations, such as domestic bus and railway transportation, opening of daycare, certain education facilities, hotels and fitness centers (all with prescribed sanitary norms). Each region has been assigned a special commission, which can toughen the quarantine rules if the epidemiological situation worsens. In addition, domestic flights started on June 5, and limited international travel was allowed to resume starting June 15. A number of cross-border check-points were opened in June. Ukraine introduced its own list of risky countries; visitors coming from those will face additional restrictions (to be updated weekly). On July 11th government forbid restaurants, bars and entertainment facilities to host clients from 11 pm to 7 am. The government plans to strengthen responsibility for owners/managers of public places and public transportation if their visitors/customers do not wear masks. From August 1st, the government will divide Ukraine into four quarantine zones (green, yellow, orange and red), depending on the epidemiological situation. This delineation will define restrictions that will be imposed.

https://covid19.com.ua/

Key Policy Responses as of July 30, 2020

Fiscal

• Several measures have been introduced to support business. (i) Penalties for certain tax legislation violations have been canceled for the period March 1 until the last day of the quarantine, except for activities related to excisable goods. (ii) There is a moratorium on tax audits and inspections. (iii) The deadline for filing annual income and asset declarations has been extended to July 1, 2020. (iv) Rent on land was not accrued and paid for the month of March, 2020. (v) Non-residential real estate owned by individuals or legal persons was not subject to real estate tax for the month of March, 2020. (vi) Penalties for late or incomplete payment and late filing has been abolished for the period March 1 – May 31, 2020.

  Parliament has adopted legislation increasing the thresholds for the simplified taxation regime, and has adopted a holiday for these taxpayers for the payment of social security contributions until May 31, 2020 (which does not impact the accrual of their pensionable service). Parliament has also approved a top-up of 300 percent of the salary for medical personnel working with COVID-19 patients. To support households, parliament has adopted legislation that allows households to deduct the expense of COVID-19 medicine from the calculation of personal income tax. The government has introduced a one-off pension increase to low-income pensioners of UAH1,000 in April and a regular monthly UAH500 pension top-up for retirees aged 80 years or more. The authorities’ policies also include an earlier-than-planned indexation adjustment of pensions in 2020, as well as a moratorium on penalties and disconnection of consumers who are late on utility payments.

  Medicines, medical devices and other equipment used to prevent or combat COVID-19 have been exempt from import duties and VAT. The government has created a temporary stand-alone budgetary program under the Finance Ministry to fight the pandemic. This program allows for a greater flexibility in the reallocation of funds to quickly accommodate changing priorities. The Accounting Chamber is monitoring COVID-related health expenditures from all tiers of the government https://public.tableau.com/profile/ua.gov.covid19#!/vizhome/COVID-19UKRAINE/COVID_19. The Finance Ministry’s infographics could be found at

  https://mof.gov.ua/uk/news/uriad_rozpodiliv_66_mlrd_grn_z_fondu_borotbi_z_covid-19-2299

  All of the UAH 64,669 billion originally budgeted for this Fund has been appropriated among respective programs. De facto cash expenditures are made at slower pace; UAH 12.6 billion executed as of July 30. The government has a discretion to replenish the COVID fund by reallocating resources from other programs. Such an injection of UAH 2.6 billion was made on July 22.

  Parliament has introduced a state insurance for medical professionals who become disabled as a result of COVID-19-related sickness. This insurance also covers the families of doctors and nurses who die as a result of COVID-19. 

  The government has expanded the subsidized loans program—the so-called 5-7-9 program—and credit guarantee scheme (launched in February 2020). The maximum amount of a loan has been increased to UAH3 million (about US$100,000), the annual income limit to UAH100 million (US$3.7 million), and the eligibility criteria have been expanded to include COVID-19 crisis related production as well as production costs (e.g., wages and rent). The government has further expanded the program to make it more generous and accessible (for example if loans are used for refinancing outstanding credit to banks). As of July 27, 1,446 loans were extended under the program worth UAH 2.4 billion.

  The authorities have softened access to a number of social support programs, such as household utilities subsidies and aid to families with children. The changes include (a) increasing norms (by 50 percent) for energy consumption used to determine the amount of subsidy; (b) stopping the disqualification from the household utilities subsidies program of a person that breaches qualification criteria; (c) automatic re-enrollment into the program for the heating season 2020-2021; (d) extending existing social entitlements for the period of the quarantine without the need to reapply; and (e) making private entrepreneurs eligible for the state support for children younger than 10. The latter program has so far cost UAH 1.1 billion, half of which has already been spent.

  The floor for unemployment benefit has been increased from UAH 650 to UAH 1,000 for applicants whose employment history does not qualify them for a full benefit. For those with sufficient records of participation in labor market and contributions to pension system, this minimum amount is increased from UAH 1,630 to 1,800. The law governing unemployment benefits has been amended to introduce a new type of entitlement, so called furlough benefit related to a quarantine. The Cabinet of Ministers has been granted the right to determine its amount and set it at 2/3 of the basic wage, but not exceeding the minimum wage which is UAH 4,723. Employers are compensated for wages paid to partially furloughed employees, under the provision that pension contributions were paid in the six months prior to the quarantine. The first disbursement of UAH 2.3 billion for this purpose from the COVID fund in the budget has been executed, in parallel with UAH 4,25 billion for other unemployment benefits.

  The Cabinet of Ministers introduced price regulation for the period of the quarantine for 10 socially important food products, 20 categories of personal protective equipment and medicines and more than 10 types of antiseptics. After the decision of the Cabinet of Ministers came into force, it is necessary to declare a price increase 30 days in advance if the price rises by 15 percent or more, 15 days in advance if it increases by 10-15 percent, and three days in advance if it increases by 5-10 percent. The declaration should be filed on the change in the retail prices of each individual type of product. The government agency in charge of enforcing this control—the State Food Safety and Consumer Protection Service—is yet to publish the respective report for Q2 2020 (https://dpss.gov.ua) but there is almost no mentioning of price infringement over this period in media.

Monetary and macro-financial

• In order to support the economy during the quarantine, the National Bank of Ukraine (NBU) eased monetary policy by cutting the key policy rate by 200bps down to 6 percent starting from June 12th, 2020. Since end-February 2020, the key policy rate has been cut by 500bps. Simultaneously the NBU narrowed the corridor on the overnight standing facilities from 2 percent to 1 percent.

  The NBU has modified the operational design of monetary policy implementation to provide banks with more liquidity management flexibility: the frequency of liquidity tenders has been doubled (from bi-weekly to weekly), two-week certificates of deposit have become one-week certificates, and short-term refinancing loans (which previously had a maximum maturity of 14 days) are now issued for a period of up to three months.

  The NBU has modified the calculation of reserve requirements (effective April 11) so as to free up some more domestic currency liquidity.

  The introduction of additional capital buffers—including the capital conservation buffer and the systemic buffer—will be delayed. However, banks are suggested to refrain from distributing dividend until at least October 2020, ensuring that financial institutions have an additional margin of safety. Onsite inspections and stress testing of banks have been postponed. NBU has adopted a regulation that facilitates restructuring of loans to borrowers facing financial difficulties due to impact of the COVID-19. Penalties on clients not servicing loans during the period starting on March 1 and until 30 days after the quarantine finishes should not apply if there are reasonable grounds. Parliament adopted a law that prohibits the opening new bankruptcy cases against legal entities on creditors’ claims that were opened after February 1st 2020 90 days after the quarantine period ends. In credit risk classification, the loans that were serviced as of March 1, 2020 and restructured as of November 2020, will not be considered to have indications of default (temporarily restructuring is not treated as a trigger to recognize such loans as NPLs).

  Starting July 25, loans, the terms of restructuring of which provide for payments with a periodicity lower than or in an amount less than the requirements of Credit Risk Regulation (?351), will not be excluded from the group credit risk assessment. For the continuity of credit support to the public sector, banks have the right not to take into account information on the implementation of the revenue side of the budget in 2020 when assessing credit risk on loans granted to public and local governments (debtors – budgetary institutions).

  Parliament has adopted legislation (effective starting late June) releasing borrowers from obligations to pay a penalty, fine, penalty for a delay in repaying the obligation under the contract to the lender (banks and NBFIs) in case the delay appeared during the quarantine period and/or 30 days after the date of its completion.

  Parliament has approved—and the has NBU operationalized—a decision to maintain the current minimum statutory capital of banks, and the NBU will adopt regulation abolishing the requirements for minimum statutory capital to increase from UAH 200 million up to UAH 300 million by end-2020 with further increase up to UAH 500 million by July 2024.

  The law on simplified procedures for banks’ restructuring and recapitalization was extended for 4 more years (until Aug 1, 2024).

  In order to alleviate compliance burdens on banks during the COVID-crisis, the NBU has extended by six months the deadlines for banks to submit their problem asset resolution plans (for assets that were performing as of March 1, 2020), with full implementation of the problem assets resolution postponed until November 30, 2020. The NBU has also extended the deadline for banks to submit their risk tolerance declarations by four months, as well as the business recovery plans for non-systemic banks by two and a half months (by December 20, 2020). Business recovery plans can be based on one (the most severe) stress-test only. The NBU eliminated the tariffs for banks using its electronic payments system (SEP) and provided banks with guidance to ensure and promote their remote/cashless services.

  The NBU has postponed the deadlines for banks to publish their financial statements: annual 2019 audited statements can be published 5 business days after the general shareholders meeting and 2020Q1 interim financial statements can be published by June 30 (both postponed from April 30); and 2020Q1 consolidated financial statements can be published by July 30 (postponed from May 30).

  In support of the banking sector, the NBU took the decision not to apply to banks and banking groups until June 2021 sanctions for violation of capital adequacy requirements, liquidity requirements, credit risk, as well as restrictions on transactions between the bank and investors related to the subordinated debt. Such a decision will be valid only if the violations arose due to the negative impact of the quarantine and restrictive measures on the bank or banking group, and provided that banks or banking groups do not violate capital adequacy ratios and liquidity ratios under Articles 75 and 76 of the Law “On banks and banking activities “. The decision does not apply to banks, which, despite the recommendations of the National Bank, distributed profits for 2019 through dividends.

  The NBU recommended to the Financial Services Regulator to transfer the regulation of insurance companies to the NBU starting July 1st. It also recommended to introduce measures to enable the remote and smooth work of the insurance companies that exempt insurance companies from the sanctions and fines in certain cases and prolong the deadline for submission of the 2019 financial statements.

  In order to further support bank liquidity and lending, on April 23rd, the NBU announced the following measures: in late April the NBU extended the term of the refinancing loans that are granted through weekly tenders, from 30 to 90 days, and expanded its list of eligible collateral that banks can use to obtain financing using standard liquidity support instruments, incorporating municipal bonds and government-guaranteed corporate bonds into the pool of eligible collateral; the NBU also introduced an interest rate swap tool that banks can rely on to minimize interest rate risk, which is expected to become available in the second quarter; and auctions under long-term refinancing instrument (up to 5 years), the first auction took place on May 8th.

  The NBU approved the General Terms and Conditions for Interest Rate Swap Operations, as well as the underlying methodology for the fair value calculation and other elements necessary to operationalize the instrument. The instrument will be introduced in order to revive long-term bank lending. The first price auction took place on July 2, 2020.

Exchange rate and balance of payments

• The NBU and EBRD have agreed to set up and partially activated a US$500 million FX swap facility to support the real economy and strengthen Ukraine’s macrofinancial stability.

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United Arab Emirates

Background. The UAE economy is being affected by the spread of COVID-19 as well as the sharp decline in oil prices. The first confirmed COVID-19 case was reported on January 29, 2020.The authorities have enacted several measures to limit the spread of the virus, including closure of schools, nurseries, shopping malls, parks, dine-in restaurants, and various tourist attractions. As part of their National Epidemic Control Plan, they have also imposed wide-ranging travel restrictions (including grounding of flights and halting visa issuance), suspended prayers at mosques and other large gatherings, and enacted teleworking arrangements in government offices. Alongside, the authorities have increased testing and scaled up disinfection efforts, established a dedicated task force to ensure uninterrupted supply of consumer goods and prevent manipulative pricing practices, and launched remote learning initiative to ensure continuity of education.

Reopening of the economy. Starting April 24, the authorities have begun gradual reopening of shopping centers and other businesses, subject to social distancing requirements, and began facilitating repatriation of expatriate workers wishing to return to their home countries. Several airlines have resumed a limited number of regular passenger flights. Most government employees have returned to work as of mid-June. Dubai reopened to international tourists on July 7. Starting July 29, restaurants, coffee shops, cafes and other licensed food outlets in Abu Dhabi can now operate at 80 per cent capacity.

Key Policy Responses as of July 30, 2020

Fiscal

• The authorities have so far announced about AED 26.5 billion ($ 7.2 billion or 2 percent of GDP) in various fiscal measures. These include: (i.) AED 16 ($4.4 billion) approved by the federal government to support the private sector by reducing various government fees and accelerating existing infrastructure projects; (ii.) AED 1.5 billion ($0.4 billion) in measures by the government of Dubai to reduce government fees, provide additional water and electricity subsidies, and simplify business procedures; and (iii.) AED 9 billion ($2.5 billion) announced by the government of Abu Dhabi as part of the ongoing “Ghadan-21” fiscal stimulus program. The new initiatives provide for water and electricity subsidies as well as credit guarantees and liquidity support to small- and medium-sized enterprises. In addition, the government of Abu Dhabi has announced a reduction or suspension of various government fees and penalties, as well as a rebate on commercial lease payments in the tourism and hospitality sectors. On July 11 Dubai has announced a new package worth AED 1.5 billion ($0.4 billion) to help the economy cope with the effects of the coronavirus pandemic which includes cancelling certain fines imposed by the government and the customs department and tax reimbursements to hotels and restaurants.

Monetary and macro-financial

• The Central Bank of the UAE (CBUAE) has reduced its policy interest rate twice by a combined 125 basis points so far this year. Furthermore, CBUAE has announced an AED256 billion ($70 billion or 20% of GDP) package of measures comprising: i) halving of banks’ required reserve requirements from 14% to 7%; ii) zero-interest rate collateralized loans to banks (AED 50 billion); iii) allowing the use of banks’ excess capital buffers (AED 50 billion); iv) 15-25 percent reduction in provisioning for SME loans; v) increase of loan-to-value ratio for first-time home buyers by 5 percentage points; vi) limiting bank fees for SMEs; vii) waiver of all payment service fees charged by CBUAE for six months; viii) raising the limit on banks’ exposure to the real estate sector from to 30% of risk-weighted assets, subject to adequate provisioning; ix) allowing banks to defer loan repayments till end-2020.

Exchange rate and balance of payments

• No measures.

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United Kingdom

Background. The first confirmed case was reported on January 31, 2020. The pace of infections and deaths associated with COVID-19 has eased from its peak. In response to the outbreak, the government implemented a range of measures including travel restrictions, social distancing measures, closures of entertainment, hospitality, non-essential shops and indoor premises, and increased testing. In the first quarter of 2020 the economy contracted by 2.2 percent relative to the previous quarter, with a 6.9 percent month-on-month contraction in March. In April, the economy contracted by 20 percent m-o-m, followed by a 1.8 percent m-o-m expansion in May.

Reopening of the economy. On May 10, the government set out a roadmap to ease the lockdown in England (Scotland, Wales and Northern Ireland have separate rules). Moving ahead with easing steps will be conditional on meeting five conditions related to the evolution of infections and deaths and the capacity to provide adequate care and prevent a new peak of infections. In the first step, May 13-31, people who could were requested to work from home, while those working in the manufacturing and construction sectors were encouraged to go back to work minimizing the use of public transportation. In step 2, starting on June 1, some schools as well as outdoor markets and car showrooms were allowed to reopen, while all other non-essential retail reopened on June 15. In step 3, starting on July 4, the hospitality and personal care industries, as well as public places, reopened while enforcing social distancing. Gradual opening steps will continue in coming months. Wearing masks in indoor places is required as of July 24. The government has published “COVID-19 Secure” guidelines for employers to help protect their workforce and customers from coronavirus that must be met as a condition for reopening.

Key Policy Responses as of July 30, 2020

Fiscal

• Tax and spending measures to support households and families during the health emergency include: (i) additional funding for the NHS, public services and charities (£48.5 billion); (ii) measures to support businesses (£29 billion), including property tax holidays, direct grants for small firms and firms in the most-affected sectors, and compensation for sick pay leave; and (iii) strengthening the social safety net to support vulnerable people (by £8 billion) by increasing payments under the Universal Credit scheme as well as expanding other benefits. The government has launched three separate loans schemes to facilitate business’ access to credit. Together with the British Business Bank the Coronavirus Business Interruption Loan Scheme to support SMEs and the Coronavirus Large Business Interruption Loans Scheme to support bigger firms, which carry an 80 percent guarantee for loans up to £5 million for the former and up to £300 million for the latter. In addition, the government has put in place the Bounce Bank loan scheme for SMEs with 100 percent guarantee for loan amounts up to £50,000. It has also deferred VAT payments for the second quarter of 2020 until the end of the financial year and income tax payments of the self-employed by six months. The government will pay 80 percent of the earnings of self-employed workers and furloughed employees (to a maximum of £2,500 per employee per month) initially for the period March-May. For furloughed employees, the scheme has been extended until end-October. Starting in July employers will be allowed to furlough employees for part of the daily working hours. Government coverage falls to 70 percent of wages in September (up to £2,187) and 60 percent in October (up to £1,875) with employers required to contribute the difference to 80 percent of wages (up to £2,500). The scheme for the self-employed has been extended for three more months but at a reduced level of 70 percent of earnings. Trade credit insurance for business-to-business transactions will receive up to £10 billion of government guarantees through the Trade Credit Reinsurance scheme, with the scheme available for nine months. The government has put in place a £1bn package to support firms driving innovation and development through grants and loans. To support the international response, the government has made available £150 million to the IMF’s Catastrophe Containment and Relief Trust and provided a new £2.2 billion loan to the IMF Poverty Reduction and Growth Trust (PRGT) to help low income countries respond to COVID-19. See also: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses.

  The government adopted a package of measures to protect and create jobs and support the economic recovery. These include: providing firms £1,000 per furloughed employee retained until end-January; paying the minimum wage for 25 hours per week for six months for young workers at risk of long-term unemployment; increased resources to enhance skills and facilitate reinsertion in the job market; temporary reductions of the VAT rate for hospitality, accommodation and attractions and the real estate transactions tax; increased public spending on infrastructure (including on green projects such as retrofitting houses to improve energy efficiency); and a program to subsidize dining out during the month of August.

Monetary and macro-financial

• Key measures include: (i) reducing Bank Rate by 65 basis points to 0.1 percent; (ii) expanding the central bank’s holding of UK government bonds and non-financial corporate bonds by £300 billion; (iii) introducing a new Term Funding Scheme to reinforce the transmission of the rate cut, with additional incentives for lending to the real economy, and especially SMEs; (iv) HM Treasury and the BoE have agreed to extend temporarily the use of the government’s overdraft account at the BoE to provide a short-term source of additional liquidity to the government if needed ;(v) launching the joint HM Treasury—Bank of England Covid Corporate Financing Facility which, together with the Coronavirus Business Interruption Schemes, makes £330bn of loans and guarantees available to businesses (15 percent of GDP); (vi) activating a Contingent Term Repo Facility to complement the Bank’s existing sterling liquidity facilities; (vii) together with central banks from Canada, Japan, Euro Area, U.S., and Switzerland, further enhancing the provision of liquidity via the standing US dollar liquidity swap line arrangements; and (viii) reducing the UK countercyclical buffer rate to 0 percent from a pre-existing path toward 2 percent by December 2020, with guidance that it will remain at 0 for at least 12 months. See also: https://www.bankofengland.co.uk/coronavirus.

  The Prudential Regulatory Authority (PRA) set out supervisory expectation that banks should suspend dividends and buybacks until end-2020, cancel outstanding 2019 dividends and pay no cash bonuses to senior staff. The PRA indicated all Pillar 2A requirements will be set as a nominal amount, instead of a percentage of total Risk Weighted Assets (RWAs) and to mitigate the possibility of procyclical market risk capital requirements, the PRA will temporarily allow firms to offset the increase in risk-weighted assets due to the automatic application of a higher VaR multiplier through a commensurate reduction in risks-not-in-VAR (RNIV) capital requirements (See https://www.bankofengland.co.uk/coronavirus/information-for-firms target=”_blank” ). The Financial Conduct Authority (FCA) introduced a package of targeted temporary measures to support customers affected by coronavirus, including by setting the expectation for firms to offer a payment freeze on loans and credit cards for up to three months.

Exchange rate and balance of payments

• No measures.

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United States of America

Background. The US is facing a widening outbreak of COVID-19 that has claimed the lives of 150,283 Americans and infected more than 4,405,000 persons across all 50 states. In response, the U.S. has implemented a range of measures including travel restrictions, social distancing, declaration of states of emergency, closure of schools, non-essential businesses, and increased testing. Reflecting the impact of the containment measures, the U.S. economy contracted at an annualized rate of 32.9 percent in the second quarter and the unemployment rate reached 11.1 percent in June.

Reopening of the economy. Due to heterogenous developments of the Covid-19 outbreak across states, progress on reopening the economy are varying across the country. As of July 30, all states have begun the reopening process. Nevertheless, meaningful restrictions are still in place in close to 20 states, where personal care services, indoor entertainment, restaurants and bars are either closed or partially open, and only small group gatherings are permitted. And some minor restrictions remain in almost all other states.

Key Policy Responses as of July 30, 2020

Fiscal

• US$483 billion Paycheck Protection Program and Health Care Enhancement Act. The legislation includes (i) US$321 billion for additional forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (ii) US$62 billion for the Small Business Administration to provide grants and loans to assist small businesses; (iii) US$75 billion for hospitals; and (iv) US$25 billion for expanding virus testing.

• An estimated US$2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act (“CARES Act”). The Act includes (i) US$293 billion to provide one-time tax rebates to individuals; (ii) US$268 billion to expand unemployment benefits; (iii) US$25 billion to provide a food safety net for the most vulnerable; (iv) US$510 billion to prevent corporate bankruptcy by providing loans, guarantees, and backstopping Federal Reserve 13(3) program; (v) US$349 billion in forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (vi) US$100 billion for hospitals, (vii) US$150 billion in transfers to state and local governments and (viii) US$49.9 billion for international assistance (including SDR28 billion for the IMF’s New Arrangement to Borrow).

• US$8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US$192 billion Families First Coronavirus Response Act. They together provide around 1% of GDP for: (i) Virus testing; transfers to states for Medicaid funding; development of vaccines, therapeutics, and diagnostics; support for the Centers for Disease Control and Prevention responses. (ii) 2 weeks paid sick leave; up to 3 months emergency leave for those infected (at 2/3 pay); food assistance; transfers to states to fund expanded unemployment insurance. (iii) Expansion of Small Business Administration loan subsidies. And (iv) US$1.25 billion in international assistance. In addition, federal student loan obligations have been suspended for 60 days.

Monetary and macro-financial

• Federal funds rate were lowered by 150bp in March to 0-0.25bp. Purchase of Treasury and agency securities in the amount as needed. Expanded overnight and term repos. Lowered cost of discount window lending. Reduced existing cost of swap lines with major central banks and extended the maturity of FX operations; broadened U.S. dollar swap lines to more central banks; offered temporary repo facility for foreign and international monetary authorities.

• Federal Reserve also introduced facilities to support the flow of credit, in some cases backed by the Treasury using funds appropriated under the CARES Act. The facilities are: (i) Commercial Paper Funding Facility to facilitate the issuance of commercial paper by companies and municipal issuers; (ii) Primary Dealer Credit Facility to provide financing to the Fed’s 24 primary dealers collateralized by a wide range of investment grade securities; (iii) Money Market Mutual Fund Liquidity Facility (MMLF) to provide loans to depository institutions to purchase assets from prime money market funds (covering highly rated asset backed commercial paper and municipal debt); (iv) Primary Market Corporate Credit Facility to purchase new bonds and loans from companies; (v) Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds; (vi) Term Asset-Backed Securities Loan Facility to enable the issuance of asset-backed securities backed by student loans, auto loans, credit-card loans, loans guaranteed by the Small Business Administration, and certain other assets; (vii) Paycheck Protection Program Liquidity Facility (PPPLF) to provide liquidity to financial institutions that originate loans under the Small Business Administration’s Paycheck Protection Program (PPP) which provides a direct incentive to small businesses to keep their workers on the payroll; (viii) Main Street Lending Program to purchase new or expanded loans to small and mid-sized businesses; and (ix) Municipal Liquidity Facility to purchases short term notes directly from state and eligible local governments.

• Supervisory action. Federal banking supervisors encouraged depository institutions to use their capital and liquidity buffers to lend, to work constructively with borrowers affected by COVID-19, and indicated COVID-19 related loan modifications would not be classified as troubled debt restructurings. Holdings of U.S. Treasury Securities and deposits at the Federal Reserve Banks could be temporarily excluded from the calculation of the supplementary leverage ratio for holding companies. Other actions include offering regulatory reporting relief and adjusting supervisory approach to temporarily reduce scope and frequency of examinations and give additional time to resolve non-critical, existing supervisory findings.

• Regulatory action. Lower the community bank leverage ratio to 8 percent. Provide extension transition for the Current Expected Credit Loss accounting standard. PPP covered loans will receive a zero percent risk weight, and assets acquired and subsequently pledged as collateral to the MMLF and PPPLF facilities will not lead to additional regulatory capital requirements. Allow early adoption of “the standardized approach for measuring counterparty credit risk”. And there will be a gradual phase-in of restrictions on distributions when a firm’s capital buffer declines.

• Fannie Mae and Freddie Mac have announced assistance to borrowers, including providing mortgage forbearance for 12 months and waiving related late fees, suspending reporting to credit bureaus of delinquency related to the forbearance, suspending foreclosure sales and evictions of borrowers for 60 days, and offering loan modification options.

Exchange rate and balance of payments

• No measures.

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Uruguay

Background. The first cases of COVID-19 were reported on March 13. The government introduced a series of public health measures, such as school closures, cancellation of public events, and active discouragement of large gatherings. Starting April 22, customers must wear face masks while shopping in supermarkets; this rule is currently being expanded to other establishments. International travel has been severely restricted. After a sharp decline in mid-June, the number of new infections has increased somewhat, but remains well below its March-April peaks. Starting July 1, travelers from Uruguay were allowed entry into the European Union.

Reopening of the economy. The Office of Planning and Budget—which reports to the President—is developing a roadmap for re-opening the economy in consultation with experts and private sector representatives. Some containment measures have already been relaxed: construction activity was allowed to restart in mid-April, government offices re-opened in early May, and shopping centers reopened on June 9, all with appropriate sanitary precautions. Bars and restaurants are reopening, and the soccer matches are expected to begin in August, without the spectators. As of June 29, almost all schools (including in the capital Montevideo) have been re-opened. Starting August 3, school hours will be extended to be closer to normal hours.

Key Policy Responses as of July 30, 2020

Fiscal

• Additional resources to address the public health emergency have been mobilized, including by resorting to contingent credit lines from other international financial institutions. Furthermore, some tax and pension obligations are being postponed or reduced, utility payments are being cancelled or reduced for some companies, rules for claiming the unemployment insurance are being made more flexible, older workers will be subsidized so they do not have to leave home, and assistance to the most vulnerable groups (cash and direct provision of food) will be expanded. Starting in June, the government subsidized employment by paying companies 5,000 pesos per month (about 1/3 of the current minimum wage) for three months for each new hire. The cost of expanding the unemployment insurance, of assisting older workers, and of cash transfers is estimated at $400 million (0.7 percent of GDP), and the fiscal overall cost of the pandemic, including some additional measures and decline in tax revenues, is currently estimated to be roughly double that amount. As a solidarity measure, the salaries of better-paid public officials are being reduced by up to 20 percent, with the savings directed to the newly-established Coronavirus Fund. Other sources for the Coronavirus Fund include the additional Social Security Assistance Tax, the 2019 profits of Banco República and the National Development Corporation, and donations. Currently, this fund finances the cash subsidies and food assistance for the most vulnerable, together with the cash subsidies for the employees in the construction industry affected by the pandemic-related work stoppages.

Monetary and macro-financial

• The central bank has been focused on maintaining the appropriate level of liquidity in the system. It has temporarily reduced the reserve requirements that apply to the nominal peso and the inflation-adjusted peso deposits in the commercial banks. This measure is expected to inject about US$300 million of additional liquidity into the financial system.

  The central bank has temporarily relaxed the regulations in the securities and payments markets and extended the deadlines for data submission.

  Loan payments for households and businesses that occur between March 1 and August 31, 2020 are to be deferred for up to 180 days.

  The fund that guarantees loans for SMEs will be expanded from US$50 million to US$500 million (utilizing financing from international organizations). That will allow to guarantee the SME loans totaling US$2.5 billion. In addition, the rate of commission charged by the fund will be reduced substantially.

  BROU (the country’s largest commercial bank, which is government-owned) will extend soft loans to enterprises. The financing available currently is US$50 million, which may be augmented—also with financing from international organizations—to US$120 million. In addition, direct credit program for micro and small enterprises will extend working capital loans of up to 18 months to the affected businesses at subsidized rates. Loan repayments for these enterprises are being suspended for at least 30 days. 

Exchange rate and balance of payments

• The exchange rate has been allowed to adjust, with the central bank intervening to limit undue volatility in the market.

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Uzbekistan

Background. Uzbekistan reported its first confirmed case of COVID-19 on March 16, 2020. The economy is facing lower commodity prices, weaker trading partner demand, and the risk of weaker remittances from Uzbekistan citizens abroad. The authorities have implemented extensive measures to prevent the spread of the virus including: restricting travel (including international flights, domestic public transportation, and movement by car), closing borders (except for trade), closing schools and universities and all stores except grocery stores and pharmacies, and cancelling public events and religious gatherings. Government employees have been asked to telework or to stay home.

Key Policy Responses as of July 29, 2020

Fiscal

• (i) expand funding for healthcare, including for medicines, the costs of quarantines, and a salary supplement for medical employees; (ii) increase the number of low-income families receiving social benefits; (iii) provide assistance to affected businesses via interest subsidies; and (iv) finance public works in different regions to improve infrastructure and support employment. The authorities also announced the temporary reduction of social contributions for individual entrepreneurs, postponing surcharges on tourism, property tax, and land tax, extending the moratorium on tax audits, and delaying tax declarations for 2019 income taxes (until August). The central government also asked local governments to reduce taxes by 30 percent and provide a 6-month grace period on paying property tax.

Monetary and macro-financial

• The central bank suggested banks defer loan payments for firms in sectors affected by COVID-19. Consequently, state-owned banks are extending maturities of loan repayments for the affected sectors, including for the national air carrier. The central bank is monitoring financial conditions but has not changed the policy rate nor requirements for regulatory capital or liquidity. In addition in April 15, the central bank reduced the policy rate from 16 to 15 percent.

Exchange rate and balance of payments

• The exchange rate depreciated by 6½ percent between April 15 and February 28.

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Vanuatu

Background. There are no confirmed cases or deaths from COVID-19 as of July 30, 2020. The government’s response is being coordinated by the National Disaster Management Office (NDMO), the National Disaster Committee, and the COVID-19 advisory committee of 14 Directors from various government ministries. A national State of Emergency (SOE) was declared on March 26 for a two-week period. The SOE was extended for a 30-day period on April 11 as a prevention and containment measure for COVID-19 and in response to Tropical Cyclone (TC) Harold which impacted Vanuatu on April 6-7. After further renewals, it is now due to expire on December 31, 2020. The government: closed all ports of entry for international flights and cruise ships; suspended all domestic flights and ferries; suspended departures for seasonal worker programs to Australia and New Zealand (with optional repatriation of workers already abroad); closed all schools; established curfews for businesses and transport (excludes essential medical and communication services); banned gatherings of more than 5 people (suspended temporarily as of April 5 to allow for group sheltering caused by TC Harold and its aftermath) and been encouraging social distancing. Tourism, which contributes 24.6 percent of Vanuatu’s GDP, has effectively ceased.

Reopening of the economy. Domestic flights and ferries resumed on April 11, also in response to the aftermath of TC Harold. From May 12, international flights and vessels carrying international relief supplies or cargo can enter, provided they comply with Vanuatu’s COVID-19 prevention and containment measures. All public schools reopened on May 18. The government is drafting a plan to address the reopening and recovery of the tourism sector which involves how to get visitors back to Vanuatu and under what conditions. From June 3, the government began repatriation of its citizens and residents stranded abroad after strengthening in-country COVID-19 screening, testing and containment measures. Repatriation and return of vessels registered locally or internationally as Vanuatu vessels outside Vanuatu waters are suspended from July 11 till July 31. The government announced on July 16 that it will reopen its international borders from September 1, to countries that have not recorded new COVID-19 cases within the last 30 days, as part of its Tamtam travel bubble. although details of the travel bubble are yet to be fully disclosed.

Key Policy Responses as of July 30, 2020

Fiscal

• • The government, using its existing budget envelope and with help from Australia, China, New Zealand, UNICEF, WHO, other NGOs/CSOs and some local businesses, is: expanding health facilities, restocking personal protective equipment and supplies, and further training healthcare workers, especially in Port Vila; and spending on community education and awareness. With the assistance of Australia, France and New Zealand, COVID-19 tests are analyzed in the French special collectivity of New Caledonia as needed. The government provided flights and covered arrival and short-term quarantine costs in Port Vila for repatriated ni-Vanuatu. The Vanuatu National Provident Fund (VNPF) provided Hardship Loans, an interest-free withdrawal from a member’s account for 6 months of up to 100,000 vatu, after which the member either choses a repayment plan with interest or permanently withdraws the funds with a penalty. When the loan facility closed on May 1, the VNPF had paid out about 1.5 billion vatu (US$12.5 million). On March 31, a first-stage fiscal package worth 4.4 billion vatu (roughly 4.5 percent of GDP) was announced. It includes: deferred and cancelled taxes, license fees and charges for businesses in 2020 (796 million vatu); backdating to start of 2020 some reductions resulting from forthcoming business license reforms; the Employment Stabilization Payment (ESP) (reimbursing employers 30,000 vatu per employee per month for four months, plus an additional 12 percent to the employer, for a total of 2.5 billion vatu); SMEs (turnover of less than 200 million vatu) will also receive the value of their business license fees (roughly 400 million vatu); Commodity Support Grant will be provided to producers of copra, kava, cocoa and coffee (300 million vatu); Shipping Support Grant to facilitate farmers’ access to major market centres such as Port Vila and Luganville (100 million vatu); secondary school tuition fees are suspended for 2020 (42,000 vatu per student for a total of 510 million vatu, paid directly to schools). The package is financed by the government’s cash reserves, reprioritization of expenditures, some debt, and development partner assistance.

Monetary and macro-financial

• On March 27, the Reserve Bank of Vanuatu (RBV) cut its policy rate from 2.9 percent to 2.25 percent. In its March 31 press release, it also noted that it undertook other measures at its March 27 and 30 meetings, that along with its policy rate cut, were consistent with its twin policy objectives to maintain inflation within a target range of 0-4 percent and official foreign exchange reserves above a minimum threshold of 4 months of import cover. Other RBV measures include: a reduction of commercial banks’ Capital Adequacy Ratio (CAR) from 12.0 per cent to 10.0 per cent; and the reactivation of the Bank’s Imports Substitution and Export Finance Facility (ISEFF) and the Disaster Reconstruction Credit Facility (DRCF).

Exchange rate and balance of payments

• No specific measures have been undertaken at this time.

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Vietnam

Background. After almost 100 days without community transmission of COVID-19, a local outbreak in Da Nang brought the number of positive cases to 459 (no deaths) as of July 30, 2020. More than 350,000 tests have been conducted across Vietnam, and the country has the highest number of tests per confirmed case in the world. Approximately 82,000 people are currently quarantined in centralized facilities or in self-isolation and the fifth largest city in Vietnam (Da Nang) has just re-introduced social isolation for 14 days. Mobile apps are available (installed by around 60 percent of population) to provide alerts on positive cases and potential exposures in big cities. GDP growth hit the lowest level in last two decades in H1, 2020 (1.8 percent y/y), mainly reflecting substantial slowdown in manufacturing, and contraction in the service sector, in particular transport, tourism and hospitality industries.

Reopening of the economy. While the nationwide lockdown was lifted on April 23 and social distancing rules have been eased, a recent local outbreak in Da Nang led to the re-introduction of social isolation measures on July 28 (for 14 days) in that area. So far, limited contagion outside of Da Nang was reported. . Domestic travel to/from Da Nang has been curtailed. Large public events ha