Fiscal Policies after exiting from COVID 19
When the great lock down finally ends, a strong economic recovery that benefits everyone will depend on improved social safety nets and broad-based fiscal support. This includes public investment in healthcare, infrastructure and climate change. Countries with high debt levels will have to carefully balance short-term fiscal support for the recovery stage with long-term debt sustainability.
Fiscal policies have provided large emergency life lines to people and companies during the Covid- 19 pandemic. They are also invaluable to increase a country's readiness to respond to a crisis and help the recovery and beyond.
Following three maters attributes the most of a good social safety net -
1) Provide broad coverage and adequate benefits to vulnerable groups in a progressive way, that is
more generous benefits for the poor.
2) Preserve work incentives and help beneficiaries find jobs, get health care and attend education
and training.
3) Avoid a fragmented, complex web of social protection programs which ends up being more
costly to run and not benefiting people in a fair and consistent way.
Social safety nets could result in a better redistribution if a larger share of the poorest 20% of the population receive more benefits relative to the richest 20% of the population.
To help businesses to rehire workers after the pandemic, Governments could plan temporary payroll tax cuts to encourage firms to to hire. To get people to spend, they can use time-bound value-added tax reductions or consumption vouchers. Smaller investment projects can be accelerated. Countries can legislate in advance measures that would automatically activate in downturns. For example, some social benefits and tax reliefs. This would get much needed fiscal support to people faster. Though the scope of support depends on country's ability to finance these measures. Quality public investments is necessary in Health care to protect people and minimize the risks of future epidemics.
Supporting the recovery with fiscal tools while managing higher Govt. debts is a delicate balancing act. The pandemic and its economic fallout, along with policy responses, have contributed to a major increase in fiscal deficits and Govt. debt ratios. As the pandemic abates (be less intense) and the economy recovers, Govt. debt ratios are expected to stabilize, even though at new higher levels. if the recovery takes longer than expected, Debt dynamics could be more unfavorable.
As the pandemic subsides, countries can support their economic rebound with an eye on advancing credible medium - term reforms plans.
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Fiscal policies have provided large emergency life lines to people and companies during the Covid- 19 pandemic. They are also invaluable to increase a country's readiness to respond to a crisis and help the recovery and beyond.
Following three maters attributes the most of a good social safety net -
1) Provide broad coverage and adequate benefits to vulnerable groups in a progressive way, that is
more generous benefits for the poor.
2) Preserve work incentives and help beneficiaries find jobs, get health care and attend education
and training.
3) Avoid a fragmented, complex web of social protection programs which ends up being more
costly to run and not benefiting people in a fair and consistent way.
Social safety nets could result in a better redistribution if a larger share of the poorest 20% of the population receive more benefits relative to the richest 20% of the population.
To help businesses to rehire workers after the pandemic, Governments could plan temporary payroll tax cuts to encourage firms to to hire. To get people to spend, they can use time-bound value-added tax reductions or consumption vouchers. Smaller investment projects can be accelerated. Countries can legislate in advance measures that would automatically activate in downturns. For example, some social benefits and tax reliefs. This would get much needed fiscal support to people faster. Though the scope of support depends on country's ability to finance these measures. Quality public investments is necessary in Health care to protect people and minimize the risks of future epidemics.
Supporting the recovery with fiscal tools while managing higher Govt. debts is a delicate balancing act. The pandemic and its economic fallout, along with policy responses, have contributed to a major increase in fiscal deficits and Govt. debt ratios. As the pandemic abates (be less intense) and the economy recovers, Govt. debt ratios are expected to stabilize, even though at new higher levels. if the recovery takes longer than expected, Debt dynamics could be more unfavorable.
As the pandemic subsides, countries can support their economic rebound with an eye on advancing credible medium - term reforms plans.
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