Thursday, May 7, 2020

COVID Relief Package - What Other Countries Have Done


Courtesy: The Hindu
COVID-19 has impacted economies across the world, forcing people to seek government assistance in times of desperation. India already announced the PM Garib Kalyan Package and there are talks of a package to help the besieged Micro, Small and Medium Enterprises (MSME) sector. Reserved Bank of India (RBI) too has announced a host of measures along with Ministry of Finance to ease compliance issues and infuse liquidity in the hands of the people to tide over the crisis. 

Interestingly in India, a debate has also started on the very need of a stimulus package given its potential impact on fiscal credit, led by Ila Patnaik and Haseeb Drabu. This section is advocating that instead of fiscal package, states should rather be allowed to raise funds on their own, an ability they lost with the implementation of the GST.

While the Indian government is working towards resolving the economic and human crisis in the most appropriate manner, we take a look at other countries and their economic packages during this period.

United States of America
The United States of America (USA) Senate passed a stimulus package of USD 2 trillion. The package was announced in the form of specific sector wise allocation announcements:
  • USD 532 billion for big business; USD 377 billion for small businesses, loans and grants to them.
  • USD 290 billion direct payment for families.
  • USD 290 billion to cover up for revenue lost due to tax cuts.
  • USD 260 billion unemployment insurance.
  • USD 150 billion for various states.



United Kingdom
With the Prime Minister of United Kingdom Boris Johnson temporarily out of the picture after being afflicted by COVID-19, Chancellor of the Exchequer Rishi Sunak announced the stimulus in 4 packages:

  • Budget- First economic package of £12 billion allocation was announced during the budget delivery on 11 March.
  • On 17 March, he followed up with a £350-billion Coronavirus Business Interruption Loan Scheme for government-backed loans and £20 billion of grants and tax cuts for struggling companies.
  • On 20 March, he announced Coronavirus Job Retention Program of £7 billion of extra welfare spending. Government would pay 80% of salaried employees’ wages capped at £2,500/month. This was extended on 26 March to also cover additional employers. 


Germany
Germany announced a €750 billion stimulus package, comprising a mix of direct support and loans to specific sectors. Announcements were made using a mix of approaches:

  • €400 billion for securing corporate debt on the verge of default.
  • €100 billion for public sector bank KfW for giving out loans.
  • €100 billion to prevent hostile takeovers of companies by foreign entities
  • €50 billion to help small businesses and people affected by it including €15,000 Euro direct cash transfer to firms.


Australia
Australia has announced a 3-step fiscal stimulus package, using targeted approach:
  • AUD 17 billion fiscal stimulus package was announced on 11 March, targeting small business, welfare recipients and low-income households. 
  • On 23 March, the second fiscal stimulus of AUD 66 billion was announced. This included AUD 46 billion worth of direct government spending for individuals and businesses and AUD 20 billion loan guarantee. 
  • On 30 March, a AUD 130 Billion Jobs Plan was announced. Government will pay wage subsidies of AUD 1,500/employee every two weeks to help struggling businesses retain employees.


Japan:
Japan announced a two-step fiscal stimulus worth $1.1 Trillion on April 7, using a combination of targeted and broad category approach announcements. The announcements were in continuation of the $121 billion fiscal stimulus announced in December of 2019 by the Japanese Prime Minister
  • Payment of ¥100,000 for every citizen
  • Government backed loan programs.



Singapore
Singapore has announced three stimulus packages totalling to almost SGD 60 billion. The package is a mix of broad category announcements, targeted approaches and economic approaches:
  • SGD 6.4 billion allocated from the Health Ministry funds. This is targeted aid for sectors like tourism, aviation, food alongside household cash handouts.
  • SGD 48 billion announcement that provided for scrapping of property tax for hard-hit sectors, wage support for businesses and freezing of government fees.
  • SGD 5.1 billion allocation for extension of wage subsidies and foreign worker levy waiver, and raises cash handouts.



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