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 197 economies. Last updated on January 8, 2021.

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

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Afghanistan, Islamic Republic of
Background. Afghanistan reported its first confirmed COVID-19 case on February 24, 2020. As the infection spread in March, the government progressively tightened containment measures, including introducing screening at ports of entry, quarantine for infected people, and closure of public places for gathering. On March 28, it imposed countrywide lockdown, which was subsequently extended twice.
Afghanistan is now facing a second wave of infections, with the Ministry of Public Health expecting about 90,000 people to be infected with COVID-19 during the winter season. After re-opening in August, universities and schools closed again on November 28, and the final exams were postponed due to an uptick in infections since early November. The government is considering to re-introduce further containment measures, including closing wedding halls and other high-density public areas across the country.
The pandemic and containment measures introduced at the onset of the pandemic stifled domestic activity and disrupted trade and transportation. Border closures and panic-buying led to a spike in prices of some foodstuffs in April, which has abated with the re-opening of borders in early June. Income and job losses, in the formal and informal sectors, and higher prices have pushed thousands of Afghan families into poverty and threaten to reverse social development gains of the past decade. Oxfam estimates that the number of people on the brink of famine in Afghanistan has risen to 3.5 million in May from 2.5 million in September last year.
Reopening of the economy:

The government progressively eased the lockdown over the summer, with most containment restrictions removed and businesses re-opened by end-August. Social distancing guidelines and the requirement to wear a mask in public places remain in place.
In early August, working hours for government and non-government organizations were normalized to its pre-pandemic level. This was a change from alternating between odd and even weekdays from 7 am until 1 pm (and later 8am to 4 pm) instituted in June-July.
On May 17, Pakistan re-opened its Torkham and Chaman borders points with Afghanistan, followed by a restoration of bilateral trade and transit at all border crossings to pre-COVID-19 status on July 13. On July 15, trade with India through Wagah border post in Pakistan resumed. At end-June, the authorities announced the resumption of domestic and international flights and exports to Europe via the air corridors.
Famine Early Warning Systems Network reported that the May easing of containment led to increased labor availability in urban areas and, in combination with assistance and Zakat, allowed some improvement in consumption. Still, many Afghans remain in a crisis phase of food insecurity.

Key Policy Responses as of January 7, 2021

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

On April 29, the government started providing free bread to the poor in Kabul, later extended to other cities. The program was ended in late June. In May, the government waived electricity bills of less than Af 1,000 (US$13) for a family residence in Kabul for two months and paid utility bills of the past two months for 50 percent of households in Kabul. The decision benefited more than 1.5 million Kabul residents. Recognizing the liquidity constraints of many taxpayers, the government extended the tax filing deadline for the first quarter by 45 days. No further extensions have been provided. In late 2020, the government offered to waive tax and customs payment penalties if taxpayers clear their due taxes before the end of the fiscal year (December 21).
Parliament passed the revised 2020 budget on November 28, which retroactively approved the following COVID-19 related spending, including those added in the July budget amendment

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

In 2020 as a whole, the authorities envisaged to spend up to 2.9 percent of GDP pandemic-related spending, with about 15 percent directed to health.
With the support of the World Bank grant, the authorities are rolling out a relief package, amounting to 1.6 percent of GDP, to Afghan households with incomes of US$2 per day or lower (twice the national poverty line). As about 90 percent of all households fall below that threshold, the program is near universal. Households in rural areas will receive an equivalent of US$50 in essential food staples and hygiene products, while those in urban areas a combination of cash and in-kind equivalent to US$100, in two tranches.
Monetary and Macro-financial
There have been no liquidity pressures in part thanks to Da Afghanistan Bank (DAB)’s actions to maintain confidence in the Afghani and among depositors. The authorities increased the frequency of Financial Stability Committee meetings, enhanced the monitoring of early signs of liquidity stress, and reviewed banks’ business continuity plans. DAB postponed the IFRS-9 implementation to June 2021 and froze loan classifications at the pre-pandemic cutoff of end-February. It also suspended administrative penalties and fees, with no retrospective applications for breaches/noncompliance.
DAB phased out emergency pandemic measures in July. It ended the freeze on loan classifications and recommenced the enforcement of all prudential requirements in August with flexible application of penalties and prudential triggers in recognition of persisting risks. The emergency measures for the nonbank sector were allowed to expire at end-July.
Exchange rate and balance of payments
DAB remains focused on achieving price stability in the context of a flexible exchange rate regime. With domestic demand subdued the Afghani has remained broadly stable against the US$. DAB has engaged money-service providers, who play a systemic role in financial intermediation, to ensure uninterrupted services.
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Albania
Background. Albania was mildly affected in the first wave of the pandemic in spring. Due to its proximity and close links to Italy, Albania adopted some of the toughest lockdown measures in Europe in March as soon as it detected the first confirmed COVID-19 case. The government proclaimed a state of natural catastrophe which enabled it to use extended powers for its three months duration until it ended on June 23.
Reopening the economy and additional containment efforts. On June 1, Albania removed all domestic restrictions to movement and travel and re-opened its land borders after virtually shutting them since mid-March. Maritime passenger transport
resumed on June 22 and airlines have resumed flights on a lighter schedule since mid-June. There are no quarantine requirements for incoming visitors and tourists. The EU continues to maintain travel restrictions
for Albanian citizens as with other third countries with high infection rates. On December 22, Albania suspended flights to and from UK to prevent the spread of the new variant of the Covid 19, until at least January 18, and introduced 14 day-quarantine requirements for travelers from UK.
With the number of cases rising fast and hospital capacity being strained, some restrictions have been reintroduced, albeit much milder than the spring lockdown. On November 11 a night curfew (10pm-6am) was announced, allowing only movements for health emergency and essential needs. Additional measures were announced on November 17 that limit the number of people that can assemble to 10 both outdoors and indoors and impose a ban on social and political gatherings. During the end-year holiday period (December 24-January 4) the curfew hours were extended to 20:30 – 06:00. Wearing masks outside became mandatory as of October 15, while indoor use has become so since mid-July. Wedding parties are not allowed, and funerals are restricted to family members. Public transport was allowed to resume in June. Pre-university schools re-opened on September 14 classes divided in smaller groups and multiple shifts to ensure physical distancing. The government decided that universities-which were scheduled to start on November 1st- will switch to online learning for at least a month.

Key Policy Responses as of January 8, 2021

Fiscal

The government adopted two support packages in 2020 for people and businesses affected by the COVID-19 pandemic of a combined size of Lek 45 billion (2.8 percent of GDP) consisting of budget spending, sovereign guarantees and tax deferrals. The first package adopted on March 19, 2020 through a normative act had support measures of Lek 23bn (1.4 percent of GDP) through a combination of spending reallocations, spending increases and sovereign guarantees to support affected businesses. The key measures are: (i) additional funding for health sector in the amount of Lek 2.5 billion (ii) Lek 6.5bn for the support of small businesses/self-employed that are forced to close activities due to the COVID-19 pandemic by paying them minimum salaries (up to two in the case of family businesses with unpaid family members), doubling of the unemployment benefits and social assistance layouts. (iii) Lek 2bn of defense spending reallocated toward humanitarian relief for the most vulnerablewhich were not used, (iv) Lek 11bn (0.6 percent of GDP) sovereign guarantee fund for companies to access overdrafts in the banking system to pay wages for their employees for up to 3 months with an interest rate capped at 2.85 percent for a maturity of up to 2 years. The government will bear the interest costs. The second package adopted on April 15, 2020, includes (i) Lek 7bn (0.4 percent of GDP) fund to pay for a one-off transfer of Lk40,000 to employees of small businesses affected by the pandemic not covered in the first package, employees of large businesses laid off due to the pandemic, and employees in the tourism sector; (ii) a sovereign guarantee of Lek 15 billion (0.9 percent of GDP) to provide loans for working capital for all private companies that were tax-compliant and solvent before the pandemic. The government will guarantee 60 percent of the loans, and interest are capped at 5 percent. As of November 3, almost 96 percent of the overall budgeted direct support measures had been paid out while the take up for the first guarantee scheme was 59 percent and for the second scheme 42 percent. A third smaller support package was adopted on August 13, providing an additional minimum wage to public transport workers who resumed work one month later than the rest. The measure costing Lk135m is accommodated within the existing transport budget.
The government has also adopted tax deferral measures allowing all large companies (except banks, telecommunication, public enterprises and other essential businesses) to defer payment of profit tax for the second and third quarter of 2020 in 2021. Tourism, active processing and call centers can defer payments for the rest of 2020 to 2021. Small businesses with turnover below Lk14m will not pay profit tax for the remainder of 2021.
In September, the government launched an employment promotion program, that aims to cover part of reemployment costs of those who lost their jobs during the lockdown. For formal sector employees the government will cover half of the wages (at the legal minimum level) and the full employers’ share of social contributions for the duration of the program (4 or 8 months). Informal sector employees who lost their jobs during the lockdown, will have the full cost of social contributions (employees and employers share) covered for one year if they formalize.
The 2021 budget adopted by parliament on Nov 16, allocated Lk14.2bn (0.8 percent of GDP) in COVID-19 related spending. These include Lk7.2bn for COVID-19 treatment, Lk4.5bn for wage increases for doctors and nurses, and Lk2.5bn for a temporary increase in the payments for social assistance and unemployment benefits.

Monetary and macro-financial

To address the liquidity bottlenecks of companies and individuals, the Bank of Albania extended a temporary suspension of requirements for loan classifications and provisioning to August 31, 2020, enabling clients to ask banks to defer loan installments without penalties. On May 28, the BoA also adopted regulations to allow banks to restructure loans within 2020 without additional provisioning or downgrades for borrowers’ status. Entry in force of more stringent classification and provisioning measures for reclassified loans was postponed by one year to 2022. Out of court restructuring for distressed borrowers under a special regulation will be possible for an additional year until 2022.
On March 25, the Bank of Albania cut its key policy rate-the weekly repo, by 50 basis points to a new historic minimum of 0.5 percent. The Governor announced that the banking sector is liquid and well capitalized, and the central bank stands ready to provide unlimited liquidity for as long as needed.
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, 2020, the Bank of Albania announced it had set up a €400 million repo line with the ECB. The line will remain in place until June 2021, unless an extension is decided

Exchange rate and balance of payments

Albania has a floating exchange rate. The Bank of Albania intervenes only in pre-announced purchases to boost reserves or to smooth excessive and disruptive short-term volatility. On June 30, the Bank of Albania announced it had intervened in the market in end-March 2020 to smooth temporary excessive volatility caused by initial disruptions of lockdown measures.

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Algeria
Background. Algeria is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both shocks. The first case of COVID-19 was reported on February 25, 2020. The authorities have been implementing containment measures since early February (e.g., cancelling flights, and imposing quarantines to repatriated Algerians). Confinement measures included closure of schools, universities, restaurants, and shops; cancellation of public and private events; shut down of transportation services (internal and external); putting on mandatory leave half of civil servants and private workers with full compensation. Demonstrations and religious activities were cancelled, a lockdown of affected areas was ordered and a curfew was put in place in several cities including Algiers.
Reopening of the economy. The full lockdown of certain cities ended in early June, while the curfews, notably in Algiers, were relaxed. A gradual easing of the containment measured was announced and started on June 7, mostly consisting in allowing certain stores to open, under social distancing rules such as wearing masks and limiting the number of people in the stores. Faced with a resurgence in the daily number of cases, new restrictions to mobility, retail activities and social events were announced in several provinces on June 29. The authorities continue to monitor and adapt the lockdown measures as needed (latest decision on August 8 here). International borders remain closed, but schools reopened in October. The number of daily new cases has fallen sharply since the peak of the second spike in late November. Partial confinement measures and the suspension of passenger transport between wilayas, adopted in response to the November spike, are starting to be relaxed.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

On March 15, the Bank of Algeria lowered the reserve requirement ratio from 10 percent to 8 percent, and its main policy rate by 25 basis points to 3.25 percent.
On April 6, the Bank of Algeria announced that it was easing solvency, liquidity and NPLs ratios for banks. Banks are also allowed to extend payments of some loans without a need to provision against them.
On April 30, the Bank of Algeria announced that it was cutting its main policy rate from 3.25 to 3.00 percent, that it was lowering its reserve requirement ratio from 8 percent to 6 percent, and that it was lowering haircuts on government securities used in refinancing operations.
On September 14, the Bank of Algeria announced a reduction in the reserve requirement ratio from 6 percent to 3 percent and the activation of 1-month open market operations.
On October 14, 2020, the Bank of Algeria announced that the easing of prudential requirements for banks, announced in April 2020, would be extended through the end of of the year.

Exchange rate and balance of payments

The authorities announced several measures to cut the import bill by at least USD 10 bn (6 percent of GDP). Authorities banned exports of several products, including food, medical and hygiene items.
On October 11, 2020, the government announced that a previous ban on imports of cars less than 3 years old would be maintained.

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Andorra
Background. Andorra has been heavily impacted by the COVID-19 outbreak, with the first confirmed case reported on March 2, 2020. To cope with the outbreak, which affected 1 percent of the population in the first wave, the economy was in full lockdown for a month until April 17. A phased reopening, coupled with mandatory use of masks and antibody testing for the entire population, started in May 18 and extended through the summer season. The decline in tourism due to travel restrictions, together with the domestic effect of lockdowns and social distancing measures, have severely impacted the Andorran economy, which shrank by 21.6 percent y/y in 2020Q2.
Reopening of the Economy. Following the economy’s re-opening and the end of the summer season, which required students to go back to school, there was a resurgence of cases, with daily new infections almost tripling those of the first wave. While the rate of total cases is among the highest in Europe, active cases are on a declining path and deaths have recently stabilized. To cope with the health crisis the government adopted more stringent social distancing measures in September, which remained in place throughout October and were only partially relaxed in November and December in lieu of the improvement in COVID statistics. Despite circulation in the border is still limited due to the mobility restrictions imposed by France and Spain (Catalonia), the government decided to postpone the opening of the ski stations until January 2nd to contain the spread of the virus. In addition, to minimize the risk of transmission of COVID-19 during the holiday season, the authorities established special health protocols for the holiday celebrations and provided three free antigen tests to all Andorran residents older than 6 years. Andorra has already negotiated the acquisition of vaccines for half the population; a first batch of 2,000 doses is expected to arrive in early January, and the rest throughout 2020Q1. The Minister of Health established a vaccination protocol that gives priority to: (i) residents and staff of health centers for the elderly and disabled; (ii) health professionals; (iii) disabled people who require in-home professional support; (iv) health professionals involved in COVID vaccination.

Key Policy Responses as of January 7, 2021

Fiscal

Key above-the-line measures, amounting to 2.7 percent of 2020 GDP (€68.9 million), include: (i) additional healthcare-related spending (€15.2 million); (ii) payment of 75 percent of the salary to workers under temporary suspension of contract (€31.7 million); (iii) social security contributions for workers who were temporarily laid off due to the pandemic (€3.4 million); (iv) extraordinary benefit for self-employed workers affected by economic activity suspension (€8.6 million); (v) rent/mortgage payment support to the sectors most affected by the pandemic (nightclubs, indoor recreation parks, travel agencies, and recreational and arcade game rooms), with the benefit per establishment capped at €2,000 per month and varying depending on extent of the restrictions imposed to each sector (€0.9 million); (vi) 30-percent reduction in the advance payment of the corporate tax and deferment or installment payments of tax debts without generating late payment interest (€9.1 million). The government also relaxed the requirements to access unemployment benefits and rental housing aid for individuals whose economic and social situation worsened due to the health crisis.
The telecommunications and electricity public enterprises provided discounts on the monthly bills of firms that had to completely suspend activities or that experienced a significant decline in their business (€2.4 million, 0.1 percent of 2020 GDP), as well as the possibility of paying the bills in up to 12 monthly installments. In November, the government approved subsidies on electricity and telecommunication services to the businesses most affected by the pandemic that had already received the government’s support for rent/mortgage payments as well as those businesses whose workers are under either temporal suspension of work contracts or short-time work arrangements.
With the expectation that the health crisis would prolong beyond 2020, on December 4th the authorities approved a new package of measures, which came into force on January 1st, 2021, aimed at supporting the reactivation of the economy. This package extends for up to six months many of the measures already in place, and in some cases, it refines the conditions under which the measures are applicable to adapt to the health and economic circumstances. In addition, on December 16th, the government created a new temporary and exceptional involuntary unemployment benefit to support Andorran workers directly affected by the delayed opening of the ski stations; 65 applications were received, amounting to €45,515 in December. The benefit will remain in place until the affected companies are able to resume their normal activities in the 2020-21 ski season.

Monetary and macro-financial

The government has provided two packages of government guarantees for new bank loans to businesses, in which the government also takes on the interest payments. The first package, amounting €130 million (5 percent of GDP), to cover operating costs (€60 million) or to service existing debts with Andorran banks (€70 million). The second package, amounting €100 million (4 percent of GDP), to cover: (i) the service of existing debts with Andorran banks; (ii) the payment of the share of benefits associated with the temporary suspension of contracts; and (iii) investments needed to abide with the new health and social distancing protocols. On November 18, the government relaxed the conditions to access the second package, including the payment of rent and of utility bills as additional purposes for requesting the guaranteed loans.
The Andorran government approved a legislative moratoria on April 18 to provide repayment relief—and also extension of the repayment period in the case of mortgages—until December 31 2020, to households and businesses affected by the pandemic, which meet the requirements established by the law. This moratoria applies to mortgages and personal loans to finance housing or vehicles in the case of individuals and commercial property in the case of businesses. The new terms of repayment should be agreed with the bank.
On June 11th, the Andorran Banking Association (ABA) adopted non-legislative sector-wide moratoria to provide repayment relief to households and businesses, for 6-12 months depending upon the types of loan and borrower. This private moratoria scheme complements the one approved by the government, and cannot be applied simultaneously. In mid-December 2020, ABA extended until March 31st, 2021, the application deadline for the moratoria.
Supervisory and regulatory action. The financial supervisor, Andorran Financial Authority (AFA), adopted as its own the European Banking Authority guidelines on legislative and non-legislative moratoria. Furthermore, AFA adopted a set of measures, in line with the recommendations by the European Banking Authority and the European Central Bank, including: (i) limiting in situ examinations to only those strictly necessary and postpone the non-priority ones to 2021; (ii) postpone stress tests, which are supposed to be done at least every three years for supervisory purposes, to 2021 if conditions allow; (iii) postponing beyond the 2020 exercise the requirement of establishing a capital buffer for systemic risks, which was supposed to be introduced in January 2020; (iv) recommending banks to not distribute dividends from the 2019 exercise. The government also extended the deadline for banks to report on their audited balance sheets to AFA from March 31st, 2020 to April 30th, 2020.

Exchange rate and balance of payments

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

COVID-19

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Angola
Background. The first COVID-19 case was reported on March 21, 2020, while community transmission started on April 27. On October 24, authorities extended the sanitary restrictions in the country for another month, and movements from and to Luanda, and other provinces with high number cases, -are now restricted to essential activities. Authorities expanded testing activities to hospitals, informal markets, and public institutions; made the use of masks mandatory. Testing capacity has increased tenfold from 400 to 6000 tests per day and consequently the number of cases hit the highest level since the start of the pandemic, reaching more than 300 cases per day at the end of October. However, in the first weeks of November the average number of cases reduced to 200 cases per day. Resumption of primary schooling was postponed sine die. Home quarantine is now allowed for national and foreign citizens returning from abroad and asymptomatic COVID-19 patients. The World Bank, the United Nations, and the African Development Bank are providing financial support and resources in several ways. In mid-September the IMF disbursed US$1 billion in frontloaded budget support to help cope with the pandemic.

Key Policy Responses as of November 19, 2020

Fiscal

The National Assembly approved revenue and expenditure measures to fight the COVID-19 outbreak and minimize its negative economic impact. About US$40 million on additional health care spending was announced and about US$80 million are being spent on 250 Cuban doctors who arrived in Angola to help. Tax exemptions on humanitarian aid and donations and some delays on filing taxes for selected imports were granted. On July 28, the National Assembly adopted a conservative supplementary budget, aiming at securing space for additional health expenditure, while balancing the need to keep debt on a sustainable path.

Monetary and macro-financial

Since late March, 2020, the central bank (BNA) reduced the rate on its 7-day permanent liquidity absorption and expanded its credit-stimulus program to selected sectors. Financial institutions were requested to grant their clients a moratorium of 60 days for servicing debt. In April 3, the BNA increased the minimum allocation required from banks to extend credit to producers of priority products and instructed banks to provide credit in local currency to assist importers of essential goods. In May 7, the BNA reinstated its Permanent Overnight Liquidity Provision facility to provide liquidity support to banks (Kz 100 billion), and extended access to large non-financial corporations on a discount line created for the purchasing of government securities.

Exchange rate and balance of payments

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

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Argentina
Background. The first confirmed COVID-19 case was reported on March 3, 2020. The authorities adopted sweeping measures to prevent a rapid growth in infections, involving a full closure of borders and a nation-wide quarantine, beginning on March 20. The pandemic and the containment measures have had a significant economic impact, with a GDP contraction of around 20 percent of GDP in the first half of 2020. Capital Flow Management Measures (CFMs) that were already in place since August 2019 have largely protected Argentina from the impact of capital outflows.
Reopening of the economy. The government’s policy of moving from strict lockdown to a gradual reopening of the economy is contingent on the speed of contagion, defined as the length of time it takes for the number of reported cases to double. On May 8, the government announced a gradual reopening aimed at raising regional mobilization, except for the Buenos Aires metropolitan area. On May 23, restrictions in the Buenos Aires metropolitan area were tightened in response to an acceleration in infections and, in early June, the mandatory lockdown was extended to other selected large cities. Although the government announced a loosening of restrictions in the Buenos Aires metropolitan area in July, and a phased reopening of activities, rising infections led to an extension of the mandatory lockdown until November 7, with tighter enforcement in some inland provinces. On November 7, with cases levelling off in the Buenos Aires metropolitan area, the government announced a move to a stage of social distancing. However, in January, restrictions were once again tightened in some inland districts of Buenos Aires and other inland provinces, in response to increasing cases.

Key Policy Responses as of January 8, 2021

Fiscal

Announced measures (totaling about 6.0 percent of GDP, 3.9 percent in the budget and 2 percent off-budget, based on the authorities’ estimates) have focused on providing: (i) increased health spending, including for improvements in virus diagnostics, purchases of hospital equipment and construction of clinics and hospitals; (ii) support for workers and vulnerable groups, including through increased transfers to poor families, social security benefits (especially to low-income beneficiaries), unemployment insurance benefits, and payments to minimum-wage workers; (iii) support for hard-hit sectors, including an exemption from social security contributions, grants to cover payroll costs; and subsidized loans for construction-related activities; (iv) demand support, including spending on public works; (v) forbearance, including continued provision of utility services for households in arrears; and (vi) credit guarantees for bank lending to micro, small and medium enterprises (SMEs) for the production of foods and basic supplies. In addition, the authorities have adopted anti-price gouging policies, including price controls for food and medical supplies and ringfencing of essential supplies, including certain export restrictions on medical supplies and equipment and centralization of the sale of essential medical supplies.

Monetary and macro-financial

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

Exchange rate and balance of payments

A broad set of CFMs have been in place since August 2019, aimed at restricting financial account transactions (limits on purchase of dollars, transfers abroad and debt service in foreign currency), and some current account transactions (surrender requirements on export proceeds, restrictions on imports of services, dividend payments abroad, and interest payments on foreign currency debt). CFMs helped limit outflows in the wake of the pandemic. The exchange rate has depreciated by over 35 percent vis-à-vis the US dollar since early March 2020.

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Armenia
Background. The first confirmed case was reported on March 1, 2020. The pace of new covid-19 cases has slowed down further in December, after its peak in October. The government extendeda national state of emergency to September 11, and imposed strict containment measures, including school closures, travel bans on foreign citizens from high risk countries, and imposed fines to those who violate isolation orders during the state of emergency. The government announced an assistance package with a headline amount of $300 million (2 percent of GDP) to mitigate the socio-economic issues related to the pandemic, although this includes a variety of direct spending, state-sponsored loans and increased investment.
Reopening of the economy. Since May, the movement restrictions were removed, and containment measures were eased, allowing for resumption of public transport, retail businesses, and restaurants. In September, airspace was reopened, and the government lifted the state of emergency, and established quarantine in effect until Jan 11, 2021, imposing fines for those not wearing masks in public, bans on large gathering, and 14-day self-isolation and testing for incomers.

Key Policy Responses as of January 7, 2021

Fiscal

The measures fall into threebroad categories:(i) subsidized 2-3 year loans to provide short-term support to affected businesses and SMEs; (ii) direct subsidiesto SMEs and businessesto help maintain their employees; (iii) grants to entrepreneurs and firms; (iv) lump-sum transfers to the vulnerable including individuals whowereunemployed after the COVID-19 outbreak, families with or expecting children, micro-businesses, general population who needed help with utility bills, and temporary part-time employment. As of end-October, the authorities have adopted 24 support packages and, together with bank supports, allocated around 192.3billion AMD ($367m) to those. Some measures were adapted to support corporate investment. The government also allocated parts of the budget for investment to support post-crisis recovery.

Monetary and macro-financial

The Central Bank of Armenia (CBA) reduced the policy rate by another 25 bps to 4.25 percent on September 15. The interbank market has been active, and the central bank has easily met liquidity needs so far and provided a few FX swap operations to assure sufficient liquidity in dram and in FX. The CBA undertook few foreign exchange sales to limit excessive dram volatility around the beginning of April, although since then the dram has strengthened, and the CBA has been able buy some FX. The CBA has not used macroprudential policies actively, except asking banks to consider voluntary prudent loan restructuring and payment holiday period from March to June. The CBA’s authorities are supervising banks’ liquidity positions and will act swiftly if required to safeguard financial stability.

Exchange rate and balance of payments

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Aruba
Background. The number of reported new Coronavirus cases has resurged significantly since reopening borders on June 15. The total number of confirmed infections as of January 7 stood at 5,811 with 50 deaths since March. The pandemic 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 government had put in place a reopening plan in four phases starting May 4, and all economic activities had resumed by end-June. The country’s borders were reopened gradually and as of December 1, all restrictions on travels were lifted and commercial air-traffic resumed subject to strict health and safety protocols, including a requirement starting in March 2021 to present health passports for travelers entering Aruba.Travelers have the option to take a PCR test upon arrival at the airport in Aruba or provide a certified negative test result prior to traveling but need to be insured for medical expenses should they test positive during their stay. The authorities are also promoting Aruba as an alternative destination for foreigners to work remotely.
At the same time, due to the resurgence of new cases, the government announced on August 3 a contingency plan to slow down the spread of local transmission, including the launch of a mobile app to facilitate testing.
On October 22, the government began a relaxation of the measures aimed at curbing the second wave of COVID-19 pandemic and replaced the curfew by "area prohibition" in beach zones. Bars, nightclubs and rum-shops remain closed, while social gatherings and home parties prohibited except for funerals where a maximum of 25 people are allowed. Social distancing protocols remain in effect when in public. On November 24, some restrictions were relaxed for family gatherings, restaurant dining, and live entertainment. Currently, the number of active cases is below 500 compared to more than 700 cases experienced during August and September.
On November 27, the authorities announced that they are discussing with the Netherlands a COVID-19 vaccination plan starting in late December 2020-early January 2021. Vaccination will be voluntary, with priority given to healthcare workers, seniors of 60 years and older, and individuals with chronic diseases; they are also working on a digital scheduling system to avoid agglomerations at their vaccination site.

Key Policy Responses as of January 7, 2021

Fiscal

On March 26, the parliament approved the amended 2020 budget, containing a higher spending related to the healthcare sector and three supporting programs: i) a relief package for employees who lose their jobs due to the virus outbreak; ii) a package to support social security; iii) and a package to support small and medium-sized enterprises. The government also introduced a 3-month payroll subsidy for businesses that have seen a drop of over 25% in their monthly revenues. The authorities reduced government expenditures, including the wage bill and goods and services, to contain the anticipated large deficit in the budget.
On October 4, the authorities extended salary subsidies and financial aid to medium and small businesses for 3 more months, until December 2020.
On October 26, the authorities announced a second emergency fiscal plan which consists of 11 initiatives, including indirect tax relief for small business and the abolition of special taxes on rental cars and motorcycles as well as training and education allowances.
Starting January 1, 2021, income and payroll taxes were lowered although this was a previously planned reform in the context of the simplification of the tax system started in 2019.

Monetary and macro-financial

On March 17, the central bank of Aruba (CBA) lowered: the reserve requirement on commercial bank deposits from 12 to 11 percent; the minimum capital adequacy ratio from 16 to 14 percent; and the prudential liquidity ratio from 18 to 15 percent. Furthermore, the maximum allowed loan-to-deposit ratio was increased from 80 to 85 percent (see: https://www.cbaruba.org/cba/readBlob.do?id=6307). Moreover, on May 5, the CBA further lowered reserve requirement to 7 percent. On June 30, the CBA published the results of its yearly stress test on the commercial banking sector concluding that the existing ample capital and liquidity buffers provide banks with sufficient room to withstand significant external shocks, including the COVID-19 pandemic, provided that the recovery starts in the second half of 2020 (see: https://www.cbaruba.org/cba/readBlob.do?id=6655).

Exchange rate and balance of payments

On March 17, the CBA announced that it would not grant any new foreign exchange licenses related to outgoing capital transactions, and that it stands ready to take further measures to preserve the peg.

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Australia
Background. The first COVID-19 case in Australia was confirmed on January 25, 2020. Social distancing measures were increasingly tightened in late March/early April, including by banning public gatherings of more than two people and shutting down non-essential businesses. After the National Cabinet announced a three-step plan on May 8 to relax COVID-19 restrictions, States and Territories eased regional containment measures.
From July to early November 2020, a regional COVID-19 resurgence triggered a renewed lockdown in metropolitan Melbourne and tightening of restrictions for the State of Victoria (outside of Melbourne). On November 19, 2020, South Australia implemented an immediate, strict lockdown for three days in response to COVID infections in Adelaide. Since December 17, 2020, a stay-at-home order has been in place in the northern area of Sydney’s Northern Beaches due to a renewed COVID-19 outbreak.
Across the country, state-level restrictions on public gatherings and social distancing rules for restaurants and shopping remain, while some inter-state travel remains restricted. Overseas travel remains banned, and any arrivals in Australia are quarantined for 14 days, with the exception that travelers from New Zealand have been able to enter quarantine-free since October 16, 2020. Australia is planning to begin COVID-19 vaccinations in mid-to-late February 2021.
Real GDP rebounded 3.3 percent q/q in the third quarter of 2020 after a contraction of 7 percent q/q in the second quarter.

Key Policy Responses as of January 7, 2021

Fiscal

At the Commonwealth level, fiscal stimulus,consisting of expenditure and revenue measures worthA$267billion (13¾ percent of GDP),has been put in place through FY2023-24. These measures are reflected in the FY2021 budget (released on October 6) and have been updated in the Mid-Year Economic and Fiscal Outlook (MYEFO, released on December 17).The majority of the stimulus will be executed through FY2020-21. The stimulus includesthemultiyear JobMaker program(A$73 billion), comprising new measures (loss carry-backs and personal income tax cut), as well as the extension of existing measures (the temporary Coronavirus Supplement, other income support measures, full expensing, infrastructure investment, among others).The overall stimulus includes previously announced JobKeeperwage subsidies(4.6 percent of GDP), income support to households, cash flow support to businesses, investment incentives, and targeted measures for affected regions and industries (including the HomeBuilder program supporting the construction industry).The Commonwealth government will also help finance a series of fast-track infrastructure projects across States and Territories (A$3.9 billion) and the arts and screen industries to support job creation,and has put in place a home care package to support senior citizens (A$0.3 billion). The Commonwealth government provided free childcare to around one million families through mid-July (A$0.3 billion) and announced targeted support to the education system. In mid-July, the government announced extensions of the JobKeeper wage subsidies through March 2021 and of the additional income support to householdsthrough December 2020, with payment reductions to facilitate a gradual transition to a recovery. It also instituted a new JobTrainer skills package (A$2 billion).The 2020-21 MYEFO extends the Coronavirus Supplement and other income support measures through March 2021. Pandemic Leave Disaster Payment has been arranged with the State and Territory governments to provide a lump sum payment to help workers during their 14-day self-isolation period. The Commonwealth government will also invest in green technologies (A$1.9 billion) to lower emissions.
Other measures include an allocation of up to A$15 billion to invest in residential mortgage backed securities and asset backed securities to help funding for small banks and non-bank financial institutions, and loan guarantees between the Commonwealth government and participating banks to cover the immediate cash flow needs of SMEs (up to A$20 billion). In mid-July 2020, the latter scheme was extended through June 2021, with the maximum loan size raised from A$250,000 to A$1 million and the maximum maturity extended to five years.
Separately,the Commonwealth government has committed to spend an additional amount ofA$16.6 billion (0.8percent of GDP) to secure access to COVID-19 vaccines, roll out a national Vaccination Program, 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$49billion (2.5 percent of GDP), including payroll tax relief for businessesandrelief for households, such as discount utility bills, cash payments to vulnerable households, support for health spending, construction, infrastructure packages, and green investment (renewable energy and technologies).

Monetary and macro-financial

On December 1,2020, the Reserve Bank of Australia (RBA) left monetary policy settings unchanged. In the previous monetary policy meeting on November 3, the RBA reduced the cash rate target, the 3-year yield control target, and the interest rate on its Term Funding Facility (TFF) by 15 basis points to 0.1 percent (the cash rate had been at 0.25 percent following two 25 basis point cuts on March 3 and March 19). The interest rate on commercial banks' exchange settlement balances at the RBA was reduced to zero (from 0.1 percent). In addition, the RBA announced secondary market purchasesof A$100 billion of 5to 10-year government bonds over the next six months. It also stepped up its forward guidance by stating that it will not increase the cash rate until actual inflation is sustainably back in the 2 to 3 percent target range and that it is not expecting to increase the cash rate for at least three years.
Prior to this round of policy easing, on March 19, 2020, the RBA hadannounced yield targeting on 3-year government bonds at around 0.25 percent through purchases of government bonds in the secondary market. To support liquidity, the RBA conducts one-month and three-month repo operations daily until further notice. Repo operations of longer-term maturities (sixmonths or longer) are held at least weekly if market conditions warrant.To assist with the smooth functioning of Australian capital markets, the RBA hasbroadened the range of eligible collateral for open market operations to include securities issued by non-bank corporations with an investment grade. The RBA has established a swap line with U.S. Fed for the provision of US dollar liquidity up to US$60 billion. To support the provision of credit, especially to SMEs, the RBA establishedtheA$90 billion TFF in March for banks to access three-year funding at 25 basis points until September 2020. The facilitywas subsequently expanded to A$200 billion,with access extended through June 2021.
The Australian Prudential Regulation Authority(APRA) has provided temporary relief from its capital requirement, allowing banks to utilize some of their current large buffers to facilitate ongoing lending to the economy as long as minimum capital requirements are met. APRA announced on March 30, 2020, 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, 2020, 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. On December 15, 2020, APRA announced that banks and insurers will no longer require to have a minimum level of earnings retention from January 1, 2021.APRA also expects banks to conductregular 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, 2020, 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, 2020, the Australian Banking Association announced that banks will extend the period of deferred repayments by up to another four months for affected borrowers. APRA also extended the regulatory approach on deferred repayments to cover a maximum period of up to 10 months until March 31, 2021. In addition, APRA clarified that loans that are restructured before March 31, 2021 to put the borrower on a sustainable financial footing may continue to be regarded as performing loans for capital adequacy purposes.
Insolvency relief measures for businesses put in place by the Commonwealth government from March 2020 for six months as part of its response to COVID-19 have been extended through December 2020.

Exchange rate and balance of payments

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Austria
Background. The pandemic began to spread in Austria since March. During the initial outbreak, the authorities progressively tightened containment measures between mid-March and mid-April. By March 16, leaving home was banned by law with limited exceptions, restaurants and shops not delivering daily products were closed, and enforced by administrative and police measures.
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. Some re-opening process had been accelerated due to low infection rates, such as the reopening of the borders with Germany, Switzerland, Lichtenstein, Czech Republic, Slovakia, and Hungary from June 5. On 16 June, 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.
Subsequent lockdowns. Since reopening, daily new cases significantly rose and, in October, surpassed the previous peak in March with the effective reproductive rate of above 1. A pickup in the infection rate prompted the authorities to reintroduce containment measures, including reintroducing mandatory mask since July. The authorities eventually announced a partial second lockdown between November 3 and December 6. This lockdown was subsequently tightened from November 17 and new cases have begun to decline again. The second lockdown has been less strict than the first. Industry and manufacturing remain open while restaurants, bars, non-essential shops, hairdressers, and schools are closed. Another lockdown was implemented during December 26 to January 18 and has been extended to January 24.

Key Policy Responses as of January 6, 2021

Fiscal

The total fiscal package announced on March 15 amounts to 38 billion euros (about 9.5 percent of 2019 GDP). Financing includes: 4 billion euros for the health care system, long-term care, short-term work, and to compensate self-employed, family- and micro-business for the loss of earnings related to the sickness; 9 billion euros in guarantees to companies, including exporters and the tourism industry; 10 billion euros for the deferral of personal and corporate income taxes (for 2020), social security contributions (3 months), and VAT payments (until end-September 2020). The General Civil Code was enacted on March 15 declaring COVID-19 a force majeure enabling companies to force workers to take up to two weeks of leave accumulated in previous years. On March 22, €22 million were earmarked for research and short-term work was extended to 3 months with the possibility to extend it by another three months (up to September). Under this provision working hours may be reduced to up to 10 percent (later revised to 30 percent), at 80 to 90 percent of regular pay. Employers only pay the hours worked, while the rest is paid from the budget. From April 2, households could delay rent payments to their landlords until end-2020. Households and SMEs may also delay their debt servicing by 3 months. Funding for short-term work was increased from € 3 to € 5 billion on April 13, to € 10 billion on April 30, and again to € 12 billion on May 19 while the time frame for the submission of applications extended. The authorities are rolling out new fiscal measures including tax relief measures for the hospitality sector of € 500 million and support to non-profit organizations of € 700 million open for 6 months. To jump-start the economy, a new tax incentive was introduced for companies that recruit apprentices, with € 2,000 per position created during March 16 and October 31 of this year. On June 16, the package was increased to € 50 billion (13 % of GDP). Measures on the expenditure side include investment in climate protection, affordable housing, health, and digitalization and a one-off support for unemployed and families. Several specific tax relief measures are aimed at the agricultural and forestry sectors, culture and publishing. The reduction of the lowest income tax rate from 25 to 20 percent, planned for 2021, was brought forward and made retroactive to January 2020. In light of the subsequent lockdowns, the authorities added a targeted policy of "lockdown revenue replacement" (about 0.5-1 percent of GDP) to support directly affected companies during November-December 2020. Several measures have been extended, including new phase of short-term work arrangement (until March 2021), fixed cost subsidy (March 2021), hardship fund for small businesses (March 2021), and unemployment assistance (end-2020). The 2021 budget, announced in mid-October, envisaged a deficit of over 6 percent of GDP reflecting continuation of key measures.

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

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Azerbaijan
Background. Azerbaijan has been adversely affected by COVID-19 and a collapse of oil prices. The authorities reported the first confirmed COVID-19 case on February 29, 2020.
The COVID-19 Operational Headquarters has been created under the Cabinet, Ministers and working groups within various ministries and at the CBA have been tasked with developing specific response measures. To contain the spread of COVID-19, the authorities introduced a special quarantine regime (state of emergency) starting March 24. It included border closures, mandatory quarantine of citizens returning from abroad, prohibition of mass gatherings, restriction of domestic movements; closure of retail outlets, airports, and transportation hubs; social distancing, and disinfection of public spaces.
Reopening of the economy. Starting May 4, the authorities began a staged relaxation of restrictions, enabling many businesses, facilities, and public areas to reopen and reestablishing freedom of private vehicular travel between cities and districts. On June 19, as new COVID-19 cases rose with the reopening (with cases doubling between June 1-18), the authorities announced retightening of the quarantine regime (including the closure of borders until August 1, closure of establishments such as shopping malls, cinemas, and museums in the capital and big cities, and requiring permits for people to leave their homes in these cities). On July 17, the special quarantine regime was extended in 13 cities and districts until August 31, with tighter provisions in place until August 5. With new inflections starting to decline in early August, the authorities relaxed some of the lockdown restrictions in 7 cities (e.g., a few beaches were reopened and the requirement to receive SMS permission to leave home was eased). On August 29, the special quarantine regime was extended until September 30. On September 28, in response to a rise in the number of new coronavirus cases, Azerbaijan has extended some of its lockdown restrictions until November 2 and decided to keep its borders closed. On November 19, following further rise in covid infections, Azerbaijan extend lockdown restrictions until December 28, 2020. On December 14, 2020, the new quarantine measures became effective and the special quarantine regime was extended until January 31, 2021.

Key Policy Responses as of January 4, 2021

Fiscal

The authorities have increased budget spending on public health by AzN 0.37 bn (0.5 percent of GDP). This includes scaling up medical facilities (AzN 0.25 bn) with ten modular hospitals to be built (six of which have been completed) adding 2,000 beds; purchase medical supplies & equipment, payment of allowances/benefits to medical workers (AzN 0.1 bn); and creation of a COVID Response Fund for public health needs with public and private sector contributions (total AzN 114 million or 0.14 percent of GDP, with government transfer of AzN 20 million (.02 percent of GDP). Azerbaijan's government has also provided AzN 8.5 million ($5 million) to the COVID-19 Fund as part of the WHO’s Strategic Preparedness and Response Plan.
On April 4, the authorities announced support to the affected businesses and individuals in the amount of AzN 3.3 billion (4.85 percent of GDP). Measures aimed at redressing damage to entrepreneurs and supporting incomes include: partial coverage of salaries (AzN 215 million); support to microentrepreneurs (AzN 80 million); temporary public jobs (AzN 54 million); subsistence and unemployment payments (AzN 230 million); pensions (AzN 200 million); targeted social assistance (AzN 4.5 million); energy and education subsidies (AzN 20 million); allocation of additional funds to the Entrepreneurship Development Fund (AzN 50 million).
On June 2, the President approved amendments to the Tax Code, providing tax benefits to businesses affected by the COVID pandemic(AzN 0.12 bn or 0.2 percent of GDP). The amendments grant a one-year exemption from land and property tax to selected sectors, including tourism, passenger road transportation, and cultural facilities. Income taxpayers will also receive a 75 percent exemption and taxpayers filing under simplified procedures a 50 percent exemption. Moreover, the rental property tax in the COVID-affected areas is reduced from 14 percent to 7 percent.
On June 23, the Cabinet of Ministers announced a one-time extension of social assistance announced as part of the April 4 relief package for the unemployed and low-income people who lost earnings because of the special quarantine regime. An additional lump-sum payment of AzN 190 was paid once to the individuals who received social assistance under the April 4 relief package.
On August 6, the parliament passed a revised 2020 budget which reflected a lower oil price ($35 a barrel) and growth assumptions (-5 percent). The transfer from the Oil Fund was increased by AzN 850 million to offset lower state budget (SB) revenues, while SB expenditures were increased by some AzN 600 million. Overall, the 2020 SB deficit has increased from AzN 2.8 billion to AzN 3.4 billion (4.8 percent of GDP), while the consolidated government deficit increases from AzN 1.9 billion to AzN 8.4 billion (11.9 percent of GDP).

Monetary and macro-financial

On March 19, the CBA left the refinancing rate unchanged at 7¼ percent, butraised the floor of the interest rate corridor (within a de facto floor system) by 125 bps to 6¾ percent.
On May 1, the CBA lowered the ceiling of the interest rate corridor by 100 bps to 8 percent. The authorities have extended the blanket deposit guarantee until December 4, 2020. The guarantee covers all manat (foreign currency) deposits within a 10 (2½) percent interest rate cap.
On June 19, the CBA lowered the refinancing rate by 25 bps to 7 percent, lowered the ceiling of the interest rate corridor to 7½ percent, and lowered the floor of the corridor by 25 bps to 6½ percent.
On July 30, the CBA lowered the refinancing rate by 25 bps to 6¾ percent, and similarly shifted the floor and ceiling of the corridor downwards to 6¼ and 7¼, respectively.
On September 18, the CBA lowered the refinancing rate by 25 bps to 6½ percent, and similarly adjusted the ceiling and floor rates to maintain a +/- 50 bps interest rate corridor.
On December 18, the CBA lowered the refinancing rate by 25 bp to 6 ¼ percent. The floor of the interest rate corridor was set as 5.75%, and the ceiling as 6.75%.
On April 23, the CBA undertook several measures to assist the financial sector. This included: (I) a relaxation of capital requirements (system wide and the countercyclical capital buffer) and risk weights on mortgage loans; (ii) a moratorium on late fees and interest rate penalties; (iii) guarantees on insurance premiums; and (iv) suspension of inspections of credit institutions.
On April 27, the CBA appointed temporary administrators in four banks. Two of the banks were closed on April 28, with the other two closed on May 12.
On May 19, the CBA signed a $200 million swap agreement with the EBRD, aimed at improving the flow of financial resources to the real sector. The swap enables the EBRD to provide domestic currency credit support to local companies, including for short-term liquidity needs, working capital and restructuring of exposure for existing clients, as well as trade finance and emergency support to key infrastructure providers.

Exchange rate and balance of payments

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

B
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The Bahamas
Background.The Bahamas has so far reported 7,959 confirmed cases of COVID-19, with 164 deaths (as of January 6). Borders were initially reopened for international travel on July 1, as part of a phased plan that began with a reopening for boaters and private aviation on June 15. Soon after, confirmed cases increased rapidly, leading the government to issue a new order for travel procedures and restrictions on July 22 and new lockdown restrictions in August. Lockdown restrictions have been gradually rolled back since mid-August. Starting September 8, regulations on activities were eased further, such as providing indoor dining and in-store services under specific protocols (except for New Providence) and extending beach access time for all islands. Phase 3 reopening began on October 15, with hotels and beaches available to visitors abiding by a 14-day "Vacation-In-Place" (VIP) guideline until November 1 when excursions and tours recommenced. Visitors, returning citizens, and residents will need to obtain a RT-PCR test no more than seven days prior to their travel to The Bahamas. In addition, and to ensure that travelers remain COVID free, a rapid antigen test will be conducted four days after arrival in The Bahamas. New weekend lockdown measures in worst hit islands have curtailed the rise, as testing capacity and tracing have also improved. Furthermore, protocols on The Bahamas' health travel visa are continuously being revised to prevent further spread that may arise from international and domestic travel.

Key Policy Responses as of January 6, 2021

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. The authorities began a COVID-19 vaccination campaign in December 2020 and have extended free healthcare to all residents for the first two months of 2021.
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 January 4, 2021

Fiscal

A BD 560 million ($1.5 billion or 4.2 percent of GDP) stimulus package to respond to the economic distress due to the COVID-19 pandemic was announced on March 17. The package, effective for a period of three months from April, comprises seven initiatives: (i) payment of salaries for Bahrainis working in the private sector to be financed from the unemployment fund; (ii) payment of electricity and water bills for Bahraini individuals and companies; (iii) exemption of commercial entities from municipalities' fees; (iv) exemption of tourist facilities from tourism fees; (v) exemption of industrial and commercial entities from paying rent to the government; (vi) doubling of the size of the liquidity fund to support SMEs; (vii) and redirection of Tamkeen (a semi-autonomous government agency that provides loans and assistance to businesses) programs to support adversely affected companies, as well as restructuring of all debts issued by Tamkeen. In addition, to respond to urgent health needs created by COVID-19, the Cabinet has authorized the Minister of Finance and National Economy to withdraw from the general account BD 177 million ($470 million or 1.3 percent of GDP), which has subsequently been added to the 2020 budget on July 13, 2020. On April 8, 2020 a further BD 5.5 million enhancement to social benefits for lower income families was announced. On April 20 the authorities announced their objective to reduce non-priority government agencies expenditure by up to 30 percent and delay some capital expenditure to accommodate lower oil revenues due to the decline in oil prices. Other measures announced include the extension of the existing package to drivers, driving instructors and nurseries, as well as a proposal to delay the collection of some claims on nationals.
On June 29, the authorities approved new measures to extend some of the support adopted in the previous package. The new measures include i) payment of 50 percent of salaries for Bahrainis working in the most affected sectors for a further three months starting in July 2020; ii) extend the payment of electricity and water bills for Bahrainis for a further three months starting in July 2020; iii) reduce by 50 percent work permit fees and exempt the most affected sectors from work permit fee for three months starting in July 2020; and iv) expand financial support to hard hit sectors through Tamkeen.
At end-July 2020 the authorities approved the following new measures: i) for three months, exempting industrial companies operating in the industrial zone and exporting more than 30 percent of production from paying rent; ii) exempting companies hardest hit by the crisis from paying the commercial record registration or renewal fee for 2020; iii) exempting households from paying municipality fees on their first residence for three months; and iv) exempting tourist facilities from paying the tourism fee for the third quarter of 2020.
At end-September 2020 the authorities approved the extension of the following measures for the period October-December 2020: i) sponsoring of electricity and water bills in first residences for Bahrainis; ii) support 50% of salaries of Bahrainis in the most affected sectors; iii) fees exemption for tourist facilities; and iv) further wage support to taxi drivers, transport drivers and driving instructors. The authorities also approved as a new measure the coverage of 50 percent of salaries of uninsured employees in kindergartens and nurseries.

Monetary and macro-financial

On March 17, the Central Bank of Bahrain (CBB) expanded its lending facilities to banks by up to BHD 3.7 billion ($10 billion or 28 percent of GDP) to facilitate deferred debt payments and extension of additional credit. The CBB has also followed the Fed’s interest rate cuts in response to the COVID-19 pandemic: the one-week deposit facility rate was cut (in two steps) from 2.25% to 1.0%, the overnight deposit rate from 2.0% to 0.75%, and the overnight lending rate (in one step) from 4.0% to 2.45%. Other key measures to support banks and their clients include: (i) reducing the cash reserve ratio for retail banks from 5% to 3%; (ii) relaxing loan-to-value ratios for new residential mortgages; (iii) capping fees on debit cards; and (iv) requesting banks to offer a six-month deferral of repayments without interest or penalty and to refrain from blocking customers' accounts if a customer has lost his or her employment. The CBB is also following up with banks on suitability of banks' contingency plans. The loan deferral was subsequently extended through the first half of 2021. Finally, the CBB has also been following up with banks on suitability of banks' contingency plans.

Exchange rate and balance of payments

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Bangladesh
Background. Bangladesh reported the first confirmed cases of COVID-19 on March 8, 2020. 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. Starting May 31, closures and movement restrictions were gradually lifted. Civil servants have returned to their offices and public transport has resumed. While the number of cases remains low, the reluctance to be tested remains challenging. On December 21, the government announced the ‘no mask, no service’ policy and the mandatory use of masks when outside. Beyond the domestic impact of the health crisis, the economy has been sharply impacted by the slowdown in export oriented ready-made garments sector which accounts for more than eighty percent of exports. Following the outbreak, export orders worth several billion US dollars were cancelled or postponed. Foreign remittances (US$ 18.2 billion in FY20) initially declined around the onset of the pandemic but picked up during the fiscal year. The second wave, in the economies of the major trading partners, is expected to dampen the recent pick up in export demand. Remittance inflows have been steadily increasing, starting FY21, partly reflecting the central bank’s incentives to repatriate funds through official channels.

Key Policy Responses as of January 06, 2021

Fiscal

A series of fiscal measures have been introduced to contain and mitigate the impact of the COVID-19 outbreak. At end-March 2020, the Ministry of Finance issued a revised budget for FY20, including Tk. 2.5 billion in additional resources, to fund the Ministry of Health’s COVID-19 Preparedness and Response Plan and expand the existing transfer programs that benefit the poor. Increased allocation was made to the Open Market Sale program to facilitate the purchase of rice at one-third the market price. On March 31, the Ministry of Finance announced a Tk. 50 billion (about US$ 588 million) stimulus package for exporting industries to be channeled through Bangladesh Bank (BB) and distributed by the commercial banks at a 2 percent service charge. This special fund, for worker’s salary support, was disbursed through mobile financial services and bank accounts benefitting close to 4 million workers over a four-month period. The Ministry of Finance is also subsidizing interest payments on working capital loans of up to Tk. 600 billion (about US$ 7,067.1 million) provided by scheduled banks to businesses. On April 15, the Prime Minister announced the allocation of Tk. 21.3 billion (about US$ 250.9 million) under a housing scheme for the homeless, Tk.15 billion (about US$ 176.7 million) for the poor who faced job losses from the pandemic, Tk.7.5 billion (about US$ 88.3 million) to provide health insurance for government employees most at risk, and Tk. 1 billion (about US$ 11.8 million) in bonus payments for public health workers treating COVID-19 patients. The Prime Minister has also announced that Tk. 20 billion (about US$ 235.6 million) in interest payments on behalf of 13.8 million loan recipients negatively impacted by the national shutdown will be covered by the government. Thus far, Tk. 336 billion (about US$ 3957.6 million) of fiscal stimulus has been announced, of which Tk.162.1 billion (about US$ 1,909.3 million) has been disbursed as of end-November. In addition, the National Board of Revenue has suspended duties and taxes on imports of medical supplies, including protective equipment and test kits. The FY21 Budget includes higher allocations for health, agriculture, and social safety net programs, although effective targeting remains a challenge. As a precautionary measure, the government has decided that 25 percent of budgetary allocations for development projects will be placed on hold, affecting low-priority projects. It has approached donors seeking budget support. In January 2021, the government increased the COVID-19 Emergency Response and Pandemic Preparedness Project costs by Tk 56.6 billion (about US$ 666.7 million) mostly reflecting the procurement, preservation and distribution of vaccines.

Monetary and macro-financial

To ensure adequate liquidity in the financial system, in March 2020, BB announced the purchase of treasury bonds and bills from banks. The repo rate was successively cut from 6 percent to 4.75 percent over three cuts from March to July. The cash reserve ratio (CRR) for banks was reduced on both a daily (from 5 to 3.5 percent) and a bi-weekly basis (from 5.5 to 4 percent). The CRR was also cut for offshore banking operations, effective July 1, and for Non-Bank Financial Institutions (NBFIs), effective June 1. The advance-deposit ratio and investment-deposit ratio was raised by 2 percent to facilitate credit to the private sector and improve liquidity. The Export Development Fund was raised from US$ 3.5 billion to US$ 5 billion, with the interest rate slashed to 1.75 percent and the refinancing limit increased. BB has created several refinancing schemes totaling Tk 380 billion (about US$ 4,475.9 million), a 360-day tenor special repo facility, and a credit guarantee scheme for exporters, farmers, and SMEs to facilitate the implementation of the government’s stimulus packages. BB also announced an agriculture subsidy program that will be in place until mid-2021. In addition, BB has taken measures to delay non-performing loan classification, relax loan rescheduling policy for NBFIs, waive credit card fees and interests, suspend loan interest payments, impose restrictions on bank dividend payments, extend tenures of trade instruments, and ensure access to financial services. Recently, BB imposed an additional 1.0 percent general provision against loans that have enjoyed deferral/time extension facilities.

Exchange rate and balance of payments

Foreign exchange rules were eased by BB to: (i) provide foreign currency to Bangladeshi nationals facing problems while returning home due to travel disruptions; and (ii) allow foreign owned/controlled companies operating in Bangladesh to access short term working capital loans from their parent companies/shareholders abroad to meet actual needs for payments of wages and salaries. International factoring was introduced to accelerate exports. BB has been intervening in the foreign exchange market to keep the exchange rate relatively stable following the COVID-19 outbreak.

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Barbados
Background. The government took swift actions to contain the spread of the virus. Within days of the first confirmed case (March 16), 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 during the global pandemic—which accounts for 40 percent of economic activity—will significantly depress overall economic activity in 2020.
Reopening of the Economy. The authorities adopted a four-phase plan to reopen the economy. The shift to phase 2 occurred on May 4 with a modest relaxation of social and economic restrictions. Specifically, the 24hr curfew was replaced with a nightly curfew and the resumption of construction, manufacturing, and food production/distribution services. Phase 3 commenced on May 18 with the phased re-opening of remaining businesses and trades but with restrictions, such as social distancing requirements, temperature testing protocols, and limited admittance to retail spaces. More recently, the curfew was lifted effective July 1 and quarantine procedures for travelers arriving in Barbados have been relaxed ahead of the resumption of commercial airlift in July. Phase 4, which is characterized as the resumption of life as normal, will be triggered upon the development and procurement of a vaccine.

Key Policy Responses as of January 7, 2021

Fiscal

The Government of Barbados (GoB) identified upfront emergency health and capital expenditures needed to manage and mitigate the spread of infection. This included resources to refurbish the hospital and clinics, build isolation centers, and provision critical medications and supplies. In addition, the GoB have boosted priority capital spending and introduced social programs for displaced workers to mitigate the effects of COVID-19 on the economy. This included infrastructure investment to renovate schools, government buildings and industrial complexes, as well as 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. Traditional unemployment benefit and severance payment schemes, however, have provided a broad-based first line of defense for displaced workers during the economic downturn. The targeted clearance of roughly 1 percent of GDP in outstanding income tax and VAT arrears provided an additional infusion of liquidity to households and businesses. The authorities also rolled out a deferred public wage-savings scheme (BOSS) to help finance a stepped-up capital investment program intended to boost growth while the tourism sector recovers from the COVID shock.
On September 15, the Governor General announced additional policy measures during a Throne Speech to open a new session of Parliament. Key initiatives include a 12-month jobs program and a tourism-sector stimulus and transformation package (available for up to two years). The Governor General reiterated the government's commitment to long-term debt reduction—which underpins the ongoing financial arrangement with the IMF—while indicating that a reduction in the debt-GDP ratio may not be possible during next two years as the economy works through the impact of the COVID-19 shock. On balance, the pandemic response has prompted the Government of Barbados to lower its primary balance target to minus 1 percent of GDP for FY2020/21 (compared to a surplus of 6 percent of GDP envisaged prior to the pandemic, and a surplus of 3 percent target announced during the March budget presentation).

Monetary and macro-financial

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

Exchange rate and balance of payments

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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, social distancing, and recommendations for schools,education and work places.In mid-October, the Ministry of Health issued enhanced recommendations to businesses and non-profit organization on social distancing, limiting any meeting with more than 5 participants and encouraging video conferencing.In some regions such as Minsk,there has also been cancelation of public events. For travel abroad, the Ministry of Health has developed a certificate of the absence of COVID-19.Policy measures are elaborated below.First re-opening measures became effective in mid-June: The national airline Belavia continues to update its international flight schedule (flights to Russia resumed in late September)and restrictions on transit truckers were lifted. Since October, the duration of self-isolation for those returning from red zone countries is 10 days.
In addition to the impact of the Covid pandemic, Belarus faces a gradual loss of oil price subsidies from Russia through the “tax maneuver” till 2024, the economic impact of protests and strikes that are taking place since the presidential election of August 9, 2020, andthe recent oil-price shock and its negative impact on the price of Belarus' exports of refined products.

Key Policy Responses as of January 6, 2021

Fiscal

The government has announced a package of fiscal measures, which include additional resources for the healthcare sector (including salary allowances for essential personnel) and tax relief and tax deferral measures to support businesses. Some of these measures are being implemented on the local government level (e.g. in Minsk on June 1 and June 11). The possible total fiscal impact of these measures has not yet been published. In addition, public sector salaries are being kept at least at the legislated minimum and subsidies are being granted to public sector organizations forced into part-time employment or to stand idle for a specified time.

Monetary and macro-financial

Key measures include: (i) credit holidays, i.e., guidance to banks to postpone principal repayments and interest on loans in a targeted manner; (ii) mitigation of a number of prudential requirements: softening of assets classification requirements; including looser requirements on FX loans; increasing the maximum risk standard for one debtor; suspending indexation of regulatory capital of banks or other financial corporations; lowering the liquidity coverage ratio; and softening credit risk requirements for systemically important borrowers when calculating the normative capital adequacy ratio (iii) guidance on suspension of dividend distributions; (iv) softening of recommendations on interest rate ceilings on deposits and credits, and the associated risk assessment; (v) recommendations to banks on restraining from increasing interest rates on restructured debt; (vi) partially releasing the capital conservation buffer; (vii) extending the maturity of the central bank’s refinancing loans for banks. The central bank also reduced the policy rate twice during the Covid pandemic period to 7,75 percent (from July 1). See also: https://www.nbrb.by/press/10042; https://www.nbrb.by/press/10060; http://www.nbrb.by/press/10167 (Russian only)

Exchange rate and balance of payments

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

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Belgium
Background. Belgium registered the first confirmed COVID-19 case on February 4, 2020. The government at the time implemented a range of measures to contain the pandemic, including closures of schools and non-essential businesses, limiting movement to essential needs, as well as banning all gatherings and non-essential travel abroad. The economy contracted by 3.5 and 12.1 percent (q/q) in the first two quarters of 2020, followed by a rebound of 10.7 percent in the third.
Reopening of the economy. Since early May, a reopening plan conditional on health outcomes has seen the reopening in four phases of sectors and activities according to their degree of contact intensity. Following an uptick in cases from mid-July, the fifth phase of the reopening plan was put on hold, with some restrictions tightened. Despite a partial easing from late August, strict social-distancing rules remained in place. Amidst a sharp resurgence of cases and hospitalizations since early October, wide-ranging restrictions on activity and mobility were imposed on October 19, followed by a new lockdownfrom November 2, albeit less stringent than in spring. While non-essential shops were allowed to reopen from December 1, other restrictions and social distancing rules will remain in place at least until January 15, 2021. Travel and telework rules and controls have been further tightened (as decided by the Consultative Committee on December 18 and December 30) in response to a stagnation in the decline in infection rates and the emergence of a new, more contagious strain of the virus in the UK. A relaxation of the restrictions will be guided by the infection, hospitalization, and reproduction rates, and differentiated by sector according to epidemiological risks. The vaccination campaign was launched on January 5, 2021, prioritizing the inoculation of all 150,000 nursing home residents in January.

Key Policy Responses as of January 7, 2021

Fiscal

The government put in place a package of fiscal measures to address the crisis, detailed in its 2021 Draft Budgetary Plan with an estimated budget impactof €17.5 bn (3.9 percent of GDP) in 2020-21, and complemented by some €52bn (about 12 percent of GDP) of loan guarantees. Key measures include: (i) boosting health expenditure and hospital funding; (ii) increasing support for those in temporary unemployment and self-employed; (iii) liquidity support through postponements of social security and tax payments for companies and self-employed;(iv) solvency support through various tax and "below-the-line" measures; and (v) additional support to affected firms and households provided by subnational governments. A reinsurance scheme for short-term trade credit insurance, and other socio-economic measures have further supported these efforts. Following a first extension of key existing schemes in June, though more targeted at hard-hit sectors and vulnerable groups, the federal and regional governments have announced additional support in response to the re-imposition of restrictions from mid-October. These are mostly in the form of a further extension or expansion of existing, temporary measures.

Monetary and macro-financial

For monetary policy at the currency union level, please see Euro Area section.
Other measures taken by the Belgian authorities include: (i) a reduction in the counter-cyclical bank capital buffer to 0 percent, retracting an increase to 0.5 percent that was supposed to become effective inJune, whileproviding forward guidance of no change until at least mid-2021; (ii) a ban on the short-selling of stocks between March 18 and May 18; and (iii) a suspension of debt servicing to banks and insurers by households and companies affected by the crisis until end-June 2021, respectively.

Exchange rate and balance of payments

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Belize
Background. The first case of COVID-19 was reported on March 23. In response, the authorities closed the international airport and schools and implemented mandatory quarantines. They also declared a national state of emergency and nighttime curfew during April, under which people were not allowed to leave their homes except for buying essential goods, attending medical appointments, or to work in essential services. The national state of emergency was later extended until end-June, although with less stringent regulations. These measures we effective to contain the pandemic until early June. However, there have been a second wave of infections since then, with the number of cases increasing to around 5000 and the number of deaths to about 100 as of November 20.
The COVID-19 pandemic hit when the economy was already in recession due to drought and a slowdown in tourism in the second half of 2019. The impact of the pandemic on the economy is projected to be severe due to the collapse in tourism activity and the indirect effects of the necessary containment and mitigation measures. As a result, Belize is projected to experience a deep recession in 2020 and only a gradual recovery as the pandemic wanes.
Reopening of the economy. The national state of emergency ended in June, allowing more businesses to reopen. The international airport reopened on October 1 with appropriate protocols for testing and tracing. However, the number of international flights to Belize is only a fraction of its pre-pandemic levels and tourism activity has been slow to recover.

Key Policy Responses as of November 20, 2020

Fiscal

In March, Belize announced fiscal stimulus amounting to BZ$25 million (1 percent of GDP) in 2020 to provide short term relief to employees affected by the crisis, especially those in the tourism sector. So far, more than 40,000 applications for unemployment relief have been approved. Additional support to the healthcare sector and the unemployed has been financed with loans from bilateral and multilateral creditors.

Monetary and macro-financial

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

Exchange rate and balance of payments

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Benin
Background. Benin reported its first COVID-19 case on March 16, 2020. Although the number of active cases has remained lower than in neighboring countries, it is also trending upward slowly. The authorities have swiftly implemented strong containment and social distancing measures, including the partial lockdown (cordon sanitaire) around ten cities most exposed to the pandemic to isolate the contaminated population and contain the spread of the virus. They have also (i) significantly limited the transit of people across land borders; (ii) restricted the issuance of entry visas to the country; (iii) introduced a systematic and compulsory quarantine of all people coming to Benin by air; (iv) suspended all public gatherings; (v) introduced a ban on the movement of public transportation; and (vi) made wearing face mask in public compulsory. Economic activity was mostly affected during the second quarter of 2020, due to containment and mitigation measures in Benin and the global economic slowdown, while some signs of recovery appeared in June 2020. Agriculture, commerce and trade, transport, and the hospitality industry were among the most affected sectors. Inflation has been on the rise, driven by higher food and transport prices. Import and value chains disruptions, lower travel and tourism receipts in addition to diminished inflow of remittances have resulted in widening of current account deficit. The economic impact of the pandemic has also materialized through higher sovereign spreads, which remained elevated since the outset of the pandemic. The fiscal position has deteriorated as a result of the implementation of the authorities’ COVID-19 response plan (see section on fiscal response below).
In addition to Covid-19, Benin continues to be impacted by the closure of border with Nigeria. In August 2019, Nigeria decided unilaterally to close the border with some neighboring countries, including Benin. On December 17, 2020, an agreement with the Nigerian government was reached to reopen the border. Government policy is responding to both developments.
Reopening of the economy. The authorities have announced measures to gradually start reopening the economy, with the cordon sanitaire lifted on May 6, 2020. Middle schools, high schools and universities resumed their activities on May 11, 2020. Public transportation, places of worship and bars resumed their activities on June 2, 2020. International flights resumed on July 15, 2020, accompanied’ by strict protocols for testing and quarantine for new arrivals. The gradual reopening is subject to continued social distancing guidelines and mandatory use of masks, among other measures.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills issued initially by Benin amounted to 1.5 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

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Bhutan
Background. Bhutan confirmed its first case of COVID-19 on March 6, 2020. Active cases have increased since December 2020, following the outbreak in Thimpu. Since December 23, Bhutan has announced a second lockdown following a local transmission detected in Thimpu (the first lockdown was in August 2020). Under the lockdown, only designated shops within the zones and essential services will be available but all schools, institutions, offices and business establishments will be closed. Since the start of the pandemic, the economic impact of COVID-19 has been substantial, driven by the adverse impact on the tourism and related services sector.
Reopening of the economy. An Air Travel Bubble Arrangement has been agreed between the Royal Government of Bhutan and the Government of India, subject to standard quarantine and testing procedures. On January 7, 2021, the lockdown in the border town of Phuentsholing has been eased.

Key Policy Responses as of January 7, 2021

Fiscal

Linked to the Build Bhutan initiative, the government has launched the Specialised Firms initiatives to boost youth employment in various construction schemes. The government announced a National Resilience Fund for mitigating COVID-19 linked to job losses and salary cuts. The support included grant for individuals directly affected by the pandemic and full interest waiver on loans contracted since April 10, 2020 until June 2020. These measures were extended until September 2020, and partial (50 percent) interest waiver will continue until March 2021. In addition, fiscal stimulus in the FY 2020-21 budget includes the implementation of an Economic Contingency Plan (ECP) aimed at helping different sectors, including tourism resilience, agriculture, Build Bhutan (BB) and improvement of farm roads over and above annual budget (Nu 4 billion) and allocating higher level of capital outlay to frontload and accelerate activities from the 12th Five Year Plan. Current expenditure has been rationalized in response to expected fall in revenues and to ensure that it is covered by the domestic revenue. A budget of Nu.1.3 billion has been re-appropriated for health, essential food and fuel, quarantine and related initiatives. Support will be provided to FCB to stock essential food and non-food items. It is deepening fiscal decentralization with upscaling of national grants. Other measures: an additional resource of Nu. 2 billion will be provided to the Ministry of Health to meet health-related spending; Business Income tax (BIT) and Corporate Income tax (CIT) filing for the income year 2019 was deferred until June 30, 2020 and tax payments, for tourism and related sectors (hotel, airlines and tour operators) are deferred until December 31, 2020, while for other sectors until September 30, 2020; deferred payment of sales tax and customs duty on essential items (March to June 2020); waiver of payment of rent and other charges (April-December 2020) by tourism-related business entities leasing government properties, deferral of electricity charges payment for industry (till December 2020), free electricity and wi-fi services to hotels serving as quarantine facility (July-September 2020). As of May 25, the government will be refunding the 5 percent sales tax collected on telecom services collected on or after January 16, 2020. The government is mobilizing additional resources such as grants and concessional borrowing as well as bilateral and in-kind financing to support capital spending. Investments in GovTech is allowing Bhutan to reap benefits during COVID-19 including fast disbursement of cash relief funds. In late September, the first sovereign offering of a 3-year domestic bond of US$ 41 million (or Nu. 3 billion) at 6.5 per cent was issued to support increasing fiscal needs.

Monetary and macro-financial

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

Exchange rate and balance of payments

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

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Bolivia
Background. The first confirmed case was reported on March 10, 2020. While Bolivia was initially spared from the full force of the pandemic, it suffered a peak in new cases during July and August, after which the situation gradually improved. As of January 5, there are 163,671 confirmed cases, and 9,219 deaths have been reported. The previous government took a series of measures to prevent the spread of the virus, including a generalized lockdown, entailing the temporary closure of many businesses, border closure and suspension of schools, and postponed the general elections scheduled initially on May 3. On March 25, the previous authorities announced the state of health emergency until April 15 and further tightened the quarantine orders, completely closing the borders, restricting the movement of people to once a week, and prohibiting movements of vehicles except for security and health reasons. The national quarantine has been extended several times and the country is now in a stage of post-confinement that will remain in effect through January 15, 2021 with reopening modifications (see below). Wearing a facemask in public places is mandatory, certification of a negative COVID-19 test is required to enter the country and public events have reopened but must comply with biosecurity measures regulated by municipalities and local government. Efforts are underway to strengthen Bolivia’s health care system, which has struggled to accommodate the demands arising from the pandemic. During 2020, the former interim President, several members of her cabinet, and the ex-president of the central bank tested positive for COVID-19. National elections, which occurred on October 18, were delayed twice owing to the pandemic. New cases have been increasing over the last month, with some members of the current cabinet and regional authorities testing positive for the virus.
Reopening of the economy. By decree the post-confinement phase started on September 1 and has been extended to January 15, 2021 by the new government. On September 1 entry into Bolivia by air on commercial flights was reopened. From December 1 entry by air, land and water has been permitted provided that nationals and foreigners entering the country present a negative test result for COVID-19 obtained within 72 hours of the scheduled admission. However, flights from Europe are banned until February 15. Cultural, sporting, social and religious activities, electoral and recreational processes that generate crowds are permitted subject to biosecurity measures. Restrictions on working hours have been lifted and commercial activities are permitted to operate on a continuous basis. Until November 30 face-to-face classes were prohibited, however, an official announcement of new measures regarding educational activities is expected shortly, in time for the return of schools on February 1st. Departmental and municipal governments will determine commercial activity and other services not governed by the national decree and may add restrictions as needed by local conditions. The government has agreements to receive the Sputnik-V and Astrazeneca- Oxford vaccine through the international agreement Covax.

Key Policy Responses as of January 6, 2021

Fiscal

The authorities have provided direct relief payments of about $US 73 per child to households with children in public schools, a measure calculated to provide most of its benefits to poorer households. This payment was extended to students in private schools from May 18. In addition, the government instituted a program (Canasta Familiar) to make direct payments for food to 1.5 million families ($US 58 per family), pay the electric bills for three months for the consumers with lower consumption, and pay 50 percent of the potable water and gas for all households. From April 30, the government provided $US 73 to citizens who do not receive any other benefits or draw a salary from the public or private sector. The authorities also postponed the payment of some taxes (corporate income tax, VAT, and transaction tax) with the possibility to pay them in tranches. Payment of corporate income tax was deferred and independent workers can claim tax deductions against their expenses on health, schooling, food and related expenditures. The government created a $US 219 million fund to support the operations of micro, small and medium businesses. This fund will provide soft loans to companies to pay wage bills without layoffs for two months (companies can withdraw $US 1230 per employee, repayable in 18 months). Imports of $US 200 million worth of respiratory equipment are under way, while ICU capacity is being doubled.
The latest transfer to households (Bono Contra el Hambre) became available starting on December 1st. It provides a one-off transfer of about $146 for all eligible individuals, such as those who receive the universal transfer, mothers who are already recipients of targeted cash transfers, people with disabilities and citizens over the age of 18 who do not receive any type of public or private salary. On December 28 the government announced RE-VAT, a measure to refund VAT equivalent to up to 5% of an individual’s purchase for those with an average monthly income equal to or less than about $1,311.

Monetary and macro-financial

The Central Bank of Bolivia (BCB) injected 3.5 billion bolivianos (more than $500 million) into the financial system by purchasing bonds from the pension funds, which, in turn, are expected to deposit the money at banks, increasing the banking system liquidity by about 50 percent. Liquidity has also been increased by reducing reserve requirements in both local and foreign currency. The authorities announced that were suspending borrowers’ loan repayments in the financial system up to the end of 2020, with the delayed installments to be paid at the end of the loan closure date. Starting in January 2021, the Financial System Authority (ASFI) has instructed banks to establish a "grace" period of at least four months, during which time borrowers will pay only interest and not the capital repayment on the already suspended loans.

Exchange rate and balance of payments

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Bosnia and Herzegovina
Background. The first confirmed COVID-19 case was reported on March 5, 2020. In March, the government declared a state of emergency throughout the country, closed schools and universities, shuttered restaurants and shops, suspended public transportation, banned public gatherings, and imposed severe restrictions on the movement of people. Border are closed to non-BiH citizens. Incoming BiH citizens are quarantined for 14 days.
Reopening of the economy. Both entities have ended their curfews for individuals of all ages. Most public events remain cancelled and public gatherings face limitations on total number of people present. Grocery stores, pharmacies, restaurants, and cafes throughout the country are open, along with most other businesses. Restaurants and bars must close by 11:00pm. There are still social distance restrictions in place. Social distance restrictions include limitations on the number of people who can attend public gatherings and a requirement to wear masks indoors, on public transportation, and in public areas when social distancing is not possible. Sarajevo airport has reopened to passenger traffic. BiH citizens and residents, and citizens of Croatia, Serbia, and Montenegro may enter the country. Starting July 16, BiH borders are open for citizens and residents of EU and Schengen countries with a negative PCR test not older than 48 hours. Starting November 11, a new nighttime curfew has been imposed on most businesses as part of new measures to contain a second surge in the coronavirus.

Key Policy Responses as of November 18, 2020

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

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

Key Policy Responses as of December 1January 7, 2021

Fiscal

The government established a COVID-19 Relief Fund with a 2 billion Pula (about 1.1 percent of GDP) contribution from the government that will: i) finance a wage subsidy amounting to 50% of salaries of affected businesses (1000-2500 pula per month for a period of 3 months; ii) finance a waiver on training levy for a period of 6 months (150 million pula). The MoF also decided a tax deferral of 75% of any quarterly payment between March and September 2020 to be paid by March 2021.; iii) Build-up of fuel and grain reserves, as well as acquisition of relevant medical equipment and improvement of water supply (475 million Pula); iv) Fund a government loan guarantee scheme of 1 billion Pula (20% financed by commercial banks) for businesses that are tax compliant (including those who are not eligible to pay taxes/). Guarantee covers a period of 24 months with a max of 25 billion pula per borrower. Reduce the VAT refund period (from 60 days to 21 days).

Monetary and macro-financial

At the meeting held on April 30, 2020, the Monetary Policy Committee (MPC) of the Bank of Botswana decided to reduce the Bank Rate by 50 basis points from 4.75 percent to 4.25 percent to support the domestic economy, and reduced the primary reserve requirement (PRR) from 5 percent to 2.5 percent to inject liquidity. The bank rate was further reduced by 50 basis points on October 8.
Banks and nonbanks have agreed to offer loan restructuring (including for mortgages and vehicles) and payment holidays for affected sectors. Life insurance payment premiums and retirement fund contributions have been rescheduled for at least three months. The Bank of Botswana relaxed rules to meet capital requirements and introduced measures to improve liquidity. Capital adequacy ratio for banks has been reduced from 15 to 12.5 percent, and regulatory forbearance for non-performing loans. Overnight funding costs were reduced, access to repo facilities broadened, 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, and over 7.8 million people have been infected. The case fatality rate is 2.5 percent. The pandemic reached a first peak in mid-August and had steadily receded through early November. However, a second wave has brough the number of daily cases back to peak levels. ICU vacancies have again fallen below 20 percent in several states, prompting renewed lockdown measures. Non-essential businesses and services have reopened (with restrictions), but public schools keep closed in most locations. There are no active restrictions to international travel by plane but restrictions to entry by land remain in place. Preparations for vaccination start in the first quarter of 2021 are underway. President Bolsonaro was diagnosed with Covid-19 on July 7 and has recovered.

Key Policy Responses as of January 7, 2021

Fiscal

To mitigate the impact of COVID-19, the authorities announced a series of fiscal measures adding up to 12 percent of GDP, of which the direct impact in the 2020 primary deficit is estimated at 8.4 percent of GDP. Congress declared a state of “public calamity” on March 20, lifting the government’s obligation to comply with the primary balance target in 2020. The government has also invoked the escape clause of the constitutional expenditure ceiling to accommodate exceptional spending needs. Emergency measures are being included in a separate (so called ‘war’) 2020 budget, not bound by the provisions of Brazil’s Fiscal Responsibility Law and the constitutional golden rule. The fiscal measures included the expansion of heath spending, temporary income support to vulnerable households (cash transfers to informal and low-income workers, bringing forward the 13th pension payment to retirees, expanding the Bolsa Familia program with the inclusion of over 1 million more beneficiaries, and advance payments of salary bonuses to low income workers), employment support (partial compensation to workers which are temporarily suspended or have a cut in working hours, as well as temporary tax breaks), lower taxes and import levies on essential medical supplies, and new transfers from the federal to state governments to support higher health spending and as cushion against the expected fall in revenues. . Public banks expanded credit lines for businesses and households, with a focus on supporting working capital (credit lines add up to 4.5 percent of GDP), and the government has backed over 1 percent of GDP in credit lines to SMEs and micro-businesses to cover payroll costs, working capital and investment. Most measures have expired in end 2020.

Monetary and macro-financial

The central bank lowered the policy rate (SELIC) by 225bps since mid-February, to the historical low of 2 percent. Measures to increase liquidity in the financial system (reduction of reserve requirements and capital conservation buffers, and a temporary relaxation of provisioning rules, among others) have been implemented. The reserve requirement has been reduced from 25 to 17, on top of a reduction of 6 bps in early March, and the remuneration on reserve requirements on savings accounts was lowered to encourage lending. The central bank also opened a facility to provide loans to financial institutions backed by private corporate bonds as collateral, changed capital requirements for small financial institutions, and allowed banks to reduce provisions for contingent liabilities provided the funds are lent to SMEs. In addition, the Fed has arranged to provide up to US$60 billion to the central bank through a swap facility that remains in place.

Exchange rate and balance of payments

The BRL/USD exchange rate has depreciated by about 16 percent since mid-February 2020. 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 44.5 USD billion (about 12 percent of gross reserves). The central bank resumed repo operations of Brazilian sovereign bonds denominated in US dollars, having released US$9 billion into the money market.

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Brunei Darussalam
Background. Brunei Darussalam reported its first confirmed case of COVID-19 on March 9, 2020. Since the outbreak, the authorities have prioritized policy measures to contain the pandemic, while rolling out economic relief packages to mitigate the impact on vulnerable sectors and support economic activities. Continuing testing/tracking of cases has enabled early isolation and treatment, with significant resources being channeled to the health sector. To meet the increasing needs of COVID-19 tests, an auxiliary virology laboratory has been constructed, which commenced operations on April 1. By early May, the number of confirmed cases has stabilized, allowing the authorities to gradually implement COVID-19 de-escalation measures. A contact-tracing app (“BruHealth”) has also been widely implemented, which is a necessary pre-condition for re-opening, in order to minimize the risk of a “second wave”. Despite the impact of containment measures on domestic demand in the first half of the year, growth outturn was better-than-expected—due to an exceptional pickup in downstream activities. However, latest data in Q3 showed that real GDP growth decelerated to 0.5 percent yoy, due to a larger drag from the oil and gas sector.
Reopening of the economy. With the pandemic broadly under control, Brunei started relaxing COVID-19 restrictions since May 16, in phases.Since the re-opening, the total number of cases have remained largely stable.Confirmed newinfections are limited to imported cases, with no local transmissions. Travel restrictions have also been gradually relaxed, whereBrunei has established a reciprocal green lane with Singapore for short-term business and official trips effective September 1—marking the country's first steps to re-establishing international travel. From September 15, foreigners are allowed to enter Brunei for essential travels (official business, education and health purposes) and other considerations. All inbound visitors will be required to undergo a minimum 2-14 days self-isolation period, depending on risk categories of the countries the travelers are from. The government has also launched a domestic tourism campaign on November 4, aimed at encouraging residents to visit local attractions in an effort to cushion the impact on the tourism industry.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

On March 19, the Autoriti Monetari Brunei Darussalam (AMBD), working closely with MOFE as well as the financial industry, announced interim measures (effective April 1) to alleviate the financial burden on sectors hit hard by the COVID-19 pandemic. Effective April 1, (i) businesses in the tourism, hospitality/event management, restaurants/cafes, and air transport sectors (“Affected Sectors”) will be given a six-month deferment of their principal repayments of financing/loans; (ii) the deferment is also extended to importers of food and medical supplies; and (iii) all bank fees and charges (except third party charges) that are related to trade and for payments of transactions in those Affected Sectors will be waived for a period of six months. To encourage social distancing and promote the usage of digital banking, online local interbank transfer fees and charges will be waived for a period of six months for all customers. Banks are also encouraged to review their lending rates in this current environment.
•On March 30, the MOFE announced additional financial support measures amounting to an estimated total of BND250 million, effective April 1. This Economic Relief Package (i) extends the deferment on principal payments of financing or loan to all sectors, (ii) provides for the restructuring or deferment on principal repayment of personal loans and hire purchase such as car financing, for a period not exceeding 10 years, (iii) provides for the deferment on principal repayments of property financing, (iv) provides for the conversion of any outstanding credit card balances into term loans not exceeding 3 years for affected individuals in the private sector only (including the self-employed), and (v) waiver of all bank fees/charges related to these facilities (except third party charges). The deferment measures are effective from date of application approval until March 31, 2021.Coupled with the earlier fiscal assistance, the value of Brunei's Economic Stimulus Package amounted to a total of BND450 million (or 3.2 percent of GDP).

Exchange rate and balance of payments

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Bulgaria
Background.After a mild and well contained first wave of the epidemic, Bulgaria is undergoing a severe second wave of infections with four-digit number of daily new cases. The extraordinary epidemic situation, which replaced the state of emergency introduced in mid-March, has been extended until January 31, coupled with partial lockdown. As the number of cases has been on a downward trend in the past couple of weeks, a gradual reopening is underway, mainly reflected by the reopening of kindergartens and primary schools. Overall however, as the emergency epidemic situation has been prolonged much more than initially anticipated, the government announced a new set of social and economic measures.
Preliminary data suggest a significant economic impact from the pandemic. The Bulgarian economy shrank by 4.3 percent q/q in 2020Q3, after registering a quarterly decline of 10.1 in 2020Q2 and a slight increase of 0.4 percent in Q1. As of end-November, the registered unemployment rate is 0.5 percentage points higher than its level in end-February. Meanwhile, the budget recorded a BGN 3.6 bn (3.0% of government’s estimated GDP) deficit in 2020, including an estimated COVID-response of around 2.4% of GDP, which comprised entirely nationally funded measures and the national co-financing of EU funding, redirected to cope with the pandemic in Bulgaria.

Key Policy Responses as of January 7, 2021

Fiscal
The key fiscal policy responses cumulative for 2020 and planned for 2021 include:
Revenue measures: (i) tax relief for households with children with disabilities (BGN 143 mn); (ii) reduced VAT rate of 9% for restaurant services, books, baby food, wine, beer, tour operators and tourist trips, gyms and sports facilities and food delivery until end-2021 (BGN 343 mn) and (iii) VAT and customs duties relief for import of key medical supplies (BGN 3 mn).
Expenditures for household support: (i) bonuses to pensions and minimum pension increase (BGN 1322 mn); (ii) parental support – BGN (180 mn); (iii) active labor market policies (BGN 14 mn); (iv) purchase of vaccines and medicines (BGN 106 mn); (v) tourism vouchers of BGN 210 for the people of the frontline (BGN 10 mn); (vi) increased unemployment benefits and other social support (BGN 297 mn);
Expenditures for business support: (i) 60/40 wage subsidy scheme (BGN 1019 mn); (ii) support for artists, who have been hit by the lockdown (BGN 5 mn); (iii) tourism support (BGN 47 mn) and (iv) agricultural producers support (BGN 85 mn).
Expenditures in the healthcare sector and public administration: (i) provision of PPA and other equipment to the state administration (BGN 35 mn); (ii) support of personnel on the frontline of the fight with COVID-19 (BGN 192 mn); (iii) additional financing of medical activities (BGN 748 mn); (iv) provision of PPA and other equipment to the medical establishments (BGN 130 mn); (v) subsidies and capital transfers to medical establishments (BGN 70 mn); (vi) COVID-related expenditures in education (BGN 68 mn) and (vii) additional remuneration in healthcare (BGN 237 mn).
National co-financing of EU-funded measures at the amount of BGN 168 mn.
Monetary and macro-financial

The Bulgaria National Bank has implemented the following measures. (i) capitalization of the 2019 profit in the banking system (about 1.4 percent of 2019 GDP); (ii) increase in liquidity of the banking system by BGN 7 billion (6 percent of 2019 GDP) by reducing foreign exposures of commercial banks; (iii) cancellation of the increase of the countercyclical capital buffer planned for 2020 and 2021 with effect amounting to BGN 0.7 billion, or about 0.6 percent of 2019 GDP; (iv) agreement on a moratorium on bank loan payments for up to 6 months but no later than December 2021 with deadline for requests set at end-March 2021; (v) establishment of EUR 2 billion swap line with the ECB until end-2020 or as long as necessary, with the maximum maturity of 3 months for each drawing. In addition, the government has put forward liquidity support measures, utilizing national and EU resources. The measures include (i) capital increase of the state-owned Bulgarian Development Bank (BDB) by BGN 700 million (0.6 percent of 2019 GDP), of which BGN 500 million to be used for the issuance of portfolio guarantees to commercial banks for the extension of corporate loans and the remaining BGN 200 million to provide interest-free loans to employees on unpaid leave, self-employed, and seasonal workers (up to BGN 6900, with extended deadline for applications up to end-June 2021). The latter have recently been redesigned in order to increase access to the measure; (ii) allocation of BGN 1,024 million to the state-owned company “The Fund of Funds” to provide subsidies to micro enterprises, self-employed, entrepreneurs from vulnerable groups, and eligible SMEs and companies; (iii) allocation of BGN 800 million to a joint-initiative organization between the European Investment Fund and the European Commission to provide guarantee/credit to SMEs; and (iv) allocation of BGN 418 million to the Urban Development Funds, managed by the Fund of Funds, for long-term investment and working capital, targeting municipalities, PPPs and businesses, hit by the crisis, including tourism and transport.

Exchange rate and balance of payments

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Burkina Faso
Background. The first confirmed COVID-19 case was reported on March 9, 2020. The government immediately adopted several containment measures, including social distancing, a nationwide curfew, closure of schools and universities, cancelation of major public events, closure of terrestrial borders, suspension of commercial flights, quarantine of the affected cities and the mandatory nationwide use of masks. The number of reported new daily positive cases of COVID-19 has broadly declined since late April, although there has been some increase in cases following the general elections in November.
Reopening of the economy. The authorities began to ease some social and economic restrictions in late April with the reopening of some urban markets and venues of religious worship and suspension of quarantine of some cities. The reopening of passenger flights took place on August 1 accompanied by strict protocols for testing and quarantine for new arrivals. This gradual reopening is subject to continued social distancing guidelines and mandatory use of masks, among other measures.

Key Policy Responses as of January 8, 2021

Fiscal

The Parliament on July 9, 2020 approved the revised 2020 budget which seeks to address the socio-economic impacts of COVID-19. Several measures have been taken under the revised budget, including: (i) lowering import duties and VAT for hygiene and healthcare goods and services critical to tackle COVID-19, and for tourism businesses; (ii) lowering other selected tax rates; (iii) delaying tax payments, and waiving late payment fines and penalties; (iv) suspending government fees charged on informal sector operators for rent, security and parking in urban markets; (v) lowering the licensing fee for companies in the transportation and tourism sectors; (vi) suspending on-site tax inspection operations; (vii) Donating food and providing assistance to households and local small businesses; (viii) supporting the water and electricity bills, including through cancelation, of the most vulnerable social groups; and (ix) securing adequate stocks of consumer products and strengthening surveillance of prices.
The emergency response plan, initially prepared for March – June 2020, was updated to cover both health-related measures and measures to support the social and economic recovery. This includes a partial guarantee fund, which the government expects to leverage to help the financial sector inject fresh credit into the economy during 2020-2021 in support of private businesses in hard-hit sectors.
The revised 2020 budget widens the overall fiscal deficit to 5.3 percent of GDP, reflecting the impact of Covid19 especially on revenue collection, which is now projected to be 2.6 percent of GDP lower relative to the original budget. On the expenditure side, the authorities made room for COVID19-related health and transfers expenditures by keeping the wage bill unchanged, cancelling non-priority spending on goods and services and reducing transfers. The widening of the deficit is fully financed by additional external budget support.
On April 27, Heads of states of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU growth and stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of the COVID-19 pandemic. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the COVID-19 crisis. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-bills initially issued by Burkina Faso was equivalent to 0.8 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basel II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) created a CFAF 100 billion window to extend 5 to 7 year refinancing of banks's credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid19 crisis on asset quality.

Exchange rate and balance of payments

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Burundi
Background. The first confirmed COVID-19 case was reported on April 1, 2020. A large-scale testing campaign was conducted from July 6, 2020 to October 6, 2020. Testing now costs US$ 50 per test, except for cases when it is necessary.
Measures taken to minimize the risk of the pandemic breaking out in Burundi have been very limited: The population has been instructed to follow some basic rules of limited social distancing and frequent handwashing. Hand sanitizers and water for handwashing have been installed in public places. COVID-19 certificates are required for travelers entering or leaving the country. The Melchior Ndadaye International Airport was reopened on November 8, 2020 with some restrictions. Travelers from high-risk countries are required to undergo quarantine. The border with the DRC remains closed, except for merchandise. The border with Rwanda is closed for both merchandise and people. The border with Tanzania is opened for both merchandise and people. The ban will be reviewed depending on how the pandemic evolves.
Burundi’s health care system is extremely weak. The authorities’ pandemic response plan aims to strengthen the health care system, the social safety net, and parts of the road network to facilitate access to sick people. To strengthen the health system, the authorities intend to intensify the communication on the risks of COVID-19 and enhance the screening capacity, the equipment of hospitals and health centers, and the stock of drugs. IMF staff estimates that the cost of the response plan will reach at least US$150 million (4.9 percent of GDP) cumulatively over 2020 and 2021. With the exception of the US$5 million from the World Bank, the authorities currently do not have cash buffers or credit sources that allow them to make these expenditures. They have already contacted and will continue to contact their development partners to request additional support for their pandemic response plan.

Key Policy Responses as of January 6, 2021

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

Monetary and macro-financial

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

Exchange rate and balance of payments

No measure has been officially announced. Burundi has been engaged in multiple currency practices, with a parallel market exchange rate that is substantially more depreciated than the official exchange rate.

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Cabo Verde
Background. The first confirmed COVID-19 case was reported on March 20, 2020. Prevention measures taken by the authorities include: installation of body temperature scans in airports, suspension of official travel and flights to China and other heavily affected countries, preparation of quarantine areas in hospitals, suspension of flights from European countries affected by COVID-19, the United States, Brazil, Senegal and Nigeria, as well as maritime traffic (with few exceptions), and quarantine of the island of Boa Vista where the community spread started inside a resort hotel. The authorities have also prepared a contingency plan and put in place a rapid response team. In late March, they declared the state of emergency, put in place social distancing measures, restricted travel between the nine inhabited islands, and put the country in lockdown for non-essential activities. Commercial air and passenger traffic resumed on October 12.
Reopening of the economy. On May 29, 2020, the government lifted the State of Emergency for all islands. In line with it, the Prime Minister announced a deconfinement plan that includes : (i) resumption of inter-island air travel on July 15, (ii) resumption of maritime connections for passenger transport, originating and destinating to Boa Vista island on June 1 and to Santiago island on July 15, (iv) restarting of cultural and sport events on October 1, (v) reopening of restaurants with regular hours on June 1, (vi) increased rapid tests in Praia’s laboratories, (vii) creation of an incentive framework to support companies to adapt their activity to the new requirements and standards of the deconfinement plan, and (viii) implementation of a digital platform for tracking positive cases of COVID-19. Commercial air and passenger traffic resumed on October 12, 2020.

Key Policy Responses as of January 7, 2021

Fiscal

The authorities have reprioritized spending through a revised budget, which is currently in parliament. In the meantime, they have taken measures to support the private sector, including loan guarantees and tax obligations facilities as follows: loan guarantees of up to 50 percent for large companies in all sectors (CVE 1 billion, about €9 million); up to 80 percent for companies in the tourism and transport sectors (CVE 1 billion); up to 100 percent for small-and medium-sized enterprises in all sectors (CVE 300 million, €2.7 million) and for micro-enterprises in all sectors (CVE 700 million CVE, about €6.7 million). Other measures include faster settlement of invoices and VAT refunds, extension of the tax payment period, payment in installments for VAT and other withholding taxes, cancellation of contributions to the Pension Fund for three months, and funding of an emergency plan with CVE 76 million through the reallocation of budgetary appropriations, to cover additional expenses for personnel, training and medical equipment.
For the most vulnerable, mitigating measures are estimated at CVE 2.2 billion (1.2 percent of GDP). They comprise: (i) income compensation to provide financial support to individuals operating in the informal sector; (ii) social inclusion emergency measures for vulnerable people without income; (iii) social inclusion income, with support from the World Bank ; (iv) support to microfinance institutions to support interest-free loans to vulnerable households and; (v) care for the elderly with food assistance and other financial support.

Monetary and macro-financial

In late March, the central bank decided to loosen the monetary policy stance and to increase liquidity in the banking system. Key measures included a reduction in rates as follows: the policy rate by 125 basis points to 0.25 percent, the minimum reserve requirements from 13 to 10 percent, and the overnight deposit rate by 5 basis points to 0.05 percent; and the setting up at the central bank of a long-term lending instrument for banks. The central bank (BCV) also called on banks to grant a moratorium on loans obligations to borrowers in good standing with their payment record as of end-March 2020.
On April 1, 2020, the authorities introduced a moratorium on insurance payments and loans repayment during April-September 2020 for household, companies, and non-profit associations, as well as the SMEs. The moratorium on loan repayment was extended to December 31, 2020 and is likely to remain in place until the end of the first quarter of 2021.
The BCV also implemented prudential measures, including the reduction in capital adequacy ratio and provision for banks depending on requests by borrowers to place a moratorium or forbearance on loan repayment for three months.

Exchange rate and balance of payments

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Cambodia
Background. The first confirmed COVID-19 case was reported on January 27. There have been no deaths so far. All foreign arrivals into Cambodia need to obtain a visa at a Cambodian diplomatic mission abroad, a health certificate before departure to Cambodia, and a deposit of USD2000 (to cover potential health care costs). All arrivals are required to be tested and quarantined. Returning migrant workers are to self-isolate for 14 days. Domestic travel restrictions were lifted on 16 April. Massage parlors, sports arenas, fitness centers, and public transports have been closed since March. Public events and gathering (including religious gathering and concerts) have been banned. Since June, casinos, cinemas, museums and theatres have varyingly been reopened. Entertainment venues (e.g. karaoke and clubs) have been reopened as restaurants since July; schools have also been reopened in phases starting from September. The crisis has hit the Cambodian economy very hard during the first half of 2020, through exports of garments and textiles and tourism.

Key Policy Responses as of December 3, 2020

Fiscal

A package worth USD 60 mn has been allocated for virus testing, containment, and treatment. Social assistance of nearly USD 400 mn is being implemented, including USD 300 mn for a new monthly cash transfer program for poor and vulnerable households (5-7 months from June 2020) and USD 100 mn cash for a work program. Measures to target poorer households are being scaled up with more frequent updates of IDPoor, especially because of the extent of informal work and returned migrant workers. USD 64 mn has been allocated for wage subsidies and skill training program for suspended workers/employees in the garments and tourism industries. Other spending has been rationalized, yielding savings of roughly USD 900 mn, of which around USD 500 mn will be from capital spending. Several tax relief measures, worth around USD 200 mn, have been introduced. The government has allocated USD 600 mn as special low-interest loans to specialized banks (USD 200 mn in Credit Guarantee Fund and USD 300 mn in Additional Financing Facility), in addition to packages issued to SMEs in manufacturing (USD 50mn) and SMEs in agricultural sector (USD 50mn). In September the government extended until the end of this year: i) allowance subsidy for garment and tourism sectors; ii) tax exemption for tourism and aviation sector; and iii) cash relief program for poor and vulnerable families.

Monetary and macro-financial

The National Bank of Cambodia (NBC) implemented four measures to improve liquidity in the banking system early in the crisis: (i) delaying additional increases in the Capital Conservation Buffer; (ii) cutting the interest rate in its Liquidity Providing Collateralized Operations, decreasing banks' funding costs in domestic currency; (iii) cutting the interest rate on Negotiable Certificates of Deposit (the collateral for LPCOs), to encourage banks to disburse loans; and (iv) lowering required reserves that banking and financial institutions must maintain at NBC both for local (Riel) and foreign currency (USD). In November, NBC announced to keep the reserve requirement on hold at 7 percent both for Riel and USD until the end of March 2021.
NBC has also issued guidelines to allow financial institutions for loan restructuring for borrowers experiencing financial difficulties (but still performing) in priority sectors (tourism, garments, construction, transportation and logistics) temporarily by the end of this year. In November, NBC announced to extend the forbearance by another 6 months to the end-June 2021, taking account of the adverse impacts from the recent nation-wide flooding in addition to the COVID-19 shock.

Exchange rate and balance of payments

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Cameroon
Background. The first cases were reported on March 6. Cameroon continues to record daily increases in the number of COVID-19. Following a reduction in the infection rate from end-July to end-September, the WHO reports a resurgence in recent months, but with a reduced fatality rate. On March 17, 2020, the government announced a package of 13 containment measures including closure of land, air and sea borders, quarantine for travelers returning from a country with a high level of infection, closure of schools and universities, prohibition of gatherings of more than 50 persons, closure of bars, restaurants and entertainment spots after 6 pm, suspension of missions of civil servants and parastatals abroad, cancellation of school and university games, and a ban on overloading taxis and public transportation. Social distancing and sanitation measures include the use of electronic communications and digital tools for meetings of more than 10 persons, compliance with hygiene measures recommended by the WHO.
On April 10, 2020, the government took seven additional measures to stop the spread of COVID-19. These measures took effect from April 13, 2020 and include wearing a mask in all areas open to the public, local production of drugs and screening tests, establishment of specialized COVID-19 treatment centers in all regional capitals, intensification of screening and an awareness campaign, among others. In October 2020, the Ministry of Public Health reinforced COVID-19 screenings for all travelers landing in Cameroon, after a network of fake negative COVID-19 tests sold to travelers was dismantled.
From July to December 2020, the authorities have been following a decentralized approach, based Cameroon’s on health districts and regions, and aimed at strengthening the monitoring of cases and strengthening the continuity of the health services and systems.
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 January 7, 2021

Fiscal

On April 30, 2020, the president announced fiscal measures aimed at alleviating the adverse socio-economic impact of the crisis. A set of measures provide temporary tax accommodation to businesses directly affected by the crisis through tax moratoria and deferred payments, notably (i) exemptions from the tourist tax in the hotel and catering sectors for the rest of the 2020 financial year; (ii) exemption from the withholding tax for taxis and motorbikes and petty traders for the second quarter; (iii) the allocation of a special envelope of CFAF 25 billion for the expedited clearance of VAT credits awaiting reimbursement, and (iv) the postponement of the deadline to pay land taxes for the 2020 financial year, to 30 September 2020.
Other measures aim to alleviate the impact on households, in particular (i) an increase in the family allowance from CFAF 2,800 to CFAF 4,500; (ii) a raise of 20 percent for pensions that did not benefit from the 2016 reform; (iii) continued payment of family allowances from May to July to staff of companies which are unable to pay social security contributions or which have placed their staff on technical leave due to the crisis; (iv) spreading the payment of the social security contributions for the second quarter over three instalments and canceling late fees.
Specific measures support the fight against the pandemic, notably (i) full income tax deductibility of donations and gifts made by companies for the fight against COVID-19, (ii) three-month suspension of the payment of parking and demurrage charges in the Douala and Kribi ports for essential goods; and (iii) the establishment of a MINFI-MINEPAT consultation framework aimed at mitigating the crisis and promoting a rapid resumption of activity.
The authorities’ three-year preparedness and response plan presents a total financing cost close to US$ 825 million, of which about US$750 million have been identified or made available. The plan includes five pillars, namely: (i) health strategy to prevent the spread of the pandemic and take care of infected persons (US$101 million); (ii) mitigation of economic and financial repercussions of the pandemic (US$646 million); (iii) supply of essential products (US$9.5 million); (iv) local development of innovative solutions (US$16.5 million); and (v) social resilience to alleviate the repercussions of the COVID-19 pandemic on vulnerable people and households (US$52 million). These pillars include tax relief to affected businesses estimated at about US$200 million. In addition, the government has continued efforts to extend the Unified Social Register, which covers socially vulnerable persons.
A special COVID-19 account, dedicated to financing the national response plan to the pandemic, has been created and is governed by a circular issued by the Minister of Finance. The circular specifies the modalities of organization, operation, and monitoring-evaluation mechanisms of the account. For 2020, the Revised Finance Law enacted in June 2020 allocates about US$310 million to the special COVID-19 account financed at 76 percent by resources released by debt service suspension and external budgetary support.

Monetary and macro-financial

On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting onMarch 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter, which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.
On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

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Canada
Background. Canada has experienced more than 468,800 COVID-19 cases and more than 13,500 deaths and finds itself in the middle of the strong second wave of SARS-CoV-2. Canada is also continues being hit by the sharp decline in global oil prices. Federal and provincial governments have implemented a range of measures to mitigate the spread of the virus, including travel restrictions, social distancing, and declarations of states of emergency and closures of non-essential businesses in some provinces. The rate of new cases peaked in April, remained at low levels throughout the Summer, but has since begun to rise, resulting into the current second wave and ensuing regional-specific economy restrictions
Reopening of the economy. On April 28, Prime Minister Trudeau released a joint statement with premiers across Canada on their shared public health approach to support restarting the economy; all provinces began to implement detailed, data-driven plans to reopen in May. However, a recent surge in new cases has prompted a tightening of restrictions in some areas in Quebec and Ontario.

Key Policy Responses as of December 15, 2020

Fiscal

Key tax and spending measures (16.4 percent of GDP, $354 billion CAD) include: i) $20 billion (0.9 percent of GDP) to the health system to support increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities; ii) around $249 billion (11.6 percent of GDP) in direct aid to households and firms, including wage subsidies, payments to workers without sick leave and access to employment insurance, an increase in existing GST tax credits and child care benefits, and a new distinctions-based Indigenous Community Support Fund; and iii) around $85 billion (3.9 percent of GDP) in liquidity support through tax deferrals. More information here.
At the end of November, Canadian government released their Fall Economic Statement, outlining their "build back better" strategy for the recovery from the COVID-19 crisis. Details available here

Monetary and macro-financial

Key measures adopted by the Bank of Canada include: i) reducing the overnight policy rate by 150 bps in March (to 0.25 percent); ii) an extension of the bond buyback program across all maturities; iii) launching the Bankers' Acceptance Purchase Facility; iv) expanding the list of eligible collateral for Term Repo operations to the full range of eligible collateral for the Standing Liquidity Facility (SLF), except the Non-Mortgage Loan Portfolio (NMLP); v) supporting the Canada Mortgage Bond (CMB) market by purchasing CMBs in the secondary market; vii) announcing a temporary increase the amount of NMLP a participant can pledge for the SLF and for those participants that do not use NMLP; vii) announcing an increase in the target for settlement balances to $1,000 million from $250 million; viii) together with central banks from Japan, Euro Area, U.K., U.S., and Switzerland, announcing further enhancing the provision of liquidity via the standing US dollar liquidity swap line arrangements; ix) announcing the launch of the Standing Term Liquidity Facility, under which loans could be provided to eligible financial institutions in need of temporary liquidity support; and x) announcing the Provincial Money Market Purchase (PMMP) program, the Provincial Bond Purchase Program (PBPP), the Commercial Paper Purchase Program (CPPP), the Corporate Bond Purchase Program (CBPP), and the purchase of Government of Canada securities in the secondary market. More details here. Bank of Canada put out “forward guidance”, communicating not to rise interest rate until the recovery is well on the way and is inflation sustainably at the inflation target.
Other measures in the financial sector include: i) OSFI, the bank regulator, lowered the Domestic Stability Buffer for D-SIBs to 1 percent of risk weighted assets (previously 2.25 percent); ii) under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC); iii) the federal government announced $95 billion in credit facilities (including $13.8 billion in forgivable loans) to lend to firms under stress, with ; and iv) Farm Credit Canada will receive support from the federal government that will allow for an additional $5.2 billion in lending capacity to producers, agribusinesses, and food processors.
In October 2020, Bank of Canada rolled back some of the liquidity measures (Bankers' Acceptance Purchase Facility, Canada Mortgage Bond Purchase Program, and Provincial Money Market Purchase Program), deeming them no longer necessary.

Exchange rate and balance of payments

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Central African Republic
Background. The first case has been identified in mid-March and the number of new cases has declined since September 2020 and stabilized afterward, owing in part to the discontinuation of widespread testing. To help contain the pandemic, the authorities adopted a response plan for the health sector and enacted social distancing measures, including the closing of borders, schools, and most public establishments, a ban on meetings of more than 15 people, and restrictions on the movement of people from Bangui. They have also been working on a more exhaustive plan, which, in addition to the strengthening of the health sector, would provide financial support to the most vulnerable households and companies.
Reopening of the Economy. As the number of new cases has been declining, the president has announced some reopening measures to enable the restart of the economic activity. Restaurants, bars and places of worship have been allowed to re-open. Moreover, international travels have resumed gradually, and most travel restrictions have been lifted, and the quarantine for people arriving from abroad has been reduced from 21 to 14 days. This reopening is conditional on following some measures such as frequent hand washing and social distancing. However, self-quarantine for confirmed cases remain in place.

Key Policy Responses as of January 07, 2021

Fiscal

The response plan for the health sector was prepared in strong collaboration with the WHO, with an estimated cost of 27 billion of FCFA (1.9 percent of GDP). It goes beyond an immediate response plan and contains measures to strengthen the ability of the healthcare system to deal with such pandemics in the future. It notably aims at: (i) providing medical care of confirmed cases, (ii) improving the monitoring of the country’s points of entry; and (iii) strengthening the capacities of the medical staff, laboratories and hospitals. In addition to the health sector plan, the authorities are envisaging providing financial support to the most vulnerable households and companies, while increasing access to water. Other specific fiscal measures to help the private sector, such as tax relief or suspension and easing of public procurement procedures, are also being considered. The government has requested the help of its development partners to finance this plan, through grants and loans. A draft supplementary budget law has been adopted and includes around 44 billion of CFAF of donors additional support related to COVID-19. The additional spending related to COVID-19 amounts for about 15 billion of CFAF, mainly broken down as 12 billion for prevention and management of the pandemic, 0.5 billion as support to vulnerable household and 2.6 billion for the support to the private sector.

Monetary and macro-financial

On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end- 2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting . Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase of the program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. 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. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

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Chad
Background. The first confirmed COVID-19 case was reported on March 19, 2020. Over the last three weeks, 528 new cases were recorded, compared to 145 three weeks earlier, mainly in N’Djamena.. Following the recent increase in COVID-19 cases in N’Djamena, the authorities have taken stringent preventive measures starting January 1, 2021, (for a period of one week), these include: (i) bringing forward the curfews to 6:00 PM- 5:00 AM from 8:00 PM-5:00 AM; (ii) the closure of land borders; (iii) the closure of schools and universities; (iv) the closure of places of worship; (v) the closure of bars, restaurants, shops and large markets; (vi) the closure of non-essential public and private services; (vii) the prohibition of public and private groupings of more than 10 people; (viii) the prohibition of urban and intercity public transport; and (ix) the prohibition of congregations for baptisms, weddings, deaths, and burials. Beginning January 4, 2021, passenger air travel has also been suspended. Only essential services remain open with access, these include hospitals, pharmacies, food shops, water and electric services, hotels, and cargo flights. Additionally, the state of medical emergency was extended for six months starting from October 17. Wearing a face mask became mandatory in public places starting May 7.
Reopening of the economy and additional containment measures. The measures that were relaxed on May 18, 2020, in N’Djamena were re-imposed in January 1, 2021, for a duration of one week, as mentioned above. The duration was renewed on January 7, with few changes: (i) the maximum allowed gathering is increased from 10 to 50 people; (ii) the curfew changed to 7:00 PM to 5:00 AM, instead of 6:00PM to 5:00AM; and (iii) a few basic businesses, including supermarkets and gas stations are allowed to open.

Key Policy Responses as of January 7, 2021

Fiscal

Financing for COVID-19 health-related expenditures are estimated at CFAF 42 billion (0.8 percent of non-oil GDP), which are being implemented under a national contingency plan. Key measures include: (i) training of medical and technical staff, (ii) purchase of necessary medical equipment, (iii) construction of seven health centers in remote areas, (iv) construction of three mobile hospitals, and (v) securely managing entry points. Additionally, the capacity of Farcha Hospital in N'Djamena is going to be expanded and the hiring of additional health workers is in process. The authorities have also decided on a package of fiscal measures to help businesses weather the shock: (i) for SMEs, the authorities will, among other things, reduce by 50 percent the business license fees and the presumptive tax for 2020, (ii) tax breaks such as carryforward losses and delays in tax payments will also be examined on a case-by-case basis, (iii) clearance of domestic arears of about CFAF 110 billion owed to suppliers, (iv) a subsidy planned to the agricultural sector (0.3 percent of non-oil GDP), and (v) the simplification of the import process for food and necessity items, including health equipment, and tax exemptions for these items. Measures were also taken to alleviate the hardship on households, including (i) temporary suspension of payments of electricity and water bills for the lifeline consumption, as well as (ii) Replenishment of the national food distribution program (Office National de Sécurité Alimentaire, ONASA) (0.5 percent of non-oil GDP), (iii) the National Assembly adopted a new law on May 11 that establishes a Youth Entrepreneurship Fund (0.6 percent of non-oil GDP), (iv) payment of all death benefits due to deceased civil and military agents, indemnities and ancillary wages owed to retirees and payment of medical expenses for civilian agents and defense and security forces (0.1 percent of non-oil GDP), and (v) the national assembly adopted the law on September 26 that establishes the solidarity fund for the vulnerable population amounting to CFAF 100 billion. The 2020 supplementary budget, which includes the COVID-19 measures, was enacted by the Parliament in August.

Monetary and macro-financial

On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.
On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regards to dividend distribution. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

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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 March 2021), travel restrictions, closure of schools, curfews and bans on public gatherings, and a Law on teleworking. The authorities have also unveiled measures to support employment and incomes, and provide liquidity, elaborated below. The COVID-19 outbreak came only a few months after the social unrest that started in mid-October 2019.
Reopening the economy.The government has implemented a step-by-step plan for reopening the economy and phasing out quarantine measures. There are 5 steps, from quarantine to advanced opening, which municipalities will transition through in accordance to several criteria, such as the reproduction rate of the virus, hospital bed occupancy and projected rate of regional active cases. Chile remains under a State of Emergency through March 2021 and is under a daily nationwide curfew from 10:00 pm to 5:00 am. The government has secured doses of vaccines from Pfizer-BioNTech, Sinovac, AstraZeneca-Oxford and Johnson & Johnson to vaccinate its population.

Key Policy Responses as of January 7, 2021

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). On July 23, Congress approved legislation that allowed the first withdrawal of pension funds, with a second withdrawal approved on December 3.

Monetary and macro-financial

The key measures undertaken by the Central Bank of Chile include: (i) two policy rate cuts by cumulative 125 basis points to 0.5 percent; (ii) introduction of a new funding facility for banks conditional on them increasing credit; (iii) inclusion of corporate securities as collateral for the Central Bank’s liquidity operations and inclusion of high-rated commercial loans as collateral for the funding facility operations; (iv) initiation of a program for purchase of bank bonds (up to US$8 billion); (v) expansion of eligible currencies for meeting reserve requirements in foreign currencies; (vi) flexibilization of Central Bank regulations for bank liquidity; and (vii) expansion of the program for providing liquidity in pesos and US$ through repo operations and swaps;and (viii) relaxing the liquidity coverage ratio (the ratio remains unchanged, but temporary deviations could be tolerated on a case-by-case basis). On June 16, the Central Bank announced additional measures to support liquidity and credit through: (i) an additional funding-for-lending facility in the total amount of US$16 billion effective for eight months; and (ii) a special asset purchase program in the total amount of US$8 billion over a six-month period. The Financial Market Commission unveiled a package of measures to facilitate the flow of credit to businesses and households, which includes: (i) special treatment in the establishment of provisions for deferred loans; (ii) use of mortgage guarantees to safeguard SME loans; (iii) adjustments in the treatment of assets received as payment and margins in derivative transactions; and (iv) revision of the timetable for the implementation of Basel III standards.

Exchange rate and balance of payments

The exchange rate has been allowed to adjust flexibly. The Central Bank of Chile has extended until January 9, 2021 the window for possible resumption of FX sales and NDF operations that was opened in November 2019 (during the social unrest). On May 29, the IMF approved a two-year Flexible Credit Line (FCL) Arrangement for Chile in an amount equivalent to SDR 17.443 billion (about US$ 23.93 billion). On June 24, the Central Bank of Chile announced that it obtained access to the Temporary Foreign and International Monetary Authorities (FIMA) Repo Facility.

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The Kingdom of the Netherlands—Curaçao
Background.Following the first COVID-19 case in March 2020, Prime Minister Rhuggenaath declared the state of health emergency and announced travel restrictions, quickly followed by a border closure. As the number of cases increased, the government introduced a curfew followed by a full lockdown in late March. These measures helped to contain the spread of COVID-19 during the first wave of the pandemic, although the economic activity came to a halt. Following a gradual phasing out of the domestic restrictions, the number of COVID-19 infections has been rose sharply between late August and late December. On December 11, the government has declared a state of emergency for 90 days. In addition, a curfew and restrictions on gatherings from 9:00 pm to 4:30 am have been in place since early December. The authorities are working in close collaboration with the Curaçao Tourist Board to guarantee a safe reopening of hotels.
Reopening of the economy. The authorities have gradually reopened the borders by allowing travel from several low and medium risk countries since mid-June 2020. The island has since started to see a steady increase in tourist arrivals, with stayovers increasing in Q3 to 26 percent of the same period in 2019 and further to 39 percent in October. As of January 1, the country will require a PCR test except from “low risk” countries. The low-risk countries comprise Bermuda, Barbados, Bonaire, Cayman Islands, the Eastern Caribbean Currency Union, Jamaica, Trinidad and Tobago. Travelers departing out of any of these countries are only required to fill out the Passenger Locator Card (PLC) within 48 hours before departure. All other countries are considered “high risk” and travelers from these countries will require a PCR test 72 hours before departure to Curaçao. No PCR test is required for children six years and below, provided that the parent has a negative PCR result 72 hours before departure. In addition to the PCR test, all passengers must fill out the PLC. Curaçao also noted the previous 14-day mandatory quarantine upon arrival requirement has been removed for all travelers. It was also announced that the maximum of 20,000 visitors per month has also been eliminated. The Netherlands tightened the travel advice for Curaçao on December 15 from code yellow to orange, encouraging residents to only make necessary trips to the country and to go into quarantine for ten days upon return. The Netherlands has also introduced a mandatory PCR test up to 72 hours prior to departure for all passengers travelling from Curaçao, and this included people with a Dutch passport. Social distancing measures were increasingly tightened as of December 1, including by banning public gatherings of more than four people and suspending public transportation after 9 pm. Additional measures were introduced which included banning alcohol in restaurants and bars and capping the maximum number of people allowed in a business at 50 percent of normal capacity. Restaurants can offer service through delivery or pick-ups until 8 pm only while beach bars must close at 5 pm. All shops including malls must close at 6 pm, with additional two hours for grocery stores, bakeries, pharmacies, gas stations and lottery offices.

Key Policy Responses as of January 7, 2021

Fiscal

The first package (Alivio 1) was introduced in March. It included tax measures of NAf 33 and some first-response spending. The second, more comprehensive package
(Alivio 2) elaborated the following assistance programs: (i) payroll subsidies to support employment in the private sector up to 80 percent of pre-crisis wages conditional on the revenue loss; (ii) support for the self-employed (NAf 1,335 per person per month); (iii) job loss benefits (NAf 1,000 per person per month) for workers laid off since mid-March 2020; (iv) additional benefits for welfare recipients; (v) credit facilities for SMEs, and (vi) compensation of premium losses for the Social Security Bank. The Netherlands provided financing of NAf 381 million (8½ percent of GDP) to support Alivio 2 in the second quarter. Given available financing, measures implemented during April-September period included the payroll subsidies, support for the self-employed, job loss benefits and food vouchers. On November 2, Curaçao and the Netherlands reached an agreement on the establishment of the Caribbean Entity for Reform and Development and a landspakket (country package) of reform measures necessary to improve Curaçao's financial, economic and administrative resilience. On November 24, Curaçao received an additional tranche of liquidity support in the amount of NAf 181 million (4.1 percent of GDP), increasing total financing in 2020 to 15.1 percent of GDP. The agreement also envisages targeted support for several areas such as education and border control.

Monetary and macro-financial

On March 20, 2020, the Centrale Bank van Curaçao en Sint Maarten (CBCS) reduced the pledging rate–at which the commercial banks can borrow from the CBCS–by 150 basis points to 1 percent and suspended the 200 basis points surcharge on the pledging rate on loans exceeding NAf 20 million. Furthermore, the CBCS reintroduced the overdraft facility for commercial banks. The CBCS also announced that it would lower the interest rates on Certificates of Deposit (CDs) to ease the money market by absorbing less liquidity.
On March 20, 2020, the CBCS (i) allowed commercial banks and credit institutions to provide a 3 to 6-month payment moratorium on interest and principal of all outstanding loans, without having to make an adequate provision, (ii) announced that commercial banks might exceed the debt service ratio (37 percent), to a maximum of 50 percent, and (iii) allowed life insurance companies and pension funds to provide clients a 3 to 6-month payment moratorium on policy premiums without having to make an adequate provision.

Exchange rate and balance of payments

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

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China, People's Republic of
Background. On early January 2020, Chinese authorities determined that a pneumonia outbreak in Wuhan was caused by a novel coronavirus. The government imposed strict containment measures, including the extension of the national Lunar New Year holiday, the lockdown of Hubei province, large-scale mobility restrictions at the national level, social distancing, and a 14-day quarantine period for returning migrant workers. Reflecting these containment measures, the economy contracted by 6.8 percent (yoy) in Q1.
Reopening of the economy. Starting in mid-February, the government has gradually removed mobility and activity restrictions, prioritizing essential sectors, specific industries, regions, and population groups based on ongoing risk assessments. Most businesses and schools have reopened nationwide, but social distancing rules remain in place at the micro level and foreign entry remains restricted to contain imported cases. Localized movement restrictions were re-imposed in new hotspots, including in Jilin, Heilongjiang, Beijing, Liaoning, and more recently in Qingdao, Kashgar Manzhouli, and Hebei. These restrictions were lifted once the local outbreaks became under control. Testing and individualized health QR codes are used to gauge the path of the virus and contain outbreaks. With normalizing economic activity, real GDP rebounded by 3.2 percent (yoy) in Q2 and continued to recover by 4.9 percent in Q3.

Key Policy Responses as of January 7, 2021

Fiscal

An estimated RMB 4.8 trillion (or 4.7 percent of GDP) of discretionary fiscal measures have been announced. Key measures include: (i) increased spending on epidemic prevention and control, (ii) production of medical equipment, (iii) accelerated disbursement of unemployment insurance and extension to migrant workers, (iv) tax relief and waived social security contributions, and (v) additional public investment. Automatic stabilizers further increase on budget support. The overall public sector support is expected to be higher. For example, support outside the budget includes additional guarantees for SMEs of RMB 400 billion (0.4 percent of GDP) and fee and tariff cuts of over RMB 900 billion (0.9 percent of GDP) for usage of such items as roads, ports, and electricity.

Monetary and macro-financial

The PBC provided monetary policy support and acted to safeguard financial market stability. Key measures include: (i) liquidity injection into the banking system via open market operations (reverse repos and medium-term lending facilities), (ii) expansion of re-lending and re-discounting facilities by RMB 1.8 trillion to support manufacturers of medical supplies and daily necessities, micro-, small- and medium-sized firms and the agricultural sector (of which 0.8 trillion was phased out at end-June) and reduction of their interest rates by 50 bps (re-lending facilities) and 25 bps (re-discounting facility), (iii) reduction of the 7-day and 14-day reverse repo rates by 30 bps, as well as the 1-year medium-term lending facility (MLF) rate and targeted MLF rate by 30 and 20 bps, respectively, (iv) targeted RRR cuts by 50-100 bps for large- and medium-sized banks that meet inclusive financing criteria which benefit micro- and small-sized enterprises (MSEs), an additional 100 bps for eligible joint-stock banks, and 100 bps for small- and medium-sized banks to support SMEs, (v) reduction of the interest on excess reserves from 72 to 35 bps, (vi) expansion of policy banks’ credit line to private firms and MSEs (RMB 350 billion), and (vii) introduction of new instruments to support lending to MSEs, including a zero-interest “funding-for-lending” scheme (RMB 400 billion) to finance 40 percent of local banks’ new unsecured loans and incentivizing them to further extend payment holidays for eligible loans by subsidizing 1 percent of loan principles (RMB 40 billion).
The government has also taken multiple steps to limit tightening in financial conditions, including measured forbearance to provide financial relief to affected households, corporates, and regions facing repayment difficulties. Key measures include (i) encouraging lending to SMEs, including supporting uncollateralized SME loans from local banks, raising the target for large banks’ lending growth to MSEs from 30 percent to 40 percent, and establishing an evaluation system for banks’ lending to MSEs, (ii) delay of loan payments, with the deadline extended to the end of March 2021 or later, and eased loan size restrictions for online loans, and other credit support measures for eligible SMEs and households, (iii) tolerance for higher NPLs and reduced NPL provision coverage requirements, (iv) support bond issuance by financial institutions to finance SME lending, (v) additional financing support for corporates via increased bond issuance by corporates, including relaxing rules on insurers for bond investments, (vi) increased fiscal support for credit guarantees, (vii) flexibility in the implementation of the asset management reform, and (vii) easing of housing policies by local governments.

Exchange rate and balance of payments

The exchange rate has been allowed to adjust flexibly. The counter-cyclical adjustment factor in the daily trading band’s central parity formation was phased out. The reserve requirement on FX forward was reduced to zero. A ceiling on cross-border financing under the macroprudential assessment framework for financial institutions and enterprises was raised by 25 percent in March, but lowered to the original level for financial institutions in December and for enterprises in January 2021. Restrictions on the investment quota of foreign institutional investors (QFII and RQFII) were removed and new quota for domestic institutional investors were granted. The macroprudential adjustment coefficient for overseas lending by domestic enterprises was increased by two-thirds, leading to a higher ceiling.

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Hong Kong Special Administrative Region
Background. Hong Kong SAR reported its first confirmed COVID-19 case on January 23, 2020. As the COVID-19 situation improved during late August to early November, some social distancing measures had been gradually relaxed, but some containment measures remain in place, including (i) requiring mask-wearing in all public places including on public transport with certain exemptions; (ii) implementing a temporary entry ban on Hong Kong SAR non-resident from overseas countries; (iii) reducing and partially suspending cross-border transport and border control point services; (iv) requiring passengers flying from “high-risk” countries to have negative COVID-19 testing results before arriving in Hong Kong SAR; and (v) tightening exemption arrangements for air and sea crews. Accordingly, real GDP rebounded by 2.8 percent (qoq, sa) in Q3 after contracting by 5.5 and 0.1 percent in Q1 and Q2, respectively.Hong Kong SAR reported its first confirmed COVID-19 case on January 23, 2020. As the COVID-19 situation improved during late August to early November, some social distancing measures had been gradually relaxed, but some containment measures remain in place, including (i) requiring mask-wearing in all public places including on public transport with certain exemptions; (ii) implementing a temporary entry ban on Hong Kong SAR non-resident from overseas countries; (iii) reducing and partially suspending cross-border transport and border control point services; (iv) requiring passengers flying from “high-risk” countries to have negative COVID-19 testing results before arriving in Hong Kong SAR; and (v) tightening exemption arrangements for air and sea crews. Accordingly, real GDP rebounded by 2.8 percent (qoq, sa) in Q3 after contracting by 5.5 and 0.1 percent in Q1 and Q2, respectively.
However, as the pandemic situation has worsened since late November, more containment measures have been introduced, including (i) prohibiting public gathering of more than 2 people, unless exempted; (ii) limiting dine-in services until 6 pm and allowing up to 2 people at each table; (iii) reducing the number of persons allowed in a room of shareholders' meeting of a listed company or in wedding ceremonies to 20 from 50; (iv) limiting the number of people participating in banquets in restaurants to 20; (v) removing the exemption on group gatherings in relation to religious activities and local tours; (vi) suspending face-to-face classes of kindergartens, primary and secondary schools; (vii) closing all bars, clubs, party rooms and public entertainment places (except performance venues); (viii) requiring restaurants to apply for a "Leave Home Safe" venue QR code and facilitate the public in recording their visits; (ix) empowering registered doctors to require any person who is clinically suspected to contract COVID-19 to undergo a test; (x) designating hotels as quarantine-only facilities and arranging dedicated transportation for inbound travelers; (xi) extending quarantine period for travelers from overseas to 21 days from 14 days, while maintaining 14-day quarantine period for arrivals from Mainland China; and (xii) banning travelers from South Africa and the United Kingdom. The government provided one-off virus testing services to all citizens on voluntary basis during September 1-14. In addition, “high-risk” groups are required to undergo mandatory COVID-19 testing.

Key Policy Responses as of January 7, 2021

Fiscal

An estimated HK$317.9 billion (or about 11½ percent of GDP) of fiscal measures have been announced and are being implemented. Key measures include (i) enhancing anti-epidemic facilities and services (HK$43 billion or 1.6 percent of GDP) including the establishment of a new Anti-Epidemic Fund, (ii) tax and fee reliefs and other one-off relief measures (HK$85.5 billion or 3.1 percent of GDP), (iii) cash payout to Hong Kong SAR permanent residents aged 18 or above (HK$71 billion or 2.6 percent of GDP), (iv) employment subsidy scheme (HK$80 billion or 2.9 percent of GDP), (v) sector-specific relief measures (HK$31.9 billion or 1.2 percent of GDP), and (vi) temporary job creation (HK$6 billion or 0.2 percent of GDP).

Monetary and macro-financial

Under the currency board arrangement, the Base Rate was adjusted downward to 1.50 and 0.86 percent on March 4 and March 16, respectively, according to a pre-set formula, following the downward shifts in the target range for the US federal funds rate. The jurisdictional countercyclical capital buffer for Hong Kong SAR was reduced further from 2.0 to 1.0 percent on March 16 and the level of regulatory reserves was cut by half in April to increase banks' lending capacity. The Hong Kong Monetary Authority (HKMA) also introduced measures to increase banking sector’s liquidity, including a temporary US Dollar Liquidity Facility (US$10 billion) which uses funds obtained through the US Fed's FIMA Repo Facility, encouraging banks to deploy their liquidity buffers more flexibly, and easing interbank funding conditions by reducing the issuance size of Exchange Fund Bills. The implementation of the various requirements under the Basel III framework will also be deferred. The HKMA also eased countercyclical macroprudential measures for mortgage loans on non-residential properties by raising the LTV cap to 50 percent from 40 percent for general cases, effective on August 20.
Key measures to provide financial relief include (i) the introduction of low-interest loans for SMEs with 100 percent government guarantee (HK$70 billion), (ii) enhancing the 80- and 90-percent government guarantee products by raising the maximum loan amount and extending the eligibility coverage to listed firms, (iii) pre-approved principal payment holiday for corporates, and (iv) other measures by banks to the extent permitted by their risk management principles, including delay of loan payment, extension of loan tenors, and principal moratoriums for affected SMEs, sectors, and households as appropriate.

Exchange rate and balance of payments

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Macao Special Administrative Region
Background. Macao SAR has reported 46 confirmed COVID-19 cases and no deaths as of January 8, 2021. 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. For details about current entry restrictions to Macao SAR, please visit
https://www.ssm.gov.mo/apps1/PreventCOVID-19/en.aspx#clg17044.
Reopening of the economy. (i) Eased border restrictions: on May 8 2020, the shuttle bus service in Hong Kong-Zhuhai-Macao Bridge (HZMB) connecting Hong Kong SAR and Macao SAR restarted after over a month of suspension; operating hours of HZMB and Zhuhai Gate returned to normal on May 3; starting on May 11, non-resident workers from Zhuhai are eligible for an exemption from the 14-day medical observation period with certain requirements; starting on August 12, the 14-day quarantine on Macao SAR residents travelling to Mainland China has been lifted as long as the traveler has a negative NAT certificate obtained within the last 7 days and does not have a history of travelling to foreign countries, Hong Kong SAR or Taiwan POC within the last 14 days, excluding foreign nationals living in Macao SAR. (ii) Schools: senior and junior secondary schools resumed classes on May 4 and 11, respectively; primary school classes resumed on May 25 (for year levels four to six) and on June 1 (for year levels one to three). (iii) Businesses: casinos reopened on February 20. (iv) Resumption of visit permit application: the issuance of Individual Visit Scheme (IVS) permits and group permits to Macao SAR has been resumed for residents of Zhuhai, Guangdong Province and the rest of Mainland China since August 12, August 26 and September 23, respectively. Nevertheless, a negative NAT certificate obtained within the last 7 days and a Guangdong Health Code must be presented when entering Macao SAR. (v) Vaccines: Emergency COVID-19 vaccines for vulnerable sectors of the population – frontline workers, workers with high risk of exposure (public transport drivers/workers, handlers of frozen products) and residents who need to travel overseas – should be available in Macao SAR by the end of the year. Doses to the general population are expected to be available in the first half of 2021, with two shots for each person, totaling 1.4 million doses to cover the population.

Key Policy Responses as of January 8, 2021

Fiscal

Key fiscal measures in 2020 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 in 2019, (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 02 percent of GDP), paid occupational training (317 million patacas or 0.07 percent of GDP), and tax exemption/deductions for residents and local enterprises. To support the local tourism business, between June 22 and September 30, a subsidy was in place for eligible residents to join two local tours (280 patacas per tour, amounting to 280 million patacas or 0.06 percent of GDP). Starting on September 1, a campaign was launched to attract visitors by providing promotional offers and vouchers (400 million patacas or 0.09 percent of GDP). Fiscal measures amount to an estimated 52.6 billion patacas or 11.18 percent of GDP in 2019.

Monetary and macro-financial

Under the exchange rate peg in place, the Base Rate of the discount window was adjusted downward on March 4, 2020 and 16, by 50 and 64 basis points respectively, reaching 0.86 percent on March 16, 2020. With the pataca pegged to the Hong Kong dollar, changes to the Base Rate follow those in Hong Kong SAR’s Base Rate that in turn follow shifts in the target range for the US federal funds rate according to a pre-set formula.

Exchange rate and balance of payments

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Health quarantine requirements and measures for inbound travelers

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Colombia
Background. Colombia confirmed its first COVID-19 case on March 6, 2020. The government declared a state of emergency on March 17, and a quarantine began on March 25. On August 25 the end of the quarantine was announced effective September 1 with some restrictions (consistent with the extension of the health emergency) including gatherings of more than 50 individuals, the operation of bars and land and sea borders will remain close. Restrictions will remain in place until at least February 28. On Jan 7, curfews were announced on selected cities where ICU utilization is high. Limited international air travel resumed on September 19.
Reopening of the economy. The construction and manufacturing sectors were allowed to restart operations on April 27, and an expanded list of industrial and commercial services sectors restarted on May 11. Other services, including selected retail segments, were allowed to reopen on June 1, although local jurisdictions (including Bogota) have been slower to ease restrictions.

Key Policy Responses as of January 7, 2021

Fiscal

A state of emergency decree created a National Emergency Mitigation Fund, which will be partially funded from regional and stabilization funds (around 1.5 percent of GDP) and will be complemented by 1.3 percent of GDP from domestic bond issuance and other budgetary resources. The Fiscal Rule Consultative Committee had allowed a 2020 fiscal deficit of 6.1 percent given the expected economic impact, but on June 15 allowed the government to temporarily suspend the fiscal rule in 2020 and 2021. The government now projects headline deficits of 8.9 and 7.6 percent of GDP for 2020 and 2021 respectively. Additional budgetary support for health has been announced including part payment for COVID-19 tests and vaccines, along with faster direct contracting for services associated with the emergency response, payments to health providers for ICU availability and the creation of a National Tracking and Contact Center, a one-off bonus for health workers, new credit lines providing liquidity support to the coffee sector, the education sector, public transportation sector, technology sector, health and public sector providers, and all tourism-related companies, new credit lines for payroll and loan payments for SMES, for working capital for large corporates, and for corporates in the sectors most affected by the pandemic trough the National Guarantee Fund, a two-month suspension of pension contributions by both employees and employers, delayed tax collection, an exemption of tariffs and VAT for strategic health imports and selected food industries and services, delayed utility payments for poor and middle income households, expanded transfers for vulnerable groups, and additional benefits for recently unemployed workers. In addition, the government announced a payroll subsidy equivalent to 50 percent of the minimum wage per worker for businesses with a fall of over 20 percent in revenues for a period of three months. The 2021 government budget includes measures to reactivate the economy, with extensions to the programs supporting households and firms and increases in infrastructure investment.

Monetary and macro-financial

The Central Bank has cut the policy rate by 250 bp and has implemented several measures to boost liquidity in both domestic and foreign currency. These include: (i) an expansion of their liquidity overnight and term facilities in terms of amounts, applicable securities and eligible counterparts, (ii) purchase of debt issued by credit institutions, and (iii) TES purchases in the secondary market. The Central Bank also lowered the reserve requirement applicable to savings and checking accounts from 11 to 8 percent and the one applicable to fixed-term savings accounts (less than 18 months) from 4.5 to 3.5 percent.
Superfinanciera has allowed supervised entities to reprofile all loans that were less than 30 days over-due on Feb 29. These new provisions can include grace periods or extended deadlines and the PAD (Program to Support Debtors) to support viable borrowers which was due to end in December 2020 was extended to June 30, 2021 on December 16. Banks cannot increase interest rates on loans, charge interest on interest, or report entities to credit registries for availing themselves of any forbearance measures. Countercyclical provisions have been released, and SFC has authorized certain related-party transactions for fund managers, including the purchase of Certificados de Deposito a Termino (term deposit certificates) issued by an associated entity. Fund managers can also invest, directly or indirectly up to 15 per cent of the value of each fund, in other investment funds managed by them.

Exchange rate and balance of payments

To provide liquidity in FX markets, the central bank has auctioned FX swaps (in US dollars), but suspended this program on June 30 due to vacant auctions. In addition, a new mechanism of exchange-rate hedging was introduced through auctions of Non-Deliverable Forwards with a 30-day maturity. Colombia also obtained access to the FIMA Repo facility and the Flexible Credit Line (FCL) arrangement with the IMF was renewed for two years on May 1. The existing FCL arrangement was augmented on September 25, and Colombia announced a drawing of US$ 5.4 bn on December 3.

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Comoros
Background. The pandemic in Comoros did not initially turn into a deep health crisis with only seven deaths being officially reported between the reporting of the first on May 1 and December 2020. A new wave began in December 2020 and cases are rapidly increasing through the beginning of 2021. There seems to be evidence that the new and more transmissible strain originally found in South Africa has been transported to Comoros, and the authorities are very concerned. The COVID-19 shock came less than a year after Cyclone Kenneth, which necessitated emergency Fund financial support. Remittances through exchange houses increased throughout the months of lockdown.
Reopening of the economy. The economy had gradually started to reopen but this is now in doubt given recent developments in cases. Air travel resumed in September 2020, and school attendance and religious ceremonies are now allowed. The authorities have prepared a public-health related plan that describes the measures to be taken to minimize risks from pandemics. Implementation of the plan appears to be proceeding slowly, however, reflecting the authorities’ severe financial and capacity constraints. The authorities response to the new wave is yet to be determined. The WHO ranks the health system’s preparedness at the lowest level in international comparison.

Key Policy Responses as of January 8, 2021

Fiscal

The authorities are implementing their pandemic preparedness plan. Their top priority is to substantially expand spending on health care in line with pandemic-related needs, trying to overcome to the greatest extent possible the health care system’s capacity constraints. The government granted a delay in the payment of taxes for the formal sector businesses. Import taxes on food, medicines, and items related to hygiene were reduced by 30 percent.
The government announced a program to support agriculture and tourism with US$25 million financing from the World Bank. A supplementary budget with additional budgetary allocations for addressing COVID is in process of approval by the parliament.

Monetary and macro-financial

Exchange rate and balance of payments

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Congo, Democratic Republic of
Background. The Democratic Republic of Congo declared its first case of COVID-19 on March 10, 2020, and the virus continues to spread across the country with thousands of confirmed cases and hundreds of deaths. During the first COVID-19 wave in March 2020, the government declared a state of emergency and imposed the confinement of the capital, Kinshasa, which included restrictions to travel between Kinshasa and the rest of the country and the prohibition of all gatherings of people in public spaces. Passenger flights from abroad were not allowed and border posts were closed to non-cargo shipments. Additional restrictions included the closure of all education centers, suspension of all religious and sporting events, and closure of bars and restaurants. In late June 2020, the government announced the deconfinement of the Gombe business district in Kinshasa and the gradual deconfinement of workers in mining sites. Entry restrictions in airports, ports and borders were also lifted. As a result of a second COVID-19 wave, the government announced new restrictions, effective December 18, 2020, such as the establishment of a curfew between 9 pm and 5 am, the obligation of wearing a mask, or compulsory COVID testing for domestic and external travelers. In 2020, the effects of the COVID-19 pandemic reduced real GDP growth, increased consumer prices (particularly of imported products), reduced fiscal revenues, and increased fiscal spending through the implementation of a COVID-19 response plan which included the opening of new COVID-19 test centers in Lubumbashi and other cities. A new 9-month multi sectoral response plan against the pandemics (PMUAIC-19) was launched in June 2020, which included actions to strengthen the health system, stabilize the economy, and reinforce security and social protection.

Key Policy Responses as of January 7, 2021

Fiscal

A preparedness and response national plan to deal with the pandemic was designed with support from development partners, and was coordinated by Dr. Jean-Jacques Muyembe. The plan mainly focused on actions to (i) strengthen early detection and surveillance and foster technical and operational coordination within the government; (ii) improve the quality of medical care to infected patients; and (iii) develop effective preventive communication strategies and enhance medical logistic platforms. The plan’s budget is estimated at US$135 million (0.3 percent of GDP).
The following measures were approved the week of April 12, 2020, by the Prime Minister: i) a three-month VAT exemption on pharmaceutical products and basic goods, ii) suspension of tax audits for companies, iii) a grace period for businesses on tax arrears, iv) full tax deductibility of any donations made to the COVID relief fund. The week of April 19, 2020, an additional set of measures were adopted, namely: i) provision of water and electricity for a period of two months, free of charge, ii) prohibition to evict renters in case of no payment of financial obligations from March to June 2020, iii) suspension of VAT collection on the production and on the sales of basic goods.
In the context of sustained increases in inflation and exchange rate depreciation, on August 18, 2020, the central bank (BCC), the Ministry of Finance, and the Ministry of Budget formally signed a Stability Pact, which sets a number of policy and operational commitments by those institutions that would contribute to maintaining “macroeconomic stability, as a prerequisite for strong and sustained growth”.

Monetary and macro-financial

On March 24, 2020, the BCC announced several measures to ease liquidity conditions by: (i) reducing the policy rate by 150 bps to 7.5 percent; (ii) eliminating mandatory reserve requirements on demand deposits in local currency; and (iii) creating a new collateralized long-term funding facility for commercial banks of up to 24 months to support the provision of new credit for the import and production of food and other basic goods. The BCC also postponed the adoption of new minimum capital requirements and encouraged the restructuring of non-performing loans. In addition, the BCC announced measures to reduce contamination risks in bank notes and promote the use of e-payments.
In order to re-anchor inflation expectations and maintain a positive in real terms policy rate, on August 10, 2020, the BCC increased its policy rate to 18.5 percent.

Exchange rate and balance of payments

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

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Congo, Republic of
Background. Congo, as most of oil producers, is being hit by two shocks—the potential spread of COVID-19 and the sharp decline in oil prices. The first confirmed COVID-19 case was reported on March 15, 2020. The Ministry of Health has prepared a national contingency plan in collaboration with WHO and other international partners. In the meantime, the authorities started to adopt containment measures, including social distancing, travel bans on visitors from high-risk countries and quarantine for nationals/expatriates returning from those countries, screening at ports of entry, and school closures. A lock-down was established in the country from April 1 to mid-May, and extended through end July but with a reduced time interval of 10PM to 5AM. In late July, in response to the surge in cases, the authorities have increased the time interval for the lockdown to 8PM-5AM in the two major cities of Brazzaville and Pointe Noir. In late September, the lockdown period was reduced to 11PM-5AM but subsequently was reversed to 8PM-5AM on weekends following a surge in cases.
Reopening of the economy. On May 18, the lockdown was eased with opening up of public transportation, primary schools final year class and graduation class. As of late June, restaurants, hotels, and most private services have opened in the two main cities, while the rest of the country had opened up completely previously. Since May 30, a large scale screening for teachers and administrative staff has been occurring. The flight space reopened fully as of August 24 with the requirement that each arrival is equipped with a negative covid19 test result dating from at most 3 days. The official school opening date on campus was to October 12, but since early December a number of private schools have returned to online schooling.

Key Policy Responses as of January 6, 2021

Fiscal

The overall cost of the response plan to the COVID 19 epidemic has been estimated at US$170 million (100 billion XAF), equivalent to 1.6 percent of 2020 GDP. The EU, WFP, France are coordinating support for the poorest segments of the population with combined support amounting to about 3 billion XAF as of now. Other UN agencies have provided about 7 billion XAF to support COVID-19 efforts. Up to mid-November, the total amount of funding provided for COVID-19 expenses is about 75 billion XAF.
The government has adopted some measures to ease tax and duty payments for private enterprises. In particular, more time has been given to companies to pay their taxes and tax assessments on site have been abandoned. The import duty directorate is also strongly encouraging electronic payment of dues and allowing more electronic documents to be accepted at the port. Corporate income tax has been reduced to 28 percent from 30 percent and the turnover tax has been reduced to 5 percent from 7 percent for small businesses with turnover below 100 million XAF, although these measures will apply in 2021.

Monetary and macro-financial

On March 27, 2020, BEAC
announced
a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral in monetary operations. The BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.
On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5% to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regards to dividend distribution. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

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Costa Rica
Background. Costa Rica reported its first confirmed case of COVID-19 on Mar 6, and as of January 7, the country has registered 175,038 confirmed cases and 2,267 deaths. In response, the government has implemented a range of measures to contain the spread of coronavirus, including declaration of a state of yellow alert and a national emergency, restrictions and bans on non-essential private and public vehicle circulation, international travel restrictions, mandatory quarantines for close contacts and those who enter the country, closures of schools, churches, beaches, national parks, bars, clubs and casinos, entry restrictions for foreign truck drivers, increased testing, and the conversion of a rehabilitation center into a hospital specializing in COVID-19 treatment. 2020H1 GDP declined by -4.0 percent y/y. A monthly indicator of economic activity so far points to 2020Q growth of around -5.0 percent y/y.
Reopening of the economy. Costa Rica began easing some coronavirus measures starting May 1. Theaters, gyms and athletic centers will be permitted to reopen during the week but with limited capacity and under strict rules (cleaning, distances etc.). The Health Ministry announced a further loosening of restrictions, to be implemented in four phases over 80 days. The first phase started on May 16 when some national parks and hotels re-opened at limited capacity and contact sports were permitted without spectators, among other easing measures. The second phases began on June 1 when restaurants, gyms, museums, and remaining hotels re-opened at 50 percent capacity. Phase 3 started on June 26 with extended hours for shops, cinemas, museums, theaters, and beaches. Houses of worship could open at limited capacity and under social distancing rules. The authorities subsequently slowed down the reopening of the economy in districts that have a high number of new infections and reintroduced localized vehicle circulation restrictions and business closures. Since August 31, restrictions have been relaxed further in the entire country, with a focus on increasing economic activity. Restrictions were further relaxed starting September 9, when hotels could operate at 100 percent capacity, among other measures (a mandatory face mask order for public enclosed places was introduced at the same time). The border opened to international tourists from countries/regions that have controlled the pandemic on August 1 and to visitors from all countries by November 1.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

The Central Bank cut its policy rate by a full percentage point to a record low of 0.75 percent to soften the economic damage caused by the pandemic and to improve credit conditions for households and businesses. In addition, the Central Bank started purchasing government securities (issued pre-2020, in Costa Rican colones, and with a maximum maturity of 10 years) in the secondary market to provide liquidity during market distress. Further measures that aim at protecting workers and companies include (i) reducing the cost of credit (including through ¢900,000 million loans at preferential interest rates to firms across all sectors from state-owned banks); (ii) relaxed regulations on restructuring of loans and on buybacks; (iii) a minimum 2-month moratorium on the payment of principal and/or interest for personal credit, mortgages, auto loans, credit card loans, consumer loans, and education loans for affected households and firms (the National Bank of Costa Rica announced it would extend moratoria for affected clients until December 2020); (iv) a temporary reduction in the minimum accumulation of countercyclical provisions for financial entities to zero; (v) the temporary suspension of provisioning rules for financial entities that record losses for at least 6 out of 12 months; (vi) authorization for complementary pension operators to provide partial funds to employees affected by COVID-19; and (vii) ¢700,000 million medium-term swap facilities that the Central Bank is offering to financial intermediates.

Exchange rate and balance of payments

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Côte d’Ivoire
Background. The first confirmed case was reported on March 12, 2020. The authorities swiftly adopted containment measures including (i) declaring a state of emergency and establishing a curfew from 9pm to 5am; (ii) banning all international travels, except for humanitarian aid purpose; (iii) prohibiting public gatherings of more than 50 people; (iv) closing schools, nightclubs, restaurants, bars, theatres and other recreational facilities; and imposing restrictions on public transportation and movements between regions in the country; (v) making wearing masks mandatory and encouraging teleworking. On March 30, 2020, the authorities launched a vast cleaning and disinfection operation in Abidjan.
Reopening of the economy. On May 7, 2020, the authorities announced the relaxation of the containment measures, which were further eased on May 14, 2020. In the Grand Abidjan district, they lifted the curfew and the closure of restaurants on May 15, while the reopening of schools and universities occurred on May 25. The isolation of the Grand Abidjan has been ended from July 15. The recreational centers will be opened on July 31. Though, the state of emergency will remain in place. Regarding the remaining regions, the curfew and the closure of restaurants, schools and recreational facilities were lifted on May 8; the prohibition of public gatherings was lifted on July 30. Domestic flights resumed on June 26 and international flights on July 1.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted of a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount for such special T-Bills initially issued by Cote d'Ivoire was equivalent to 1.5 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020.. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5- to 7- year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

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Croatia
Background: The Croatian economy has been significantly affected by COVID-19, given its dependence on tourism and its largest trading partner being Italy. Containment started early and was gradually tightened from border controls, to closure of schools, universities, open markets, and restrictions on intercity travel. Croatia quickly adopted 63 different economic measures and additional measures were announced beginning of April in order to preserve jobs and alleviate the impact of COVID-19.
Reopening of the economy: On April 23, the government announced a gradual easing of containment measures in three phases, but subject to a review after each stage. Beginning April 27, some retailers (except shopping malls), libraries, museums, galleries, service-based activities not requiring close client contact (e.g., tailors, photoshops, locksmiths) reopened. Public transportation in cities and suburbs and boat connections for islands that do not have ferries resumed. Beginning May 4, service industries where close contact with people is unavoidable (e.g., hairdressers, beauticians) could reopen. Public and private health systems became fully operational except for special cases decided by epidemiologists. Playgrounds and sports fields reopened. Beginning May 11, public gatherings of up to 10 people were allowed outdoors (previously capped at 5 people). Shopping malls, preschools and elementary schools (grades 1-4), cafes and restaurants, sports and fitness centers and national parks have reopened. Inter-county public transportation and domestic air traffic have resumed. Shopping centers have begun to operate. Public gatherings for cultural and sport events are permitted as of June 15.
As of July 1, 2020, all EU/EEA nationals and individuals holding permanent residence in the EU/EEA countries can enter Croatia freely, without restrictions. As of July 1, 2020, all EU/EEA nationals and individuals holding permanent residence in the EU/EEA countries could enter Croatia freely, without restrictions, while all other foreign nationals could enter Croatia for business, tourism, or other pressing personal reasons, if they provided relevant proof. The mandatory self-isolation and quarantine restrictions for individuals entering Croatia were lifted. Upon entry, individuals were given a Pamphlet with Recommendations and Instructions from the Croatian Institute of Public Health that they must follow for 14 days.
Parliamentary elections were held on July 5.
As of July 10, several restrictions have been reintroduced following a spike in infections. Wearing protective masks is now mandatory throughout the country in public transportation, medical facilities, shops, and malls, employees and clients where face to face contact is required, services that require close contact, drivers and all other employees in public transportation vehicles, as well as passengers, employees of all hospitality services who serve and prepare beverages and food, all health care workers and visitors to hospitals, etc. All travelers arriving to Croatia for tourism, business, urgent personal reasons, or educational purposes must present a negative PCR test not older than 48 hours. Travelers with a test older than 48 hours can enter Croatia but will be issued a self-isolation order and will have to be tested again locally, at their own expense Those who do not provide a negative PCR test will be ordered to quarantine/self-isolate for 14 days. As of July 30, the government has lifted the extraordinary price control over food, cosmetic products; the law continues to apply nevertheless to drugs, medicinal products, protective masks, protective gear and disinfectants. In July and August, several countries (The Netherlands, Finland, Italy, Austria, France, and Germany) have introduced mandatory coronavirus testing and/or self-isolation requirement for people coming from Croatia. Following a sharp rise in new COVID-19 cases recently, wearing a mask is mandatory as of October 19 in all closed indoors settings (including in bars and restaurants) where a minimal two-meter distance cannot be maintained. Protective masks are also recommended outdoors when it not possible to keep a distance of two meters. Gatherings involving more than 50 people require prior approval. As of October 26, public gatherings are limited to 50 persons and can only last until 10:00 pm; private gatherings are limited to 15 persons; sport events are to be held without spectators. As of November 28, a soft lockdown as introduced, through December 21, then extended to January 10, 2021, with several restrictions, among which social distancing, the closure of all hospitality services (restaurants, cafes, and bars), closure of gyms, sports and recreation facilities, nightclubs, interdiction of cultural events, amateur sporting or tourist events and gatherings. Hotels and camps may remain open but only for their guests. From December 1 to January 15, 2021, the Croatian Government has prohibited all border crossings, with some exceptions (for EU citizens under certain conditions, or for countries currently covered by Annex I to EU Council Recommendation 2020/912). The vaccination against COVID-19 has started on December 27, 2020.

Key Policy Responses as of January 7, 2021

Fiscal

Key measures include: deferment of public obligations, free of interest for three months, which can be extended by additional three months if necessary; temporary suspension of payments of selected parafiscal charges; interest free loans to local governments, the Croatian Health Insurance Institute, and the Croatian Pension Insurance Institute to cover the deferred payments; subsidization of net minimum wages for three months to preserve jobs, which could be extended for another three months; and early refund of taxes for individuals. Beneficiaries of some EU Structural and Investment Funds will be able to receive larger advance payments. Part of the EU funds envelope has been reallocated to micro loans, a new credit line was introduced, accompanied by measures to facilitate faster disbursements of loans with lower interest rates, and larger partial risk guarantees. The government has also resorted to purchases of unsold stocks of finished goods in agriculture, food processing industry, medical equipment, and similar strategic goods.
On April 1, the government announced additional measures, including: an increase of the subsidization of the net minimum wage; tax obligations of companies to be reduced or written-off depending on their turnover and loss; VAT payments will not be due until payment is received from customers and the deadline for the 2019 financial reports will be extended to June 30. Applications to the EU Solidarity Fund and SURE (temporary support to mitigate unemployment risks in an emergency) are being considered as additional sources of financing/budget support.
On June 25 the government announced the possibility of introducing a short time work program, financed from EU SURE, to safeguard jobs thereby employers who need to introduce shorter working hours due to a decline in business activities would be entitled to aid for the payment of a part of their workers' wages. The measure is intended for all sectors and for all businesses with more than 10 employees. On September 7, the measures designed to help the economic sectors hit by the coronavirus crisis, including those designed to keep jobs and ensure liquidity and COVID-19 loans, were extended until the end of the year. For all sectors, the government will co-finance a shorter working week with a maximum HRK 2,000 per worker plus contributions, as well as provide assistance to micro businesses until end December, also in the amount of HRK 2,000 per worker, if the employer has suffered a drop in turnover of more than 50 percent. For activities that are particularly at risk (transport of passengers, hospitality, travel agencies and recreation-related businesses, as well as cultural, business and sports events), support is provided in the amount of HRK 4,000 per employee until end-December, if their drop in turnover exceeds 60 percent. On September 24, the deadline for SOEs to pay profit into budget was extended until January 15. On December 17, 2020 the government announced the continuation of the measure of HRK 4,000 per employee in January and February 2021 to protect jobs in businesses forced to close down as part of efforts to curb the spread of the coronavirus pandemic.

Monetary and macro-financial

The Croatian National Bank (CNB) has provided additional liquidity,
supported the government securities market, and temporarily eased the
regulatory burden on banks (
https://www.hnb.hr/en/home).
Liquidity was provided via: (i) the structural repo facility, used for
the first time since December 2018 (5-year kuna liquidity of HRK 3.8
billion at a fixed interest rate of 0.25 percent); (ii) regular weekly
repos used by banks for the first time since December 2017 (but no bidders
at recent auctions). This repo rate has been reduced from 0.30 to 0.05
percent; and (iii) a reduction of the reserve requirement ratio (from 12 to 9 percent). The CNB has bought government securities in the secondary market (five times since March 13, in total HRK 17.9 billion). The European Central Bank and the CNB have agreed on a €2 billion swap line. The agreement is in place until end-June 2021.

A moratorium for three months on obligations to banks has been introduced.
Banks will not apply enforcement measures during this period. The Croatian
Banking Association has agreed to defer repayment of loans to the tourism
sector until end-June 2021. Depending on clients' possibilities and needs,
regular interest may be paid for the duration of the moratorium, according
to the existing payment schedule, or the loan maturity may be extended to
adapt monthly loan instalments to clients' possibilities and cash inflow.
The CNB has temporarily adjusted its supervisory practices in line with the
EBA statement of March 12 (
https://eba.europa.eu/eba-statement-actions-mitigate-impact-covid-19-eu-banking-sector).
Banks will not distribute dividends.

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

Exchange rate and balance of payments

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Cyprus
Background. After the first case was reported on March 9, 2020, COVID-19 spread has been brought under control since April 29, before a second wave since October. Since March, the government implemented a range of measures to limit the spread of coronavirus, including travel and mobility restrictions, a 14-day mandatory quarantine for travelers to Cyprus, closure of schools, hotels and businesses, and mandatory mask-wearing in large indoor spaces.
Reopening of the economy. With low daily new infections since end-April, the government has started implementing lifting of restrictions in four phases. The first phase started on May 4, allowing reopening of construction sites, retail stores and public sector under social distancing and health guidelines. The second phase started on May 21, allowing reopening of public schools and open-air restaurants as well as free movement within the country. The third phase started on June 9 allowing reopening of airports, shopping malls, ports facilitating cruise ships, the interior areas of restaurants and hotels, theaters and open-air cinemas. International travel restrictions remain in place for all but 35 countries. From June 24, the maximum number of persons at gathering has been increased gradually. Some of the reopening measures were partially reversed since August to control the surge in daily new cases.

Key Policy Responses as of January 7, 2021

Fiscal

Cyprus has implemented an economic support package that is estimated to amount to €899 million (4.5 percent of GDP) in 2020 for the health sector, households and businesses. The package includes: (i) a €100 million support for the health sector to combat the pandemic; (ii) income support for households including leave allowance for parents and those with health issues; (iii) wage subsidy for affected businesses to maintain jobs, grants to small businesses and self-employed, support for the tourism sector, a two-month deferral of VAT payments, and a temporary VAT cut to stimulate tourism/hospitality sector, and (iv) three-month suspension of a scheduled increase in the contribution to the General Healthcare System and interest subsidy for new business and housing loans for four years, which benefit both businesses and households. This package also includes guarantees on or financing of credit facilities up to €1.7 billion through participation in the Pan-European Guarantee Fund, increased state guarantees to expand existing European Investment Bank (EIB)-supported loans to SMEs, and increased government borrowing from EIB to expand existing funding scheme for SMEs. In face of the second wave, Cyprus has extended some of the support measures until March 2021 in a more targeted manner, including support for crisis-affected businesses and extension of unemployment benefits.
http://mof.gov.cy/en/press-office/minister-s-press-releases/685/?ctype=ar

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

Monetary and macro-financial

For monetary policy at the currency union level, please see Euro Area section.
The Central Bank of Cyprus (CBC) announced additional measures on March 18th. They include a release of capital and liquidity buffers for banks directly supervised by the CBC (€100 million), simplification of documentation requirements for new short-term loans and other credit facilities, encouraging banks to apply favorable interest rates for new loans and newly restructured loans, and simplification of approval processes for loan restructuring.
The Parliament passed a bill on March 29 providing a general moratorium on loan repayments for all creditworthy borrowers until end-December 2020.
The Central Bank announced additional capital release measure on April 10, with a twelve-month extension of the phased-in introduction of Other Systemically Important Institutions capital buffer. This corresponds to a release of additional funds of approximately €90 million as of January 1, 2021.

Exchange rate and balance of payments

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Czech Republic
Background. The first case of COVID-19 was reported on March 1, 2020. The government declared a state of emergency and a nationwide quarantine limiting free movement and international travel to contain the spread of the virus. It further implemented a range of measures to support the population, jobs and businesses. GDP fell by 1.9 percent in Q1, 10.7 percent in Q2, and 5 percent in Q3-2020 compared to a year earlier.
Reopening of the economy. The list of permitted activities had been gradually expanded since end-April. However, due to a strong resurgence in new infections marking the second wave of the pandemic restrictions had to be reintroduced in late summer/early autumn 2020 starting with the requirement to wear face masks indoors as of September 10.
On October 5, a 30-day state of emergency was reinstituted and repeatedly prolonged, currently to January 22, 2021. As of October 12, distance learning was applied to schools and universities, and restaurants accessible to the public were closed. As of October 22, retail shops providing non-essential goods and services including accommodation facilities also had to close. Movement of persons and physical social contact were restricted and the wearing of masks outdoors subject to specific conditions was introduced. On November 16, a five-level risk assessment anti-epidemic system (PES) with a specific matrix of measures for each level was introduced, starting at the fourth (i. e. second-worst) level of risk. On the same date, pupils of the first two elementary school grades (6 to 8 years of age) returned to classroom learning. Pupils of the next three grades (8 to 11 years of age) returned on November 30. As a result of an improving pandemic situation, the risk on the PES scale moved down to the third level on December 3 and all shops and services reopened with restricted capacity and under strict hygienic conditions.
However, due to a worsening of the pandemic situation later in the month, the risk on the PES scale moved back to level four as of December 18. As a consequence, government measures were tightened again. The Christmas holidays at schools started two days earlier. As the pandemic situation deteriorated even further, the risk on the PES level was increased again to level five (the most serious one) on December 27 and the government adopted corresponding measures. Among other things, distance learning applies to schools with the exception of the first two elementary school grades and an overnight curfew from 9 p.m. to 5 a.m. is in place. On the same day, vaccinations against the virus began with priority groups, totalling around 600,000 people, including healthcare professionals caring for COVID patients and people over the age of 80.

Key Policy Responses as of January 6, 2021

Fiscal

The government implemented a fiscal package of CZK 304.4bn (€11.6bn, 5.5 percent of GDP) in 2020. Until the end of February 2021, the government contributes 80 percent of wages (incl. SSC) to employers if employees are sent into quarantine and 100 percent of wages (incl. SSC) if employers’ businesses have been closed or reduced as a result of the crisis management or emergency measures taken by the Government. Until end of February 2021, the government also contributes 60 percent of wages (incl. SSC) to employers due to obstacles to work on the part of the employer caused by the current epidemiological situation and related measures to prevent the spread of the disease both locally and abroad. Between June and end-August, the government waived social security contributions paid by employers (24.8%) with a maximum of 50 employees (if certain conditions are met). This support was provided concurrently with the wage compensation, but it was not possible to utilize both programs simultaneously in the same month. The government also lowered the VAT rate (from 15% to 10%) on selected services (accommodation, culture, sport), decreased road tax for vehicles above 3.5t (by 25%) and introduced a loss carryback measure: in case of a reported tax loss in 2020 due to the state of emergency, taxpayers will be able to reduce their tax bases for this tax period for the tax years 2019 and 2018 by this loss (maximum tax loss is set at CZK 30million). The government also approved a tax package, which includes, among other things, the introduction of extraordinary accelerated depreciation of assets (in the 1st and 2nd depreciation class), acquired in 2020 and 2021. Between April and June, the state further covered 50% of rents of all businesses after mandating a reduction of 30%, while tenants covered the remaining 20%. Self-employed were able to apply for a lump sum of CZK 500 and contractors of CZK 350 per day for the period between Mar 12 and Jun 8. The CZK 500 lump sum also applied to very small businesses (Ltd) for the period between Mar 12 and Jun 8. The government also approved a one-off benefit for pensioners of CZK 5,000 as well as a bonus for workers in social services and the health-care system of CZK 16.9bn in total. The government approved grants for tourism (e.g. spas, hotels, etc.) of CZK 6.8 bn in total. Due to the reinstated lockdown in response to a second wave of COVID-19 infections, the government approved measures to selectively support affected sectors. Self-employed, contractors and small businesses (Ltd) will be able to apply for a lump sum of CZK 500 per day for the period between Oct 5 and 23 Jan 2021. The government again approved grants for culture, sport, tourism, agriculture, restaurants, bus transportation and all other enterprises, which had to close because of crisis management or emergency measures taken by the Government, amounting to CZK 21.5 bn. Between July and December the state again covered 50% of rents of selected businesses, this time without the necessary reduction of 30%. The government further pledged close to CZK 500bn (EUR 19bn, 9 percent of GDP) in potential state guarantees. Advance payments on personal and corporate income tax were suspended for Q2 2020 and again from October until the end of 2020 (for selected businesses) and penalties waived for failing to pay property tax and file income tax returns on time. The government approved the postponement of the electronic registration of sales for all subjects until the end of 2022. The government approved a moratorium on bank loans (subject to certain criteria and limitations) of up to six months, which ended at the end of October.

Monetary and macro-financial

The Czech National Bank (CNB) lowered the policy rate by 50 bps on March 16
, and 75 bps on March 26
and May 7
, respectively, to 0.25 percent. It also increased the frequency of repo operations from one to three times a week and reduced the countercyclical capital buffer rate by 75bps to to 1 percent
, effective April 1, 2020, and on June 18, further toto 0.5 percent
, effective July 1, 2020. Also effective as of April 1, 2020, the CNB relaxed
credit ratios for new mortgages, increasing the maximum recommended LTV ratio from 80 to 90 percent, the DSTI ratio from 45 to 50 percent and removing the DTI ratio from its list of recommendations (previously set at a multiple of 9). On June 18, 2020 the CNB abolished the DSTI ratio. An amended CNB act extends the CNB’s powers regarding the types of securities and counterparties it can engage with in secondary markets in case of disorderly market conditions.

Exchange rate and balance of payments

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Denmark
Background. Denmark reported its first confirmed cases of COVID-19 on February 27, 2020. In March, the government implemented a range of measures to contain the spread of COVID-19, and to support people, jobs and businesses. These include closure of all borders ; prohibition of events with more than 10 people; closure of schools, universities and daycare centers ; closures of entertainment, hospitality and public leisure facilities ; sending home non-essential public employees and asking all private businesses to keep employees home when possible.
Reopening of the economy. The authorities announced a careful and gradual lift of some containment measures (April 6). In the 1^st Phase primary schools and under, as well as additional health care sectors and liberal professions opened up mid-April. As part of the 2^nd 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 third Phase. On July 1 the border was opened to selected countries outside the EU and the assembly ban was raised from 50 to 100 people. This phased reopening, was supported by a comprehensive testing and detection strategy and authorities are now offering Covid19 tests for foreign tourist Due to increasing infection rates authorities decided to not raise the assembly ban further (August 6), made adjustments to Phase 4 of the reopening (August 14), introduced new targeted measures against Covid19 (18 September) and lowered the assembly ban to 50 people (September 19). Due to increasing infections rates, authorities imposed targeted lockdowns (closure of restaurants/bars and movie theaters) in 38 of its 98 municipalities(Dec 7) and lowered the assembly ban from 50 to 10 people (Oct 26). The targeted lockdown was extended to all municipalities (Dec 15) while daycares and schools below 5th grade remain open. A full lockdown was announced for Dec 25-Jan 3.

Key Policy Responses as of December 17, 2020
Fiscal

Monetary and macro-financial

Exchange rate and balance of payments

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Djibouti
Background. Djibouti has had 5749 confirmed COVID-19 cases as of December 14, 2020, and 61 deaths. The government implemented various prevention measures, including: border restrictions; halting international of passenger flights and trains; suspension of visa issuance; confinement of non-essential employees, and steps to encourage social distancing. Most recently, in November, the authorities required that all international visitors take a COVID-19 test before arrival.
The Ministry of Health and its partners have increased their preparedness by building surveillance, testing, quarantine and health worker capacity. The WHO has delivered protective and medical equipment, including tests and respirators. The Ministry of Health is strengthening the capacity of the medical facilities.
Reopening of the economy. The government has generally relaxed confinement measures since May. Transport, retail, services, construction and public administration have reopened. Wearing a mask is mandatory in public spaces as well as other hygiene measures such as hand washing and regular sanitization of public places. The borders were reopened and international travel permitted in starting in July, but a recent uptick in cases led the authorities to reimpose restrictions for a two-week period ending November 4. The authorities now also require travelers to have a negative COVID-19 test (PCR test) taken 72 hours before departure. The government continues to target those who have potentially been in contact with people who have tested positive.

Key Policy Responses as of December 16, 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

Exchange rate and balance of payments

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Dominican Republic
Background. The Dominican Republic reported its first confirmed case of COVID-19 on March 2, 2020. Since then, the authorities declared a national emergency, introduced a country-wide curfew, closed schools, borders, and non-essential businesses, suspended public activities and mass gatherings, introduced teleworking arrangements for public servants, and enforced strict social distancing. The state of emergency initially ended on June 30 but was reinstated on July 15 due to the resurgence of COVID-19 in the country. Starting on September 28, the curfew was set to commence from 9pm to5 am Monday through Friday, and 7pm to 5am during weekends. On October 18, the state of emergency was extended for 45 days. On November 10, the curfew was extended for 20 days. On December 1, the curfew was extended for 20 additional days, with the schedule remaining the same. Considering an increase in cases, the government announced on December 15 that curfew on weekdays would start two hours earlier (from 7pm) with a free transit policy until 9pm to allow time for people to return to their homes, (but only in Distrito Nacional and the provinces of Santo Domingo, Santiago, Duarte, La Vega and Puerto Plata) and with a further exemption during the holidays December 24 and 31 when curfew hours would be from 7pm to 5am, with free transit until 1 am nationwide. However, following further increased cases and hospital occupancy in late December, the government tightened the curfew for December 31 (when the curfew would start at 7pm and without a free transit allowance), and from January 1 – 10, when the curfew will run from 5pm to 5am on weekdays and 12pm to 5am on weekends.
The Emergency and Health Management Committee to Combat the Coronavirus, established on April 2, advises on response strategies, promotes public-private partnerships to increase the healthcare system’s capacity, and supervises the implementation of adopted measures. The Ministry of Health created an AI-based e-platform Aurora MPS, to inform citizens about the outbreak and connect them with doctors. A unified command center called C5i was created to centralize patient information from various sources and generate computer models to develop epidemiological profiles, predict the behavior of the virus in the following days, and provide a “live” number of medical personnel and available supplies.
Elections. The presidential and congressional elections took place on July 5. PRM’s candidate—Luis Abinader—won the presidential vote and the change of administration took place on August 16, 2020.
Reopening of the economy. On May 20, a plan to reopen the economy in four phases was implemented with the reopening of most small businesses, including public transportation operating at up to 50 percent capacity.
On June 3, the country entered phase 2 of deconfinement with the reopening of inter-urban transportation services as well as privately-operated transportation in cities, operating at 60-percent capacity. Small businesses of up to 10 employees can resume at full capacity, while businesses between 11 and 50 employees can operate at 75 percent capacity. Large businesses can operate at 50 percent capacity. Also, religious services can take place on Sundays while certain activities such as gambling (but not casinos) are allowed. Social distancing and the use of face masks in public spaces remain mandatory.
Although phase 3 was planned for June 17, the government decided to remain in phase 2 following an increase in new confirmed cases. While each phase is planned to last for 14 days, the start of the next phase will depend crucially on the evolution of the pandemic.
Even though the country has not proceeded with the full reopening of private activities, the Ministry of Public Administration ordered that all public sector agencies resumed their activities at full capacity wherever physical conditions allow. If a public agency cannot accommodate minimum social distancing for its employees, it can operate at 75-percent capacity. Meanwhile, vulnerable employees such as those with medical conditions or above the age of 65 are advised to continue working from home.
Notwithstanding, the tourism sector resumed activity on July 1 with the reopening of all regions and airports to tourists. American Airlines restarted its flights to four destinations (Puerto Plata, Punta Cana, Santiago and Santo Domingo). The government implemented a tourism recovery plan starting September 15, which includes non-invasive random tests at airports and a traveler assistance plan that covers emergencies in the event of contagion for all short-stay tourists (non-resident foreigners) who arrive between September 15 and December 31. On November 11, the ferry service between the Dominican Republic and Puerto Rico resumed operations. At end 2020, the government announced that the traveler assistance plan would be extended until end-April 2021.
Vaccination plans: The Dominican Republic bought 10 million doses (USD 40 million) of the AstraZeneca vaccine that are expected to arrive to the country by February 2021. Vaccination is expected to start in March 2021. The authorities are also negotiating with another pharmaceutical to increase the number of COVID-19 vaccines to 14 million. These vaccines doses would inoculate about half of the population. The first to be vaccinated will be front-line personnel, which includes doctors, nurses, bio analysts, paramedics, police, and guards; along with them, people over 65 years of age and those with comorbidities such as diabetes and high blood pressure, as well as high-risk illnesses.

Key Policy Responses as of January 6, 2021

Fiscal

The original economic measures announced by the previous administration amounted to RD$32 billion (about US$576 million, or ¾ percent of GDP). These include higher social spending: (i) the Quédate en Casa program (RD$17 billion), subsidizing the most vulnerable households, including informal workers. Coverage under the existing program Comer es Primero, paying RD$5,000 (about US$90) per month, increased from 0.8 to 1.5 million households; 452,817 families will receive additional transfers of RD$2,000 (about US$36) per month; (ii) the newly created Employee Solidarity Assistance Fund (FASE) (RD$15 billion), which benefits about 754,000 families of formal workers who were laid off with a monthly transfer up to 70 percent of last formal wages (minimum of RD$5,000, RD$8,104 on average); (iii) On May 17, a new program called Pa’ti was introduced to support independent workers, providing RD$5,000 (about US$90) a month to each beneficiary with an additional allowance made available for healthcare workers, the military and police officers, amounting to RD$2.4 billion. The newly elected President Luis Abinader announced the extension of all social aid programs until the end of 2020. The government increased healthcare spending on medical supplies and equipment, tests in private labs, rent of two private medical centers, and support of the pharmaceutical industry, including through budget reallocations. On the revenue side, tax relief is provided through extended payment deadlines and some tax benefits. The government accumulated more than RD$10 million from fines for the violation of the COVID-19 curfew established in March.
On October 8, the government approved a 2020 budget increase for RD$202 billion (4.5 percent of GDP) with the aim of mitigating the crisis generated by the pandemic. To cover the financing gaps, the authorities mobilized loans and commercial credit lines from the IMF , World Bank , the Interamerican Development Bank, Latin American Development Bank, and the Central American Bank for Economic Integration; and raised private donations for healthcare needs. On October 5, the European Union disbursed a budget support grant in the amount of RD$725 million (US$12.4 million). The government also placed domestic debt in the amount of US$0.7 billion (in 4 series), with the maturities of 10-20 years at an interest rate of 10-11 percent. Despite the continuing global uncertainties, the country successfully issued a record US$3.8 bn in sovereign bonds in September, comprising new global bond (US$1.8 bn; maturity 12 years; yield of 4.875%); reopening of the 2060 US dollar global bond (US$1.7 bn; yield of 6.25%); and reopening of the 2026 peso-denominated bond (US$0.3 bn; yield of 10.0%).On December 1, the government announced its plan to reopen its 2032 global bonds to finance a buyback of four different dollar notes maturing between 2021 and 2025, amounting up to US$3.5 bn.
On December 7 the Government presented a new bonus that will be distributed for Christmas of RD$1,500 to one million beneficiaries. This bonus will replace the traditional food boxes the Government used to hand during the holidays to the poorest households.
On December 30, the government announced that the FASE I program (for formal workers with suspended labor contracts) would be extended until April 2021. FASE II (for formal workers with active labor contracts) would be replaced by another program to be announced in January. On January 4, 2021, the President announced the extension until April 2021 of the Quedate en Casa program and its eventual replacement with a new program (Superate), which will double the assistance under the existing Comer es Primero and cover an additional 200 thousand vulnerable households (thus reaching a total of 1 million households).

Monetary and macro-financial

On March 16, the Monetary Council of the Central Bank of the Dominican Republic (BCRD) eased its policy stance and took measures to provide additional liquidity and support the economy. Interest rate measures include monetary policy rate cuts (from 4.5 to 3.5 and then to 3.0 percent per annum), reduction of the 1-day REPO facility rate (from 6.0 to 4.5 and then to 3.5 percent), and the overnight deposit rate cut (from 3.0 to 2.5 percent). Banks were allowed to cover reserve requirements with public and BCRD bonds up to RD$22.3 billion (about ½ percent of GDP), which is equivalent to a 2 percent reduction in the reserve requirement rate and a release of RD$30.13 billion (US$553.7 million; about 2/3 percent of GDP) to the economy. These resources will be used for credit to households and businesses at an interest rate capped at 8.0 percent. On April 16, the Monetary Board lessened the criteria to access these resources by allowing financial intermediaries to lend to any economic sector and extended the maturity of the loans from 1 to 4 years. The BCRD has also made available liquidity for loans to small businesses and personal microcredits. The first window amounts to RD$15 billion accessible through Banco de Reservas. It will be available for 3 years and loans would carry an interest rate of up to 8 percent. At the same time, the BCRD released RD$5.7 billion from the reserve requirement (about 0.5 percent of reserve requirements) for new loans, refinancing of previous debt and debt consolidation for small businesses and personal microcredit under loans for 4 years at an interest rate of up to 8 percent.
Liquidity measures include easing other REPO operations for RD$50 billion (about 1 percent of GDP) to provide funds to the financial system, and provisions of U.S. dollar liquidity (US$0.622 billion, roughly 3/5 percent of GDP) through REPO operations and allowing banks to use public bonds towards reserve requirements on foreign currency deposits. Interest rate on these REPOs was lowered from 1.8 percent to 0.9 percent. In addition, the BCRD made arrangements with the Federal Reserve for a liquidity facility worth US$1-US$3 billion through short-term repos. Debt relief measures include a temporary freeze of debtor ratings and provisioning; classifying overdue loans for a 60-day period; and giving 90 days to debtors to update loan guarantees. In addition to these measures, on May 7, the BCRD announced a new facility to provide financing up to RD$20 billion for businesses operating in tourism, construction, exports, and manufacturing. Loans under this facility would carry an interest rate of 8 percent and would receive the same regulatory treatment as all other facilities put in place so far.
As of December 1, of the RD$190 billion (about 4.0 percent of GDP) made available to financial intermediation entities to provide liquidity to economic agents, approximately RD$154.5 billion have been disbursed, providing financing to sectors such as commerce, manufacturing, exports, agriculture, construction, and tourism.
At the August 2020 monetary policy meeting, the BCRD lowered its monetary policy rate by 50 basis points to 3.00 percent and reduced its interest rate on the Repo standing facility by 100 basis points to 3.50 percent. The BCRD left unchanged the rate on the deposit standing facility, narrowing the corridor to a band of ± 50 basis points. The decision on the policy rate and corridor came despite a recent uptick in inflation, which reached 4.35 percent in July. Market consensus continued to point towards inflation remaining within the target range of 4.0 percent ± 1.0 percent. At the September and October meetings, the BCRD kept its policy rate unchanged.

Exchange rate and balance of payments

The BCRD has intervened in the foreign exchange markets to prevent disorderly market conditions and maintains a relatively strong international reserve position (about US$10.7 billion, or about 13.6 percent of GDP, as of January 5, 2021). In July, the BCRD announced that it would expand its operations with Non-Deliverable Forwards (NDFs) to offer hedging instruments for international investors in local bonds denominated in domestic currency.

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 January 7, 2021

Fiscal
Several ECCU members have announced fiscal measures.

Anguilla.On April 15, the Premier announced several measures, including (i) unemployment assistance and direct financial support, (ii) waiving of duties and taxes on essential food and hygiene item imports, (iii) a fund to grant small low interest loans, and (iv) waiving all interest and penalties on debt obligations (excluding arrears) and social security payments by employers. On April 16, the UK government announced an emergency grant of US$1.5 million to fund the COVID-19 response. The government removed all regulations restricting movement and gatherings, effective April 29. Furthermore, details are still being worked on whereby the UK government will provide extra budgetary assistance of EC$100 million – the first time since 1983 when aid to Anguilla was discontinued.
Antigua and Barbuda. On March 26, 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 the 2020 budget; and (v) expansion of social safety net programs. In June, a further 5 percent reduction in electricity bills was introduced, applicable through September. Since May 15, the government has begun a gradual phased approach to easing containment measures and reopening the economy. Most businesses including personal services have been allowed to operate, and access to churches and beaches has been granted, following specific health protocols. The government reopened the borders on June 1. All passengers arriving by air must provide a negative COVID-19 test result, taken within seven days of their flight. Further screening, testing, monitoring and other protective measures, both for visitors and returning nationals, are in place. Several regional and international air carriers (from the US and the UK) resumed operations to the island in July and August. Air Canada has resumed flights in December. The state of emergency has been extended to March 31, 2021 and the curfew window remains at 11pm-5am daily. As of end-November, 37 out of 42 hotels and resorts have resumed operations. Tourist arrivals have been slower than anticipated, and the average occupancy rate fell to5.4 percent compared 69.4 percent tin 2019.
Dominica. On May 17, the Prime Minister announced the following measures: (i) extension of the deadline for filing of personal and corporate income tax returns; (ii) extension of three months for payment of corporate income tax; (iii) Waiving penalties for businesses that enter into payment plans within 6 months of the new payment deadline; (iv) reduction in the corporate income tax rate (from 25 percent to 17 percent) to companies which commit to continue to employ at least 80 percent of their staffing as of January 1, 2020, for a period of 12 months; (v) reduction to zero percent in the import duty and the value-added tax charged on disinfectants, cleaning supplies, protective gears and face masks; (vi) increased budgetary funding to the Ministries of Health and Agriculture; (vii) cash grants to approximately 2,500 individual crop farmers, based on the size of the farmers holding; (viii) implementation of multiple infrastructure projects with expenditure of up to US$100 million, with total additional investments in construction expected to amount to at least US$296.8 million; (ix) pay to small contractors and merchants with amounts owed by the Government of EC$100,000 and less, utilizing the resources approved by the IMF under the Rapid Credit Facility (RCF); and (x) income support for the period April-June 2020 for heads of families and single persons who are currently unemployed. Phase one of reopening of borders began on July 15, allowing nationals to return home. The government announced that all travelers, including non-nationals, will be allowed to travel to Dominica from August 7, 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 from July 1, 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. In early July, it was announced that measures of fiscal support of hotel workers would be extended for another 3-month period as the closure of the borders continued to impact economic activity. In parallel, the COVID-19 regulations were further eased, lifting the curfew and granting 24-hour access to beaches. There however remain restrictions on the maximum number of people gathering (20, excluding funerals and weddings where the cap is 50). The regulations continue to require each person to wear a mask/covering in public and distancing of at least 6 feet. It was announced that from July 15 the airport would accept commercial flights from the Caribbean region, from August 1 from medium-risk countries and regions (Canada, UK, and the EU). Only chartered flights would be accommodated from all other countries. On December 13, a cluster of COVID cases related to the Sandals resort in Grenada was detected. On December 17, it more than doubled the total number of cases in the country, from 41 to 85. In response to the development, on December 21, the government declared a state of emergency, imposed a partial lockdown (which limited all gatherings to 10 people, required businesses to close by 10 p.m., and limited restaurants and bars to takeout only, etc.). It also conducted mass COVID-screening, reviewed safety protocols, and in late December, decided to delay the reopening of the school term (which should otherwise start from Jan 4, 2021). The incidence highlights challenges to re-opening the tourism sector. On December 20, in the wake of reports about the recent discovery of a new strain of COVID-19, the government banned all flights to Grenada from the United Kingdom. On January 4, the country recorded its first COVID-related death.
Montserrat. On April 1, the government announced a broad set of fiscal and financial measures, including (i) increasing the tax threshold, and a deferral of business-related taxes; (ii) providing financial support to vulnerable tourism sector employees; (iii) providing EC$900 (US$333) per month in benefit support to unemployed persons; (iv) providing additional food packages and food delivery to low income groups; and (v) providing financial support to the agricultural sector. On April 8, the government announced that it would receive an additional US$3.1 million in financial aid from the UK government to fund its COVID-19 measures. The premier issued a new order on May 6 regarding the phased reopening of the economy, by expanding the list of businesses that are permitted to operate, including mechanics, landscapers, fisheries and hardware stores. Effective on May 22, the government further eased lockdown measures, including the opening of retail stores and lifting construction restrictions. On May 29, the government announced a one-off grant of EC$10,000 as an assistance package to small and micro businesses impacted by the pandemic to cover business overheads. Restrictions were further eased on June 15 when the government permitted the reopening of bars and restaurants to dine-in customers. On July 1, the curfew was lifted, and businesses were permitted to operate as per their normal schedule with sanitization and distancing measures in place.
St. Kitts and Nevis. On March 22 and March 26, the Prime Minister announced an increase in the health budget (½ percent of GDP). He also announced a slew of fiscal stimulus measures (3¾ percent of GDP), including (i) an injection of funds to SMEs and the agriculture sector; (ii) waiving of customs duties for essential hygiene and health products imports; (iii) additional support for poverty alleviation program; (iv) a reduction of the corporate income tax rate from 33 percent to 25 percent, and of the Unincorporated Business Tax rate from 4 percent to 2 percent, for three months; (v) funding for mortgage loans to citizens of St. Kitts and Nevis; and (vi) a moratorium on payments for electricity services for affected businesses and individuals for three months. On July 23, the Premier of Nevis announced tax exemptions for new constructions projects as a stimulus measure. Since May 23 and about a month after the last new case of COVID-19 was reported, the government ended its 24-hour curfew after gradually reducing the number of days in which it applied. Curfews have been shortened to 12pm to 5am. Beaches, churches, and bars have been reopened. Physical distancing of at least 6 feet applies to all persons that are not members of the small household. Borders remain closed.
St. Lucia. On April 8, the government announced the Social Stabilization Plan and a public health response (3 percent of GDP), including temporary income support, suspension of rental fees to enterprises renting from government and a fuel rebate to bus drivers. On July 12, the government announced an Economic Recovery and Resilience Plan (11.5 percent of GDP), including an electricity assistance program (effective over a period of 6 months, from October 2020 to March 2021), an expansion of the public assistance and provision of grants and loans to enterprises.
St. Vincent and the Grenadines. On April 7, the government approved a fiscal package (3.6 percent of GDP) in response to the pandemic crisis. The main measures include: (i) increased health spending, (ii) waiving of VAT and duties on health and hygiene products, (iii) relief to the hardest-hit sectors (i.e. tourism, transport, and agriculture), (ii) expansion of social safety net programs, and (iv) deferred payment of personal income taxes and various license fees. Effective October 14, the country started the Phase 4 of its reopening protocols. All travelers (except those from Barbados) must arrive with a negative COVID-19 test. Also, visitors from high and medium risk countries have to comply with a mandatory quarantine (2-5 days depending on the risk profile of source countries.)

Monetary and macro-financial

On March 19, the Monetary Council of the Eastern Caribbean Central Bank (ECCB) approved grant funding to the ECCB Member Governments, totaling EC$4 million (EC$500,000 each), to help in their fight against the COVID-19. On March 20, the ECCB and ECCU Bankers Association announced a support program for customers and residents during this time of difficulty and uncertainty. The program includes: (i) a loan repayment moratorium for an initial period up to 6 months, with a possible extension upon review; (ii) waiver of late fees and charges to eligible customers during this period; and (iii) targeted supervisory flexibility. On March 27, the ECCB decided to increase credit line limits for governments (by reducing those for banks), and on April 3, it reduced its discount rate from 6.5 percent to 2 percent. On September 24, the ECCB and ECCU Bankers Association announced that (i) banks would consider extending the loan repayment moratorium up to a maximum period of 12 months, in their sole decision; (ii) the loan repayment moratorium would be based on an assessment of the financial condition of customers; and (iii) a waiver of late fees and charges would be applicable to eligible customers during this period.

Exchange rate and balance of payments

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Ecuador
Background. As of January 6, 2021 Ecuador has reported 217,377 confirmed cases and 14,146 deaths. The Government responded with series of measures to protect the population and support the economy. These include closing schools and universities, public spaces and non-critical commercial activities, halting public transport, and imposing curfew. Ecuador shut all its borders on March 18th. On March 22nd, the Government requested the joint commandment of the armed forces to manage the province of Guayas as a zone of national security, with the objective to enforce confinement measures, in the province concentrating the largest share (70 percent) of confirmed cases in the country.
Reopening of the economy. The National Emergency Operations Committee (COE) defined new parameters for the reopening and the mayor of Quito announced a move to lower confinement requirements starting June 3.
In Quito, starting June 3: – Productive activities will be reactivated "as long as they respect biosafety protocols" in person with 50% of the staff. – The reopening of commercial premises may operate with 30% of customer capacity. – The curfew will apply from 18:00 to 05:00 (instead of 14:00 to 05:00). – Public transportation will resume in a gradual and controlled way to avoid crowds. – The telework modality will continue in force for public officials. – The Municipality of Quito has the power to manage and issue the safe-conducts. – A request will be presented so that – in coordination with the Ministry of Health – the Municipality of Quito assumes the management of the epidemiological fence of the city.
In the rest of the country, “yellow confinement level” means: – The curfew will apply from 21:00 to 5:00 (instead of 14:00 to 05:00). – Private vehicles -including motorcycles- even and odd can circulate from Monday to Saturday. – Circulation of taxis and mixed transport even and odd every day. – Public transportation will circulate without restriction of plates. – Urban transportation will circulate with 50% capacity. – Authorized inter-parish transportation. – Interprovincial transport between cantons of neighboring provinces. – Restaurants and cafes will work with 30% capacity. – The prioritization of the working day in telework mode is maintained. – Companies are obliged to expand a biosafety protocol, considering the guidelines established in the Guide and General Plan for the progressive return to work activities. The approval by the national, provincial or cantonal COE will not be required. – After the request of the cantonal COE in Quito, the presential working day of the public sector will remain suspended until June 15.
In the rest of the country, “green confinement level” means: – Curfew from 00:00 to 05:00. 70% of private vehicles will be able to circulate. – Taxis and mixed transport may circulate. Public transportation circulates without restriction of plate. – Urban transportation will work 50% of its capacity, or all sitting. – Inter-cantonal transport may operate between cantons with the same traffic light color. – Interprovincial transportation prohibited at the national level. Restaurants may open with 50% capacity. – The prioritization of the working day in telework mode is maintained.
The government adopted containment measures, closing public spaces, imposing a curfew, and closing its borders since March 18th through September 13th while the State of Emergency was in effect. Over those six months, decisions on pandemic control were concentrated in the Emergency Operations Committee (COE). On December 21, President Moreno announced a new 30-day state of emergency and two weeks of night curfew to prevent new outbreaks during the holiday season and in response to the new UK strain of the virus. The new restrictions limit the time of traveling by car, and reduce capacity at shopping centers restaurants and hotels.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

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Egypt, Arab Republic of
Background. According to the WHO, the first case of COVID-19 was reported on February 14, 2020. The pandemic is likely to impact the Egyptian economy primarily due to declining travel and tourist activity, reduced worker remittances, capital outflows, and slowdown in domestic activities as people are asked to stay home. The weaker demand in the global market will also reduce Egypt's exports as well as earnings from the Suez Canal. The authorities have taken a host of precautionary measures to improve testing as well as to limit the community spread of the virus, including setting up testing centers, imposing a nighttime curfew, temporarily closing places of worship, temporarily halting all air travel, and encouraging civil servants to work from home in non-essential sectors. Authorities also suspended the export of all types of legumes for a period of 3 months – which has been extended further for 3 more months in June 2020, and they plan to start increasing strategic food reserves to meet domestic demand. Egypt have resumed the export of medical supplies, after a temporary halt in March 2020. Around 77,000 Egyptians have been repatriated since the start of the pandemic. The central bank and the government are actively implementing measures to contain economic implications of the pandemic.
Reopening of the economy. According to a Cabinet statement on April 30, 2020, the government had started to draw up plans to ‘coexist’ with COVID-19 in the long term. Since the last week of April 2020, shopping malls and retail outlets had been allowed to open on weekends until 5 pm, while restaurant customers had been allowed to place takeaway orders in-store. Starting May 4, 2020, hotels were allowed to operate at 25 percent capacity until June 2020, and at 50 percent capacity, thereafter. Egypt’s Health Ministry has published a 3-stage plan for coronavirus management that contains required procedures in preparation for the gradual return of normal life in the country. Starting June 1, 2020, nighttime curfew was one hour shorter – from 8pm to 5am instead of 6am. Starting July 2020, a gradual re-opening of the economy – air travel will resumed, restaurants and cafes opened with 25 percent capacity, stores will close at 9 pm while restaurants and cafes will close at 10 pm, beaches will remain closed until further notice, public transportation will operate between 4 am and midnight., All parks and specialized gardens around Cairo will open to the public starting on August 26, 2020, with a maximum capacity of 50 percent. Starting September 21, funeral prayers and wedding ceremonies held in open-air venues have been allowed, for a maximum limit of 300 people. Guidance on risk mitigation measures remains in place, including social distancing and mask wearing. International flights have resumed, and tourists are arriving in small numbers.

Key Policy Responses as of January 7, 2021

Fiscal

The government has announced stimulus policies in the USD 6.13 billion package (EGP 100 billion, 1.8 percent of GDP) to mitigate the economic impact of COVID-19. Pensions have been increased by 14 percent. Expansion of the targeted cash transfer social programs, Takaful and Karama, are also being extended to reach more families. A targeted support initiative for irregular workers in most severely hit sectors has been announced, which will entail EGP 500 in monthly grants for 3 months to close to 1.6 million beneficiaries. A consumer spending initiative of close to EGP 10 billion has been launched to offer citizens two-year, low-interest loans to pay for consumer goods discounted by up to 10-25 percent and provide ration card subsidies. A new guarantee fund of EGP 2 billion has been formed to guarantee mortgages and consumer loans made by banks and consumer finance companies. To support the healthcare sector, EGP 5 billion has been allocated, targeted at providing urgent and necessary medical supplies, and disbursing bonuses for medical staff working in quarantine hospitals and labs. To support medical professionals, including doctors working in university hospitals, a 75 percent allowance over the wages has been announced. Energy costs have been lowered for the entire industrial sector; real estate tax relief has been provided for industrial and tourism sectors; and subsidy pay-out for exporters has been stepped up, discount on fuel price has been announced for the aviation sector As part of the EGP 100 billion stimulus, EGP 50 billion has been announced for the tourism sector, which contributes close to 12 percent of Egypt’s GDP, 10 percent of employment, and almost 4 percent of GDP in terms of receipts, as of 2019. The moratorium on the tax law on agricultural land has been extended for 2 years. The stamp duty on transactions and tax on dividends have been reduced. Capital gains tax has been postponed until further notice. A Corona tax of 1 percent on all public and private sector salaries and 0.5 percent on state pensions have been imposed, the proceeds of which are earmarked for sectors and SMEs most affected by the pandemic.

Monetary and macro-financial

The central bank reduced the policy rate by 300bps in response to the pandemic and has since then reduced the policy rate by 100 bps. The preferential interest rate has been reduced from 10 percent to 8 percent on loans to tourism, industry, agriculture and construction sectors, as well as for housing for low-income and middle-class families. A housing initiative has been announced to provide low cost financing for housing units. A new lending initiative with soft loans at zero-to-low interest rates from banks is aimed at replacing old cars with natural gas-powered vehicles. A government guarantee of EGP 3 billion on low-interest loans by the central bank has been announce for the tourism industry soft loans. The central bank has also approved an EGP 100 billion guarantee to cover lending at preferential rates to the manufacturing, agriculture and contracting loans. Loans with a two-year grace period will be made available to aviation sector firms. Support has been announced for small projects harmed by COVID-19, especially in the industrial and labor-intensive sectors, through the availability of short-term loans of up to a year, to secure the necessary liquidity for operational expenses until the crisis is over. The limit for electronic payments via mobile phones has been raised to EGP 30,000/day and EGP 100,000/month for individuals, and to EGP 40,000/day and EGP 200,000/per week for corporations. Microlenders have been advised by the Financial Regulatory Authority to consider delays on a case-by-case basis, of up to 50 percent of the value of monthly installments for struggling clients, and the regulations issued last year requiring banks to obtain detailed information of borrowers have been relaxed. An initiative that suspends credit score blacklists for irregular clients and waives court cases for defaulted customers under certain conditions, has been extended for customers in the tourism sector. The central bank launched an EGP 20 billion stock-purchase program which it has minimally used. The central bank has also extended a previously existing tourism lending initiative as well as a retail loan initiative for workers in the tourism sector until end of 2021.

Exchange rate and balance of payments

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

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El Salvador
Background. El Salvador has reported 26,773 positive cases (777 deaths, 17,433 recovered) as of September 11, 2020. The government has implemented a range of measures to contain the spread of the virus, including travel restrictions, closure of schools, universities and the non-essential public sector, social distancing, and closure of restaurants. It has also transformed a convention center into a hospital specialized in the treatment of COVID-19 patients. On March 21, 2020, the government issued a nationwide stay-at-home order and closed all non-essential businesses. 2020Q1 y/y growth is 0.8 percent.
Reopening of the economy. On June 2, the government allowed hardware stores and maintenance firms to re-open. The construction sector was granted permission to re-open for works related to the damage from a tropical storm. The government began the gradual reopening of the economy on June 16. The economy will reopen in five phases, each lasting 21 days. About 50 percent of the economy is open during phase 1. On July 19, President Bukele postponed indefinitely the move to phase 2 of reopening, which previously was scheduled for July 5 and moved to July 21. Economy reopened on August 24, following the Supreme Court’s decision rejecting the executive decree on phases of reopening.

Key Policy Responses as of September 24, 2020

Fiscal

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

Monetary and macro-financial

Key measures include: (i) lowering banks’ reserve requirements by 25 percent for newly issued loans; (ii) reducing banks’ statutory reserve requirements for various liabilities by about 12 percent of deposits (to about 10 percent); (iii) amending provisioning for NPLs through freezing credit ratings; (iv) imposing a temporary moratorium on credit risk ratings; (v) temporarily relaxing lending conditions through a grace period for loan repayments; and (vi) establishing a US$650 million trust fund to be operated by the development bank BANDESAL to provide support to workers and SMEs.

Exchange rate and balance of payments

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Equatorial Guinea
Background.The first confirmed COVID-19 case was reported on March 14, 2020 and the government was proactive in implementing substantial preventive measures at an early stage. As of mid-June and early August, preventive measures had been loosened to a large extent, lifting the stay-at-home order and closing of the airspace and allowing businesses to reopen though some with capacity restrictions. However, in mid-December, due to an uptick in local contagion, the authorities reintroduced preventive measures that are currently in effect until January 15, 2021. These measures include limiting the number of international flights, requiring foreign visitors to present a negative PCR test and to quarantine for 5 days upon arrival in Equatorial Guinea, prohibiting the arrival of passengers coming from the UK after the discovery of a new variant of the virus in that region, requiring local travelers between the continental and insular regions to present a negative PCR test, and restricting social gatherings for the holiday season. Other measures include limiting the number of passengers on ferry boats to 50 percent capacity and enforcing the use of face masks and social distancing. The government also canceled all licenses of pubs and nightclubs on January 4.

Key Policy Responses as of January 5, 2021

Fiscal

Fiscal policy is facing large two shocks: the Coronavirus and lower oil prices.
In 2020,the government approved various measures to address the crisis. A broad emergency health spending package (1.0 percent of GDP), aims to improve hospital preparedness to respond to local transmission. It also deepens investments focused on the first response system, quarantine facilities for incoming travelers, and laboratory facilities/testing which had already been operationalized in early March. Furthermore, a social assistance scheme (0.3 percent of GDP) has been approved and initiated for the most vulnerable and will be expanded gradually to cover approximately 15 percent of the population. Other spending measures were also taken, mainly to ensure continuity of education (0.4 percent of GDP); schools have also resumed in early September with class sizes cut in half and therefore longer school days. On the revenue side, the authorities are providing some targeted and temporary support to the private sector (estimated cost of 0.3 percent of GDP). Measures include halving withholding tax rates and delaying tax payment deadlines for small and medium-sized firms, while safeguarding public revenues, and reducing electricity bills for firms affected by the Covid crisis, with a focus on SMEs, and for households. In addition, in light of the recent oil price decline, Equatorial Guinea is facing a large fiscal revenue shock, given that hydrocarbons accounted for more than ¾ of fiscal revenues. To address this shock, the government is contemplating to mobilize more financing. The government has also been postponing execution of non-priority capital expenditures, identifying savings to non-wage current expenditures, urging public enterprises to cut personnel and costs as well as continuing implementation of plans to strengthen the tax administration.

Monetary and macro-financial

On March 27, 2020, BEAC announced a set of monetary easing measures including a decrease of the policy rate by 25 bps to 3.25 percent, a decrease of the Marginal Lending Facility rate by 100 bps to 5 percent, a suspension of absorption operations, an increase of liquidity provision from FCFA 240 to 500 billion, and a widening of the range of private instruments accepted as collateral for refinancing operations. The BEAC also reduced haircuts applicable to private instruments accepted as collateral for refinancing operations until end-2020, which it extended by 6 months from January 1, 2021 at its December 21, 2020 MPC meeting. Further, at its July 22, 2020, extraordinary Monetary Policy Committee (MPC) meeting the BEAC announced a new program of government securities purchases for the next 6 months, which it extended by another 6 months starting on March 1, 2021 at its December 21, 2020 MPC meeting. The purchase program is meant as a safety net, to ensure full cover of government securities issuances, while being consistent with BEAC Charter which prohibits direct monetary financing. The program is based on revised securities issuance plans for each country, consistent with the latest revised budget laws and the budget financing frameworks agreed under the IMF programs. The BEAC also decided to resume liquidity injections with longer maturity, of up to one year.
On March 25, 2020, the COBAC informed banks that they can use their capital conservation buffers of 2.5 percent to absorb pandemic-related losses but requested banks to adopt a restrictive policy with regard to dividend distribution. In July 2020, the COBAC prevented all banks from distributing any dividend for the years 2020 and 2021. The COBAC also put in place ad-hoc reporting to closely monitor financial stability developments following the COVID-19 crisis.

Exchange rate and balance of payments

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Eritrea
Background. The State of Eritrea reported its first positive COVID-19 case to the World Health Organization (WHO) on March 21, 2020, and since then, the cases have been increasing. The government imposed a 21-day national lockdown effective from April 2, which was extended on April 22, with restrictions being eased incrementally. However, as the pandemic has been spreading in all the regions including in some rural areas, the government issued new Guidelines to implement vigorous and stringent measures, effective on December 22, 2020.
Under the new Guidelines, movement of all citizens is restricted except in cases of indispensable developmental, service and security tasks. Travel from one village/city to another village/city in the country is banned. The use of private cars and other individual means of transport (excluding trucks) is not allowed without permits. Trade services which are related to the daily livelihood of people may operate but close at 8:00 pm every evening, while all other trading services are closed. Major productive and service sectors (manufacturing, agriculture, food processing, construction, etc.) continue their functions while all government institutions stop routine services and functions to focus on indispensable developmental and security tasks. Any individual who violates these Guidelines will be punished.
The Guidelines will be assessed periodically and relaxed depending on the trajectory and threat of the COVID-19 pandemic.
Reopening of the economy. On June 28, the government published the guidelines on partial reopening of schools aiming to reopen all schools by end of July, 2020.
Restrictions have been eased incrementally in the past months.

Fiscal

Monetary and macro-financial

Exchange rate and balance of payments

Links
21-day national lockdown

Guidelines on partial reopening of schools

New Guidelines effective on December 22, 2020

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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. In recent weeks, the continued deterioration of the epidemiological situation as a result of a second wave of COVID-19 infections, has prompted the authorities to reintroduce travel restrictions, and a series of containment measures. GDP dropped by 1.9 percent in Q3, following a record-low drop of 6.9 percent in Q2.
Reopening of the economy and additional containment measures. The Government is rolling out the exit strategy approved on April 27, 2020. After being in place for 68 days, the emergency situation ended on May 18. Shopping centers and restaurants reopened on May 11; ferry links between Tallinn and the Finnish capital, Helsinki partly reopened for work-related traffic on May 14; schools reopened on May 15 with most of the learning remaining online; Baltic states now allow travel among the three nations but travelers from outside the region need to undergo 14-day quarantine. However, children’s playrooms, casinos, slot machine halls and entertainment facilities including bowling alleys, billiard halls and adult clubs will remain closed. Gyms and swimming pools restarted operations on May 18. From June 1, Estonia reopened its borders to travelers from the EU and EEA nations without having to undergo a 14-day quarantine period. Bars and restaurants are now permitted to remain open and sell alcoholic beverages after 10 PM. Public events of up to 100 participants are now permissible with a maximum of 50 percent audience/space occupancy. Estonia has started to test digital immunity passports, seeking a safer return to workplaces following the coronavirus lockdown. Government has changed the requirement to adhere to the 2+2 rule to a recommendation. Government has decided to ease restrictions on spectator capacity at public events, from 500 to 1,500 persons for indoors and from 1000 to 2000 for outdoors, starting from July 15. The restrictions on indoor events, however, are strengthened again in September 29 from 1,500 to 750 persons in an effort to mitigate the second wave. Until August 31, it is forbidden to open direct air services from Estonia to high-risk countries experiencing 25 cases or more per 100,000 inhabitants in the past 14 days. The travel restrictions are regularly updated on the government website
. In view of a potential new wave of coronavirus, Estonia is building a stock of personal protective equipment to cover the needs for a whole month and the university of Tartu developed a monitoring system based on sewage analysis to discover potential second wave of COVID-19 as soon as possible.
The 14-day cumulative infections per 100,000 inhabitants continued to increase in recent weeks, reaching 582 cases on January 6, compared to only 75 cases in early November. The average proportion of positive tests in the last 14 days stood at 13.4 cases. The highest number of daily cases (1104 cases) was recorded on January 6, 2021. On the same day, there were 433 COVID-19 patients being treated in hospitals (of which 30 people in intensive care) and the COVID -19 deaths stood at 265 people. Harju driven by Tallinn, Ida-Viru and Tartu counties remained the most affected.
Recognizing the substantial deterioration of the situation, the government tightened restrictions by: (i) making mandatory mask-wearing in public indoor spaces and extending the 2+2 rule (effective November 24); and (ii) limiting the maximum number of participants in public events (effective November 28). As of November 16, the period of mandatory self-quarantine for 10 days is lifted for arrivals from the EU/EEA area if that country has a 14-day reported coronavirus rate lower than 50 per 100,000 inhabitants. Additional restrictions were imposed in Harju and Ida-Viru Counties, which are the epicenter of the coronavirus epidemic (e.g., 10 people limit for hobby and education and activities; dispersed seating model for rooms with stationary seating). Restrictions also came with penalties, as the state can now fine noncompliance up to €9,600.
On December 3, the Prime Minister announced a further tightening of containment measures to be effective as of December 5. Under the new restrictions, entertainment and public events venues with no fixed seating, and catering outlets must close at 10 p.m. – instead of midnight – and must remain closed until 6 a.m. Shops, public spaces and service halls must apply the 2+2 rule and limit the number of people inside to 50 percent of capacity. On December 10, the Government further tightened restrictions at the national level and for Ida-Viru county specifically. At the national level, restrictions now allow only contactless indoor activities, while outdoor sports are allowed in groups smaller than 10. In Ida-Viru County, lockdown measures initially set to be effective from December 12, to January 3, 2021.
The Government introduced further restrictions on December 23 to contain the continued rapid spread of the virus. Restrictions consisted of lockdown measures, mostly targeting Harju county, while further extending restrictions in Ida-Viru County. Lockdown measures in force in Harju and Ida-Viru counties—effective from December 28, 2020 to January 17, 2021— include: (i) closing entertainment venues, sports facilities, museums and exhibitions; (ii) prohibiting public meetings and events, including conferences, theatre performances, concerts, and indoor cinema viewings; (iii) limiting outdoors public events and meetings to less than 10 people; and (iv) restricting sales and catering companies to food takeaway or delivery. At the national level, the maximum attendance to religious services was set at 50 percent of capacity from December 24. Estonia has ordered over 600,000 doses of the Pfizer/BioNTech vaccine to be received in weekly batches of 9,750 doses, the first of which was received on December 26. In line with the government strategy approved on December 15, the first to be vaccinated are priority groups healthcare professionals and people older than 70 with preexisting conditions. As of January 4, about 3188 people had been vaccinated with the first dose. The government is taking measure to speed up the distribution of vaccines, while negotiations for acquiring additional doses are underway at the European Union level.

Key Policy Responses as of January 8, 2021

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

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Eswatini
Background. Eswatini reported its first COVID-19 case on March 14, 2020 and cases have been rising rapidly since then. In response, on March 17, the government declared a national state of emergency, and implemented containment measures, including suspension of private and public gatherings of 20 people or more, schools closures, suspension of non-essential travel within cities for all citizens, closure of borders to all but goods, cargo, returning citizens, and legal residents, and mandatory self-isolation for residents/citizens coming from abroad. On March 27, a partial lockdown went into effect, and a month later the Manzini region, where a third of the population resides, went into full lockdown. The authorities in collaboration with the WHO have built domestic detection capacity. Economic activity has been affected by the closure of some ports of entry with South Africa and weak demand, registering a preliminary contraction of 8.2 percent in 2020Q2. While the exchange rate against the US$ depreciated by 28 percent in the first quarter of 2020, it has appreciated by 6 percent cumulatively in the second and third quarters. On July 29, the IMF Executive Board approved US$110.4 million in emergency financial assistance under the Rapid Financing Instrument to support authorities' efforts in addressing the severe impact of the COVID-19 pandemic. On November 19, the World Bank has approved a US$40 million loan to support the economic recovery in the country.
Reopening of the economy. Since May 8, the government has begun the process of carefully easing the partial lockdown by allowing some businesses to operate. The national emergency was further extended until November 19. Schools have reopened since July 6 in the completing classes, while other class levels will remain closed until January 2021, and the government issued new guidelines allowing for religious and social gatherings under strict conditions. More businesses including casinos, gyms, cinemas, and public transportation have been allowed to operate under established WHO and health guidelines since July 13. On September 30, the government lifted restrictions on international travel and issued a new travel advisory, requiring that international travelers present a negative COVID-19 certificate taken within 72 hours and discouraging non-essential travel. Essential travelers, such as daily commuters (i.e., scholars, teachers, truck drivers) who have been making cross border travel during the travel restriction period will continue to follow existing protocols. Selected arts and medium-risk sports activities, such as chess, gymnastics, swimming, and top-level football have reopened since October 12. The ban on the production and sale of alcohol was lifted on October 26 and sale is restricted to home use and restaurant consumption with meals only. Eswatini has joined the COVAX Facility aimed at ensuring global access to viable COVID-19 vaccines as a co-financing country and is also pursuing self-procurement. The government has budgeted E200 million to procure vaccines for Eswatini's entire population. Vaccinations are expected to begin in Q1 2021. Due to rapidly increasing COVID-19 infections in mid-December, the government implemented stricter restrictions on travel and gatherings during the period December 18, 2020 – January 6, 2021. In response to the increased number of cases around Mbabane, the government conducted a door-to-door screening and testing exercise in the city and residential areas.

Key Policy Responses as of January 6, 2021

Fiscal

In FY19/20 (ending March 31, 2020), a supplementary budget was approved for additional public healthcare of E100 million (0.14 percent of GDP). In addition, the authorities have put in place a response package in FY20/21 of E1 billion (1.5 percent of GDP) to increase healthcare capacity, ramp up food distribution and social protection transfers, and improve access to water and sanitation facilities for the most vulnerable. Food assistance has been provided, benefiting over 360,000 people. Low priority recurrent spending will be redirected to the fight against the pandemic and a portion of the capital budget will be reallocated towards refurbishing hospitals and completing new hospitals. The government has set up a revolving fund of E45 million (0.07 percent of GDP) to assist SMEs, which is currently near finalization in Parliament, and a E25 million (0.04 percent of GDP) relief fund to aid laid off workers, E12.8 million of which has been disbursed to laid off workers thus far. Revenue measures to mitigate the impact of the virus include: (i) taxpayers projecting losses will file loss provisional returns and no payment will be required; (ii) extension of returns filing deadlines by 3 months before penalties kick-in; (iii) payment arrangements for taxpayers facing cash flow problems; (iv) waiver of penalties and interest for older tax debts if principal is cleared by the end of September 2020; and (v) up to E90 million (0.13 percent of GDP) in tax refunds for SMEs that have complied with tax obligations, retain employees, and continue to pay them during this period. The authorities have reduced the price of fuel twice and postponed the planned increase in water and electricity prices. The government is also subsidizing the cost of required COVID-19 tests for informal cross-border traders, many of whom are women whose livelihoods depend on this trading activity. For more information see http://www.gov.sz/.

Monetary and macro-financial

The Central Bank of Eswatini has: (i) reduced the discount rate by a cumulative 275 basis points to 3.75 percent and kept it unchanged during its meeting in September; (ii) reduced the reserve requirement to 5 percent (from 6 percent); (iii) reduced the liquidity requirement to 20 percent (from 25) for commercial banks and to 18 percent (from 22) for the development bank; (iv) encouraged greater use of electronic payments; and (v) encouraged banks to consider loan restructuring and repayment holidays. The authorities have also began enhancing their liquidity management framework and tools, and on July 15, issued a notice outlining new facilities and changes to existing ones. Banks have announced that those individuals and companies that need short term financial support or relief can approach them and each application will be assessed on a risk-based approach. For more information see https://www.centralbank.org.sz/

Exchange rate and balance of payments

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Ethiopia
Background. The first confirmed case was reported on March 14, 2020. Despite a slow rate of initial community transmission, the recent pace of confirmed infections has accelerated, with a peak of 1829 daily new cases reached on August 21, 2020. Authorities closed land borders, closed schools, ordered the shuttering of nightclubs and entertainment outlets, announced social distancing measures, and called in retired and in-training medical personnel. In addition, all people entering Ethiopia from another country are required to have a negative COVID test 120 hours prior to entering the country and are subject to a mandatory 7-day quarantine at designated hotels at the traveler’s expense. The authorities postponed the elections due to the pandemic from August 29, 2020 to the recently announced date of June 5, 2021. On April 8, the Prime Minister declared a state of emergency under Article 93 of the constitution, which allowed it to impose more stringent measures. Among them, most states have banned inter-regional public transport and public gatherings, although the international border with Djibouti remains fully open to transport of commercial goods. Layoffs by private employers have also been forbidden. The state of emergency expired in early September, and some restrictions on travel and sports events have since been lifted.
Ethiopia is highly exposed to the shock through the large contribution of air transportation to exports: the national carrier, Ethiopian Airlines, which has the largest fleet in Africa, originally announced the suspension of 80 flight routes, but resumed flights to 40 destinations on July 13. The latest information shows that the airlines is operating flights to 116 international destinations and 23 domestic destinations. During July-November 2020, flower exports have declined likely due to lower demand from Europe (main destination) and closure of airports on the continent. Finally, Ethiopia benefits from improved terms of trade that arises not only from lower global oil prices, but also from the prices on its main export commodities such as coffee, oil seeds and flowers. The potential risk for COVID-19 transmission is high due to the large number of internally displaced persons living in collective sites with no options to implement the recommended norms of social distance, and no access to proper sanitation facilities and essential supplies. The dire health situation and the capacity challenges of the health system are exacerbated by other public health challenges such as cholera and measles outbreaks. According to projections of National Disaster Risk Management Committee, an estimated 30 million people could experience food consumption gaps. The urban poor are likely to be highly affected. In rural communities, food insecurity will worsen among households that rely on market purchases. COVID-19 prevention measures in some regions will likely contribute to delays in movement of commercial goods (and humanitarian goods) in the country, resulting in localized food insecurity due to shortages of food items or price increases. Finally, the humanitarian community is concerned about the ongoing deportation of Ethiopian migrants from Saudi Arabia, Djibouti, Kenya and Somalia, considering the risk of COVID-19 contagion into Ethiopia, and challenges related to their reception and assistance in quarantine centers.
Growth in FY 2019/20, while below trend, surprised on the upside as the two largest sectors -agriculture and construction – shrugged off the impact of the pandemic. Growth for FY 2020/21 is expected to be 4 percentage points lower than the pre-crisis baseline.
Reopening of the economy. Ethiopian Airlines has started to resume flights to about half of previously suspended destinations in July. On October 20, the government announced that around 30 percent of schools would be reopened, though schools in Addis Ababa, where the bulk of cases have been reported, will remain closed.

Key Policy Responses as of January 8, 2021

Fiscal

Ethiopia initially announced a Br 300 million package to bolster healthcare spending in early March. On March 23, the Prime Minister announced the aid package would be increased to Br 5 billion (US$154 million or 0.15 percent of GDP) but details on the precise modalities of the assistance were not made available. On April 3, the Prime Minister’s office announced a COVID-19 Multi-Sectoral Preparedness and Response Plan, with prospective costing of interventions of US$1.64 billion (about 1.6 percent of GDP). The funds were expected to be allocated as follows: (i) $635 million (0.6 percent of GDP) for emergency food distribution to 15 million individuals vulnerable to food insecurity and not currently covered by the rural and urban PSNPs; (ii) $430 million (0.4 percent of GDP) for health sector response under a worst-case scenario of community spread with over 100,000 COVID-19 cases of infection in the country, primarily in urban areas; (iii) $282 million (0.3 percent of GDP) for provision of emergency shelter and non-food items; (iv)The remainder ($293 million, 0.3 percent of GDP) would be allocated to agricultural sector support, nutrition, the protection of vulnerable groups, additional education outlays, logistics, refugees support and site management support. Implementation of measures, which began in late-2019/20, have continued in the current fiscal year. The government plans to temporarily expand the Urban PSNP in early FY2020/21 to cover 500,000 new beneficiaries for three months at a cost of US$88 million.
On April 30, the Council of Ministers approved another set of economic measures to support firms and employment. These include forgiveness of all tax debt prior to 2014/2015, a tax amnesty on interest and penalties for tax debt pertaining to 2015/2016-2018/2019, and exemption from personal income tax withholding for 4 months for firms who keep paying employee salaries despite not being able to operate due to COVID-19.
On June 25, the Prime Minister’s Office released a statement detailing measures intended to support FDI in the country through the crisis and recovery, including: (i) operational facilitation of logistics in export and import process (such as free railway transport of manufacturing goods between Ethiopia and Djibouti); (ii) removal of taxes from the import of raw materials for the production of COVID-19 essential goods, and lifting of the minimum price set by the NBE for horticulture exports.
A broader set of measures including further support to enterprises and job protection in urban areas and industrial parks is under discussion with the donor community but has not been formalized. The Urban Productive Safety Net Programme is expected to expand to 16 additional cities in FY2020/21, 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

Exchange rate and balance of payments

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European Union/Euro Area
Background. Since the first reported cases on January 24, 2020, COVID-19 has spread across the European Union (EU) with a severe impact. The first wave, which peaked in April 2020, resulted in a surge of infections and deaths in some euro area countries. Cases and mortality subsided during the summer months, partly thanks to the unprecedented containment measures. In the euro area and the EU, respectively, real GDP
(q/q) contracted in the second quarter of 2020 by 11.7 and 11.3 percent before rebounding strongly in the third quarter by 12.5 and 11.5 percent, driven largely by household consumption. Most European countries have taken several containment measures ranging from lockdowns and travel restrictions to school closures and bans on large gatherings, which had eased with a steady decline in cases during the summer. However, as countries reopened in the fall, infection rates picked up again. New daily cases in the last quarter of 2020 far exceeded the first wave’s peak and lead to renewed local and nationwide lockdowns. Mortality rates—albeit increasing—has so far remained below the levels seen in April. On December 2, the European Commission adopted a strategy for managing the pandemic over the winter months, recommending continued vigilance and caution until safe and effective vaccines become available in early 2021. The European Commission, acting on behalf of all EU countries, has signed six advance purchase agreements with major vaccine producers, for a total of 1.5 billion vaccine doses, with options to expand the total supply to 2 billion. Member states have agreed to abstain from negotiating with vaccine manufacturers with whom the EU has already reached agreements.
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. 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.

Key Policy Responses as of January 8, 2021

Fiscal

On December 11, EU leaders finalize the agreement on the EU budget and Next Generation EU (NGEU) recovery fund on December 11. The Next Generation EU (NGEU) recovery fund 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 Council and European Parliament now need to take steps to adopt the relevant legislation, including the OwnResources Decision, which must also be ratified by member states' parliaments.
The European Commission’s latest package
of about €540 billion (4 percent of EU27 GDP) includes (i) allowing the European Stability Mechanism (ESM) to provide Pandemic Crisis Support (based on existing precautionary credit lines) up to 2 percent of 2019 GDP for each euro area country (up to €240 billion in total) to finance health related spending; (ii) providing €25 billion in government guarantees to the European Investment Bank (EIB) to support up to €200 billion to finance to companies, with a focus on SMEs (which augments previously agreed guarantees of €40 billion for the EIB’s on-lending activities); and (iii) creating a temporary loan-based instrument (SURE) of up to €100 billion to protect workers and jobs, supported by guarantees from EU Member States. The Pandemic Crisis Support from the ESM has become operational and the European Council has adopted the SURE.
Key measures from the EU Budget (about €37 billion and 0.3 percent of 2019 EU27 GDP) include (i) establishing the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Investment Initiative Plus (CRII+) in the EU budget to support public investment for hospitals, SMEs, labor markets, and stressed regions; (ii) extending the scope of the EU Solidarity Fund to include a public health crisis, with a view of mobilizing it if needed for the hardest-hit EU Member States (up to €800 million is available in 2020); (iii) redirecting €1 billion from the EU Budget as a guarantee to the European Investment Fund to incentivize banks to provide liquidity to SMEs and midcaps; (iv) announcing credit holidays to crisis-affected debtors; and (v) adopting a proposal for a €3 billion macro-financial assistance (MFA) package to ten enlargement and neighborhood partners to help them limit the economic fallout of the coronavirus pandemic. The European Commission proposed modifications
to its 2020 budget to make €11.5 billion for crisis repair and recovery available already this year. The European Commission also activated the general escape clause in the EU fiscal rules, which suspends the fiscal adjustment requirements for countries that are not at their medium-term objective and allows them to run deficits in excess of 3 percent of GDP. After announcing a flexible interpretation of EU State Aid rules to support national support measures for critical sectors, the European Commission has further directed Member States to apply Article 107(2)(b) TFEU, which enables them to compensate companies for the damage directly caused by exceptional occurrences, such as COVID-19, including measures in sectors such as aviation and tourism. To date, national liquidity measures, including schemes approved by the European Commission under temporary flexible EU State Aid rules amounted to €3 trillion.

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

Monetary and macro-financial

At the onset of the pandemic the ECB decided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020 under the existing program (APP), and (ii) temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) between June 2020 and June 2021, with interest rates that can go as low as 50 bp below the average deposit facility rate. The ECB introduced a new liquidity facility (PELTRO), which consists of a series of non-targeted Pandemic Emergency Longer-Term Refinancing Operations carried out with an interest rate that is 25bp below the average MRO rate prevailing over the life of the operation. The PELTROs commenced in May will mature in a staggered sequence between July and September 2021.The ECB also introduced an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP), initially through end-2020. On June 4, the ECB announced further measures including an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs). The ECB also announced a broad package of collateral easing measures
for Eurosytem credit operations in early April. 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.
On December 10, the ECB Governing Council extended the duration and scale of several monetary policy instruments, reflecting a weaker inflation outlook. The recalibration of the ECB's instruments included: (i) increase in the Pandemic Emergency Purchase Program (PEPP) by €500 billion to €1,850 billion and extension of its duration by nine months to at least the end of March 2022 (from June 2021), (ii) modification of targeted longer-term refinancing operations (TLTRO-III) terms, including by extending the period over which banks can secure favorable terms through June 2022, increasing the borrowing limits, and announcing three additional operations to be conducted between June and December 2021, (iii)extension of theApril 2020 collateral easing measures to June 2022, (iv) announcing four additional pandemic emergency longer-term refinancing operations (PELTROs) in 2021 to act as a liquidity backstop.

The ECB Banking Supervisionallowed significant institutions
to operate temporarily below the Pillar 2 Guidance (P2G), the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical capital buffer (CCyB) by the national macroprudential authorities will enhance its capital relief measures. In addition, the ECB Banking Supervision allowed banks under direct supervision (i.e., the largest banks) to exclude cash holdings and central bank reserves from the calculation of their leverage ratio
until end-June 2021. The leverage ratio is currently not a prudential requirement for banks but will become mandatory next year. If further decided
to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans (NPLs) that are covered by public guarantees and COVID-19 related public moratoria; it also recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions and opt for the IFRS9 transitional rules. The ECB Banking Supervision also provided some temporary capital relief for market risk
by adjusting the prudential floor to banks’ current minimum capital requirement.
On December 15, the ECB Banking Supervision relaxed its recommendation that banks suspend dividend payments and share buybacks. Nine months after the ECB had asked banks to cease all dividends and share buybacks to conserve €30 billion of capital in March, the region's strongest banks can now resume dividend payments until September 30, 2021, within strict limits if their capital buffers are sufficient to absorb expected loan losses.
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.
On September 21, the European Banking Authority (EBA) announced
that its temporary guidance
(April) emphasizing flexible provisioning for loans that have been granted debt repayment relief would lapse after end-September. Banks have been asked to reinstate their steady-state risk management and asset valuation processes. On December 2, EBA reactivated
its guidelines until March 31, 2021 to ensure that loans, which had previously not benefitted from moratoria, can now also benefit from them. The guidelines were amended and include two safeguards, a 9-month eligibility limit on loans and the requirement for banks to submit plans that help avoid these exposures from becoming impaired.
On November 30, the Eurogroup agreed to proceed with the ESM reform and introduced a common backstop for the SRF by early 2022, pending ratification of the amended ESM treaty by member state parliaments.
The European Commission published an action plan on non-performing loans (NPLs)on December 16, amid fears of rising NPLs due to COVID. In its plan, the Commission proposes for instance a systemic risk exception under its legal framework (BRRD) for COVID-19, which would enable member states to extent state aid to otherwise solvent banks and national asset management companies (AMC).
On December 17, the European Securities and Markets Authority set guidelines for mitigating leverage risks of hedge funds. The agency published
common criteria for assessing leverage risk as well as the design, calibration and implementation of leverage limits.

Exchange rate and balance of payments

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Fiji
Background. The Fijian authorities have been highly effective in controlling the spread of COVID-19. The early imposition of travel restrictions limited imported infections. The authorities reacted to the first confirmed case (on March 19) with a broad set of measures, including massive screenings of the population, the closure of the international airport, restrictions on domestic travel and public gatherings, closures of schools and certain types of businesses (e.g. cinemas, gyms, etc.), a nationwide curfew and lockdowns of affected areas halted the spread of cases in the country. The repatriation of Fijian citizens since July led to a temporary resurgence of border cases that were quarantined in government-designated facilities and the last active COVID-19 patient was diagnosed and quarantined on October 30.
Reopening of the economy.. The authorities started relaxing containment and mitigation measures at the national level on April 26th. Phase 2 of Fiji's COVID-safe Economic Recovery Plan, announced on June 21, leads to the gradual easing of some restrictions (e.g. national curfew, limitations on public gatherings) and the reopening of schools and certain recreational facilities under strict conditions. The reopening of the economy under Phase 2 has been tied to the launch of Care FIJI, a contact-tracing mobile application. On Oct 15, the tourism ministry launched Care Fiji commitment program to promote tourism and to increase awareness among the visitors about pandemic related safety measures. It also removed mandatory 14 days quarantine requirements for visitors from COVID contained countries. Further, the Tourism Fiji announced First ever virtual Fijian Tourism Expo (FTE) on Nov 25, 2020 to promote tourism and business activities in the country. The Expo is aimed at bringing together potential investors from Australia, New Zealand and leading industrialists in Fiji.

Key Policy Responses as of December 17, 2020

Fiscal

The authorities have announced two major fiscal stimulus packages in response to the COVID-19 pandemic, one on March 26 and one on July 17. The first package entailed up to FJ$1 billion (8.7 percent of GDP) in supplemental expenditures on public health, lump sum payments through the Fiji National Provident Fund (FNPF), tax and tariff reductions, and loan repayment holidays (up to F$ 400 million of the total envelope) aim at protecting public health, supporting the economy and ensuring food security. The second fiscal package was announced as part of the FY2020-21 budget for the fiscal year beginning in August. The stimulus mainly consists of sizeable tax and tariff cuts. Fiscal and import excise duties on over 1,600 items are reduced or eliminated. Similarly, the budget includes cuts to the service turnover tax, environmental tax and departure tax. The budget also entails a total of F$100 million for unemployment assistance and a subsidy to Fiji Airways of F$60 million to incentivize first 150,000 tourists in new fiscal year.
The government has also implemented several additional measures in between the two stimulus packages, including an Agricultural Response Package to ensure food security was also announced. It includes the scaling up of the existing Home Gardening program and a new Farm Support Package which aims at boosting the production of short-term crops through seeds and materials distribution. The government also introduced several additional allocations amounting F$50.9 million for the development of sugar sector. More recently, the government expanded its unemployment assistance, guaranteed the debt of Fiji Airways and announced a concessional loans initiative for MSMEs impacted by COVID-19, approving loans of in the amount of F$ 23.5 million (as of Oct 12, 2020). The government’s initiatives aim to improve the investment ratio which has fallen to 12.8 percent against an average of 20 percent in the last three years. The authorities also announced a new hiring subsidy program under which the government will pay the minimum wage of F$ 2.68 per hour and the remainder will be paid by the employers.

Monetary and macro-financial

The Reserve Bank of Fiji reduced the overnight policy rate to 0.25 percent from 0.5 percent on March 18 to counter the economic impact of COVID-19. The RBF also: (i) expanded the SME Credit Guarantee Scheme to assist small entities, (ii) raised its Import Substitution and Export Finance Facility by FJ$100 million to provide credit to exporters, large scale commercial agricultural farmers, public transportation and renewable energy businesses at concessional rates, (iii) raised its Natural Disaster and Rehabilitation Facility to FJ$60 million (renaming it the Disaster Rehabilitation and Containment Facility) to provide concessional loans to commercial banks for them to on-lend to businesses affected by COVID-19, and (iv) purchased FJ$280 million of Government bonds in the first half of 2020 to help finance the Government deficit.

Exchange rate and balance of payments

Fiji’s currency is pegged to a basket of currencies amid limited capital mobility. The Fijian dollar depreciated by 9 percent against the U.S. dollar between January 1 and March 20, 2020, before gradually appreciating in the period from late March to early September, rising above its end-2019 level. The Reserve Bank of Fiji tightened exchange controls on April 3 and June 11 to ensure that adequate foreign reserves can be maintained. It reported foreign exchange reserves stood at F$2371.0 million (8.7 months of retained imports) as of August 31, 2020. The reserves increased on account of fresh loans from ADB and World Bank and grant by the European Union. The ADB has announced to provide US$ 2million to Fiji from its Asia Pacific Disaster Response Fund (APDRF) to respond to pandemic crisis in the country.
The Fijian Government and the United States signed Trade and Investment Framework Agreement (TIFA), first of its kind with the United States to promote trade and investment ties between the two countries.

Link

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

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Finland
Background. The first confirmed case was reported on January 29, 2020. The number and incidence of new coronavirus infections remains small nationally but there is a second wave of infections as the number and incidence of new cases areincreasing sharply.In response to the crisis, in addition to measures announced by the euro area, the Finnish government announced a package of fiscal, liquidity and regulatory measures which – combined with existing automatic stabilizers – would (if fully utilized) constitute an impulse of nearly 30 percent of GDP. On March 16, the government invoked the Emergency Powers Act, which was used to close borders, restrict domestic movements, and expand service obligations of essential personnel. In response, unemployment climbed to nearly 12 percent in March.
Reopening of the economy. Restrictions to and from the region of Helsinki were lifted on April 14. On May 4, the government announced a plan to lift broad restrictions in favor of more targeted containment measures, including: on May 14, resumption of primary and lower secondary school and cross-border movement of essential traffic; on June 1, reopening of restaurants and public facilities and limits on public gatherings increased from 10 to 50 people; on July 31, resumption of public events with more than 500 people. Effective June 16, the government repealed the use of powers under the Emergency Powers Act, declaring that the country is no longer in a state of emergency. Barring any significant setbacks, the restrictions on gatherings will be lifted altogether on October 1. On June 23, the government announced the lifting of internal border control and restrictions on traffic between Finland and countries with similar incidence of COVID-19 with a limit value of 8 new cases per 100,000 persons in the previous 14 days. As of July 13, travel between Finland and non-EU countries on the ‘green list’ approved by the Council of the European Union will be permitted subject to restrictions which depend on the incidence of COVID-19. On August 13, the government adopted resolutions on recommendations for wearing face coverings and face masks, and for remote work. On August 18, the government reinstated travel restrictions on traffic between Finland and several countries based on their 14-day incidence rates. This is in addition to entry restrictions for three countries introduced on August 6. The government adopted on September 11 a decision to continue internal border checks and restrictions on border traffic, which entered into force on September 19 and will continue through October 18. The government also adopted a resolution on a hybrid strategy for cross-border traffic and travel which requires a rapid increase in cross-border testing capacity and analysis by 10,000 tests/day. This would allow a more flexible approach to border restrictions. On September 24, the government reintroduced travel restrictions between Finland and several Schengen area countries. The government has imposed new restrictions starting October 8 on the opening and licensing hours of food and beverage service businesses. As of November 20, restrictions on the activities of food and beverage service businesses in five regions will continue due to their epidemiological conditions. On November 19, the government decided to extend till December 13 the entry restrictions into Finland due to the acceleration of the COVID-19 epidemic elsewhere. The government continues to recommend that Finnish citizens and residents avoid unnecessary travel to high-risk countries. On December 10, the Government adopted a resolution on Finland's COVID-19 vaccine strategy: Vaccination will be offered based on medical risk assessments with priority given to healthcare and social welfare workers caring for COVID-19 patients, homecare workers, elderly persons, and persons at high risk for severe disease due to underlying health conditions.Finland is participating in the European Union's joint vaccine procurement.

Key Policy Responses as of January 8, 2021

Fiscal

Key discretionary tax and spending measures(around 3 percent of GDP) include additional spending for (i): healthcare and testing, protection and medical equipment, public safety and border controls, and research on the coronavirus epidemic, in particular to develop methods for rapid diagnostics and vaccines and a knowledge base for timely decision-making on coronavirus measures, (especially on the exit strategy) (€3 billion); (ii) lower pension contributions through the remainder of 2020 (€1.05 billion); (iii) grants to SMEs and self-employed (over €1 billion); and (iv) expanded parental allowance, social assistance and unemployment insurance (€3 billion). In addition to discretionary measures, automatic stabilizers are expected to increase the fiscal deficit by about 4-5.0 percentage points of GDP. Deferral of tax and pension payments for 3 months are expected to provide additional short-run relief of 2 percent of GDP (€4.5 billion). Finland 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) and other state-owned companies. 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, €171 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 (€1.2 billion). The supplementary budget also includes relief in the form of adjusted VAT payment arrangements (€750 million). The temporary loosening of unemployment insurance benefit eligibility was extended until the end of 2020. On June 23, the government extended the duration until end-2020 of temporary amendments to the unemployment security act aimed at enhancing labor market security and flexibility. On July 9, the government adopted an amendment that allows Business Finland to grant temporary financing to companies with financial difficulties that ordinarily fail to meet eligibility requirements for support from the Decree on Funding for Research, Development, and Innovation Activities. On September 3, the government published a fifth supplementary budget proposal for 2020 which included €60 million to support the most vulnerable in society for which restrictive measure imposed due to the pandemic have generated additional costs. The proposal also included an increase of €1 billion in revenue estimates due to less than anticipated use of flexible tax-related payment arrangement introduced to support liquidity. On September 24, the government submitted to parliament a sixth supplementary budget proposal for 2020 which included €200 million to support the rapid increase in cross-border testing capacity and analysis as part of the hybrid strategy for cross-border traffic and travel. On October 29, the government submitted a seventh supplementary budget. This included EUR 750 million to municipalities for implementing the hybrid testing and tracing strategy and basic public services; the budget also included EUR 200 million to the country's hospital districts for pandemic-related costs and EUR 90 million for the acquisition of COVID-19 vaccines. On November 19, the government submitted a proposal to amend the 2021 budget to include among others EUR 350 million in capital funding for Finavia Corporation; EUR 56 million for unemployment security; and EUR 45 million to increase the health insurance reimbursements for COVID19 tests carried about by private healthcare providers.

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 €12 billion (and the government increased its coverage of the agency's credit and guarantee losses from 50 to 80 percent); (iv) the State Pension Fund will also invest in commercial paper (€1 billion); (v) a state guarantee for Finnair (€600 million); (vi) state guarantee for shipping companies (€600 million); and (vii) easier re-borrowing of pension contributions allowed; support restaurants in employing workers (€40 million) and compensation for the imposed restrictions on activities (€ 83 million). The fourth supplementary budget contains financial and liquidity measures including increased capitalization into the national climate fund (€300 million) and capital funding for state-owned enterprises (€770 million). On June 29, Finland's Financial Supervisory Authority relaxed to 90 percent the macroprudential limit on loan-to-collateral ratios for residential mortgages. On September 30, the Board of Finland's Financial Supervisory Authority decided not to extend the validity of the 15% risk weight floor on housing loans which is due to expire January 1, 2021.

Exchange rate and balance of payments

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France
Background. The coronavirus has significantly affected France. The first confirmed COVID-19 case was reported on January 24, 2020. After a steady decline since mid-April, infections are surging again, with daily new cases past the previous peak. Localized clusters with outbreaks are being continuously monitored. In mid-March the government introduced a range of measures to reduce the spread of COVID-19, including school closures, the ban of all non-essential activities, outings and long-distance travel, and the introduction of night-time curfews in some cities. The French economy contracted by 5.9 percent in Q1-2020, compared to the previous quarter, and by 13.8 percent in Q2-2020. Activity rebounded strongly in Q3-2020, with GDP growing by 18.7 percent.
Reopening of the economy and additional containment efforts. As of May 11, France started to ease the first round of containment measures, beginning with the reopening of primary schools, shops, and industry, on a differentiated regional basis. Most major domestic restrictions associated with the first lockdownwere lifted as of June 22 (including travel restrictions). The resurgence of infections at end-August prompted the government to first apply regional night curfews, and, eventually a second lockdown beginning October 30. Schools remained open but non-essential retail and services were ordered to close. Regional and international travel restrictions were also applied. A progressive lifting of the lockdown rules began at the end of the November with the opening of retail stores. As of mid-December, the lockdown was replaced by anight curfew. Bars and restaurants are set to open again only in late January. Covid vaccinations commenced on December 28 2020, with the government aiming to inoculate one million people by end-January 2020.

Key Policy Responses as of January 8, 2021

Fiscal

The authorities have introduced three amending budget laws between March and July increasing the fiscal envelope devoted to addressing the crisis to about €135 billion (nearly 6 percent of GDP, including liquidity measures). This adds to a package of public guarantees of €327 billion (close to 15 percent of GDP), including €315 billion in guarantees for bank loans and credit reinsurance schemes. Key fiscal support measures include (i) streamlining and boosting health insurance for the sick or their caregivers; (ii) increasing spending on health supplies; (iii) liquidity support through postponements of social security and tax payments for companies and accelerated refund of tax credits (e.g. CIT and VAT); (iv) support for wages of workers under the reduced-hour scheme; (v) direct financial support for affected microenterprises, liberal professions, and independent workers, as well as for low-income households; and (vi) postponement of rent and utility payments for affected microenterprises and SMEs; (viii) additional allocation for equity investments or nationalizations of companies in difficulty; (ix) facilitating granting of exceptional bonuses exempt from social security contributions; (x) extension of expiring unemployment benefits until the end of the lockdown and preservation of rights and benefits under the disability and active solidarity income schemes; and (xi) support measures for the hardest-hit sectors (e.g. including incentives to purchase greener vehicles and green investment support for the auto and aerospace sectors). Some support measures are being gradually phased out since June (e.g. by scaling down the generosity of the reduced-hour scheme), except for industries that still face opening restrictions (e.g. tourism, which will benefit from targeted exemptions from taxes and social security contributions, and extended support through the reduced-hour scheme and the solidarity fund until end-2020). On September 3, the government announced a new fiscal package to support the recovery of the French economy (“Plan de Relance”). The plan includes measures amounting to about 100 billion euros over two years and focuses on the ecological transformation of the economy, increasing the competitiveness of French firms, and supporting social and territorial cohesion. About 40 billion of this envelope is expected to be covered by grants from the EU Recovery Fund. In response to the reintroduction of lockdown measures, the authorities announced the extension of emergency support for firms and households (by about 0.9 percent of GDP) in the context of the fourth amending budget law. The 2021 budget voted in December incorporated the recovery plan and additional funding for emergency programs (e.g. solidarity fund and short-time work scheme) amid ongoing containment measures.

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

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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 April 27, some of these measures were relaxed, including the full lockdown in Libreville. A second reopening wave started on July 1 with the reopening of commercial flights twice per week per company from Libreville and a reduced night curfew from 8pm till 5am. Since mid-August commercial flights were further relaxed to three flights per company per week departing from Gabon. Public schools reopened on November 7, 2020. Public gatherings are still not approved. Travelers departing to the countryside from the two main cities (Libreville and Franceville) must show a negative Covid-19 test performed up to five days prior to departure. Since early September, the test for domestic trips can be performed up to 14 days prior to departure. Travelers flying abroad must take the test if the destination country requires it, whereas all passengers arriving in Libreville’s airport must show a negative test performed in the last five days. At arrival, they are once more tested by Gabonese authorities in the airport for posterior tracing. On October 10, a new round of relaxation of the preventive measures have been announced, allowing restaurants and religious centers to resume activity and shortening the night curfew from 10pm till 5am. Such gradual reopening of the economy has been based on a comprehensive-testing strategy with a capability of around 10,000 tests to be performed per day and with the equivalent of more than fifteen percent of the population tested, making the country one with the highest rates of testing per capita of sub-Saharan Africa. The Gabonese parliament has also launched at the end of the first semester a Parliamentary Inquire Committee to investigate the quality and transparency of the Covid-19 expenditures by the government. The Ministry of Health is currently preparing a national vaccination strategy against the disease.

Key Policy Responses as of January 7, 2021

Fiscal

The Amended Budget Law approved in end-June 2020 proposes the control of non-priority expenditure and redirects savings and development partners support of FCFA 73.9 billion (USD 138.1 million or 0.83 percent of GDP) to COVID-19 related spending. The government also plans to allocate additional FCFA 108 billion (USD 194.1 million or 1.2 percent of GDP) as an economic response, including through food stamps, electricity and water subsidies, direct support to SMEs and tax holidays. The Minister of Finance has created a fund available at their Caisse de Depots et Consignation (CDC) and designated a public accountant in order to facilitate disbursements of the health-related spending of that fund. An additional mechanism of around USD 375 million has further been announced to facilitate access to commercial banks financing for private (formal and informal) companies, including SMEs.

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

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The Gambia
Background. The Gambia registered its first COVID-19 case on March 17, involving a female Gambian returnee from the United Kingdom. The number of cases and the rate of infection increased, albeit at a slow rate, until mid-July. The President declared a state of public health emergency starting from March 27, including closing all non-essential public and private businesses, following an earlier order to close the airspace and land borders. Emergency powers were used to freeze prices of essential commodities such as rice, meat, fish, cooking oil soap, sanitizers, and cement. To enforce social distancing, all commercial vehicles were allowed to carry only up to half of their licensed number of passengers. All public gatherings, including funerals, were limited to a maximum of 10 people. Nevertheless, there was a surge in the number of confirmed COVID-19 cases by mid-July, mainly through community transmission involving many healthcare workers and high-level government officials. The surge strained the already fragile health system and stretched government’s ability to properly respond to the pandemic, especially in terms of testing and management of treatment centers.
The imposition and extension of the state of public health emergency have not been plain sailing. The National Assembly declined to approve a second 45-day extension of the state of public health emergency after the expiration of the first. However, based on the role played by the emergency measures in containing the spread of the disease, the President used executive powers to extend it by 21 days, effective May 19 (which is the maximum allowed under the Constitution, as the National Assembly was then not in session). Since the expiration of the extension, the President used executive powers again (on June 10, July 1, and July 7) to extend the state of public health emergency, mainly for 7 days, which is the maximum permissible period under the constitution, when the National Assembly is in session. Concerned by the extensions of the state of public health emergency without parliamentary approval, the Gambia Bar Association, and the National Assembly in particular, questioned the legitimacy of such extensions. The Attorney General and Minister of Justice presented a motion at the National Assembly around July 13 for a 45-day extension of the public health emergency laws, but it failed after majority of the lawmakers voted against it. The situation led the President to announce another 7-day extension of the public health emergency to July 22, 2020. At the same time, the presidency urged the public to observe strict social distancing, and imposed a mandatory wearing of facemasks in all public places, including inside taxis and other public transports, markets, and schools, while empowering the Minister of Health to take any restrictive measures required to contain the disease. With the mid-July surge in the number of new Covid-19 infections, the presidency announced another 21-day public emergency regulation, effective August 6, 2020. The regulation imposed a night-time curfew between the hours of 10 p.m. and 5 a.m. and re-introduced a ban on all public gatherings and closure of all non-essential businesses, educational institutions, and places of worship. A subsequent extension of the emergency regulation on August 27 eased some of the emergency restrictions, including the opening of places of worship, albeit under strict COVID-19 protocols. It also maintained the ban on public gatherings and the night-time curfew, which was relaxed subsequently on September 17 together with market restrictions. In anticipation of the re-opening of the tourism season in October, and in the bid to attract tourists, the authorities announced, on September 4, an amendment to their guidelines on COVID-19 prevention. They abolished the two-week mandatory quarantine for inbound travelers and required evidence of a negative COVID-19 test result of less than 72 hours from all passengers prior to departure to The Gambia. Those without the required certificate as well as those who are COVID-19 positive will be quarantined. Meanwhile, following the second wave of the surge in Covid-19 cases and the emergence of a new strain of the virus in America, Europe and parts of Africa, the authorities have amended their rules regarding visits to The Gambia. Effective January 9: (i) travelers coming from countries where the new strain of Covid-19 is identified will have to undergo testing for the Covid-19 virus upon arrival, in addition to the requirement to have a valid COVID-19 PCR test result of 72 hours; and (ii) these travelers will also have to undergo a mandatory quarantine at their own cost.
Tourism, a key driver of trade and foreign exchange inflows, has halted. Interest rates on T-bills increased and remained elevated but have eased recently on the back of a decline in inflation and measures taken by the Central Bank to support market liquidity. Remittances from official channels have remained exceptionally high so far, in part, due to a reduction in private transfers through informal channels (which have migrated to formal channels) and remittances by the Gambian diaspora in response to COVID-19. Meanwhile, a supplementary appropriation bill was approved by the National Assembly to accommodate spending on the health emergency and social support, and to facilitate the recovery through infrastructure spending and support to the tourism sector.
Reopening of the economy. A government announcement on Wednesday July 22 lifted the state of public health emergency and thus re-opened the economy, which first started with a gradual easing of emergency restrictions that helped a partial re-opening of businesses. Fuel prices were reduced to prevent transport price hikes and help ease the burden on commercial transport operators who were then required to carry 3/4 of their vehicle capacities. The authorities also eased restrictions, including the re-opening of markets up to 6 p.m., the re-opening of Mosques, Churches, and schools for Grades 9 and 12 students who were preparing for their sub-regional junior and senior secondary school leaving certificate exams. The government issued on October 6 a press release announcing the re-opening of all weekly markets dubbed ‘Lumos,’ which are very popular in the rural areas. It also announced a two-thronged resumption of face-to-face learning, which began with the re-opening of all Junior & Senior Secondary schools, and tertiary institutions on October 14; followed by a re-opening of kindergartens and primary schools on October 28. The authorities also announced on October 16, the immediate re-opening of the country’s borders, although the airport remained closed for renovation until it was reopened at end-October. They authorities also relaxed the restrictions on the night clubs and casinos, following an earlier decision to only allow the re-opening of hotels, bars, restaurants, and gymnasia.

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

Key Policy Responses as of January 7, 2021

Fiscal

In mid-March, the authorities prepared a US$ 9 million (0.5 percent of GDP) COVID-19 action plan, for which they had already obtained grant financing. The government reallocated GMD 500 million (0.6 percent of GDP) from the current budget to the Ministry of Health and other relevant public entities for containment measures to prevent and control the spread of the COVID-19 outbreak. The government also launched a student relief fund to support Gambian students abroad and a GMD 800 million (US$ 15.8 million) nation-wide food distribution program to benefit 84 percent of the households. In addition, 2,000 tons of fertilizer were distributed to support the needs of farmers. These actions benefitted from technical support from the country’s development partners, including WFP and FAO, and are subject to enhanced oversight by the National Assembly. The supplementary appropriation (SAP) approved by the National Assembly in July included GMD 2.3 billion in additional measures. The SAP included a GMD 737-million relief package to various sectors, including the municipal councils, public entities, the tourism sector, the media, and GMD 224.3 million in additional food assistance delivered through WFP. The SAP also provisioned for GMD 250 million in additional health spending and GMB 854.3 million for targeted public investment outlays to fill critical infrastructure gaps and support the economy. RCF and CCRT financing from the IMF (see below) helped to cover some of these costs.
The GMD 600 million 3-year T-bond issuance on December 7, which the Central Bank intends to reopen for GMD 50 million on December 23 with a yield of 9 percent has reduced banks’ appetite for short-term T-bills causing the interest rate to rise. Encouraged by the drop in headline inflation from 7.7 percent at end-2019 to 5.6 percent in April 2020, the Central Bank of The Gambia (CBG) during its monetary policy committee meeting of May 28, reduced the monetary policy rate by 2 percentage points to 10 percent, a cumulative 2.5 percentage points reduction since end-2019. The Bank also reduced the reserve requirement from 15 to 13 percent, thus, releasing close to GMD 700 million (US$ 14 million or 0.7 percent of GDP) liquidity to the banks. The CBG maintained the policy rate at 10 percent in its monetary policy committee sittings of August 26-27, and December 2-3, 2020. Meanwhile, the CBG had used GMD 855 million of its retained earnings from 2019 to increase its statutory capital and settle some of the central government’s liabilities to the Central Bank, thus providing additional fiscal space to the government. The CBG is also actively monitoring developments in the financial sector. It remains in close contact with the commercial banks and stands ready to respond to the situation as inflationary pressures warrant. Additional measures are available to provide emergency liquidity support if needed, together with increased intensity and frequency of supervision to address any financial stability concerns. As per end-September FSIs, non-preforming loans of banks edged up relative to end-2019 but capital adequacy and liquidity indicators remained strong. The CBG successfully completed a remote IMF 2020 safeguards assessment mission, which found good progress since the last assessment in 2018. The 2019 CBG audit is about to be completed with a clean audit opinion. The CBG has also prepared a strategic plan based on the 2019 FSSR recommendations, which it will implement along with the recommendations from the 2020 safeguards assessment.
The Gambia Revenue Authority extended, by two months that expired in end-May, the filing of the 2019 annual tax return and the payment of final 2019 tax, as well as the filing of the first quarter 2020 declaration and the payment of the first quarter installment. It has also revised down its annual revenue target by about 2.2 percent of GDP. However, the revenue performance thus far points to a much lower revenue loss than anticipated.

Monetary and financial

Domestic financial conditions tightened in early 2020 but have eased since late May. The average yield on the most utilized 364-day T-bills went above 11.5 percent in late May before declining on December 16 to around 8.51 percent, which is now above its end-2019 level of 7.5 percent and a-364 basis point increase compared to two weeks ago. The GMD 600 million 3-year T-bond issuance on December 7, which the Central Bank intends to reopen for GMD 50 million on December 23 with a yield of 9 percent has reduced banks' appetite for short-term T-bills causing the interest rate to rise. Encouraged by the drop in headline inflation from 7.7 percent at end-2019 to 5.6 percent in April 2020, the Central Bank of The Gambia (CBG) during its monetary policy committee meeting of May 28, reduced the monetary policy rate by 2 percentage points to 10 percent, a cumulative 2.5 percentage points reduction since end-2019. The Bank also reduced the reserve requirement from 15 to 13 percent, thus, releasing close to GMD 700 million (US$ 14 million or 0.7 percent of GDP) liquidity to the banks. The CBG maintained the policy rate at 10 percent in its monetary policy committee sittings of August 26-27, and December 2-3, 2020. Meanwhile, the CBG had used GMD 855 million of its retained earnings from 2019 to increase its statutory capital and settle some of the central government's liabilities to the Central Bank, thus providing additional fiscal space to the government. The CBG is also actively monitoring developments in the financial sector. It remains in close contact with the commercial banks and stands ready to respond to the situation as inflationary pressures warrant. Additional measures are available to provide emergency liquidity support if needed, together with increased intensity and frequency of supervision to address any financial stability concerns. As per end-September FSIs, non-preforming loans of banks edged up relative to end-2019 but capital adequacy and liquidity indicators remained strong. The CBG successfully completed a remote IMF 2020 safeguards assessment mission, which found good progress since the last assessment in 2018. The 2019 CBG audit is about to be completed with a clean audit opinion. The CBG has also prepared a strategic plan based on the 2019 FSSR recommendations, which it will implement along with the recommendations from the 2020 safeguards assessment.

Exchange rates and balance of payments

The CBG stepped up the monitoring of banks’ FX net open positions but has not imposed any specific exchange measures. It is committed to maintaining a flexible exchange rate regime to help absorb balance-of-payments (BOP) shocks.
On April 15, the Executive Board of the IMF approved a US$ 21.3 million for The Gambia under the Rapid Credit Facility (RCF), which was on-lent to the Treasury. The RCF support supplements earlier financing from the IMF under a 39-month US$ 47.1 million Extended Credit Facility (ECF) arrangement approved on March 23, 2020. To accommodate the worsened BOP outlook, the IMF also agreed to modify the performance criteria on net usable international reserves and net domestic assets of the CBG under the ECF-supported program. The Gambia has also benefited from debt relief under the catastrophe containment window of the Catastrophe Containment and Relief Trust (CCRT) approved on April 13, 2020, with an expected total relief of US$ 10.8 million, if resources are identified to extend the initiative for 24 months (US$ 5.9 million of the expected relief have already been approved). The already approved amounts were in two tranches. The first tranche of US$ 2.9 million (corresponding to debt service due to the Fund in the first six months covered by the initiative, April 14–October 13, 2020) has been already approved for delivery. The second six-month tranche (covering October 14, 2020-April 13, 2021) of US$3 million was approved on October 5, 2020. The Gambia is also seeking debt service deferral under the G20 debt service suspension initiative, which could provide between US$ 2.19 million (from the creditors that have already endorsed the initiative) and close to US$ 6.68 million, if The Gambia’s plurilateral and private creditors endorse the initiative.

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Georgia
Background. The second wave of the outbreak has been gaining pace since September 2020. The number of daily incidence of new cases exceeded 4000 for several weeks. The capacity of hospitals has been stretched. Thanks to the new set of the containment measures effective from late November, the number of active cases reduced significantly by the end December. Daily new cases declined to about 2300. As of January 4, 2021 Georgia has reported 6.6 thousand active positive cases, 222.7 thousand recovered and 2,646 deaths.
The following measures are effective countrywide starting from November 28: the extended curfew hours from 9 p.m. to 5 a.m. The exceptions are December 31 (New Year’s Eve) and January 6 (Christmas Eve). Intercity public transport service is restricted since November 28, including by rail, bus, and minibus. There are no restrictions on passenger cars and taxis. The restaurants all over Georgia may work only for the delivery services. Fitness centers, swimming pools, sports and arts activities, and study gatherings are all prohibited.
Stricter restrictions are applied in Tbilisi, Batumi, Kutaisi, Rustavi, Gori, Poti, Zugdidi, Telavi, and winter resorts (Gudauri, Bakuriani, Goderzi, Mestia). All public transport, metro and ski lifts are closed effective from November 28. All non-essential businesses were closed from November 28 to December 24. Only banks, agricultural markets, pharmacies, pet shops, beauty salons, and repair shops can operate. All street markets are banned. All kindergartens are closed. Education in all schools and high education institutions (except for the training of medical students) is conducted online. The hotels in winter resorts are only allowed to function as COVID quarantine centers. The shops were allowed to operate during December 24-January 2.
During January 3-15, 2021 there is an official public holiday, which means that none of the public organizations work, except for banks and strategic state service providers. All the containment measures effective during November 28 and December 24 are reinstituted.
From January 16 to January 30, public transport services will resume regular operations. Shops and businesses will reopen, but only during the weekdays. The curfew between 9 a.m. and 5 a.m. will be maintained until the end January 2020. Development of the pandemic curve will guide the government’s further decisions.
Georgia already lived through the state of emergency and lockdown from March 21, 2020 to May 22, 2020. International tourism has come to a standstill during the state of emergency as borders were closed; regular international flights have never resumed; however, the air companies operate a limited number of flights on an ad-hoc basis.
Reopening of the Economy. At the end of the first lockdown, the government effectively implemented its six-stage reopening plan, announced on April 24. Fast improving COVID19 statistics in May-June allowed the government to open the economy quicker than planned. Initially, the passenger cars, taxies, online trade, deliveries, and open air-markets became operational. Starting May 5, construction, production of construction materials, carwash, computer and equipment repair shops, parks opened. After May 11, all shops that have their own entrance from ground (other than malls, apparel and footwear shops) were opened; all kinds of production and publishing services were also operational. The beauty parlors and aesthetic medical centers also opened faster than initially planned (May 18). Tbilisi and other big cities opened for intercity travelers. The public transport, including the 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 one month earlier than initially planned). The sports halls and swimming pools resumed operations from July 7. Effective July 13, outdoor cultural events and indoor rehearsals were allowed. Domestic tourism opened on June 15. Public schools temporarily resumed in-house classes on the October 1, for the classes for grades 1 to 6. The theatres and cinemas, child entertainment centers have not been allowed to resume their operations at all. All these reopening measures were halted as of November 28, as discussed above.

Key Policy Responses as of January 5, 2021

Fiscal

The government introduced several fiscal support measures to mitigate the economic impact of the public health measures announced on November 28. According to the government, the total cost of these measures will be GEL1.1 billion (about 2 percent of GDP) according to the government. This figure consists of fiscal support measures to individuals with a total cost of GEL 545 million and measures to support businesses with a total cost of GEL 515 million.
The support measures to individuals consist of the following:
Utility subsidies for four months from November 2020 to February 2021 including coverage of gas and electricity utility bills for the households consuming up to 200 kw of electricity and up to 200 m3 natural gas monthly (1 million families; GEL 270 million).
Support for citizens who have lost their jobs during the pandemic: GEL 200 per person for six months starting January 2021 (125 thousand beneficiaries; GEL 150 million).
One-off compensation of 300 GEL to individuals employed in the outlets or facilities whose operation will be suspended (100 thousand beneficiaries; GEL 30 million).
100 lari per family member assistance to low-income families with the social score of 65-100 thousand for six months, starting from January 21 (220 thousand people; 72 thousand families will benefit; GEL 55 million).
Assistance to families with a social score above 100 thousand, who have kids aged 3 to 16 years: GEL 100 per month for six months starting from January 2021 (24 thousand families to benefit, GEL 15 million).
Assistance to people with disabilities: GEL 100 for six months (43 thousand beneficiaries, GEL 27 million).
Government will help negotiate postponement of bank payment payments to the employees of businesses closed during December-January due to the anti-pandemic measures.
Support measures to businesses consist of the following:
Income tax concession: during 6 months from December 2020 to May 2021: salaries up to 750 GEL will be fully exempt from income tax; for the wages below 1500 GEL per month, the first GEL 750 will be exempt from income tax (33 thousand companies will benefit; GEL 260 million).
Property tax concession: the tourism sector (hotels, restaurants, and properties involved in similar activities) will be exempt from property tax in 2021. (GEL 45 million).
Tax write-off for four months of deferred income tax payments from 2020: Deferred income tax payments in the tourism sector (hotels, restaurants, and properties involved in similar activities from before 1 December 2020 will be written off by the government. (GEL 20 million).
Interest subsidies for the bank loans of hotels will continue; additionally, interest subsidies will be provided for the bank loans of restaurants over six months. (3700 beneficiaries).
Microgrants to entrepreneurs (GEL 40 million).
Credit guarantee scheme to help businesses cope with the pandemic will continue in 2021 and help the private sector restructure existing loans and attract new loans.
Bank loan deferment for companies whose operations will be restricted in the December-January period.

Fiscal response to the 1st lock down. On June 24, 2020, the parliament approved an amendment to the state budget 2020 funding the relieve measures of the ‘Anti-Crisis Economic Action Plan’ of the Government that was announced on April 24. The supplemental budget increased fiscal deficit to 8.5 percent of GDP. The initiatives, with a total cost of GEL 3.4 billion were to cover higher healthcare spending and fiscal support to households and businesses that have been most impacted by the shock. The following measures were financed by the 2020 budget:

Support for citizens who have been employed but lost their jobs during the pandemic: GEL 200 per person for 6 months (GEL 450 million).
Income tax waiver for low-income citizens: during 6 months: (1) salaries up to 750 GEL will be fully exempt from income tax; for the salaries below 1500 GEL per month, the first GEL 750 will be exempt from income tax (GEL 250 million) will be forgone.
One-time assistance of GEL300 to the self-employed (GEL 75 million).
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).
Assistance to low-income families (with the social score of 65-100 thousand); assistance was given according to the number of people in the household for 6 months (GEL 48 million).
Assistance to the families with the social score above 100 thousand: GEL 100 for 6 months (GEL 13 million).
Assistance to the disabled and disabled children GEL 100 for 6 months (GEL 24 million).
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).
Government has to cover costs of organizing quarantine spaces; sponsoring flights that returned the citizens to Georgia Total cost: GEL 45 million.
Healthcare costs and virus spread prevention measures. Total cost: GEL 285 million.
Improvement of healthcare infrastructure to serve COVID patients. Total cost GEL 60 million.
Credit guarantee scheme to help businesses cope with the pandemic GEL 330 million.
Interest subsidy was issued to help the hotels meet their banking obligations and co-finance up to 80 per cent of the annual interest rate on loans issued to family-owned, small and medium-sized hotels. Total cost GEL- 70 million; This interest subsidy was initially designed for 3 months but was prolonged to 6 months. In addition, the government allows new application process (Sep-Oct 2020) for the interested hotels.
Touristic enterprises are exempt from profits tax- GEL 45 million (reflected in tax revenues).
Microgrants -GEL 20 million.
Support to construction sector/ purchase of houses for the refugees: Total cost: GEL 40 million.
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. The government will subsidize the price of grapes and sub-standard apples to help peasants in the regions.
Additional VAT refunds GEL 600 million; Accelerate VAT reimbursements and make reimbursements automatic; (reflected in tax revenues).
Lari deposits for commercial banks GEL 600 million (reflected in domestic debt and government deposit).
3m bank loan service holidays for individuals (initially available for March-May) were prolonged for 3 more months for those borrowers who asked for extension.
The custom clearance term for vehicles imported before 1 April 2020 was once extended to September 1, 2020 and then further to March 2021. This measure will benefit 24 thousand importers of cars but postpones GEL 30 million revenues for the state budget.
Pensions: Starting from January 2021, the rule of indexation of pensions will be introduced. According to this rule, the pensions will increase by at least the rate of inflation; for pensioners aged 70 and above: the pensions will increase in addition by 80% of the real economic growth rate. Regardless of the actual rates of inflation and economic growth, the pension increase will be at least GEL 20 for the pensioners below 70 and GEL 25 GEL for pensioners above age 70.
The government increased the list of villages that benefit from the provisions of the law on ‘Mountainous Regions’ by 59 villages. Total 272,000 people will benefit from this law. These are dwellers of high mountainous regions; as well as the villages adjacent to the occupied territories. The benefits introduced by this law include: subsidized electricity and heating to households; higher pensions; social transfers for the newborns; increased salaries for teachers and medical personnel; some tax allowances for businesses operating in those areas.
On August 6, the Prime Minister’s unveiled new new/modified measures to support the citizens of Georgia to cope with the pandemic. According to which:
The government provided GEL 200 one-time assistance to all children below 18, which benefited 855,000 families with a total cost of 0.4 percent of GDP or GEL 160 million. The government asked the banks to ensure that these sums reach the intended beneficiaries (i.e. children) so, that the banks do not offset the credit or belated liabilities of the parents, if such exist with these sums. The beneficiaries receive these grants before the start of the school year.
Tuition assistance to university students from vulnerable families (with the social score below 150 thousand), benefitting 33,000 individuals at a cost of 0.1 percent of GDP.
Additional social transfers to the self-employed who lost income, by relaxing eligibility criteria for a one-time cash transfer of GEL300, benefiting 80,000 individuals at a cost of 0.05 percent of GDP.
Extension of the electricity and gas subsidies from November 2020 until February 2021. So far, over 1 million households have benefitted from the subsidies, with the extension expected to cost 0.5 percent of GDP.

About 700 thousand people benefited from the government’s economic benefits package due to the first lockdown in 2020.
Monetary and macro-financial

The National Bank of Georgia (NBG) announced measures to support capital and liquidity in the banking sector. Banks have been asked to evaluate the quality of the loan portfolio; on-site inspections have been suspended; and a moratorium on fines was introduced where a breach emerged due to the crisis. The NBG reduced its policy rate cumulatively by 100 bps since April 2020 (by 50 bps on Apr 29; 25 bps on Jun 24, 2020; 25 bps on Aug 5). NBG kept the policy rate at 8 percent at the Sep 16; Oct 28 MPC and Dec 9 meetings. Next MPC meeting will be held on Feb 3rd, 2021 . The currency exchange booths and other payment service providers are fully operational since early June, after closing them for 2 months due to the pandemic. The second lockdown (November 28-January 30) will not restrict operation of the financial sector. To ease lari liquidity pressures, the NBG started FX swap lines with banks and microfinance institutions in mid-April. In addition, starting June 1 the NBG launched a new tool for liquidity management to support the financing of small and medium-sized businesses in Georgia, which consists of two components: the first is for commercial banks, which receive liquidity support from the NBG in exchange for mortgaging the loan portfolio; the second component is for micro-financing organizations. The depreciation in Georgian Lari accelerated along with the deteriorating epidemic situation and lari depreciated by 18.1 percent vis-à-vis the U.S. dollar since March 6th.

Exchange rate and balance of payments

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Germany
Background. Germany registered the first confirmed COVID-19 case on January 27, 2020. The government has responded with a range of measures to contain the spread of virus through border closures, closure of schools and non-essential businesses, social distancing requirements, enforcement of mask-wearing, and a ban on public gatherings. Following a steady decline since early-April, infections are again on the rise, with daily new cases gradually trending up since late July and now exceeding the previous peak. Mortality rates, although rising, remain low to date compared with peer countries.
Reopening of the economy. On April 20, smaller shops re-opened subject to social distancing requirements. Select grades in schools gradually re-opened on May 4, as did cultural and leisure venues. On May 6, the government announced further easing of containment measures extending to all shops, restaurants and sports facilities, with the exact timeline to be determined at state level. Re-opening is subject to an “emergency brake”, whereby an occurrence of more than 50 new infections per 100.000 inhabitants over 7 days will require state governments to reverse the re-opening and re-institute containment. Border controls to neighboring countries are being gradually lifted starting May 16. Quarantine requirement for travelers from EU-countries has been lifted in several states starting May 18. On May 26, federal and state governments agreed to ease restriction on public gatherings for up to 10 people or two separate households subject to minimum distancing and face mask requirement in public places. The travel warning to all EU countries, Schengen states, the UK and Northern Ireland, has been lifted on June 15 though some “high risk” destinations have been put under travel warning as infections resumed On June 16, the government launches a Corona Warning App that allows users to trace potential contact with COVID-infected individuals on a voluntary and anonymous basis. On July 1, the entry restriction for travelers from 11 non-EU countries is lifted (3 of which conditional on reciprocity).
In light of the rising number of new infections in Germany since the summer vacation season, a mandatory COVID-19 test requirement, in addition to 14 day quarantine, for people entering from around 130 “high risk” countries upon their arrival came in effect on August 8^th. Mass events remain banned until at least end-2020, and local governments have committed to tightening local containment measures where infections exceed the “emergency brake”. Non-essential travel from and to high-infection hot spots are discouraged. On October 14^thfederal and state governments agreed on common hot-spot strategy: whenever and wherever the threshold of 50 (new cases per 100K inhabitants over 7 days) is exceeded, local governments shall tighten mask-wearing mandates, limit public and private gatherings, and introduce curfews for restaurants and bars.
Against a rising second wave of infection, a nation-wide “lockdown light” was introduced for the month of November: Restaurants/bars, leisure/sports and personal services providers will be closed nationwide, though schools remain open. Private gatherings are limited to maximum 5 persons from two households. Non-essential travel is strictly discouraged, and hotels must not offer accommodation to tourists. These lockdown measures have now been extended until January 10.

Since December 16, the lockdown has been tightened in light of continued high infection rates and rising death rates. All non-essential shops are closed, as are schools and daycares, until at least January 10 2021. Some states have also introduced nightly curfews. On January 5th, the lockdowns have been further tightened and extended until end-January 2021.

Key Policy Responses as of January 7, 2021

Fiscal

To combat the COVID-19 crisis and subsequently support the recovery, the federal government adopted two supplementary budgets: €156 billion (4.9 percent of GDP) in March and €130 billion (4 percent of GDP) in June. The authorities plan to issue €218.5 billion in debt this year to finance the packages. Early measures include: (i) spending on healthcare equipment, hospital capacity and R&D (vaccine), (ii) expanded access to short-term work (“Kurzarbeit”) subsidy to preserve jobs and workers’ incomes, expanded childcare benefits for low-income parents and easier access to basic income support for the self-employed, (iii) €50 billion in grants to small business owners and self-employed persons severely affected by the COVID-19 outbreak in addition to interest-free tax deferrals until year-end and €2bn of venture capital funding for start-ups, (iv) temporarily expanded duration of unemployment insurance and parental leave benefits. The stimulus package in June comprises a temporary VAT reduction, income support for families, grants for hart-hit SME’s, financial support for local governments, expanded credit guarantees for exporters and export-financing banks, and subsidies/investment in green energy and digitalization. In August, the government extended the maximum duration of short-term work benefits from 12 to 24 months.
At the same time, through the newly created economic stabilization fund (WSF) and the public development bank KfW, the government is expanding the volume of available guarantees and access to public guarantees for firms of different sizes, credit insurers, and non-profit institutions, some eligible for up to 100 percent guarantees, increasing the total volume by at least €757 billion (24 percent of GDP). The WSF and KfW also include facilities for public equity injection into firms with strategic importance.
In addition to the federal government’s fiscal package, many local governments (Länder and municipalities) have announced own measures to support their economies, amounting to €141 billion in direct support and roughly €70bn in state-level loan guarantees.
Parallel to the renewed lockdown to combat the second wave of COVID infections, the government introduced additional fiscal measures and enhanced existing ones to support affected businesses, including revenue compensation (of up to 75 percent), as well as, public loan guarantees andbasic income provision.

Monetary and macro-financial

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

Exchange rate and balance of payments

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Ghana
Background. Ghana registered the first confirmed COVID-19 case on March 14, 2020. Starting March 16, the government adopted sweeping social distancing measures and travel restrictions to avert an outbreak, including (i) suspension of all public gatherings exceeding 25 people for four weeks; (ii) closure of all universities and schools until further notice; and (iii) mandatory 14-day self-quarantine for any Ghanaian resident who has been to a country with at least 200 confirmed cases of COVID-19, within the last 14 days. On March 23, Ghana closed all its borders to travelers. On March 30, a partial lockdown of major urban areas was implemented. As an oil exporter, Ghana is significantly affected by the volatility in oil prices.
Reopening of the economy. The partial lockdown was lifted on April 23 following expansion of treatment and isolation centers, enhanced testing and contact tracing capacity, increased capacity to produce sanitizers and medicines, and the severe impact of the lockdown on the most vulnerable. Phase One of the process of easing restrictions began on June 5. Provided social distancing restrictions were met, religious services for fewer than 100 congregants were allowed, and schools and universities re-opened so that older students could resume classes ahead of exams. Phase Two started on August 1, lifting restrictions on the number of congregants for religious services and opening tourist sites. However, beaches, pubs, cinemas and nightclubs remain closed. International flights resumed from September 1, subject to enhanced COVID-19 protocols. Land and sea borders continue closed for human traffic.

Key Policy Responses as of January 4, 2021

Fiscal

The government has so far committed a total of GHc 11.2 billion to face the pandemic and its social and economic consequences. The bulk of these funds (GHc 10.6 billion) is being used under the Coronavirus Alleviation Programme to support selected industries (e.g., pharmaceutical sector supplying COVID-19 drugs and equipment), support SMEs, finance guarantees and first-loss instruments, build or upgrade 100 district and regional hospitals, and address availability of test kits, pharmaceuticals, equipment, and bed capacity. Another GHc 600 million were used initially to support preparedness and response.
To compensate for larger spending related to the COVID-19 crisis, the government plans to cut spending in goods and services, transfers, and capital investment (also reflecting the lower absorption capacity due to the pandemic), for a total of at least GHc 1.1 billion (0.3 percent of GDP). In addition, the government has agreed with investors to postpone interest payment on non-marketable domestic bonds held by public institutions to fund the financial sector clean-up for about GHc 1.2 billion (0.3 percent of GDP). The government has also drawn US$218 million from the stabilization fund, and will borrow up to GHc 10 billion from the Bank of Ghana.

Monetary and macro-financial

The Monetary Policy Committee (MPC) cut the policy rate cut by 150 basis points to 14.5 percent on March 18, and announced several measures to mitigate the impact of the pandemic shock, including lowering the primary reserve requirement from 10 to 8 percent, lowering the capital conservation buffer from 3 to 1.5 percent, revising provisioning and classification rules for specific loan categories, and steps to facilitate and lower the cost of mobile payments. The committee also signaled it would continue to monitor the economic impact of COVID-19 and take additional measures if necessary.
At subsequent meetings, the MPC has kept the policy rate unchanged. A 10-year government bond with a face value of GHc 10 billion (2.6 percent of GDP) has been purchased by the Bank of Ghana.

Exchange rate and balance of payments

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Greece
Background. The first confirmed COVID-19 case was reported on February 26, 2020. The government adopted strict containment measures during the second quarter of 2020 to manage the initial wave of the pandemic, including: (i) a national lockdown that restricted all but essential movement and economic activity, (ii) school closures, (iii) domestic travel restrictions, (iv) travel bans on visitors from high-risk countries; and (v) quarantines for international visitors and Greek nationals returning from abroad.
Reopening of the economy and additional containment efforts. The government implemented a gradual re-opening, close to full normalization of economic activity (except for large public events), as of July 1st. However, as a result of rising cases, the government has announced a new national lockdown starting on November 7, with some essential businesses open.

Key Policy Responses as of December 3, 2020

Fiscal

The government has announced a fiscal package of measures totaling about 14 percent of GDP (€24 billion), including loan guarantees, financed from national and EU resources (some of the latter involves reprogrammed funds). Key measures include: (i) health spending for hiring of 3,300 doctors and nurses, procurement of medical supplies, and cash bonuses to health sector workers; (ii) temporary transfers to vulnerable individuals, including cash stipends and full coverage of pension and health benefit payments for employees working in hard hit firms and for self-employed professionals, extension of unemployment benefits, support for short-term employment, subsidies to households with delinquent loans tied to their primary residency and paid leave for parents who have children not going to school; (iii) liquidity support to hard hit businesses through loan guarantees, interest payment subsidies, refundable advance payment, rent reductions, and deferred payments of taxes and social security contributions; and (iv) VAT rate reductions for critical products needed for COVID protection, research spending and transportation and hospitality sectors. On November 5, the government extended selected support measures in parallel to the imposition of new movement restrictions.

Monetary and macro-financial

While Greece is not eligible to additional asset purchases of €120 billion until end-2020 under the existing APP from the ECB, Greece is eligible for other ECB monetary support measures, including temporary additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) from June 2020 through June 2021. Greece is also eligible for the new liquidity facility (PELTRO), which consists of a series of non-targeted Pandemic Emergency Longer-Term Refinancing Operations carried out with an interest rate that is 25bp below the average MRO rate prevailing over the life of the operation.Further measures by the ECB for which Greece is eligible include an additional €1.350 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until at least June-2021 and the corresponding maturing principal payments will be reinvested until at least end-2022. In addition, Greece is eligible for an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs).
The ECB Banking Supervision is allowing significant institutions to operate temporarily below the Pillar 2 Guidance, the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition,new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical buffer by the national macroprudential authorities will enhance its capital relief measures. The ECB Banking Supervision entity, the Single Supervisory Mechanism (SSM) further decided to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans(NPLs) that are covered by public guarantees and COVID-19 related public moratoria; and recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions. Furthermore, the ECB recommends that banks opt for the IFRS9 transitional rules.

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

Exchange rate and balance of payments

For additional information, visit the Greek Government Website: https://government.gov.gr/
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Guatemala
Background. As of January 7th, Guatemala has reported 140,202 confirmed cases and 4,899 fatalities of COVID-19. In March, the government declared a State of Calamity, which was extended six times, providing the legal framework to implement several provisions to counter the effects of the pandemic. In late September, the government withdrew the State of Calamity and announced a recovery plan to support the re-opening of the economy. As of October, a full-fledge reopening has been in order whereby all commercial and other activities can operate with some restrictions on physical distancing partly affecting their capacity.
The GTM government, a member of the COVAX facility, has prepaid about one seventh of the total cost purchase for 6.74 million doses of vaccines and since a double dose is required, it will vaccinate 3.37 million people, about one fifth of the population. Covax has recently closed negotiations with AstraZeneca, Johnson & Johnson and Sanofi. In addition, the government has been engaged in bilateral negotiations with two pharmaceuticals, AstraSeneca and Moderna, seeking to cover its entire adult population.. The vaccine will be applied first to doctors, nurses, firefighters, police and soldiers. Pregnant women and children under the age of 18 will not be able to receive the vaccine.

Key Policy Responses as of January 7th, 2021

Fiscal

For COVID-19 prevention and mitigation, Congress approved in 2020 three fiscal packages, totaling around 3.4 percent of last year’s GDP. This fiscal stimulus was financed mainly by IFIs loans and the issuance of treasury bonds. The fiscal response has been focused on two programs: i) stepping up healthcare resources (0.2% of GDP) and ii) providing support to different sectors in the economy through cash transfers (1.2% of GDP), salary subsidies (0.3% of GDP) and funding to SMEs (0.6% of GDP). As part of the National Emergency and Economic Recovery Plan, additional targeted measures were enacted: i) streamlining tax refunds to exporters, ii) deferring income tax payments and social security contributions (one quarter), iii) waiving taxes on medical supplies, iv) increasing the coverage and amount of electricity subsidies, and v) fostering low income housing.

Monetary and macro-financial

Banco de Guatemala lowered its policy rate by 75 basis points to 2 percent in March. To support further the financial sector, the Monetary Board eased through year-end credit regulations to facilitate loan restructuring for borrowers facing temporary liquidity constraints, due to the impact of the pandemic. In June, the Monetary Board cut its policy rate by an additional 25 basis points to 1.75 percent, in response to the detrimental impact on domestic growth from weaker global conditions than initially foreseen.
Upon Congress’ special authorization, Banco de Guatemala purchased GTM Treasury Bonds for GTQ 10.6 billion (about USD 1.5 billion, 96.8 per cent of the total bond issuance authorized by Congress). The government has been using the proceeds to finance programs for the COVID-19 emergency.
Through September, the financial system was performing relatively well: more than enough liquidity and reasonable profitability, however, because of the temporary regulatory forbearance, non-performing loans have remained stable at below 3 percent throughout the pandemic period but bank reserves have kept increasing, perhaps, as an anticipation that the stock of non-performing loans might be higher than currently estimated. The SIB have requested additional information to borrowers, which, hopefully, will help to have a better assessment of the risks involved.

Exchange rate and balance of payments

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Guinea
Background. Guinea reported its first COVID-19 case on March 12, 2020. Since then, the contagion has spread rapidly. The authorities have adopted several measures to reduce the risk of contagion. Notably, large public gatherings have been banned, the international airport has been closed to non-essential flights, and public areas (markets, religious facilities) are required to have hand sanitizing equipment. All schools have been closed. Other measures included closure of land borders, suspension of public events, religious, and leisure facilities; limiting public transport; and a nationwide night curfew. Guinean embassies and consulates have suspended visa issuance to travelers from countries with more than 30 confirmed cases. On March 26, Guinea declared a state of emergency and tightened lockdown. Since then, the state of emergency has been renewed every thirty days with the latest extension announced on September 15. Starting April 18, wearing a face mask is mandatory in public places.
Reopening of the economy. On May 15, Guinea extended the containment measures but started easing the lockdown restrictions. The authorities lifted the curfew in the rest of the country and relaxed the limit on mass gatherings from 20 to 30 people. The curfew remains in force in the greater region of Conakry but is shortened from 10pm – 5am to 11pm – 5am.
On May 25, Guinea updated its travel advisory, requiring all travelers to provide proof of a COVID-19 test result and upon arrival, to undergo another test and a mandatory 14-day quarantine. In addition, foreign nationals must undergo a 14-day quarantine prior to their travel.
On June 15, Guinea announced further measures to ease lockdown restrictions. Since June 22, worship places in prefectures without new cases for 30 consecutive days were able to resume services. Universities and school-classes preparing for official examination reopened on June 29. To support the reopening, schools, universities and public markets are subject to regular disinfecting. Sanitary kits are distributed to schools, universities and places of worship.
On July 15, Guinea further relaxed the curfew in Conakry and nearby areas to midnight to 4am. International commercial flights resumed gradually starting July 17.
On September 22, the Guinean authorities lifted the capacity restriction on public transportation, announced the reopening of bars, restaurants and motels, and the resumption of cultural and social activities. Mask wearing and social distancing measures remain in effect.

Key Policy Responses as of January 7, 2021

Fiscal

A National Emergency Preparedness and Response Plan for a COVID-19 outbreak was prepared, with the support of international development partners. Key measures focus on strengthening surveillance at ports of entry; reinforcing capacity for COVID-19 detection; increasing the number of quarantine centers; expanding treatment facilities and acquiring needed medical equipment; and conducting a communication campaign. The implementation cost of the National Emergency Plan is estimated at US$47 million (0.3 percent of GDP).
In addition, a COVID-19 economic response plan was announced on April 6, 2020. The Plan aims at strengthening infrastructure in the health sector, protecting the most vulnerable, and supporting the private sector, notably small and medium enterprises. The authorities estimate the cost of the Plan at about US$ 328 million (2.3 percent of GDP). Key measures include: the introduction of temporary exonerations on taxes, social contributions and payment of utilities for firms in the most affected sectors; the implementation of labor-intensive public works, provision of cash transfers, a waiver on the payment of utilities for the most vulnerable.
On June 23, the authorities announced additional measures, including a three-month extension of some measures initially planned till end-June. The additional cost is estimated at about US$ 50 million (0.34 percent of GDP). Additional measures include: support to the agricultural sector; exemption from the payment of utility bills for businesses in the tourism and hotel sectors; reduction of taxes on health and life insurance contracts; exemption from the payment of the apprenticeship tax as an incentive to retain workers; and import duty exemption on fishing equipment.

Monetary and macro-financial

As announced in the April 6 COVID-19 economic response plan, the central bank of the Republic of Guinea (BCRG) unveiled on April 16 some support measures to mitigate the economic impact of the pandemic on the financial sector. The policy rate and the reserve requirement ratio were both reduced by 100 basis points to 11 and 15 percent respectively. The BCRG allows banks, for the duration of the pandemic, to count against their reserves credit provided to SMEs, businesses in the services sector affected (hotels, restaurants and transport), and major importers of food and pharmaceutical products. The central bank also announced a program of liquidity injection, including a window for the provision of long-term liquidity.
Moreover, the central bank announced measures to mitigate prudential requirements. These include: lowering the liquidity coverage ratio from 100 to 80 percent; suspending the NPL classification for businesses and individuals impacted by the pandemic and the provisioning of such loans; and relaxing the limits on foreign exchange positions (from 20 to 25 percent of capital for the net position, and 10 to 12.5 percent for the position in each currency). Dividend payments have been suspended while financial institutions are required to limit technical assistance fees paid to their parent companies to the strict minimum. Financial institutions have been granted a three-month postponement of the payment of supervision -related fees as well as contributions to the deposit insurance scheme. Insurance companies are to postpone the payment of premia falling due during the epidemic and to suspend policies at the request of customers. Identification requirements for e-money accounts have been eased and companies are encouraged to reduce e-money transfer fees.

Exchange rate and balance of payments

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Guinea Bissau
Background. The first cases were reported on March 25. On March 18, borders were preemptively closed. A state of emergency was declared on March 28, followed by a state of calamity declared on September 9. Flights to Bissau resumed in September and schools reopened in October. Considering a more favorable development with fewer contagions, a state of health alert was declared on December 10 for ninety days, which is somewhat less restrictive in terms of meetings and events but maintains the mandatory use of mask and physical distancing. A negative Covid-19 test is required for people travelling to Guinea-Bissau. Guinea-Bissau was amongst the 28 beneficiary countries of the IMF debt service relief through the Catastrophe Containment and Relief Trust (CCRT), approved on April 13 and October 2.

Key Policy Responses as of January 7, 2021

Fiscal

To mitigate the immediate impact of the pandemic the government made emergency allocations of: (i) CFAF 222 million (US$ 0.4 million) to provide medicine, food, and medical equipment; and (ii) CFAF 580 million (US$ 1 million) to distribute 20,000 bags of rice and 10,000 bags of sugar throughout the country, including in distant areas. As additional actions, the government has increased its targeted number of families to benefit from food supply from an initial 3,000 to 20,000 and provided other family support (CFAF 100 million). The government has provided direct support to the agricultural campaign for CFAF 790 million. It has used the BCEAO special refinancing window for "Covid-19 T-Bills" issued by the State for an amount of about US$27 million (CFAF 15 billion or 1.8 percent of GDP) for on-lending by domestic commercial banks to the cashew nut sector. The authorities have been seeking international financial support to complement its assistance program.

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount outstanding of such special T-Bills initially issued by Guinea-Bissau was equivalent to 1.9 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks's credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

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Guyana
Background. Guyana reported its first confirmed COVID-19 case on March 11, 2020. The government has announced containment and mitigation measures (including imposing staying home order, bans on public gatherings, except for essential services, mandatory social and physical distancing for essential services, curfews, domestic and international travel restrictions, closure of schools and borders, mandatory quarantine for those infected or exposed to the disease, providing tests to suspected infection cases, and additional supplies to medical professions, and raising public awareness). Guyana has been one of five countries in the Caribbean including the Dominican Republic, Haiti, Aruba and Curacao, to benefit from pre-manufactured housing units from the United Nations High Commissioner for Refugees (UNHCR). The international organization handed over 48 housing units to the Ministry of Public Health through the Civil Defense Commission (CDC) to boost the regional capacity of the COVID-19 response in the country. On July 21, the Ministry of Education received a donation of 2000 face shields from the United Nations International Children’s Fund (UNICEF) to support measures to contain the spread of the COVID-19 virus in schools, when they open. The new government announced the establishment of a new Covid-19 response unit to replace the previous National COVID-19 Task Force, including G$4.5 billion (US$21.6 million) for the COVID-19 response effort, and started making efforts to mobilize US$60 million from international financial institutions. More recently, the government received US$2 million from India, and announced G$25,000 per household for COVID-19 relief assistance. It is still unclear whether the aid would be in cash or kind, how often this will be provided and whether all or affected households will be getting assistance. In addition, authorities announced packages for essential workers, and under the childcare assistance program, direct payments would be made to licensed childcare facilities for disbursements to parents of children under seven years of age. On November 25, the World Bank approved US$7.5 million for Guyana’s Covid response and strengthening the health system.
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 ended on July 31. Social distancing rules and the wearing of face masks continue to be mandatory. Bars, sporting events and gatherings of more than ten persons are still prohibited, and stay-at-home orders remain in effect except for essential services. During phase 3, the national curfew was from 8pm to 6am except for regions 5 and 6. Food services and restaurants were allowed to open for delivery, drive-thru, and curb-side pick-up service from 6am to midnight daily, however; outdoor dining at restaurants are still under the updated national curfew regulations from 6am until 6pm. Public transportation services (except in Aranka, Arangoy, and Moruca) were allowed to operate at a 75 percent passenger capacity, and private sector construction, clothing, shoe and bookstores were allowed to resume operations. Phase 4 reopening began on August 1, with further easing of restrictions including opening of places of worship and ceremonies, and gatherings allowed at 25 percent capacity. The airports were opened to commercial travel on October 12 under phase 2 of the reopening of the airspace. Travel to Suriname through the Moleson Creek Crossing will be opened on December 12. On November 30, the government issued new Covid-19 measures which includes restrictions of non-essential services to region 7 and to Suriname. The curfew remains the same for December, with lockdown hours from 10:30 pm to 4am, and has been extended to January 31, 2021

Key Policy Responses as of January 6, 2021
Fiscal

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

Monetary and macro-financial

The Bank of Guyana (BoG) has extended the moratorium to allow banks to deter repayments and to classify affected accounts as non-performing, and the waiver on the regulatory treatment or condition for renegotiating loans under the supervisory guidelines to December 2020. The institution also reduced reserve requirements from 12 percent to 10 percent; lowered liquid asset requirements for demand deposits from 25 percent to 20 percent, and savings and time deposits from 20 percent to 15 percent. The commercial banks will provide short term financing for working capital at concessional rates of 5-6 percent, and reduce interest rates on consumer loans below G$10 million by 1-2 percent until December 2020. Other measures proposed to banks by the BoG include; the deferment of loan payments to assist customers in good standing, companies with liquidity requirements; and waiving or reducing fees and penalties for transactions with ATMs, POS, EFT, debit cards, loan processing, late payments on loans and special treatment on interest accrued during the moratorium period on outstanding balances below G$10 million.

Exchange rate and balance of payments

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Haiti
Background. The COVID-19 pandemic comes at a time of economic contraction and considerable macro-economic imbalances. Haiti reported its first confirmed cases of COVID-19 on March 20, 2020 and the country remains at high risk of rapid contagion given the weak health system and the proximity and porous border with the Dominican Republic. Tourism had already declined sharply in 2018-2019 due to the political instability and social unrest. The main economic impact from COVID-19 will come through remittances, which represent about 30 percent of GDP and are expected to drop with the income shock in the United States and other source markets.
Reopening of the economy. The Government of Haiti has communicated many important instructions to minimize the spread of the disease, particularly: closure of schools and factories, closure of airports and ports to passengers, banning of meetings of more than 10 people, nationwide curfew between 20:00 and 5:00 and plea for social distancing guidelines to be respected. Some of these restrictions were lifted or modified by the Haitian government as of 30 June 2020. The state of health emergency that had been declared by the Government on April 19 over the spread of COVID-19 has been lifted on July 20. The Prime Minister announced the end of restrictive measures and the resumption of business operations across the country, including, among others, the reopening of textile factories at 100% and the resumption of religious services across the country. Public sector workers have been instructed to work on a rotational basis, and remote working has been encouraged as much as possible. In order to guarantee jobs provided by subcontracting companies in the textile industry, the Government authorized these factories to gradually resume their activities from April 20, 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 January 7, 2021

Fiscal

The authorities launched a public health preparedness plan for containment and treatment; they plan to boost some social programs, and are also considering additional health care and security spending, as well as transfers to support workers and households, including supporting wage payments temporarily in some sectors. Altogether, spending should increase by 2.12 percent of GDP, of which 1.74 percent of GDP on healthcare, 0.35 percent of GDP to protect vulnerable populations (including dry food rations) and 0.03 percent of GDP in other transfers. The authorities have also committed to report monthly on COVID-related expenditures and undertake an ex post financial and operational audit on COVID spending.

Monetary and macro-financial

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

Exchange rate and balance of payments

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Honduras
Background. Honduras has reported 109,144 (2,930 deaths) as of December 3, 2020. The country went into lockdown on March 16, with only essential services operating. The government declared a national state of emergency and adopted containment measures, including restrictions on freedom of movement, a nation-wide night-time curfew, and closing of national frontiers. The authorities have taken fiscal and monetary and macro-financial actions to respond to the healthcare and humanitarian crisis, protect employment and mitigate the impact on economic activity.
Reopening of the economy. The government reopened national frontiers in August (subject to presentation of negative Covid test results by inbound travelers), and lifted restrictions on freedom of movement and reduced the duration of the night-time curfew in October. While the national state of emergency remains, a plan agreed with the private sector to gradually reopen the formal economy starting in June was discontinued in practice in October, leading to significant acceleration in the resumption of regular activities in private and public sector institutions

Key Policy Responses as of December 3, 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 escape clause included in the Fiscal Responsibility Law (FRL), the authorities' initial fiscal response to the pandemic envisaged a deficit of the Non-Financial Public Sector of 4 and 3 percent of GDP in 2020 and 2021—after 1 percent deficit in 2019 in line with the FRL—with additional borrowing by the government of $2.5 bn in 2020-21, about 10 percent of GDP in total. As the impact of the crisis deepened, Congress approved in November a revision in the escape clause, increasing fiscal deficit limits of the NFPS to 5 and 4 percent of GDP in 2020 and 2021.
• Efforts have concentrated on supporting the fragile health system and providing targeted support to families, workers, and firms. Additional crisis-related spending needs were initially estimated at 2.1 percent of GDP in 2020, including emergency healthcare expenditures (0.9 percent of GDP), temporary unemployment benefits to formal workers (0.6 percent of GDP), delivery of food supplies to poor families (0.2 percent of GDP), and cash transfers to informal workers (0.4 percent of GDP). The authorities identified significant nonpriority spending reallocations to partly finance these emergency expenditures. Congress approved a decree authorizing expedited purchasing procedures for emergency expenditures related to the crisis.
On the revenue side, Congress approved reduced advance payments in corporate income tax to provide cash flow relief to companies, as well as a temporary VAT exemptions for medical supplies. There is also a one-off income tax credit (10 percent of salary expenses) for companies maintaining pre-crisis employment levels. Congress also approved deferrals to the second half of 2020 and early 2021 for payments of income taxes and social contributions, favoring especially SMEs. VAT payments were also deferred for SMEs in non-essential sectors not operating during the curfew.
The government introduced temporary freezes in prices of goods in the basic consumption basket, as well temporary free access to emergency telecommunications services related to the COVID-19 crisis—these measures do not have a budgetary cost.

Monetary and macro-financial

Since the start of the pandemic, the central bank has cut the policy rate by 225 bps to 3 percent—following cumulative cuts of 50 bps in December and January—and reduced the spread over the policy rate for its emergency lending facility (by 50 bps) and its repo operations (by 25 bps). The BCH also suspended liquidity absorption operations (resumed in October), and accelerated the implementation of previously announced elimination of obligatory investments in the central bank. In September, the BCH reduced reserve requirements from 12 to 9 percent, while reintroducing temporary mandatory investments of 3 percent to incentivize new credits backed by the guarantee funds.
Second-tier public development bank Banhprovi 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. A dedicated L4,000 mn (0.7 percent of GDP) rediscount facility funded with accumulated profits at Banhprovi was also created for loans restructured as a result of the pandemic.
The government also issued a decree mandating all supervised financial institutions to provide temporary debt service relief to companies and individuals whose incomes have been affected by the crisis. Debt service of affected sectors was suspended until end-June, without penalties or impact on credit classification; at end-June, financial institutions were granted discretion to extend these measures until end-December for most affected households and corporates. In October, the government agreed with banks on a scheme to support further restructuring of SME and microcredit loans according to repayment capacity. The scheme is available to high quality borrowers that were current on their debt obligations before the pandemic and includes: rolling over debt service arrears accumulated during the grace period, without capitalizing interest; extension of loan maturities; and reductions in interest rates. The government also initially introduced a 3-month moratorium on service of bank loans financed by Banhprovi (covering about 5 percent of total bank credit to the private sector), and later reprofiled those loans to borrowers whose payment capacity had been more durably affected by the pandemic.

Exchange rate and balance of payments

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Hungary
Background. The first case of COVID-19 was reported on March 4, 2020. The economy has been hit hard by the outbreak as it is tightly intertwined globally through supply chains and tourism. The government declared a state of emergency on March 11 and implemented various containment measures, including travel and activity restrictions, and mandatory distance learning for schools and universities. On March 27, mandatory shelter-in-place in place was imposed, except for essential business and activities (e.g., food shopping, healthcare).
Reopening of the economy. Starting May 4, the economy gradually reopened. Stores, malls, museums, churches, were allowed to reopen and outdoor seating is permitted in restaurants. Students returned to schools and daycares in June, and summer camps were open. Ordinary health services restarted. Sports could be conducted in closed doors and music and dance events with less than 500 participants could be held. The state of emergency was lifted by June 18 but some of the emergency measures remained in place and the government was allowed to declare a health crisis for a period of up to six months (extendable indefinitely) without parliamentary authorization. Social distance rules were expected to be heeded everywhere and policies and fines regarding wearing masks recently have become stricter
Second wave. While the first wave of the pandemic relatively spared Hungary, cases have been rising very rapidly since the end of August. In response, border restrictions were imposed in early September and the state of emergency reintroduced on November 4th. The government introduced a number of containment measures, including a curfew from 8pm-5am, restricted opening hours for shops and other businesses, and restaurants closures, and restriction on hotels guests and gathering. Those measures and the state of emergency are in place until January 11, 2021.

Key Policy Responses as of January 5, 2021

Fiscal

A first wave of fiscal measures were introduced earlier in the epidemic, including, on the revenue side, measures to alleviate the fiscal burden on businesses: (i) employers' social contributions will be lifted in the most affected sectors; (ii) the health care contributions will be lowered through June 30; (iii) around 80,000 SMEs (mainly in the services sector) will be exempt from the small business tax (the payment of the tax by other companies in affected sectors will be deferred until the end of the state of emergency); (iv) the tourism development contributions will be temporarily cancelled; (v) media service providers will be given a tax relief for incurred losses of advertising revenue; and, (vi) procedures for collecting tax arrears will be suspended during the state of emergency. On the spending side, about HUF 245 billion (0.6 percent of GDP) was reallocated to the healthcare sector. On 28 September, the government rolled out on a tax relief package for the benefit of families and businesses, including a tax relief on fringe benefits for tourism companies have been extended through end-June 2021.
On April 8, a new package of new measures was announced, supported by the creation two new funds, the Anti-Epidemic Protection Fund and the Economy Protection Fund. The latter Fund will be financed through new taxes on the private activity and reallocations from ministries and from the Employment Fund. Their spending targets (i) job protection, notably by subsidizing wages to companies on workers who were put on shortened work hours (with rules that were made more flexible on April 23); (ii) job creation by supporting investments worth a total of HUF 450bn; (iii) support for priority sectors, including tourism, health, food, agriculture, construction, logistics, transport, film and entertainment industries; (iv) provision of interest-subsidized and guaranteed credit facilities to Hungarian companies; (v) an extra week of pension will be paid out every February during 2021-24. On April 16, the government introduced three new export support measures through the state-owned Eximbank: (i) EUR 800,000 grant for investments of export companies; (ii) preferential working capital loans, and (III) a new guarantee and insurance scheme. On April 23, a state-owned development bank MFB launched a HUF 1,490bn package of financial support instruments for companies, consisting of three loan products, two guarantee instruments and four capital programs. On May 7, the government announced it will purchase up to HUF 150 billion (0.3 percent of GDP) of bonds issued by banks in order to support lending during the crisis and to ensure financial stability. On May 20, the government announced a new wage subsidy program for new hires, with the condition for a company of keeping a worker for at least nine months. Interest-free loans to SMEs will be available from June 12. Half of the program’s budget will be available for investments, while the other 50 percent is intended to finance liquidity and operations. The highest amount available for investments is HUF 150 million, while asset and liquidity financing loans are capped at HUF 300 million. On August 25, the government announced that it will not be expanding the wage subsidy scheme as of end-August.

Monetary and macro-financial

Since the start of the pandemic, the central bank (MNB) increased access to liquidity through: (i) an increase in the regular forint-liquidity swap stock at regular auctions; (ii) the introduction of the daily provision of one-week forint-liquidity swaps; (iii) the expansion of eligible collateral; (iv) the introduction of a long-term unlimited collateralized lending facility; and (v) suspension of penalties for unmet reserve requirements. On April 1^stit introduced a one-week deposit tender at the Lombard rate, which effectively tightened overall liquidity and eased depreciation pressures on the HUF. On April 7, the MNB announced (i) a change in the overnight lending rate by 95 bps to 1.85 percent, making the interest rate corridor symmetric (with the overnight deposit rate at -0.05 percent; the base rate at 0.9 percent; and the overnight lending rate at 1.85 percent); (ii) an increase in the one-week lending rate to 1.85 percent; and (iii) the elimination of the target on the amount of the liquidity injection or withdrawal to give greater flexibility to monetary policy. On June 23 and July 21, the MNB reduced the base rate by 15 basis points each time, from 0.90 to 0.60 percent, while the interest rate corridor remained unchanged (-0.05 to 1.85 percent). On 4 May, quantitative easing program was also launched, consisting of buying government securities on the secondary market, and the mortgage bond purchase program re-started. On October 6, the MNB raised the limit on its purchases of certain government bonds from to 33 to 50 percent of the outstanding bond stock while extending the range of assets available for purchase to government-guaranteed debt securities. On September 24, the MNB hiked the 1-week deposit rate by 0.15 percent to 0.75 percent in order to reduce inflationary pressures and currency depreciation. On September 8, the MNB introduced a new forex-liquidity swap facility. The facility seeks to improve the effectiveness of the monetary transmission mechanism and reduce the volatility of yields on the domestic forex swap market.
On April 7, a new SME lending program was also announced (FGS GO!) with increased amounts and increase in the interest rate subsidy. On July 2, the MNB relaxed its conditions, including allowing the use of loans for investment abroad and loosening conditions for borrowing working capital loans. On November 18, the NBH expanded program by HUF 1 tn. The corporate bond purchase program (BFGS) remained in place and maturities of eligible bonds were extended and amount per business group was increased. On September 22, MNB raised the amount available under the program to 750 billion forints from HUF 450 bn previously. On November 18, it raised the ceiling to HUF 2 tn (4.3% of GDP) having already purchased HUF 793 bn (1.7% of GDP) of bonds under the program. The MNB intends to sterilize liquidity injected through both the FSG GO! and BFSG programs through a preferential deposit facility bearing tiered interest rates up to 4 percent.
Measures were also taken to provide financial relief to households and corporates borrowers, including: (i) the provision of a grace period of repayment of loans to the Growth Funding Facility (subsidized lending to SMEs supported by the MNB); (ii) the extension of short-term loans to businesses until June 30; (iii) a repayment moratorium on all existing loans, corporate and retail, until the end of this year, with a reprofiling of debt payment thereafter to avoid an increase in monthly payments; and, (iv) a cap on the average annual percentage rate (APR) on new unsecured consumer credit at the central bank base rate (currently, 0.9 percent) plus 5 percent. On September 20, the government extended debt repayment moratorium by six months for select groups.
Regarding macro-prudential measures, (i) the Foreign Exchange Coverage Ratio (FECR), which imposes a limit on the difference between forex-denominated assets and liabilities of credit institutions as a percent of total assets, was reduced from 15 to 10 percent; and (ii) the additional capital buffer requirement for systemically-important banks will be temporarily eliminated as of July 1. On September 8, regulatory forbearance for unmet reserve requirements was reversed.

Exchange rate and balance of payments

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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 January 7, 5845 domestic cases COVID-19 have been confirmed, of which 126 are active. Twenty-nine have died. The recovery rate from the latest wave of infections already exceeds 95 percent. The strategy to contain the disease has involved a national pandemic plan with significant focus on mass testing, contact tracing, and quarantines. Vaccination of the population is being rolled out, subject vaccine availability. The economic impact of the pandemic is partially being offset by Iceland’s use of its available policy space. GDP growth fell to -10.4 percent (y/y) in Q3 from a -10.9 growth in Q2 (y/y).
Containment measures. In response to the upsurge of infections, containment measures were tightened, with the maximum size of social gatherings down to its lowest level of 10 individuals and venues for high-contact economic activity temporarily closed. Cautious relaxation of the containment measures is ongoing following the reduced number of new infections. Since August 19, to avoid a 14-day quarantine, arriving passengers must take two COVID-19 tests in between a 5-day quarantine.

Key Policy Responses as of January 7, 2021

Fiscal

Parliament approved an array of fiscal measures to ease the strain on households and firms and, looking forward, to help the economy recover. Key measures to support households and firms include tax cuts, deferrals, and loss offsets; increased unemployment benefits, child allowances, quarantine grants, subsidies, state contributions to firms’ dismissal costs to prevent bankruptcies of viable firms and protect workers’ rights; early pension withdrawals, and state-guaranteed loans to companies. Key measures to restart the economy include public investment, tax incentives for real estate improvement, temporary tax relief for the tourism sector, and marketing efforts to encourage tourism in Iceland. Parliament also approved simpler temporary rules for financial restructuring of companies. With expectations of recurrent flare ups, a number of supporting fiscal measures have been extended beyond their sunset clauses. The 2021 budget and accompanying medium-term fiscal strategy plan envisage continued fiscal support and a gradual reduction in the general government deficit. See also: Link1, Link2 , and Link3.

Monetary and macro-financial

The Central Bank of Iceland (CBI) has provided monetary support and has taken measures to preserve financial stability. Since the outbreak, the Monetary Policy Committee has cut policy rates by 200 basis points to 0.75 percent and reduced deposit institutions’ average reserve requirements to 1 from 2 percent to ease their liquidity positions. To increase liquidity in circulation, the CBI eliminated its intake of 30-day deposits. The CBI Financial Stability Committee reduced the countercyclical capital buffer to 0 from 2 percent. A voluntary loan moratoria program is being phased out. See also:
Link4
and
Link 5.

Exchange rate and balance of payments

The CBI has allowed the exchange rate to adjust, while preventing disorderly market conditions. Through January, the CBI intervened in the foreign exchange market, selling about €900 million and buying about €80 million. On September 9, the CBI announced a program of FX sales, which currently involves selling a minimum of €3 million a day. As of end November, international reserves stood at US$6.5 billion.

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India
Background. The first case of COVID-19 in India was reported on 30 January 2020 and the number of cases continues to rise. Prime Minister Modi announced on March 24 that the entire country will go under lockdown, with localized lockdowns in containment zones extended to November 30 in the latest announcement. Prior to the March 24 announcement, numerous containment measures had already been imposed, varying in intensity across the country, including travel restrictions; closing educational establishments, gyms, museums, and theatres; bans on mass gatherings; and encouraging firms to promote remote work. The economic impact of COVID-19 has been substantial and broad-based. GDP contracted sharply in 2020Q2 (-23.9 percent year-on-year) due to the unprecedented lockdowns to control the spread of COVID-19.
Reopening of the economy. On April 15, with a view to supporting economic activities, the government announced several relaxation measures in geographical areas designated as non-hotspot, with effect from April 20, 2020. On April 29, the government permitted inter-state movement of stranded people, including migrant workers, managed by the nodal authorities who are designated by the states. Some graded relaxations in economic activities have been allowed in geographic areas designated as orange and green zones on May 4 and domestic air travel restarted on May 25. On May 12, the PM announced a relief package of around 10 percent of GDP, including previously announced monetary and fiscal measures. On July 29, the central government issued ‘Unlock 3.0’ guidelines further paving the way for a phased re-opening of activities across the country and limiting the lockdown only to containment zones till August 31. On August 29, the government issued (‘Unlock 4.0’) to further re-open the economy in September, removing restrictions on metro rail in a graded manner from 7 September, and allowing for social, academic, sports, entertainment, and other congregations of up to 100 people. On September 30, the central government issued “Unlock 5.0” guidelines to allow state/union territory governments to decide on reopening schools and coaching institutions after October 15 in a graded manner. Cinemas/theatres/multiplexes will be permitted to open with up to 50% of their seating capacity and entertainment parks will be permitted to open from October 15. The ceiling on congregations has been extended to 200 people. The latest government announcements on October 27 extended localized lockdowns till November 30, under the same guidelines as in “Unlock 5.0”. On January 3, 2021, India’s Central Drugs Standard Control Organisation (CDSCO) has provided emergency approvals for two COVID-19 vaccines.

Key Policy Responses as of January 7, 2021

Fiscal

India's fiscal support measures can be divided into two broad categories: (i) above-the-line measures which include government spending (about 3.2 percent of GDP, of which about 2.2 percent of GDP is expected to fall in the current fiscal year), foregone or deferred revenues (about 0.3 percent of GDP falling due within the current year) and expedited spending (about 0.3 percent of GDP falling due within the current year); and (ii) below-the-line measures designed to support businesses and shore up credit provision to several sectors (about 5.2 percent of GDP). In the early stages of the pandemic response, above-the-line expenditure measures focused primarily on social protection and healthcare. These include in-kind (food; cooking gas) and cash transfers to lower-income households (1 percent of GDP); wage support and employment provision to low-wage workers (0.5 percent of GDP); insurance coverage for workers in the healthcare sector; and healthcare infrastructure (0.1 percent of GDP). The more recent measures that were announced in October and November include additional public investment (higher capital expenditure by the central government and interest-free loans to states, of about 0.2 percent of GDP) and support schemes targeting certain sectors. The latter includes a Production Linked Incentive scheme targeting 13 priority sectors and is expected to cost about 0.8 percent of GDP over 5 years, a higher fertilizer subsidy allocation benefiting the agriculture sector (0.3 percent of GDP) and support for urban housing construction (0.1 percent of GDP). Several measures to ease the tax compliance burden across a range of sectors have also been announced, including postponing some tax-filing and other compliance deadlines, and a reduction in the penalty interest rate for overdue GST filings. Measures without an immediate direct bearing on the government’s deficit position aim to provide credit support to businesses (1.9 percent of GDP), poor households, especially migrants and farmers (1.6 percent of GDP), distressed electricity distribution companies (0.4 percent of GDP), and targeted support for the agricultural sector (0.7 percent of GDP), as well as some miscellaneous support measures (about 0.3 percent of GDP). Key elements of the business-support package are various financial sector measures for micro, small, and medium-sized enterprises and non-bank financial companies, whereas additional support to farmers will mainly be in the form of providing concessional credit to farmers, as well as a credit facility for street vendors. Agricultural sector support is mainly for infrastructure development.

Monetary and macro-financial

Since March 2020, the Reserve Bank of India (RBI) reduced the repo and reverse repo rates by 115 and 155 basis points (bps) to 4.0 and 3.35 percent, respectively, and announced liquidity measures across three measures comprising Long Term Repo Operations (LTROs), a cash reserve ratio (CRR) cut of 100 bps, and an increase in marginal standing facility (MSF) to 3 percent of the Statutory Liquidity Ratio (SLR), now extended till March 2021 and open market operations (including simultaneous purchases and sales of government securities), resulting in cumulative liquidity injections of 5.9 percent of GDP through September. The RBI has provided relief to both borrowers and lenders (through end-August) and the Securities and Exchange Board of India (SEBI) temporarily relaxed the norms related to debt default on rated instruments and reduced the required average market capitalization of public shareholding and minimum period of listing. The implementation of the net stable funding ratio and the last stage of the phased-in implementation of the capital conservation buffers were delayed by six months (on September 29 the delay was extended till April 2021). On April 1, the RBI created a facility to help with state government's short-term liquidity needs, and relaxed export repatriation limits. Earlier, the RBI introduced regulatory measures to promote credit flows to the retail sector and micro, small, and medium enterprises (MSMEs) and provided regulatory forbearance on asset classification of loans to MSMEs and real estate developers (later extended to loans from NBFCs). CRR maintenance for all additional retail loans has been exempted, and the priority sector classification for bank loans to NBFCs has been extended for on-lending for FY 2020/21. During April 17-20, the RBI, along with additional monetary easing, announced: (a) a TLTRO-2.0 (funds to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs); (b) special refinance facilities for rural banks, housing finance companies, and small and medium-sized enterprises; (c) a temporary reduction of the Liquidity Coverage Ratio (LCR) and restriction on banks from making dividend payouts; (d) a standstill on asset classifications during the loan moratorium period with 10 percent provisioning requirement, and an extension of the time period for resolution timeline of large accounts under default by 90 days. Furthermore, state’s Ways and Means Advance (WMA) limits have been increased by 60 percent and now extended till March 2021. The RBI asked financial institutions to assess the impact on their asset quality, liquidity, and other parameters from the COVID-19 shock and take immediate contingency measures. On April 27, the RBI announced a special liquidity facility for mutual funds (SLF-MF) and a fixed-rate 90-day repo operation for banks exclusively for meeting the liquidity requirements of mutual funds, along with regulatory easing for liquidity support availed under the facility, later (April 30) extended to banks’ own deployed resources; and the SEBI reduced broker turnover fees and filing fees on offer documents for public issue, rights issue and buyback of shares. On May 13, the government announced measures targeting businesses: (i) a collateral-free lending program with 100 percent guarantee, (ii) subordinate debt for stressed MSMEs with partial guarantee, and (iii) partial credit guarantee scheme for public sector banks on borrowings of non-bank financial companies, housing finance companies (HFCs), and micro finance institutions. The government also announced (i) a Fund of Funds for equity infusion in MSMEs, and (ii) a special purpose vehicle (SPV) to purchase short-term debt of the eligible non-bank financial companies and housing finance companies, fully guaranteed by the government and managed by a public sector bank. On May 22, the RBI undertook further regulatory easing, including the increase in the large exposure limit, relaxation of some of the norms for state government financing, credit support to the exporters and importers and extension of the tenor of the small business refinancing facilities. On June 4, the RBI extended the benefit under interest subvention and prompt repayment incentive schemes for short-term agricultural loans until August 31, 2020. On June 12, the GST council announced that it would halve the interest rate charged on overdue filings of small businesses. On June 21, the RBI directed banks to assignment zero percent risk weight on the credit facilities extended under the emergency credit line guarantee scheme. On August 6, RBI permitted banks to restructure existing loans to MSMEs classified as ‘standard” (as of March 1, 2020) without a downgrade in the asset classification. The restructuring of the borrower account is to be implemented by March 31, 2021. Banks are required to maintain additional provision of five percent over and above the provision already held by them for accounts restructured. The RBI also announced a resolution plan for corporate and personal loans that were classified as ‘standard’ as of March 1, 2020 but were stressed due to COVID-19. Resolution needs to be invoked by end-December 2020 and the eligible loans continue to be classified as ‘standard’ until the implementation of the resolution plan. Ten percent provisioning is required following the implementation of the resolution plan. On August 31, banks are allowed to hold fresh acquisitions of SLR securities acquired from September 1, 2020 under held-to-maturity up to an overall limit of 22 per cent through March 31, 2021. On September 22, the Parliament adopted the amendment to the Indian Bankruptcy Code (IBC), with no insolvency cases until December 25,2020. The suspension of the IBC was later extended until end-March 2021. On October 9, the RBI announced that the risk weights for new housing loans sanctioned until March 31, 2022 will not be linked to the size of the loan, while they will remain linked to the LTV ratios; the maximum single counterparty exposure limit for retail loans by banks was eased from 5 to 7.5 crore. The RBI announced OMOs of state government securities on October 16. On-tap TLTROs up to three years tenor for a total amount of up to ₹1,00,000 crore at a floating rate linked to the policy repo rate were announced on October 21. The Government extended the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs first till November 30th, 2020, and then till March 31, 2021, while at the same time relaxing the eligibility criteria. The RBI has extended the Liquidity Adjustment Facility and the Marginal Standing Facility to the regional rural banks to improve their liquidity management since December 2020.

Exchange rate and balance of payments

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

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Indonesia
Background. Indonesia reported its first confirmed COVID-19 case on March 2, 2020. The government adopted various containment measures, including temporary bans on domestic and international air and sea travel, screening at ports of entry, school closures, and other restrictions on public events. The government also banned Indonesia’s traditional annual exodus for Muslim holidays during Eid al-Fitr celebrations in May in an effort to curb the spread of the virus from Jakarta and other high-risk regions.
Reopening of the economy. In June, Indonesia began easing some containment measures. The city of Jakarta started a transitional phase from large-scale social restrictions on June 5th and further eased restrictions on malls (on June 15) and parks and recreation areas (on June 20). However, the city of Jakarta has extended the transitional phase from large-scale social restrictions through September 10 in the absence of a sustained decline in daily new virus cases. On September 9, Jakarta’s governor announced that large-scale social restrictions would be tightened further to contain the spread of the virus.
Indonesia’s growth improved in the third quarter of 2020 to -3.5 percent y/y (up from -5.3 percent Q2:2020) or 12.4 percent q/q, s.a.a.r., mostly driven by recovery in domestic demand. External pressures eased in April and May, although some volatility remains.

Key Policy Responses as of January 7, 2021

Fiscal

In addition to the first two fiscal packages amounting to IDR 33.2 trillion (0.2 percent of GDP), the government announced an additional package of IDR 405 trillion (2.6 percent of GDP) on March 31, 2020, which was further expanded to IDR 677.2 trillion (4.2 percent of GDP) on June 4, 2020, as part of a national economic recovery program. The national economic recovery program has been continuously refined and currently stands at IDR 695.2 trillion. The fiscal packages comprise (i) support to the health care sector to boost testing and treatment capacity for COVID-19 cases; (ii) increased benefits and broader coverage of existing social assistance schemes to low-income households such as food aid, conditional cash transfers, and electricity subsidies; (iii) expanded unemployment benefits, including for workers in the informal sector, (iv) tax reliefs, including for the tourism sector and individuals (with an income ceiling); and (v) permanent reductions of the corporate income tax rate from 25 percent to 22 percent in 2020-21 and 20 percent starting in 2022. In addition to tax and spending measures, the fiscal packages include capital injections into state-owned enterprises and interest subsidies, credit guarantees, and loan restructuring funds for micro, small, and medium enterprises. To support credit creation, the government has placed state funds in selected commercial banks in an effort to enable banks to increase leverage and guaranteed working capital loans for labor-intensive corporations.

Monetary and macro-financial

Bank Indonesia (BI) reduced the policy rate by 125 bps cumulatively in February, March, June, July, and November 2020, to 3.75 percent. BI also announced other measures to ease liquidity conditions, including: (i) lowering reserve requirement ratios for banks; (ii) increasing the maximum duration for repo and reverse repo operations (up to 12 months); (iii) introducing daily repo auctions; (iv) increasing the frequency of FX swap auctions for 1, 3, 6 and 12 month tenors from three times per week to daily auctions; and (v) increasing the size of the main weekly refinancing operations as needed. BI also adjusted macroprudential regulation to ease liquidity conditions and support bond market stability. A Presidential decree has expanded BI’s authority to maintain the stability of the financial system in the presence of the COVID-19 shock, including by facilitating BI liquidity assistance to banks, allowing BI to purchase government bonds in the primary market, and financing the deposit insurance agency (LPS) for bank solvency problems. The government and BI announced on July 6 a burden sharing scheme to help finance the economic response to the pandemic. The scheme, expected to be implemented only in 2020, covers (i) BI’s purchases of government bonds with coupons at the BI’s policy rate to finance priority spending on public goods such health and social protection; (ii) the budgetary interest cost of spending support to firms will be subsidized by BI transfers to the budget; and (iii) BI will act as buyer of last resort for long-term local-currency bonds to finance other spending. The government issued the first bond under the burden sharing scheme on August 6. BI has been providing funding to LPS through repo transactions and purchases of government bonds owned by LPS. BI has also taken measures to further strengthen financial deepening, access to financial services, and monetary operations, including by facilitating collaboration between the banking industry and Fintech companies, supporting digital payment in various sectors, and introducing Sharia-compliant instruments. To ease stock market volatility, the regulator OJK has introduced a new share buyback policy (allowing listed companies to repurchase their shares without a prior shareholders’ meeting) and introduced limits on stock price declines. OJK has also relaxed loan classification and loan restructuring procedures for banks to encourage loan restructuring and extended the deadline by 2 months for publicly listed companies to release their annual financial reports and hold annual shareholders meetings. They have also postponed banks’ implementation of mark-to-market valuation of government and other securities for six months; relaxed the obligation to fulfill the Liquidity Coverage Ratio and Net Stable Funding Ratio requirements; and allowed the use of the Capital Conservation Buffer.

Exchange rate and balance of payments

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

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Iran, Islamic Republic of
Background. Iran reported its first confirmed COVID-19 cases on February 19, 2020 in the city of Qom. After the outbreak, the government introduced a range of measures to limit the spread of the virus, including stopping flights from China, closing schools, malls, markets and key religious sites, and banning cultural and religious gatherings. On March 25, President Rouhani announced a partial lockdown, closing businesses and government offices for two weeks and banning travel between different cities. Accordingly, the Purchasing Managers’ Index in March and April collapsed.
Reopening of the economy. Concerned about the economic damage from the outbreak, the government ordered a step-by-step reopening of businesses that it considered to be at low or average risk in terms of spreading the virus starting on April 8. On April 27, Iran reopened all international borders to revive regional trade, while mosques and schools reopened in mid-May. On May 26 all businesses and major religious sites were opened. While the Purchasing Managers’ Index in May and June suggested that industries had started to recover, it registered a 6 percent contraction in July.
Second and third wave: : A “second wave” of virus cases hit Iran during the summer. Following this, the government instituted mandatory mask-wearing and new restrictions in Tehran. Based on this order, all schools and universities, restaurants, cafes, cultural facilities and beauty salons were closed and a third of government employees in Tehran worked remotely. With the number of new infections exceeding 10,000 a day in November, Iran is in the grip of a “third wave” of COVID-19. Border crossings between Iran and Iraq have been sealed to prevent Iranian pilgrims from traveling to the neighboring country for the annual Arbaeen pilgrimage which takes place on October 7th. Tehran and six other provinces have closed down recreational centers, universities, schools and places at high risk of contagion for one week to stem the spread of the pandemic. Facemasks became compulsory in public (indoors and outdoors) in Tehran starting from October 10 with fines for those who breach the law. A slew of new restrictions, including partial lockdowns and curfews, came into effect on November 28 in the most affected regions. A mandatory mask rule is implemented across the country. At end December 2020, the Bashmaq border crossing between Iran and Iraq was closed until further notice due to concerns over the new COVID-19 variant. In January 2021 the coronavirus infection rate has slowed but night-time curfew and distance learning has been extended to keep the contagious outbreak at bay. Iran Air has resumed flights to Ankara.
Vaccine: The human trial of the Iranian COVID-19 vaccine started and the first volunteers received the vaccine in Tehran at the end of December 2020. Besides the Iranian vaccine, Iran’s Red Crescent Society Director said Iran will receive 150,000 shots of the Pfizer vaccine in the next weeks. Governor Hemmati said Iran, with U.S. approval, will pay US$ 244 million for initial imports of 16.8 million doses of vaccines from COVAX. Around 4 million doses are being also negotiated with China.

Key Policy Responses as of Janaury 7, 2021
At the end of March President Rouhani announced over 10 percent of GDP in COVID-19 relief and recovery measures.
Fiscal

Key measures include (i) extra funding for the health sector (2 percent of GDP); (ii) cash transfers to vulnerable households (0.3 percent of GDP); (iii) support to the unemployment insurance fund (0.3 percent of GDP); and subsidized loans for affected businesses and vulnerable households (4.4 percent of GDP). In addition, the government announced a moratorium on tax payments due to the government for a period of three months (6 percent of GDP). Sukuk bonds, the National Development Fund, and privatization proceeds will provide part of the financing.
On April 15, the government embarked on its biggest-ever initial public offering, selling its residual shares in 18 companies (including 12 percent share of Social Welfare Fund (SHASTA), the largest public company) to generate income as it struggles with the economic consequences of COVID-19 and U.S. sanctions. The estimated privatization proceeds are at around 165 trillion rials (0.6 percent of GDP) from banks and insurance companies and 70 trillion rials (0.2 percent of GDP) from SHASTA. On May 3, the government’s spokesman said that shares of four state-owned oil refineries will begin to be offered to the public soon.
As of end of August, 13 percent of business applicants affected by the pandemic has received part of the aid package and 56.5 trillion rials ($245 million) have been paid from the National Development Fund of Iran.

Monetary and macro-financial

The Central Bank of Iran has (i) announced the allocation of funds to import medicine; (ii) agreed with commercial banks that they postpone by three months the repayment of loans due in February 2020; (iii) offered temporary penalty waivers for customers with non-performing loans; and (iv) expanded contactless payments and increased the limits for bank transactions in order to reduce the circulation of banknotes and the exchange of debit cards.

Exchange rate and balance of payments

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

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Iraq
Background. Iraq's first confirmed case was on 22 February 2020, however in the early weeks of the crisis the number of new cases was relatively contained. At the end of Ramadan in late May 2020, the number of new cases escalated rapidly, and the crisis intensified over the summer. Since October 2020, daily new cases have declined significantly, and recently have averaged less than 1,000 cases a day.
In the early stages of the crisis, the authorities implemented a range of measures to limit the spread of the virus, including closing borders, travel restrictions (including on international flights and internal public transportation), and closing schools and universities. A nationwide lockdown and curfew were first introduced on March 22, 2020. Most containment measures have now been relaxed to some extent and the curfew has been removed. In September 2020, Iraq joined the COVAX Facility, a global initiative aiming to secure access to COVID-19 vaccines. Initially this facility will provide vaccines to cover 20 percent of the population. In addition, Iraq has agreed a deal to obtain 1.5 million doses of the Pfizer-BioNTech vaccine in early-2021.
The containment and mitigation measures have had a significant negative impact on non-oil activity, predominantly from 2020 Q2 onwards. Non-oil GDP is projected to have contracted 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. Revenues are likely to remain low for a prolonged period, reflecting both a lower profile for oil prices and a decline in production, following the OPEC+ agreement.
Reopening of the economy. Most containment measures have now been relaxed to some extent. In June 2020, the curfew restrictions began to be eased, and were completely removed in late September. All land border crossings reopened for trade and airports reopened in July 2020 and schools reopened in November 2020. In late December 2020, there was a reversal in some of the easing measures, following a spike in COVID-19 cases in other countries and the discovery of new strains of the virus. A ban on travel to the UK, Denmark, the Netherlands, Belgium, Iran, South Africa, Australia, and Japan was introduced, and only Iraqi citizens can enter from these countries. In addition, land border crossings were shut again, except for emergency cases, and restaurants, malls, shopping centers, and clubs were shut for two weeks.

Key Policy Responses as of January 7, 2021

Fiscal

To support the Ministry of Health's efforts to fight the COVID-19 pandemic, the Central Bank of Iraq established a fund to collect donations from financial institutions which raised a total of $37 million, with initial donations of $20 million from the Central Bank and $5 million from the Trade Bank of Iraq. The authorities have reduced spending in non-essential areas and have safeguarded budgetary allocations to the Ministry of Health. The Supreme Committee for Health and National Safety introduced a cash transfer scheme, targeting the families of workers in the private sector that do not receive salaries or benefits from the government. Each eligible individual received 30,000 Iraqi dinars ($25), with the scheme costing around 300 billion Iraqi dinars ($254 million) in total.

Monetary and macro-financial

The Central Bank of Iraq reduced its reserve requirement from 15 percent to 13 percent. At the onset of the crisis, it also announced a moratorium on interest and principal payments by small and medium-sized enterprises through its directed lending initiative (the “one trillion ID” initiative) and encouraged banks to extend the maturities of all loans as they deem appropriate. More recently, the Central Bank has offered 5 million Iraqi dinars ($4200) of additional support to existing projects under the “one trillion ID” initiative and reduced the interest rates on loans extended through the scheme. The Central Bank also encouraged the use of electronic payments to contain the transmission of the virus and instructed vendors to eliminate commissions on such payments for six months.

Exchange rate and balance of payments

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Ireland
Background. The first confirmed COVID-19 case was reported on March 1, 2020. The government has implemented a wide range of containment measures. On March 27, the government has issued strict restrictions on business activity, social distancing, and travel. Q2 2020 GDP release surprised on the upside with only 3.7 percent decline year-on-year, supported by export growth and strong performance of pharmaceutical and IT sectors.The economy expanded 11 percent (q/q) in Q3 driven primarily by private consumption and solid trade surplus, as a result, the level of GDP was 8.1 percent higher year-on-year.A six-week lockdown started on October 22 is likely to have an adverse impact on Q4 domestic consumption but to much lesser extend than the first round of lockdown.November was the eight deflationary month, with the CPI averaging -0.3 percent year-to-date.
Reopening/Closing of the economy.
On May 18, Ireland started a gradual reopening plan in five phases and progress was made up to phase 4, thanks to declining infection rate. In August, the government adapted a medium-term national framework for living with Covid-19¹. It consists of five levels depending on the pandemic indicators, with lower level having less social restriction. Ireland move to the level 3 on October 5 due to a surge in the new covid cases.
In response to the second wave of the pandemic, on October 19, Ireland moved to the highest level 5 restrictions which have helped to bring the infection reproduction rate below 1. After 6 weeks the second lockdown ended and Ireland moved to the level 3 restrictions with non-essential retail outlets, churches, gyms, hairdressers and other businesses allowed to open. A spike in case numbers after the holidays, with daily cases exceeding 7800 on Jan 6th , necessitated another lockdown for January with tighter restrictions, including the closure of schools and most construction sites. The government has started vaccination in end-December following the published plan by allocation groups[ https://www.gov.ie/en/publication/bf337-covid-19-vaccination-strategy-and-implementation-plan/].
Key Policy Responses as of January 7, 2021
Fiscal

The Irish authorities have announced a comprehensive fiscal package of €24.5 billion (about 14 percent of GNI*), distributed over 2020 and 2021, which includes €20.5 billion in direct support and €4 billion indirect support through (a) €2 billion credit guarantee scheme and (b) €2 billion Pandemic stabilisation and recovery Fund (ISIF). The direct supports include: (i) €2.9 billion taxation measures, i.e., warehousing and deferrals; (ii) €17.6 billion expenditure measures through (a) €11.4 billion labor market support, (b) €2 billion health sector capacity enhancement, (c) €1.5 billion business support, (d) €0.5 billion capital works. Draft Budget 2021 contains an additional stimulus of 1.7 percent of GDP and is focused on extending the income support measures, providing targeted support to the hospitality sector, and increasing health and housing spending, as well as strengthening the green agenda. In addition to that, the government has increased unemployment and wage subcidy supports to cushion the negative shock from the tightening of restrictions announced this week. Furthermore, the automatic stabilizers operate in full, i.e., tax revenues have automatically fallen in tandem with the decline in economic activity, while unemployment spending has risen. Key discretionary policy measures include:
I. Employment Wage Support Scheme. Employers, whose turnover has fallen 30%, will receive a flat-rate subsidy of up to €203 weekly per employee.
II. The Pandemic Unemployment Payment—a payment available to those who have lost employment due pandemic at a flat rate of €350 per week— runs until April 2021 but with a gradual reduction in payment level, linked to previous incomes, bringing payments in line with existing social welfare levels over time.
III. Covid Restrictions Support Scheme (CRSS), a new scheme that will provide 10 to 5 percent turnover compensation payments to the affected firms in several sectors (accommodation, food and the arts, recreation and entertainment). It will only apply at the time of increased restrictions, and is capped at 5 thousand euros per week.
IV. Additional €200 million investment in training, education, skills development, work placement schemes, recruitment subsidies, job search and assistance measures, to help those who have lost their jobs find a new one, retrain, or develop new skills, in particular for emerging growth sectors.
V. Measures to support SMEs include but not limited to: (a) The Restart Grant for Enterprises ( €550 million); (b) Waiver of commercial rates; (c) Credit Guarantee Scheme: 80% gov’t guarantee for a wide range of credit products from €10,000 to €1 million up to a maximum term of 6 years; (d) MicroFinance Ireland and the Local Enterprise Measures: a package of liquidity and enterprise investment measures worth €55 million to reduce lending rate for micro and small businesses; (e) The Future Growth Loan Scheme (€500 million) with the European Investment Bank Group, so businesses with up to 499 employees can invest for the longer-term at competitive rates.
VI. Measures to support hospitality and tourism sector include: (a) CRSS; (b) temporary VAT rate cut from 13.5 to 9 percent until end-2021; (c) Stay and Spend Incentive through a tax credit; (d) €10 million Restart Fund for the Tourism sector; (e) €10 million Performance Support Scheme for the culture sector to assist planning for events in the context of COVID-19.
VII. Tax measures include but not limited to: (a) reduction in the standard rate of VAT from 23 to 21 percent for 6-month starting Sep 2020; (b) warehousing of tax liabilities for affected businesses to delay payment of their PAYE and VAT debts in part of in full for a set period with no interest or penalties; (c) Interest rate reduction to 3%, applying to agreed repayments of all tax debt (where agreement has been reached prior to September 30 2020); (d) To provide immediate cash-flow support to previously profitable companies, the early carryback of trading losses will be allowed, leading to an immediate refund of some or all of corporation tax paid; (e) Income tax relief for self-employed individuals who were profitable in 2019, but as a result of the COVID-19 pandemic, incur losses in 2020; (f) RCT (Relevant Contract Tax) rate review scheduled to take place in March 2020 is suspended; (g) Critical pharmaceutical products and medicines will be given a Customs ‘green routing’ to facilitate uninterrupted importation and supply.

Monetary and macro-financial

For monetary policy at the currency union level, please see the Euro Area page.
Additional measures announced by Central Bank of Ireland (CBI) include: (i) the release of the countercyclical capital buffer , which will be reduced from 1% to 0%.; ii) payment breaks available for mortgages, personal and business loans for customers affected by COVID-19 that were extended from three to six months. The payment break will not affect borrowers’ credit records, and recording on the Central Credit Register will be adjusted; this will result in any arrears being exempt from the classification and loan loss provisioning as NPLs.
Additionally, there are moratoriums on evictions and rent increases for the duration of COVID emergency; and notice period for tenancies of less than six months was increased to 90 days; the Commission for Regulation of Utilities has issued a moratorium on disconnections of domestic customers for non-payment to the gas and electricity suppliers.

Exchange rate and balance of payments

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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 7percent (on an annualized basis) in the first quarter and 29.2percent in the second quarter of 2020, before rebounding by 38.9 percent in the third quarter.
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 workplaceand reopening most stores. In May, the authorities also allowed schools to gradually open by the end of the month, eased movement and gathering restrictions. Malls opened early in the month, while restaurants towards the end of the month. The authorities have issued safety guidelines for distancing and sanitation in businesses and requiring the use of face masks in public places. On June 29, following a resurgence in morbidity, the authorities imposed new restrictions on gatherings and increased telework for public sector employees. This was followed by further restrictions in early July including on capacity use for restaurants and public transportation buses, closing bars and gyms.The authorities eased some restrictions in late July and early August.The reopening of the economy allowed for a strong rebound in economic activity, with output increasing 38.9 percent (on an annualized basis) in the third quarter. In early September, the government imposed a lockdownin several cities with high morbidity, followed by a second nationwide lockdown on September 18, which was tightened on September 25. The lockdown started to ease on October 18, including gradually opening schools throughout November. On December 27, a third nation-wide lockdown was imposed as the number of new cases increased sharply. Lockdown restrictions will be tightened further as of January 10. A vaccination campaign has been rolled out since December 20, and administered dosses have already exceeded 17 per 100 people.

Key Policy Responses as of January 7, 2021
Fiscal

On April 8, the parliament approved a package of NIS 80 billion (about 6.1 percent of 2020 GDP), which includes NIS 11 billion for health expenses. The package supports the social safety net (NIS 20bn), funding a relaxation in the requirements for unemployment benefits and grants for self-employed workers. It also provides NIS 41bn in liquidity assistance through (i) direct and government-guaranteed loans for large companies, SMEs, and other organizations, (ii) property tax relief for businesses, (iii) payment deferrals for VAT, municipal taxes, utilities, and income taxes, (iv) accelerated tax refunds, and (v) business grants. The package also contains NIS 8 bn for infrastructure projects, including IT support for SMEs and government digitalization. A one-time NIS 500 grant for families with children, the elderly and other vulnerable population groups was also approved by parliament. On June 2, parliament adopted a 20 billion (about 1.5 percent of 2020 GDP) expansion of the package, which includes employment incentives grants, support for high-risk businesses, and additional funds to support SMEs. On July 29, the parliament approved a second stimulus package of NIS 80bn, including 50 billion in budgetary measures and 30 billion in loans and guarantees. The package’s key features include extending unemployment benefits for furlough workers, expanding grants to self-employed workers and small businesses, and expanding the State Guarantee loan program for small and medium enterprises. In addition, parliament approved a one-off grant program amounting NIS 6.72bn for adults and families with children, excluding high earners. On September 29 , parliament approved additional NIS 10.5bn to support businesses and to increase eligibility for social benefits. In total, approved measures amount to about NIS 183 billion for 2020, and additional NIS 72 billion for 2021.

Monetary and macro-financial

Key monetary policy measures include: (i) the announcement of government bond purchases up to NIS 50 billion, expanded to 85 billion in late October (NIS 46.2 billion as of end-December), (ii) repo operations to provide shekel liquidity to the banks (NIS 1.5 billion as of end-December), (iii) a cut in the policy rate of 15bp to 0.1 percent, (iv) expanding the acceptable collateral for repos to include corporate bonds rated AA or higher, (v) a term funding scheme that has provided 3-year loans for banks to fund credit for small and microenterprises (19.6 billion as of end-December) (vi) launched a plan to purchase corporate bonds on the secondary market for up to NIS 15 billion (NIS 3.5 billion as of end-December). The Bank of Israel has taken measures to ease financial conditions for households and companies by: (i) reducing bank’s regulatory capital requirement by one percentage point; (ii) increasing the loan-to-value cap on residence-backed loans (from 50 to 70 percent); (iii) eliminating the additional 1 percent capital requirement on housing loans, (iv) allowing banks to calculate the debt-payment to income ratio for mortgage loans using pre-crisis income, under certain circumstances (v) raising the cap (from 20 to 22 percent) on the banks’ loan portfolio allocated to construction companies; (vi) allowing commercial banks to increase customers’ overdraft credit facilities and suspend restrictions on accounts of customers with checks returned due to insufficient funds, and (vii) reducing the leverage ratio by half a percent. In May, the Bank of Israel also announced a comprehensive framework that has been adopted by the banking system for deferring loan payments as assistance to bank customers in dealing with the ramifications of the coronavirus crisis. The framework has been extended several times and is currently set to expire in March. See also: https://www.boi.org.il/en/Pages/CoronaUpdates.aspx

Exchange rate and balance of payments

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Italy
Background. Net inflows of COVID-19 cases remain elevated. As of January 6, the number of active cases has declined from the peak at end-November to about 568,000. The number of hospitalized patients and those in intensive care units have also started declining. 76,000 people have died.
Reopening of the economy and additional containment measures. The nation-wide lockdown expired on May 4. Since then, manufacturing and construction reopened under new safety rules (e.g., staggered shifts, spaced workstation, temperature checks, masks). The government moved forward some of the reopening plans. In addition to retail shops, restaurants, cafes and hairdressers reopened on May 18 (the initial reopening plan was June 1). Sports facilities reopened on May 25, followed by cinemas and theatres on June 15. Regional governments are allowed the discretion to adjust the dates in both direction. People can now travel within their own region, and mobility restrictions across regions has been lifted on June 3, when international borders also reopen without restriction to and from other EU countries.

Following the increase in confirmed cases beginning in early August, the government reintroduced some containment measures, including closing night clubs, capacity limits at cultural sites. Mask wearing in public places (both in and outdoors) is required through end January 2021. Fines were raised for those who do not follow anti-contagion and quarantine rules. Rapid Covid tests are required for travelers coming back from a number of countries in Europe, and have been authorized for use in schools to identify and quarantine infected individuals, thereby avoiding the need to close entire schools. The state of emergency was extended through January 2021
A series of additional containment measures have been rolled out since mid-October and have been extended until mid-January 2021. Closures of services and mobility restrictions are more focused and vary by risk levels assigns to regions. Regions with the highest level of infections must close all bars, restaurants, and most non-essential shops. Travelling into high risk regions (and between municipalities in these regions) is only permissible for essential work- and health-related reasons. In early 2021, the ban on travelling between regions has been introduced for low risk areas.

Key Policy Responses as of January 8, 2021

Fiscal

On March 17, the government adopted a €25 billion (1.6 percent of GDP) “Cura Italia” emergency package. It includes (i) funds to strengthen the Italian health care system and civil protection (€3.2 billion); (ii) measures to preserve jobs and support income of laid-off workers and self-employed (€10.3 billion); (iii) other measures to support businesses, including tax deferrals and postponement of utility bill payments in most affected municipalities (€6.4 billion); as well as (iv) measures to support credit supply (€5.1 billion)

On April 6, the Liquidity Decree allowed for additional state guarantees of up to €400 billion (25 percent of GDP). The guarantee envelope from this and earlier schemes is aimed to unlock more than €750 billion (close to 50 percent of GDP) of liquidity for businesses and households (see below).

On May 15, the government adopted a further €55 billion (3.5 percent of GDP) “Relaunch” package of fiscal measures. It provides, among other things, further income support for families (€14.5 billion), funds for the healthcare system (€3.3 billion), and other measures to support businesses, including grants for SMEs and tax deferrals (€16 billion).

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

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

Monetary and macro-financial

For monetary policy at the currency union level, please see Euro Area section.
Key measures adopted in the government’s Cura Italia’ and the Liquidity Decree emergency packages include: a moratorium on loan repayments for some households and SMEs, including on mortgages and overdrafts; state guarantees on loans to all businesses; incentives for financial and non-financial companies in the form of Deferred Tax Activities; state guarantee to the state development bank—Cassa Depositi e Prestiti—to support lending and liquidity to banks to enable them to finance medium- and large-sized companies; con-insurance scheme for exporters.
The Bank of Italy have announced a series of measures to help banks and non-bank intermediaries under its supervision, in line with the initiatives undertaken by the ECB and the EBA. These include the possibility to temporary operate below selected capital and liquidity requirements; extension of some reporting obligations; and rescheduling of on-site inspections. On May 20, 2020, to promote the use of credit claims as collateral and to incentivize lending to small and medium-sized enterprises, the Bank of Italy has extended the additional credit claim frameworks to include loans backed by COVID-19-related public sector guarantees.
IVASS (Insurance supervisory authority) followed the EIOPA recommendations and called insurance companies to be prudent about dividends and bonus payments to protect their capital position; insurance companies are asked to provide updated Solvency II ratios on a weekly basis.
CONSOB decided to maintain until October lower minimum threshold beyond which it is required to communicate the participation in a listed company. These measures are aimed to contain the volatility of the financial markets and to strengthen the transparency of the holdings in the Italian companies listed on the Stock Exchange.

Exchange rate and balance of payments

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

Key Policy Responses as of July 14, 2020

Fiscal

The Minister of Finance announced tax cuts of around 0.6 percent of GDP, along with targeted measures for up to 0.5 percent of GDP to counteract the effects of COVID19. This is largely expected to be financed by ongoing asset divestment. Additional measures have been announced to support the most affected sectors by the virus and contain labor shedding, including SCT and custom duty waivers on medical supplies and sanitizers and a COVID-19 Allocation of Resources for Employees (CARE) program, which envisages (i) temporary cash transfers to businesses in targeted sectors based on the number of workers employed; (ii) temporary cash transfer to individuals where loss of employment can be verified since March 10; (iii) grants targeted at the most vulnerable segments of society. The Minister also noted that the Fiscal Responsibility law contains an escape clause that would allow for some temporary flexibility in meeting the fiscal targets, should the economic situation deteriorate further. On May 13, the Ministry of Finance tabled in Parliament a Supplementary Budget for FY2020/21 targeting a primary balance of 3.5 percent of GDP to account for the expected revenues shortfalls and necessary spending reallocations as a result of the COVID-19 crisis.

Monetary and macro-financial

The overnight policy rate remains unchanged at 0.5 percent, but Bank of Jamaica has taken additional actions to ensure uninterrupted system wide liquidity, with an estimated J$57 billion liquidity injection to date, and removal of limits on the amounts that deposit taking institutions can borrow overnight without being charged a penalty rate and a broadening of the range of acceptable repo collateral. The authorities are also encouraging the banking sector to conserve capital by postponing dividends payments to shareholders reschedule loans and mortgages, in addition to the mortgage rate cuts already announced by the National Housing Trust.

Exchange rate and balance of payments

The Bank of Jamaica has intervened in the FX market through limited sales of reserves via the B-FXITT auction mechanism, issuance of US$ linked notes and, repos of FX denominated Government of Jamaica bonds with banks and securities dealers.

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Japan
Background. The first confirmed COVID-19 case in Japan was reported on January 16, 2020. In response to the outbreak, the authorities have taken several measures targeted towards health and containment efforts. Japan expanded entry bans; as a result, this brings to a total of 152 countries/regions currently subject to Japan’s entry ban which will restrict the entry of foreigners who have visited COVID-19 affected countries and regions within the last 14 days. Then Prime Minister Shinzo Abe declared the state of emergency for seven prefectures (including Tokyo, Saitama, Kanagawa, Chiba, Osaka, Hyogo, and Fukuoka) on April 7 and expanded the coverage of the state of emergency to all Japanese prefectures on April 16, effective through May 6. The state of emergency enabled prefectural governors in the designated areas to request people to stay at home, order closures of schools and public facilities, build temporary medical facilities, and adopt actions to support medical and food supplies. On May 4, PM Abe extended the nationwide state of emergency through May 31. The 2020 Tokyo Olympic Games have been postponed to July 23-August 8, 2021.
Reopening of the economy. Amid the declining trend of daily new confirmed cases of COVID-19 since the beginning of May, the state of emergency was lifted for 39 prefectures out of a total of 47 prefectures on May 14 and for Osaka, Kyoto, and Hyogo on May 21. On May 25, the state of emergency was lifted for all prefectures, earlier than the previous May 31 expiry date. Restrictions on inter-prefectural travel were lifted on June 19.
Following the second wave of infections, Tokyo raised the COVID-19 alert level to the highest on July 15. Amid that backdrop, it requested residents to refrain from traveling outside Tokyo and karaoke venues and restaurants serving alcohol to close by 10 p.m. In August, Aichi, Osaka, Miyazaki, Okinawa also requested restaurants that serve alcohol and karaoke venues to shorten operating hours to close at 8 p.m. and 10 p.m. As new infections continued to trend down, Tokyo lowered the alert level by one notch from the highest level on September 10 and lifted a measure that shortened hours for restaurants and karaoke from September 16.
As new infections increased, on November 19, Tokyo raised the COVID-19 alert level to the highest and requested residents to refrain from going outside and karaoke venues and restaurants serving alcohol to close by 10 p.m. until mid-December. Hokkaido, Ibaraki, Saitama, Chiba, Kanagawa, Aichi, Osaka also requested karaoke venues and restaurants serving alcohol to shorten operating hours to close at 9 p.m. and 10 p.m. until mid-December. Sapporo and Osaka were temporarily removed as destinations from the Go-to-Travel campaign—a government’s subsidy program to promote domestic travel—through December 8. On December 14, the government temporarily suspended the Go To Travel campaign nationwide from December 28, 2020 to January 11, 2021. On January 7, 2021, PM Suga declared the state of emergency for Tokyo and three neighboring prefectures (Saitama, Kanagawa, and Chiba) effective from January 8 to February 7. The government has asked restaurants and bars to shorten operating hours to close by 8 p.m., urged teleworking to reduce the number of workers at offices by 70 percent, requested residents to stay at home and refrain from non-essential outings especially after 8 p.m., and limited the audiences at large events to 5,000 people.
Regarding cross-border travel, Japan has resumed re-entry into Japan by all foreign nationals who possess the status of residence since September. Japan has agreed on "Residence Track" which allows essential business exchange between the two countries, on condition they take preventive and quarantine measures, with Brunei, Cambodia, China, Lao's People's Democratic Republic, Myanmar, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam. In addition, Japan has agreed with China, Singapore, South Korea and Vietnam on "Business Track" which enables limited business activities during the 14-day stay at home period (partially relaxes restrictions on such activities), immediately after arrival at those countries/regions or Japan, on condition that travelers accept additional quarantine measures such as submission of "Schedule of Activities in Japan." Starting from October, the holders of statuses of residence of "Student", "Dependent" and others, in addition to cross-border business travelers of all countries and regions have been permitted to enter Japan under the condition that the person is hosted by a company/entity that can assure observation of quarantine measures. On October 30, the Government of Japan decided to remove the entry ban on Australia, Brunei, China (including Hong Kong and Macau), New Zealand, Republic of Korea, Singapore, Taiwan, Thailand and VietNam.
As a precautionary step against the new variant of Coronavirus, Japan has suspended new entry into the country of nonresident foreign nationals from December 28, 2020 to January 31, 2021. New entry of nonresident foreign nationals from the United Kingdom and South Africa is suspended until further notice from December 24 and 26, 2020, respectively. The government requires all Japanese citizens and foreign nationals coming from countries and regions whose authorities have announced the confirmation of domestic infection of new variant of Coronavirus (except for those who enter or return to Japan under the framework of “Business Track” and “Residence Track”) to submit negative COVID-19 test results within 72 hours prior to departure and undergo tests upon arrival from December 30, 2020 to January 31, 2021.

Key Policy Responses as of January 7, 2021

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 (20.9 percent of 2019 GDP) and subsumed the remaining part of the previously announced packages (the December 2019 stimulus package (passed in January 2020) and the two COVID-19-response packages announced on February 13 and March 10 respectively). The April package aims at five objectives, including to: (i) develop preventive measures against the spread of infection and strengthen treatment capacity (expenditure of 0.4 percent of 2019 GDP), (ii) protect employment and businesses (15.8 percent of 2019 GDP), (iii) regain economic activities after containment (1.5 percent of 2019 GDP), (iv) rebuild a resilient economic structure (2.8 percent of 2019 GDP), and (v) enhance readiness for the future (0.3 percent of 2019 GDP). The key measures comprise cash handouts to every individual and affected firms, deferral of tax payments and social security contributions, and concessional loans from public and private financial institutions.
On May 27, the Government of Japan announced the second FY2020 draft supplementary budget (passed on June 12). The package, worth ¥117.1 trillion (20.9 percent of 2019 GDP), covers (i) health-related measures, (ii) support to businesses, (iii) support to households, (iv) transfers to the local governments, and (v) raising the ceiling of the COVID-19 reserve fund. The specific measures include expansion of the work subsidies, provision of subordinated loans by the public financial institutions to affected firms, and subsidies to affected firms for their rent payments.
On December 8, the Government of Japan adopted the Comprehensive Economic Measures to Secure People's Lives and Livelihoods toward Relief and Hope. The package, worth ¥73.6 trillion (13.1 percent of 2019 GDP), covers measures to: (i) contain COVID-19, (ii) promote structural change and positive economic cycles for Post-Corona eraand (iii) secure safety and relief with respect to disaster managementtogether with allocation of the COVID-19 Reserve Fund. The specific measures include incentives for firms to invest in digitalization and green technologies, as well as an extension of the ongoing COVID-19 responses such as concessional loans to affected firms.
Japan is the largest contributor to IMF financial resources and the Fund’s concessional lending facilities, as well as the longest standing partner in capacity development activities. In early April, Japan pledged an additional US$100 million contribution to the IMF’s Catastrophe Containment and Relief Trust as immediately available resources to support the Fund’s capacity to provide grant-based debt service relief for the poorest and most vulnerable countries to combat COVID-19. In order to provide emergency financing for broader emerging markets and developing countries to meet their prospective imminent needs, on April 16, Japan announced that it is aiming at doubling its contribution to the Poverty Reduction and Growth Trust (PRGT) from the current SDR 3.6 billion. Japan made available the first SDR 1.8 billion immediately. Japan calls on other ember countries to follow quickly, and Japan will match an additional SDR 1.8 billion with their contributions. In October, Japan announced a new contribution of US$10 million to the COVID-19 Crisis Development Initiative.

Monetary and macro-financial

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

At its April 27 monetary policy meeting, the BoJ announced additional measures to maintain stability in financial markets and support credit provision. The BoJ decided to purchase a necessary amount of JGBs without setting an upper limit on its guidance on JGB purchases. In addition, it raised the maximum amount of additional purchases of commercial paper and corporate bonds, lifting the upper limit of commercial paper and corporate bond holdings to ¥20 trillion (US$186 billion) in total. The special funds-supplying operations have been scaled up by expanding the range of eligible counterparties and collateral to private debt (including household debt), as well as by applying a positive interest rate of 0.1 percent to the outstanding balances of current accounts held by financial institutions at the BoJ that correspond to the amounts outstanding of loans provided through this operation. On May 22, the BoJ introduced a new fund-provisioning measure to support financing of mainly small- and medium-sized enterprises, providing funds against loans such as interest-free and unsecured loans made by eligible counterparties based on the government’s emergency economic measures. The total size of the special funds-supplying operation and the new fund-provisioning measure amounts to about ¥90 trillion (US$838 billion).
The BoJ in coordination with the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve and the Swiss National Bank enhanced the provision of U.S. dollar liquidity on March 15, by lowering the pricing on the standing U.S. dollar liquidity swap arrangements by 25 basis points. Japan also has several important bilateral and regional swap arrangements with Asian countries.
The government expanded the volume of concessional loan facilities (interest free without collateral) primarily for micro, small and medium-sized businesses affected by COVID-19 through the Japan Finance Corporation and other institutions. The government will also enhance access to loans with the same conditions from local financial institutions, such as local banks. To support borrowers during this period of stress, the Financial Services Agency (FSA) has reassured banks that they can assign zero risk weights to loans guaranteed under public guarantee schemes, draw down their regulatory capital and systemically important bank buffers to support credit supply, and draw down their stock of high-quality liquid assets below the minimum liquidity coverage ratio requirement. The FSA has also asked banks to defer principal payments on mortgage loans as needed, and refrain from charging fees for modifying mortgage loan conditions.

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

Exchange rate and balance of payments

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Jordan
Background. Jordan has reported 302,856 cumulative cases, and 3,955 deaths related to COVID as of January 7. At the onset of the global epidemic, the authorities implemented a range of measures to try and limit the spread of the virus. Early measures included the suspension of all international flights, the enforcement of strict curfews, restrictions on movement, and the closure of businesses, schools and universities. As the number of contagions remained low, restrictions were progressively relaxed over the summer. In parallel, the authorities launched a public communication and awareness campaign to inform the public on examination and treatment facilities and imposed social distancing measures and the use of masks. In the Fall, the sharp rise in COVID cases led the authorities to enforce local lockdowns. In early October, the Government re-instated a nationwide lockdown for Fridays until the end of 2020, and closed schools and universities until the end of the semester.
Reopening of the economy. A phased-out easing of the first wave lockdown started on April 6, when factories located in industrial zones were allowed to resume operations. The re-opening of the economy continued through the month of April, with work partly resuming for selected sectors on April 21^t , as well as most commercial activities on April 30. .On May 4 , Jordan lifted most lockdown measures and allowed most economic sectors to operate under strict safety guidelines. In late May 2020, the government allowed companies in hard-hit sectors to cut employees’ May and June salaries by 30%. The authorities announced that transport between governorates would resume, night curfews would be shortened, hotels and cafes would be allowed to re-open, along with sporting events with no spectator effective June 6. Universities remained closed and a curfew continued to be in effect at night. On July 15 , the Ministry of Education announced that schools would reopen on September 1 for the new academic year. The Ministry of Health and local companies developed the “Aman” (“Safety”) application, which alerts users when they come into contact with someone who has COVID-19. The phased-out approach also entailed the complete restart of economic activities in certain regions that remained closed to the rest of the country. The government also started organizing the return of Jordanians that were abroad at the onset of the crisis and had not been able to return given the interruption of international flights. On August 13, Jordan closed its border with Syria due to virus concerns following an uptick in new cases. The Government reinstated Friday curfews starting August 27 in Amman and Zarqa. On September 8 , Jordan re-opened airports for regular commercial flights with strict measures to contain the pandemic. Passengers from green-listed countries (low COVID cases countries) were able to enter Jordan if they proved they had resided for at least 14 days in the origin country, presented a negative PCR test conducted less than 72 hours before departure and took another test at the airport in Jordan. Passengers from other countries would need to quarantine for 7 days and take another PCR test at the end of the quarantine – in November, the 7-day quarantine was introduced for passengers from all countries who tested negative when entering Jordan. The Government enacted Defense Order 16 in mid-September, which introduced new measures designed to contain the pandemic (e.g.: limits to social gatherings) and includes strict penalties on people and businesses which do not comply with health safety measures (incl. fines, establishment closure and potential imprisonment). On October 6, the Government announced that a total lockdown would be imposed on all governorates on all coming Fridays and Saturdays until further notice. On October 20, the newly formed Government of Prime Minister Bisher al Khasawneh announced that total lockdowns would apply to all governorates only on Fridays, and introduced a daily curfews from 11pm to 6am for citizens and from 10pm to 6am for businesses across the country. Schools and universities were also closed and distance learning re-instated until the end of the first semester. On October 22, the Government issued defense orders 19 and 20 which allowed Friday prayers while introducing strict safety guidelines, restricted restaurants' operations to only 50 percent of capacity with no more than six people per table, and introduced new fines for establishments and persons not abiding by the defense orders rules. On November 3, the Ministry of Health struck a deal with the Private Hospitals Association to allocate at least 1,000 beds and 150 ICU beds for COVID-19 patients who would be referred to private hospitals by public hospitals. The authorities announced that starting from November 11, a total lockdown would be implemented for 4 days. In early December, the number of new weekly cases started to decline for the first time since the beginning of the second wave. On December 15, the authorities announced that vaccination would start in 2021 Q1, with priority given to those aged 60 and over and who suffer from chronic diseases. A first batch of 200,000 vaccines is expected to be delivered in early 2021.
Relationship with the IMF: On May 20, 2020, the Executive Board of the International Monetary Fund (IMF) approved Jordan's request for emergency financial assistance under the Rapid Financing Instrument (RFI) equivalent to SDR 291.55 million (about US$ 400 million, or 85 percent of quota). The purchase under the RFI is expected to cover part of Jordan's financing needs stemming from the COVID-19 shock. IMF has conducted (virtually) the 1st review mission under the Extended Fund Facility (EFF) that was approved in March 2020, and reached staff level agreement in November, 2020. On December 14, 2020, the IMF Executive Board approved the completion of the 1st review of the EFF. The completion of the review will make SDR 102.93 million (about US$148 million) immediately available.

Key Policy Responses as of January 7, 2021

Fiscal and structural

On March 18, the Ministry of Finance announced a host of measures in response of the epidemic. Measures included (i) sales tax exemption on sanitizers, face masks, and medical equipment; (ii) the allocation of 50 percent of maternity insurance revenues (JD 16 million – about USD 23 million) to material assistance for the elderly and the sick; (iii) the introduction of price ceilings on essential products; (iv) the postponement of 70 percent of customs duty collections due from selected companies and the reduction of social security contributions from private sector establishments (from 21.75% to 5.25%). On March 31 , Prime Minister Omar Razzaz issued the Defense Order No. 4, establishing a coronavirus relief fund under the name "Himmat Watan" (a nation's effort), to which local and foreign donations will be deposited to support the Kingdom’s efforts to eradicate COVID-19. The government allocated additional spending (JD 50 million – about USD 71 million) for purchases of health equipment and supplies, rental of hotels for quarantines, and additional COVID-related security costs. It also instituted a temporary cash transfer program for the unemployed and self-employed (JD 81 million – about USD 114 million). On June 15, Prime Minister Razzaz announced a battery of measures to support the tourism sector, by: : (i) allowing tourism sector to pay its 2019 tax liability in installments with no penalty; (ii) reducing the general sales tax from 16pc to 8pc and of the service tax from 10pc to 5pc for hotels and restaurants. The Ministry of Labor announced a plan to re-instate a one-year military service to help contain youth unemployment in the aftermath of the pandemic. On December 3, Prime Minister Khasawneh announced expansion of the cash transfer program to cover 100,000 new families and daily workers; funding to protect nearly 180,000 jobs in the hard-hit sectors, and additional support for the tourism sector.

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

Exchange rate and balance of payments

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Kazakhstan
Background. Kazakhstan reported 159,044 COVID-19 cases and 2,262 deaths as of January 5, 2021. A state of emergency introduced in mid-March to contain the spread of the coronavirus was lifted on May 11 and followed by a gradual ease of quarantine measures. Quarantine measures were re-imposed in early July and adjusted later in light of new development of the COVID-19 situation. Kazakhstan launched local production of the Russia-developed vaccine (Sputnik V) in December 2020 and recently reached a preliminary agreement with another vaccine developer (Pfizer). The authorities plan to start voluntary mass vaccination in early 2021; the first stage vaccination is expected to cover groups with high risk exposure, including doctors, teachers, and law enforcement workers. Preliminary estimate suggests that overall growth in the first nine months was about -2.8 percent (yoy), while high frequency indicator points to a slight deterioration in October. The economic contraction is mainly due to weak activity in the service sector and the oil production cut required under the OPEC+ agreement. In March, the President announced a significant anti-crisis package (9 percent of GDP), and further supportive measures were proposed in the presidential statement delivered in early September. Immediate policy actions have included trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises. Near- to medium-term plans include improving public administration through civil service reform, enhancing competitiveness in priority sectors such as manufacturing, pharmaceutical, and agriculture, and adopting social policies to support the welfare of the population.
Reopening of the economy. The authorities started to re-open the economy in mid-May. Enterprises in selected sectors were allowed to resume work with strong sanitary and epidemiological measures. Restrictions on food exports introduced under the state of emergency to ensure domestic food supply were lifted on June 1. The reopening was interrupted by the reintroduction of the quarantine regime in early July amid rising number of cases. The authorities only resumed partial reopening in late August following the epidemy's stabilization, and have remained cautious and monitored the situation closely. The daily number of cases rose significantly in late October, prompting the authorities to re-impose quarantine to the most affected regions. The authorities have also imposed more stringent controls and testing requirement at the border and reduced the number of flights connecting a few countries with worsening epidemiological situations. In contrast, the authorities continue to soften restrictions on activities in low-risk regions and with low human contact.

Key Policy Responses as of January 6, 2021

Fiscal

The anti-crisis package includes cash payments to the unemployed and self-employed, an increase in pension and social benefits, additional health spending, and support for employment and businesses. Subsidized lending of KZT 1 trillion (1½ percent of GDP) is being provided under the State Program “Economy of Simple Things,” along with actions to help small and medium-sized enterprises (SMEs) finance working capital (KZT 800 billion). KZT 1.8 trillion is allocated to support employment under an “Employment Roadmap” program, including some large-scale projects to modernize the transportation infrastructure. Selected enterprises and individual entrepreneurs are also eligible for new tax incentives. Further measures recently announced to restore economic growth include: a subsidized mortgage program for households with a segment targeting youth specifically, tax incentives to agriculture and hard-hit sectors (civil aviation, tourism), credit support to SMEs and manufacturing enterprises (the latter via a newly created industry development fund), and infrastructure development. Following the reintroduction of the quarantine in early July, the authorities provided additional cash transfers to individuals who lost their jobs due to the quarantine, lowered subsidized interest rates for SME loans (to 6 percent), and extended tax concessions for vulnerable individuals and businesses.Some supportive measures (e.g. “Employment Roadmap” and working capital support to SMEs) are expected to continue in 2021.

Monetary and macro-financial

The National Bank (NBK) raised its policy rate from 9.25 percent to 12 percent on March 10 after pressures on the tenge (KZT) intensified with the drop of oil prices. It cut the base rate to 9.5 percent in early April and further to 9 percent in July to support activity. To support banks and the economy, the authorities have, since the imposition of the state of emergency, (i) lowered risk weights (for SME from 75% to 50%, for FX loans from 200% to 100%, and for syndicated loans from 100% to 50%); (ii) expanded the list of eligible collaterals; (iii) lowered capital conservation buffer (by one percentage point); (iv) reduced the liquidity coverage ratio requirement (from 80% to 60%), and (v) lowered limits on foreign currency positions. To support the population and SMEs, the authorities have encouraged banks and other lenders to grant loan repayment deferrals to eligible borrowers, and to freeze their loan classifications at the pre-COVID-19 status. Most of these measures are expected to be in place for at least six months, with some (e.g., capital conservation buffer) extending to mid-2021. Cash withdrawals limits have also been temporarily imposed on legal entities starting early June. The financial supervisor recently revoked the license of a medium-sized bank which failed to meet the minimum capital requirement.

Exchange rate and balance of payments

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

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Kenya
Background. The first confirmed COVID-19 case was reported on March 14, 2020. The government adopted a number of containment measures, including social distancing and heightened restrictions in most non-essential social spaces to gatherings; encouragement of teleworking where possible; establishment of isolation facilities; declaration of night curfew and limitations on public transportation passenger capacity. Some of the containment measures have since been relaxed. Domestic flights commenced on July 15th, 2020, while international flights commenced on August 1st, 2020. All international arrivals have to undertake specifically a SarsCoV2 RT PCR Swab test, failure to which they will be quarantined for two weeks. Test result notwithstanding, passengers from selected counties are required to undergo a fourteen-day quarantine. A resurgence of infections in a second wave led to reversal of some of the relaxed measures. Physical participation in places of worship with an age limit of 65 years to take a maximum of 90 minutes down from two hours. Attendance to weddings limited 50 people down from 200 people. While funeral attendance limit remains 200 people, those allowed at the grave side are only 15. Schools re-opening was in phases and were fully reopened on January 4, 2021.

Key Policy Responses as of January 7, 2021

Fiscal

The government, as part of the FY2019/20 budget (ending June 30, 2020), initially earmarked Ksh40 billion (0.4 percent of GDP) for Covid-related expenditure, including health sector (enhanced surveillance, laboratory services, isolation units, equipment, supplies, and communication); social protection (cash transfers and food relief); and funds for expediting payments of existing obligations to maintain cash flow for businesses during the crisis. The FY2020/21 budget includes a Ksh56.6 million (0.5 percent of GDP) economic stimulus package that includes a new youth employment scheme, provision of credit guarantees, fast-tracking payment of VAT refunds and other government obligations, increased funding for cash transfers, and several other initiatives. A package of tax measures has been adopted, including full income tax relief for persons earning below the equivalent of $225 per month, reduction of the top pay-as you earn rate from 30 to 25 percent, reduction of the base corporate income tax rate from 30 to 25 percent, reduction of the turnover tax rate on small businesses from 3 to 1 percent, and a reduction of the standard VAT rate from 16 to 14 percent. Some of the tax measures, including the reduction of top PAYE rate, corporate income tax rate and VAT were reversed effective January 1, 2021.

Monetary and macro-financial

On March 24, the central bank (1) lowered its policy rate by 100 bps to 7.25 percent; (2) lowered banks’ cash reserve ratio by 100 bps to 4.25 percent; (3) increased the maximum tenor of repurchase agreements from 28 to 91 days; and (4) announced flexibility to banks regarding loan classification and provisioning for loans that were performing on March 2, 2020, but were restructured due to the pandemic. The central bank has also encouraged banks to extend flexibility to borrowers’ loan terms based on pandemic-related circumstances and encouraged the waiving or reducing of charges on mobile money transactions to disincentivize the use of cash. On April 15, the central bank suspended the listing of negative credit information for borrowers whose loans became non-performing after April 1 for six months. A new minimum threshold of $10 was set for negative credit information submitted to credit reference bureaus. On April 29, the central bank lowered its policy rate by 25 bps to 7.0 percent. Some of the measures including waiving or reducing of charges on mobile money transactions and suspension of listing of negative credit information for borrowers were reversed on January 1, 2021.

Exchange rate and balance of payments

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Kiribati
Background. Kiribati does not have any confirmed cases as of January 7, 2021. Travel restrictions have been in place since January and borders have been closed on March 21, except for delivery of essential goods (quarantine requirements apply at all ports). A press release to prevent speculations and panic was released on March 17 and government task forces have been formed to address commodity and cargo buffers; communication and awareness; isolation centers and containment efforts; and border control. A state of public emergency has been declared and schools suspended on March 28. Since then schools have reopened.

Key Policy Responses as of January 7, 2021

Fiscal

A stimulus package was approved in June 2020. The package amounts to AUD 15.5 million, equivalent to 7.5 percent of GDP. It consists of unemployment support (AUD 2.6 million), private business stimulus (AUD 4.5 million plus AUD 3.5 million cargo buffer), and SOE stimulus (AUD 5.2 million). This excludes the first response package of AUD 11.5 million that has been largely donor-funded
The specific measures include: unemployment benefit via partial income substitution, employer cost sharing for off-shore observers, sea farers, and fruit packers, reduction in social security contributions for both employers and employees, and loan support through government-owned financial intermediaries.

Monetary and macro-financial

Exchange rate and balance of payments

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Korea
Background. Korea first reported confirmed COVID-19 cases in late January, with the average daily number of new cases peaking at over 500 in early March. The authorities rapidly implemented a comprehensive strategy to combat the virus based on widespread testing, aggressive contact tracing, and prompt isolation and treatment of cases. Along with voluntary social distancing, this approach slowed infections, allowed most businesses to remain open, and brought new cases near zero during the summer. The authorities recently introduced a five-tier framework for distancing measures, with tiers set by region using multiple infection metrics, and granular restrictions tailored to the risks of various activities. Infections have climbed recently despite tighter limits on bars and clubs, in-person education, and public gatherings. Real GDP in Q2-2020 declined by -3.2 percent in quarterly terms but rebounded to 2.1 percent growth in Q3-2020.

Key Policy Responses as of January 7, 2021

Fiscal

On March 17, the National Assembly passed the first 2020 supplementary budget. The supplementary budget includes a decline in revenue by KRW 0.8 trillion, and additional KRW 10.9 trillion spending on disease prevention and treatment, loans and guarantees for business affected, support for households affected, and support for local economies affected.
On April 30, the National Assembly passed the second 2020 supplementary budget. The supplementary budget includes an increase in spending by KRW 8 trillion to fund an emergency relief payment program of KRW 14.3 trillion that provides transfers to households.
On July 3, the National Assembly passed the third 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 spendinghas beenincluded in the 2020 (3rd) supplementary budget.A total of KRW 67.7 trillion(accumulated) will be invested by 2022, and by 2025 a total of 160 trillion won (accumulated, 114.1 trillion won from fiscal investment) will be invested. A total of 1.9 million jobs are expected to be created.
On September 22, the National Assembly passed the 4th supplementary budget. An additional KRW 7.8 trillion will be spent on support for small businesses and SMEs (3.9 trillion), employment support (1.5 trillion), support for low income households (0.4 trillion), and daycare support and others (2 trillion).
On December 2, the National Assembly passed the 2021 budget. Budgeted revenue for 2021is 482.6 trillion, about KRW 23 trillion (1.2 percent of GDP) lower than the projected 2021 revenue published in the2020 budget plan. Budgeted expenditure is 558 trillion, aboutKRW 11 trillion (0.6 percent of GDP) higher than the amount projected in the 2020 budget plan.

Monetary and macro-financial

The Bank of Korea (BOK) has taken several measures to ensure continued accommodative monetary conditions and facilitate financial system liquidity. These include 1) lowering the Base Rate by a cumulative 75 basis points, from 1.25 percent to 0.5 percent; 2) making unlimited amounts available through open market operations (OMOs); 3) expanding the list of eligible OMO participants to include select non-bank financial institutions; 4) expanding eligible OMO collateral to include bank bonds, certain bonds from public enterprises and agencies, and government-guaranteed MBS issued by KHFC; 5) easing collateral requirements for net settlements in the BOK payments system; and 6) purchasing Korean Treasury Bonds (KRW 6.0 trillion, with 5.0 trillion in additional purchases announced by end-2020). To augment available funding for SMEs, the BOK increased the ceiling of the Bank Intermediated Lending Support Facility by a total of KRW 18 trillion (about 0.9% of GDP) and lowered the interest rate to 0.25 percent (from 0.5-0.75 percent).
On March 24, President Moon announced a financial stabilization plan of KRW 100 trillion (5.3 percent of GDP). The main elements are: 1) expanded lending of both state-owned and commercial banks to SMEs, small merchants, mid-sized firms, and large companies (the latter on a case-by-case basis) including emergency lending, partial and full guarantees, and collateralization of loan obligations; 2) a bond market stabilization fund to purchase corporate bonds, commercial paper, and financial bonds; 3) financing by public financial institutions for corporate bond issuance through collateralized bond obligations and direct bond purchases; 4) short-term money market financing through stock finance loans, BOK repo purchases, and refinancing support by public financial institutions; and 5) an equity market stabilization fund financed by financial holding companies, leading financial companies, and other relevant institutions.

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

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

Exchange rate and balance of payments

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Kosovo
Background. The first confirmed COVID-19 cases were reported on March 13, 2020. Number of new cases continue to be high with declining trend during last weeks. New restriction measures been introduced by Ministry of Health, all entities that provide gastronomy services such as restaurants, coffee shops, are prohibited operating from 20.00 to 5:00, except for take away services, activities of shopping mall are prohibited from 20.00-5.00. Ministry of Health prepared a manual which sets rules that must be respected by everyone in order to control the situation. Containment measures taken by the government in order to delay the spread of the coronavirus include temporary suspension of educational process on all levels, closures of all non-essential businesses, social distancing, travel and movement restrictions. Starting from April 15 stronger movement restriction been introduced allowing people to go out only for 1.5 hours, since May 4 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 to 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 to 5:00 in four municipalities with highest number of cases and these restrictions been extended to four more municipalities as of July 13 and as of July 27 these restrictions extended to 5 more municipalities. Starting from September 25 no movement restrictions across whole country. School reopening has taken place from September 14 when grades 1,2,3,6,9 grouped in first phase started than second phase with grades 4 and 5 and third phase grades 7,8, 10, 11 and 12 started from September 21. Schools are operating, only in those where are new cases they are closed and supposed to continue online.
Wearing protection masks is obligatory. Institutions are obliged to keep disinfectants and masks at accessible places. Activity of kindergartens in public and private institutions is allowed. Recreational, cultural, and sport activities in closed premises are suspended. All shopping centers are obliged to stick to the working hours from 05:00-19:00. Religious ceremonies at religious institutions in Kosovo are allowed. Gathering of citizens more than 5 persons at public squares, parks and similar is prohibited. Fines will be applied for those they do not respect these measures.
Reopening of the economy. Starting 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 1third 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 1. Starting from June 8 no movement restrictions and borders with countries in the region are open. From June 26, the airport started operating with number of conditions to be followed. As of July 6, restaurants and cafe bars in four municipalities with highest number of cases allowed to work only if they have open space or take away service. Restriction measures for cafe bars and restaurants still in place, they are allowed to work until 20:00.

Key Policy Responses as of January 07 2021
Fiscal

Key spending and tax measures include: (i) allocation of €6 million to the health ministry; (ii) deferrals for corporate income and personal income taxes, and VAT; (iii) advancing payments for social assistance schemes by additional one month's amount (from one month to two months) to support families in need; (iv) removal of VAT on imports of wheat and flour; (v) deferral of public utilities payments until end of April. In addition, fiscal package in the amount of 180 million euro (2.5 percent of GDP) been adopted by government. New Economic Recovery Program in the amount of 365 million been adopted by the new government within which program are also projects foreseen under emergency fiscal package. Ministry of Finance has approached IFIs (e.g., IMF, WB, EU and EBRD) and other bilateral donors for financial support. Ministry of Finance has started making payment to workers as been planned under fiscal package and total spending related to covid-19 measures reached 288 million euro as of end December. Midyear budget review included additional budget ‘economic recovery program” to address some sectors affected by covid-19. New law on economic recovery been adopted by the assembly. New set of measures foreseen with this law, more budget support to businesses, suspension of some tax fees and implementation expected to come in 2021. New calendar on excise rate on tobacco been adopted, increase by 1 euro per unit from September this year, followed with another euro increase in January 2021, 2022 and continues until it reaches 55 euro per unit in 2025.

Monetary and macro-financial

The Central Bank of Kosovo (CBK) together with the Kosovo Banking Association decided to allow banks to suspend payments of loan instalments for businesses and individuals for three months which was ended in June. Another decision taken by CBK in June by which banks are allowed to make loan restructuring for up to one year and the process of application was until end of September. The CBK will apply regulatory forbearance on loan provisions and capital requirements on reprogrammed loans.

Exchange rate and balance of payments

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Kuwait
Background. Kuwait has been hit by two related shocks – the COVID-19 outbreak and sharp drop in oil prices. The first COVID-19 case was reported on February 24, and, as of January 5, the number of confirmed COVID-19 cases reached 152,027 with 312 deaths and 147,784 recoveries. The government acted early, progressively tightening measures to contain the spread of the virus. These included suspending inbound commercial flights, closing schools and universities, banning public celebrations and gathering, suspending nonessential work in governmental entities, and eventually imposing a 24-hr curfew. The authorities also adopted a package of policy measures to cushion the social fallout from the pandemic and prevent the economic scarring, focusing on small- and medium-size enterprises and preserving employment.
Reopening of the economy. The authorities announced a five-phase reopening plan on May 28. Each phase will last for three weeks and target certain activities, and the progression to next phase will be subject to health authorities’ assessment. The first phase that started on May 31 with reducing the curfew to 12 hours allows the reopening/resumption of mosques and places of worship that meet health requirements, industrial activities, home delivery services, public services (e.g., maintenance, shipping services, gas, and laundry), drive-through-services in restaurants and cafes, mass transit, gas stations, hospitals and clinics, vehicles and equipment service (e.g., car washing, spare parts, parking, and galleries), and the telecom. In the second phase that began on June 30 with easing the curfew to 9 hours and allow up to 30 percent of public and private sector employees to return to work; construction business, financial and banking business, retail shops, malls, pick-up services at restaurants and cafes, and public parks are permitted to open. The third phase started on July 28 with reducing the curfew to 6 hours. This phase envisages opening hotels and resorts and allowing taxi rides to only one passenger and social welfare visits. The resumption plan of commercial flights started on August 1 with capacity of no more than 30 percent. The fourth phase began on August 18 with the curfew kept at 6 hours and this phase would expand the activities to restaurants and cafes with safe spacing, and public transportation services with spacing; this phase also would allow employees to return to work; the authorities lifted curfew on August 30. In the last phase, family and social events, gatherings, weddings, graduation, and all kinds of events are allowed in addition to opening public and private sport courts, cinemas and theaters, personal care shops, sport and health clubs.
COVID-19 vaccine. Kuwait has agreed to import one million vaccines from Pfizer, 1.7 million from Moderna and three million doses of the Oxford-AstraZeneca vaccines. The Ministry of Health is planning to distribute doses of the vaccines starting from the end of this year and in the first quarter of 2021. Kuwait would be able to provide vaccines for around 2.8 million, two doses per person. All citizens are expected to receive the vaccine for free. Survey shows 46% of Kuwaitis will ‘refuse’ to take vaccine. The vaccination process started on December 27.

Key Policy Responses as of January 5, 2021

Fiscal

The government allocated KD 500 million ($1.6 billion or 1.5 percent of GDP) additional funds to support efforts in fighting the spread of COVID-19. It has formed a committee to implement stimulus measures to ease the negative impact of COVID-19 on economic activity. In particular, the authorities implemented the following measures:
(i) postpone social security contributions for 6 months for private sector companies;
(ii) remove government fees on selected sectors provided that savings are passed on to customers;
(iii) continue providing full unemployment benefits to nationals;
(iv) provide concessional, long-term loans to SMEs though joint financing from the SME fund and banks.

Monetary and macro-financial

The Central Bank of Kuwait (CBK) has been working with commercial banks to ensure uninterrupted access to financial services, including online banking, payment, settlement and electronic clearing systems, and access to disinfected banknotes. Other measures implanted by the CBK include:
(i) Committed to provide liquidity if needed;
(ii) Reduced interest rates on all monetary policy instruments by 1 percentage point, following the U.S. Fed’s decision to cut interest rates to zero;
(iii) Instructed banks to delay loan payments from companies and households affected by the shock for six months;
(iv)Instructed exchange companies providing services through applications and online to open accounts using EKYC and to link payments through SMS for existing clients, with the maximum amount of transfer not exceeding 1500 KD per month
(v) Instructed banks to provide SMEs affected by the shock with financing at maximum of 2.5% interest rate.
(vi) Decreased the risk weights for SMEs (from 75 percent to 25 percent) in calculation of risk-weighted assets for determining capital adequacy;
(vii) Reduced banks’ capital adequacy requirements by 2.5 percentage points, to 10.5;
(viii) Reduced the regulatory Net Stable Funding Ratio and Liquidity Core Ratio from 100 percent to 85 percent, and the Liquidity Ratio from 18 percent to 15 percent;
(viiii) Increased the Loan-to-Value limits for land purchase for residential projects from 50 to 60 percent, for existing homes from 60 to 70 percent, and for home construction from 70 to 80 percent.
(x)On October 20, the CBK cut rates of other monetary policy instruments, by 0.125% for the entire interest rate yield curve, up to the ten-year term. This includes REPO, CBK bonds, the term-deposits system, direct intervention instruments, and public debt instruments.

Exchange rate and balance of payments

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Kyrgyz Republic
Background. The COVID-19 pandemic has been hitting the economy very hard and created an urgent balance of payments need. The first confirmed case was reported on March 18, 2020. Recently, the epidemiological situation has improved, and new COVID-19 cases has been on downward trajectory. All sectors are being impacted with extreme severity as measures are being taken to stop the spread of the virus. The authorities have taken drastic measures to prevent the outbreak, including the closure of borders with China where 36 percent of imports of goods originate, border restrictions with Kazakhstan and Uzbekistan, the quarantine of people coming from abroad, a lockdown of all non-essential activities, and a curfew. As a result, tax revenue has declined substantially. At the same time, the weakening of oil prices has resulted in a decline in economic activity in Russia and a fall in remittances from Kyrgyz workers in that country. The state of emergency ended on May 10 and the curfew was lifted, while the quarantine regime will work until the stabilization of the epidemiological situation.
Reopening of the economy. The state of emergency ended on May 10 and the curfew was lifted, while the quarantine regime will work until the stabilization of the epidemiological situation. Large shopping centers and public transport have opened on May 21, and May 25, respectively. All activities in the economic and social spheres have resumed from June 1, 2020, with some restrictions on cultural, sports, and family events; entertainment activities, and preschool activities. Domestic flights and public transport between the regions of Kyrgyz Republic resumed on June 5. International flights resumed on June 15. The authorities will strictly monitor compliance with sanitary and epidemiological standards.

Key Policy Responses as of January 7, 2021

Fiscal

The authorities will safeguard health spending at around budgeted levels and create space for increasing health and other spending. In collaboration with international organizations, the authorities have recently adopted a health sector contingency plan, with an estimated cost of $16 million (0.2 percent of GDP) to provide training for health-care workers, procure personal protective equipment and medical tests, and to put in place a communication plan about measures to contain COVID-19. To mitigate the impact on the economy, the authorities have approved the first package of anti-crisis plan economic measures of $15 million (0.2 percent of GDP) including the postponement of tax payments, time-bound exemptions of property and land taxes, and temporary price controls on 11 essential food items. They prepared a second and, more recently, a third package of economic measures of about $540 million (7 percent of GDP), including temporary tax exemptions for SMEs, support food security program to the vulnerable groups, and subsidized credit to banks to provide funding to small and medium-size enterprises through soft loans. The implementation of containment measures has caused 17.4 percent (y-o-y) drop in tax revenue in H1 2020, which will lead to a temporary widening of the budget deficit. The authorities are seeking donor financial support to close the financing gap. On March 26, the IMF Board agreed to provide $121 million in emergency financial support to the Kyrgyz authorities. On May 8, the IMF Board approved $121 million, the second emergency assistance to the Kyrgyz Republic since the outbreak of the pandemic. The Kyrgyz authorities received budget assistance of $50 million from the Asian Development Bank (ADB) on June 10.

Monetary and macro-financial

The NBKR raised the policy interest rate by 75 basis points to 5 percent in February, amid global uncertainty and the increase in inflation.
The NBKR will postpone enactment of several financial regulations until further notice. In addition, it took the following decisions: 1) liquidity ratio (ratio between liquid assets and liabilities) is lowered to a minimum of 30% (from the current 45%); 2) liquidity ratio requirements (7-day and overnight/instant) will be removed; 3) minimum threshold level for mandatory reserve requirements is reduced from 80 to 70%; 4) risk-weights of FX corporate and retail loans will be reduced from 150% to 100%; 5) banks and Non-Bank Financial Institutions (NBFIs) should create a loan-loss reserve equal to 100% for the amount of overdue accrued interest payments on loans that have been given the status of non-accrual of interest income when overdue arrears are 270 days or more (from the now 90 days); 6) in the event of arrears arising from COVID-19, banks or NBFIs have the right not to downgrade the classification category due to financial condition of the borrower. Commercial banks can delay or restructure payments of the principal of loans extended to business and people for 6 months, if desired by borrowers.

Exchange rate and balance of payments

The National Bank of the Kyrgyz Republic (NBKR, the central bank) has already sold $519.7 million of foreign exchange reserves so far and the KGS has depreciated by 18.7 percent vis-a-vis the US$ in 2020 after a long period of stability since mid-2016. The external position is weakening as remittances and tourism receipts are falling (i.e. remittances by 1.6 percent in January-September compared to the same period last year).

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Lao P.D.R.
Lao P.D.R. has 41 confirmed cases of COVID-19 as of January 7, 2021. All businesses can resume activities, but must abide by preventative measures and practice social distancing. In-country travel and public transport are fully operational. All schools have resumed but must ensure hygiene and distancing practices. All indoor and outdoor sporting activities are now permitted, and audiences are allowed. 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. The Taskforce Committee has however decided to suspend all charter flights and visa for visitors from countries with on-going community infection, suspend concerts and large gathering and tighten control of natural borders with neighboring countries following recent increase in case numbers. Fast-track immigration policies with China is being implemented, while discussion on travel bubble policy with Vietnam, Japan and with some other ASEAN countries is ongoing. Price control of essential goods is still in place. The Taskforce Committee for COVID-19 Epidemic Prevention, Control and Response is monitoring latest developments and coordinates the authorities’ response. A separate Taskforce Committee and its seven working groups, met on July 13 to discuss possible renewals of the measures and policy responses introduced for April-June period. The committee is expected to submit a new proposal, covering economic recovery measures and policies, for the government’s consideration and approval.

Key Policy Responses as of January 7, 2021
Fiscal

Thirty billion kip has been allocated for prevention and control, while an additional budget request of 23.98 billion Kip for rapid procurement of protective and medical equipment from State Budget is under process. In parallel, the Taskforce Committee has launched a fundraising campaign from the public (as of June 1, about 17.5 billion kip in cash and 85.5 billion kip in kind have been raised). A 10-measure economic stimulus package has been endorsed by the cabinet. Measures include, establishing a separate task force to address the economic impact of COVID-19. A new electricity tariff, to ensure supply of electricity, in effect from May 1, 2020 through December 31, 2025, is in place. Extra efforts to ensure revenue collections through automated platforms and inspections targeting at stockpiling of essential goods are being considered.
Recent mitigation policies include income tax exemption for both civil servants and employees of private sector with income less than 5 million kip per month for three months; profit tax exemption for microenterprises with annual income between 50-400 million kip for three months; duty fee exemption for imports of goods to be used towards the outbreak; deferring tax collection from tourism related businesses for three months; postponing mandatory contribution to social security by affected businesses for three months and extending the submission of the 2019 financial report (annual tax filing) by two months and road tax payment by three months.
The government has agreed to compensate 60 percent of workers’ salary, who currently participates in the Social Security Scheme, and has had their work suspended during May and June 2020. Of the 170,000 members, close to 80,000 will benefit from this scheme through June. Terminated, and thereby unemployed, workers are eligible for an unemployment allowance in accordance to the Social Security Law.
Cuts in administrative expenses by at least 30 percent of annual budget for Ministries and central organizations and 10 percent for local authorities have been approved and intentions to cut unnecessary spending in proportion to revenue shortfall has been signaled.

Monetary and macro-financial

Bank of Lao P.D.R. (BOL) has reduced the reserve requirements from 10 to 8 percent on foreign exchange, and from 5 to 4 percent on local currency, effective April 2. A new credit policy for those impacted, asking banks and financial institutions to restructure loans and provide new loans to businesses affected by the outbreak has been issued. Under this policy, banks and financial institutions that implement debt restructuring and new loan provisions will benefit from regulatory forbearance on loan classification and provisioning. BOL has also cut its policy rate from 4 to 3 percent for one-week loans; from 5 to 4 percent for one-two week loans; and from 10 to 9 percent for two-week to one-year loans. It has issued additional instructions on the implementation of its credit policy expanding the coverage of this policy to non-bank financial institutions including microfinance institutions, savings and credit unions, leasing companies, and pawnshops. BOL has made available 200 billion kip for low interest rate SMEs loans through commercial banks and is preparing to allocate 1,800 billion kip as low interest bank loans for post-COVID-19 economic and business recovery. BOL has completed the signing of agreements with 12 commercial banks, who will participate in first tranche of first USD 100 million SMEs loans from CDB.

Exchange rate and balance of payments

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Republic of Latvia
Background. Latvia reported its first COVID-19 case on March 2, 2020. While new cases decreased since their March peak,a second wave hit the country hard since October. The government imposed strict containment measures after declaring a state of emergency, including the shutdown of most international passenger services from March 17 onward, closure of school and banning the gathering of more than 2 people in public indoor and outdoor areas.While a gradual reopening took place during the summer months, a second State of Emergency was introduced on November 6, bringing back strict restrictions on individual and group behavior. The Q3-2020 year-on-year real GDP growth was -2.6 percent.

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

Key Policy Responses as of December 17, 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

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Lebanon
Lebanon’s underlying economic situation is challenging, with high public debt, current account deficit, and funding needs. The spread of COVID-19 is contributing to the economic recession. The number of COVID-19 cases surpassed the 100,000 level and now stand at 200,000 and 1,550 deaths. The authorities have implemented a range of measures to try and limit the spread of the virus encompassing a general mobilization until August 2, 2020 with compete closure of all private sector and public institutions through May 24, 2020; educational establishments have been closed for the rest of the school year. Lebanon also closed the airport—after suspending flights from 11 countries—as well as seaports and land borders and completed the implementation of the first phase of the plan to repatriate Lebanese citizens wishing to return to Lebanon from various countries; the second phase started on April 26, 2020. As at July 1, 2020, Lebanon had completely opened up all sectors and resumed airport activity at 10 percent capacity. However, a significant surge in infections over the past month forced the government to announce a general lockdown for all public and private sector from July 30 through August 3 and from August 6 to August 10. Authorities then announced a two-week closure from August 21 to September 7 following a significant spike in daily cases and a record one-day deaths number; and extended the general mobilization until end 2020. In addition, the government started imposing stricter quarantine measures on incoming travelers. The authorities were contemplating another two-weeks lockdown; and have finally opted for a zone approach whereby areas are completely locked down for eight days based on the number of daily infections and recoveries. With the increased strains on the health system capacities and a rise in infections and mortalities—including among medical staff—the authorities enforced a general lockdown for two weeks over November 14-30, 2020. The lockdown imposed strict mobility rules according to even-odd car matriculation numbers and closes down all but essential sectors. With the advent of the holiday season, and despite the fact that the lockdown did not lead to any improvement or flattening in the numbers of infections or mortalities, the authorities decided to open up the country gradually—this includes opening restaurants at fifty percent capacity and opening schools in hybrid mode. Pubs and nightclubs were subsequently open at 50 percent capacity and curfew hours decreased. The only visible benefit of the lockdown period was a little less pressure on the health system and an increase in beds devoted to COVID cases in both public and private hospitals and across regular and ICU units. On January 7, 2021 the authorities imposed the fifth and longest general lockdown—the lockdown lasting until February 1, 2021 reinstates the odd/even car plate circulation rule, closes all educational establishment, enforces a curfew from 6 pm to 5 am, and operates the airport at 20 percent capacity. Lebanon is expected receive the first batch of the Pfizer vaccines mid-February.

Key Policy Responses as of January 7, 2021

Fiscal

Parliament approved an additional allocation from budget 2020 worth LL1200 billion for Social Safety Nets; criteria for aid distribution will be set by COM through decrees. The government established a national solidarity fund that would accept in-kind and monetary donations. The ministry of finance announced the extension of all deadlines related to payment of taxes and fees and approved the disbursement of LL450 billion ($293 million) of dues to private hospitals. The ministry of social affairs, in collaboration with the ministries of industry, agriculture, defense, interior, labor, finance, economy and information, started the implementation of a plan —to be executed in coordination with municipalities, mayors, social affairs centers and the army—to distribute cash assistance to families hit economically and financially as a result of COVID-19.

Monetary and macro-financial

The Banque Du Liban (BDL) issued circular 547 allowing banks and financial institutions to extend exceptional five-year zero percent interest rate loans in Lebanese Pounds and in dollars to customers that already have credit facilities but are unable to meet their obligations, operating expenses, or pay the salaries of their employees during March, April and May 2020 as a result of the interruption of activity due to the COVID-19. BDL will in turn provide banks and financial institutions five-year zero percent interest rate credit lines in dollars equivalent to the value of exceptional loans granted.

Exchange rate and balance of payments

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Lesotho
Background. Lesotho reported its first COVID-19 case on May 14, 2020 and cases have been rising since then (source: https://covid19.who.int/region/afro/country/ls). Lesotho created an inter-ministerial committee to coordinate the response to Covid19 and adopted a range of containment measures, including social distancing, travel restrictions, declaration of a national state of emergency, closure of borders to all but essential goods, closure of schools, extension of initial 21-day lockdown of the country for two weeks (until May 5) and suspension of some shops (e.g. gyms, hair/beauty parlors, arcades, liquor stores, etc.). The Ministry of Health has developed a Preparedness and Response Plan. The government has developed the National Covid-19 Response Integrated Plan 2020 in collaboration with development partners.
The government committed in its Letter of Intent requesting the emergency financing from the IMF to implement specific measures on transparency and accountability of COVID-related spending.
Reopening of the economy. The lockdown of the country was relaxed since May 5. Private businesses (non-essential) gradually reopened but some (e.g., alcohol) followed WHO’s recommendations. Public servants already went back to work but practice social distancing. The lockdown was lifted on May 19, albeit with compulsory use of masks in public spaces and restrictions in high risk sectors such as tourism, sit-in restaurants, entertainment and assembly of more than 50 people. Schools have reopened gradually under the guidance of ministry of education.
However, since December 2020, COVID-19 infections and death tolls have increased rapidly, the alert level has been raised twice from “Blue Level” to “Purple Level” and to “Orange Level” within one week (12/29/2020-1/4/2021). Stricter restrictions were imposed on various entertainment and sports activities, political gatherings, international travel, businesses (i.e. liquor stores, restaurants, retail), as well as the textile and manufacturing industries. All schools have been closed.

Key Policy Responses as of January 7, 2021

Fiscal

Mainly two packages: (i) A M700 million (about 2 percent of GDP) fund was set aside for the National COVID-19 Response Integrated Plan 2020, more than half of which is being used for health care personnel and purchase of critical goods and services, with the remainder covering logistics, security, and border management. (ii) Economic mitigation measures are also being implemented including around 1.2 billion for emergency assistance and expanding social protection: Existing cash transfers, such as the Child Grant Program has been topped-up. Public assistance is expanded for 3 months, to add vulnerable groups such as children, elderly disabled, and those working in the informal sector. The authorities are providing 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 provides tax deferrals for the Pay as You Earn (PAYE), VAT, and Simplified Business Taxes for non-essential service providers.

Monetary and macro-financial

On March 23, 2020, following an extraordinary meeting of the Monetary Policy Committee (MPC), the Central Bank of Lesotho (CBL) announced (i) an increase of the NIR target floor from US$630 million to US$660 million, and (ii) a reduction of the CBL policy rate by 100 basis points from 6.25 to 5.25 percent. To encourage the use of non-cash payments, the CBL has negotiated with mobile network operators the removal of fees for transactions below M50 and temporarily raised mobile money transaction limits. On April 14, following another extraordinary meeting of the MPC of the CBL announced a reduction of the CBL policy rate from 5.25 to 4.25 percent. On May 22, the CBL further cut its policy rate to 3.75 percent and reduced the NIR floor from US$660 million to US$530 million. On July 28, the CBL cut its policy rate by another 25 bp to 3.50 percent and raised NIR floor from US$530 million to US$550 million. On November 24, the MPC further raised the NIR floor to US$635 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

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Liberia
Liberia continues to experience rapid growth in the total number of confirmed cases of COVID-19, but from a small base. The cases are concentrated in Montserrado county (which includes Monrovia) but incidences are now reported in all other counties as well. The first case was detected on March 16, 2020.
On March 21, 2020 the Liberian authorities issued a declaration designed to enforce severe social distancing, including: closure of all schools, night clubs, cinemas, beaches, spas, mosques and churches; banning of all street selling and gatherings of more than 10 people; limits on admittance to banks and restaurants to five customers kept six feet apart; Social distancing for health facilities and pharmacies (which remained open); mandatory washing with soap and clean water at all public and private establishments; and a hotline was established to report those exhibiting COVID-19 symptoms.
On midnight April 10, Government announced and began enforcing a State of Emergency, which was subsequently approved by the Legislature as required in the Constitution. This was extended in early July, but with a downward adjustment in the curfew. Also mandated were the strict enforcement of wearing face masks in public, the observance of reasonable social distancing, and other approved health protocols, along with the re-opening of the international airport. The State of Emergency at mid-night on July 21, officially expired with no renewal. The immediate withdrawal of the military from various places of assignments across the country to the barracks was ordered by the President. The troops had been deployed across the country to assist with the rigid enforcement of the execution of the State of Emergency. With the expiration of the State of Emergency, Residents have been admonished to strictly adhere to the National Public Health Law and amended anti-COVID-19 protocols. The measures includes the continued closure of all night clubs and bars, Compulsory testing of outbound and inbound passengers using the international airport, the adaptation of a no face mask no service at all public places, and the increase in the admittance to banks service areas from five to ten with the observation of a three feet social distance. Meanwhile, public sector workers considered non-essential placed on administrative pay leave as a result of the outbreak, are yet to be recall to work. Line ministries and agencies are currently operation on their approved essential staff.
In accordance with pronouncements from the Ministry of Education, in-person classes for students from 6 – 11 grades have resumed at on schools. 12 graders who returned to classes in early August are currenting sitting the regional West African high School Exams. Students below the 6th grade are required to complete sets of take-home exams in fulfillment of their academic curriculum for the school year readjusted to come to an end by mid-November. In light of the recent trends and the preventative measures to contain the spread of Covid-19, the Ministry of Education had announced full reopening of schools for in-person learning for all grades starting on January 4, 2021.
The International airport on July 28, resumed international flights with the expiration of the State of Emergency. Anti COVID-19 protocols and procedures have been put in place by the management of the airport in consultation with health authorities, including presenting the certificate of a negative test or undergoing a rapid test on arrival.Prior to departure, a traveler is required to undergo a test arranged by the Ministry of Health and present a negative test result to be admitted to the flight.

The Legislature has approved the request by the Executive to allocate US$25 million—to be supplemented by US$5 million of donor funds—for a World Food Programme-implemented food distribution to the most vulnerable citizens, and this program is now being implemented.
The World Bank approved about US$17 million of off-budget project funding for the health sector, of which US$7.50 million was new investment financed by the COVID-19 Fast Track Facility (March 23); and $9.5 million was temporarily diverted from existing projects (March 30). On July 28, 2020 the Board of Directors of the African Development Bank approved US$14 million direct budget support for Liberia as part of a multi-country COVID-19 response to help bolster the fight against the pandemic. The funding is expected to be tailored largely towards financing vulnerable female-headed household and school-going children. Other targeted beneficiaries include the business community and small and medium-size enterprises. Other donors are also contributing, but funding shortfalls remain.

Key Policy Responses as of January 7, 2021

Fiscal

Aside from some measures to speed up and facilitate the importation process—including by removal of the pre-shipment inspection requirement and some protective surcharges, the inclusion of some COVID-19-related expenditure in the recast budget for the last fiscal year and to develop a preparedness plan—no other special fiscal measures have yet been adopted.
The authorities are hoping to finalize a COVID-19 preparedness plan in conjunction with the donor community, and the draft is still evolving. The World Bank has to date disbursed over half of its available funding for actions under the plan.

Areas of concentration under the plan include support to health care
workers, purchase and rehabilitation of health care equipment, procurement
of drugs and other medical supplies, deployment of surge staff to contact
tracing activities, border areas, rapid response teams, training of
responders, planning, communications and information sharing, staffing and
equipping of laboratories, and logistical and supply support.

Monetary and macro-financial

The central bank reduced the policy rate by 500 bp to 25 percent partly to support increased financial intermediation. To mitigate the shortage of Liberian dollar banknotes, the CBL is expediting the procurement of additional banknotes to help meet the Liberian dollar demand in the economy. In response to the difficulties being felt by the private sector, the CBL is also allowing banks to practice limited forbearance on asset classification, provisioning, and lending policies in hard-hit sectors of the economy, while remaining vigilant for signs of banking sector stress.

On the payments side, to better facilitate the use of electronic
payments, the CBL has suspended fees and charges for most electronic
transfers and point-of-sale outlets used by merchants and mobile money
operators; and increased allowable daily limits. The bank has also
increased the allowable daily and aggregate limits for mobile money
transactions for a period of three months.

Exchange rate and balance of payments

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Libya
Libya reported its first COVID-19 positive case in late-March 2020, when an infected man returned from a trip to Saudi Arabia via Tunisia.
Infections and deaths from COVID-19 have increased exponentially since end-May 2020. As of January 5, 2021, the Tripoli-based National Center for Disease Control (NCDC) reported that Libya had registered about 102,500 positive COVID 19 cases. This number has more than doubled since the end- October 2020. While new infections continue to grow at a high rate, more recently, new infections appear to have stabilized or slightly declined, albeit at a very high level. The NCDC also reported that more than 1,530 patients have died from COVID 19 related complications as of the first week of January 2021, up from just 3 deaths at end-May, and double the number at the beginning of October. Currently, COVID-related deaths rate hover around 9-11 deaths per day. According to the NCDC, the outbreaks appear to be most severe in Tripoli, Misrata and the southern desert town of Sebha, although cases have also been confirmed in most other major population centers. Notwithstanding the steep rise in positively identified Coronavirus cases and deaths in recent weeks, the true spread of the disease in Libya is likely to be significantly higher because of 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. In December 2020, it was reported that Libya signed a contract with the World health Organization for the purchase of 2.8 million doses of the AstraZeneca COVID-19 vaccine at a cost of about to US$9.4 million. Delivery is expected in late-Spring or early summer 2021.
So far, the continued civil war—notwithstanding the formal ceasefire posture (see below)—has had a severe social and economic impact than COVID-19. Libya's economy is contracting sharply because of the steep drop in oil prices and the collapse of oil production of more than 90 percent due to the conflict. In early December, the Central Bank of Libya (CBL) reported that during the ten months of 2020, the government lost US$11 billion in oil exports proceeds due to the stoppage of oil production and exports, as well as disruptions in payment systems. Water supply to Tripoli and surrounding areas that was shut off in early April as a result of the fighting has since been partially restored. The combination of civil war and an accelerating pandemic has proven to be devastating.
On August 6, the US Treasury Department imposed sanctions on three Libyans and a Malta-based company, accusing them of acting as a network to smuggle drugs and Libyan fuel into Malta and thereby contributing to instability in Libya. On October 23, a ceasefire agreement was signed in Geneva between representatives of the GNA and the Libyan National Army (LNA) under the auspices of the United Nations. Thus far, the ceasefire agreement appears to be holding, although there is the real risk that it may be undermined by a number of militias and forces that were excluded from the negotiations. Some oil production and exports have resumed, but it is too early to tell how large and how sustainable these will be, nor how readily available the oil export proceeds will be. Meanwhile, social conditions in Tripoli and other major cities have continued to deteriorate considerably, with frequent and prolonged disruptions in the supply of water, electricity, and fuel. Widespread demonstrations of frustrated civilians in Tripoli and other cities have reportedly been met by harsh force, arrests and even kidnappings.

Key Policy Responses as of January 7, 2021

Fiscal. In the spring of 2020, the Government of National Accord (GNA) announced a package of initially LD 500 million (about 1 percent of GDP) in emergency COVID-19 related spending. In early December 2020, the CBL stated that, to date, the actual total amount of funds requested by the Ministry of Finance to combat the Coronavirus pandemic had reached about LD 970 million, of which LD 572 million were allocated to the Ministry of Health. In addition, LD 151 was allocated to the Medical Supply Authority; LD 50 million to municipalities and local councils; LD 95 to the military for medicines and medical equipment, and about LD 44 million to Libyan embassies and consulates overseas. Certain medical equipment and personal protective gear are already in short supply as a result of the civil war which has impacted imports and impeded the free flow of goods within Libya's borders. In an effort to protect declining reserves, in mid-April the GNA announced a 20 percent pay cut for civil servants.

Monetary and macro-financial

Exchange rate and balance of payments

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Republic of Lithuania
Background. Lithuania reported its first cases of COVID-19 on February 28, 2020. The government began implementing a range of containment measures on March 16 to slow the spread of coronavirus, including a nationwide quarantine , closed borders, increased testing, the closure of schools and cancellation of public events, as well as the shutdown of non-essential shops, museums, cinemas, and similar establishments.
Reopening of the economy. On April 15, the government began easing containment measures, with the opening of certain non-food stores and services businesses, outdoor activities, libraries, and museums, and by April 30 a wider range of leisure activities, the provision of health services, and full trading in marketplaces and public places. Gradual easing continued with the planned opening of kindergartens and preschools, a wider set of health care services, indoor restaurants and cafes, and outdoor group events as of May 18. As of June 1 , professional sports games, including international competitions resumed, the allowed capacity of public events began to increase, and the operating hours of cafes and restaurants operating hours were no longer limited. International travel is allowed and a 14-day mandatory quarantine is required for countries with a 14-day morbidity rate above 25 per 100 thousand population(raised from 16 per 100 thousand on September 14). Guidelines for a variety of activities and establishments on opening and operating safely are provided by the Ministry of Health and frequently updated. Schools are beginning the 2020-2021 school year on school premises, provided that COVID-19 infections rates in the municipality they are located in are below established thresholds and temperature tests are no longer mandatory.
The government lifted the national quarantine on June 16 but following a surge in the spread of COVID-19 in the fall, the government reinstated a national quarantine on November 7 to remain in place through January 31, 2021.

Key Policy Responses as of January 7, 2021

Fiscal

On March 16, 2020, the government announced an overall fiscal package of 2.5 billion euros (5 percent of 2019 GDP). Within this amount, spending measures by the General Government amounts to 1.1 billion euros (2.3 percent of 2019 GDP) which includes (i) additional funds for the healthcare system and emergency management (500 million euros), (ii) additional funds for caring for the sick and disabled, including for parents of school children who now need to stay home, support for the self-employed (250 million euros), and wage subsidies for employees in affected firms (250 million euros), and (iii) co-financing of climate change investment projects (about 20 percent of 250 million euros). In addition, the government expanded guarantee schemes, including guarantees for agricultural as well as SME loans by around 1.3 billion euros (2.6 percent of 2019 GDP). Finally, the government increased the borrowing limit by 5 billion euros (10 percent of 2019 GDP).
Various schemes and measures have been introduced since then. This includes interest compensation support for SME’s with deferred loans, a new financial instrument for businesses to form portfolios from business loans, cheap loans targeted to hard hit sectors like travel services and accommodation and services, and increased financial support to the agricultural sector. A business support fund of 100 million euros was launched with aim to provide loans and invest in debt and equity securities.
On May 7, 2020, the government approved to support an economic recovery for businesses and households. The package includes extended wage subsidies for persons returning from downtime or unemployment (380 million euros), job search allowances of 200 euros for those who have dropped out of the labor force (265 million euros), an increase in social benefits to pensioners and others (182 million euros), additional funds for the self-employed and for vocational training (15.6 million euros), and an increase in unemployment benefits of 42 euros per benefit. In addition, the universal child benefit of 60 euros has been increased to 100 euros for a period of six months after the end of the national quarantine for families who lost income during the quarantine
On June 10, an investment plan was approved, comprising 6.3 billion euros (13 percent of 2019 GDP), of which 2.2 billion euros (4.5 percent of 2019 GDP) is new investment and the remainder is already planned investment that will be accelerated. This plan is being reviewed by a new government that was sworn in December 2020 following parliamentary elections in October.
In the government’s 2021 budget, 1.1 billion euros was allocated to economic support measures during the second quarantine and through June 2021. This includes an extension of wage subsidies, job search allowances, interest expense compensation, soft loans to businesses, and funds for the acquisition of COVID-19 vaccines.

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

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Luxembourg
Background. Luxembourg reported its first confirmed case of COVID-19 on February 29, 2020. In response to the outbreak, the government has taken a wide range of health and containment measures to curb the spread of the virus and protect vulnerable groups, including closures of schools and non-essential businesses, strict social distancing measures, and increase in testing capacity. Furthermore, the government declared a state of emergency, providing it with additional powers to quickly take decisions, and adopted a large fiscal stimulus package to bolster the resources for the health system and help maintain businesses and jobs.
Reopening of the economy. On April 15, the government announced a multiphase lockdown exit strategy, with phases comprising activities/tentative opening dates as follows: phase 1—construction sites and selected activities—including craft, landscaping, and recycling services (April 20); phase 2—secondary education and vocational training, retail stores, beauty salons, museums and libraries, drive-in movie theaters, outdoor sports activities, and outdoor gatherings of up to 20 people, subject to strict safety measures such as mandatory wearing of face masks and maintaining physical distance (May 4–11); phase 3—basic education and childcare facilities, with classes alternating weekly attendance in school, and increasing public transport’s capacity (May 25); phase 4—selected activities in the hospitality sector (bars, cafes and restaurants), and public gatherings of more than 20 people (including sport and cultural venues, movie theaters, weddings, funerals and protests), subject to mandatory safety measures (May 29); phase 5—outdoor playgrounds and summer activities for children (June 13–15); later phases—commercial and event activities.
To achieve a well-sequenced lifting of the lockdown restrictions and avoid a second wave of COVID-19 infections, the government envisages to perform large-scale testing on a voluntary basis, including cross-border commuters. The testing strategy consists of segmenting the population into different contingents (starting with high school students and teachers) with people that have tested positive being isolated, and their contacts traced and quarantined. The government has been distributing free face masks to residents and cross-border workers.
On June 22, the Parliament adopted two COVID-19 laws that define the legal framework, including for mandatory protective measures, to be applicable after the expiration of the state of emergency on June 24. On July 16, the Parliament adopted the new COVID-19 law that combines and replaces two previous laws. The key additions include: (i) mandatory face masks for both public and private gatherings of more than 20 people in case physical distance of 2 meters cannot be guaranteed and (ii) fines for customers of bars and restaurants if they disregard the precautionary measures. On July 19, the Parliament adopted the bill introducing a series of pandemic control measures. The key measures include: (i) limiting the number of house guests to 10 people; (ii) making gatherings of more than 10 people subject to minimum distance and seating requirements, otherwise wearing a mask is compulsory; (iii) introducing fines for non-compliance with isolation or quarantine measures ranging from EUR 25 to EUR 500; and (iv) withdrawing of the establishment license for a period of three months in an event of repeated failure to comply with preventive measures by businesses in hospitality sector.
On September 4, the government announced a plan for school reopening, including more autonomy for schools to implement specific measures depending on the local health situation.
On September 22, the government adopted the COVID-19 law extending restrictive measures until December 31, 2020 and introducing new measures that include: (i) reducing the isolation period for people with confirmed COVID-19 infections to 10 days; (ii) allowing the processing of personal data that will be kept for a period of three months and then anonymized; and (iii) making it mandatory for airlines to automatically transfer to health authorities forms completed by passengers to facilitate contact tracing.
On October 29, the government introduced temporary measures to address the recent spike in COVID-19 cases, including: (i) 11pm-6am curfew (until November 30, 2020), (ii) a 4-person limit on the number of house guests, and (iii) mandatory face masks at gatherings of more than 4 people.
On November 25, the government extended the curfew until mid-December, and introduced new restrictions, including closures of restaurants and bars, and a 2-person limit for private gatherings.
On December 4, the government announced its Covid-19 vaccination strategy. Key features include: (i) a centralized approach for the purchase (through the EU common procurement mechanism) and distribution of vaccines (via centralized vaccination centers); (ii) voluntary and free vaccination available to both residents and cross-border workers; and (iii) continued monitoring of vaccines’ safety and efficacy.
On December 26, the government introduced a temporary tightening of restrictions until January 10, including: (i) the extension of the curfew to 9pm-6am; and (ii) closure of all non-essential businesses, cultural establishments (except those intended for research), and restaurants (the latter until January 15).

Key Policy Responses as of January 7, 2021

Fiscal

A large fiscal package to address COVID-19 effects has been partly adopted by the Parliament, including spending measures (€2.3bn or 3.6 percent of 2019 GDP) and liquidity support for eligible businesses and self-employed (€8.1bn, 12.8 percent of 2019 GDP). Key spending measures include: (i) acquiring medical equipment and infrastructure (€194 million, 0.3 percent of 2019 GDP); (ii) covering employees’ leave for family reasons (€226 million, 0.4 percent of 2019 GDP) and sick leave (€106 million, 0.2 percent of 2019 GDP); (iii) paying partial-unemployment benefits (€1bn, 1.6 percent of GDP); (iv) granting capital advances to cover companies’ operating costs (€400 million, 0.6 percent of 2019 GDP); and (v) providing non-repayable financial aid to micro enterprises and eligible self-employed (€250 million, 0.4 percent of 2019 GDP). Liquidity support measures include postponing tax and social-security contribution payments for the first half of the year (€4.6bn, 7.2 percent of 2019 GDP), and extending credit guarantees for new bank loans and special anti-crisis financing for SMEs and large companies (€3.6bn, 5.6 percent of 2019 GDP). To finance higher spending, the government issued a €2.5bn bond (3.9 percent of 2019 GDP) at a negative interest rate.
On May 20, the government announced a new fiscal package to support economic recovery (up to €800 million, 1.3 percent of 2019 GDP). Measures include: (i) providing structural partial unemployment benefits for affected businesses based on recovery/employment retention plans until the end of 2020; (ii) providing non-repayable financial aid to businesses not yet allowed to reopen (including retail, hospitality, tourism and events sectors); (iii) flat-rate aid to support the non-food retail stores and personal care providers (less than 250 employees); (iv) financial incentives to support national tourism; (v) extending leave for family reasons to take care of adults with disabilities and elderly and increasing the cost-of-living allowance for low-income households; and (vi) fiscal incentives to support private investment and green recovery (including aid for development and energy efficiency projects).
On July 9, the government announced a series of measures to fight unemployment by providing support for unemployed people of advanced age and incentives for businesses to further educate young workers, and making professional training programs more accessible to young workers.
On November 13, the government introduced capital grants to partly cover fixed costs and extended flat-rate financial aid for most affected sectors (tourism, events, culture and entertainment) through March 2021. Businesses eligible for both schemes should choose the one most suitable for their needs. Several existing aid schemes (available to all sectors) have been extended through Q2 2021, including partial unemployment benefits, credit guarantees and capital advances.
On November 20, the government announced new measures to support businesses, including: (i) lump sum grants for most affected sectors to partially compensate the increase in minimum wages scheduled for early 2021; and (ii) a capital injection to the public credit insurer (€20 million), the Office du Ducroire, to increase its capacity to provide guarantees to exporters.
On December 21, the government extended the list of sectors eligible for capital grants that partly cover fixed costs to retail and personal care sectors.

Monetary and macro-financial

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

Exchange rate and balance of payments

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Madagascar
Madagascar’s macroeconomic outlook has been affected by weaker external demand, the increased spread of the pandemic, and significant losses of revenue. Since the first reported cases on March 20, 2020, the number of confirmed COVID-19 cases stands at 17,767 (262 deaths, 17,298 recovered) as of January 6, 2021.
The authorities continue to implement mitigation measures to accommodate the impact of the pandemic to ensure the health of the population and preserve macroeconomic stability. The national state of emergency first declared on March 23, has been extended several times. Following the activation of their national contingency plan, the authorities are taking measures to increase health spending, help the most vulnerable, support the private sector, and preserve the stability of the financial sector. In support of these measures, a multisectoral and interdisciplinary coordination unit COVID-19 Operational Command Center (CCO) was established at central, regional and local levels.
Reopening of the economy. Despite lifting the state of emergency was on October 18, 2020, mask wearing remains mandatory (failure to wear one may result in 24-hour arrest or mandatory public works) and public events remain restricted to no more than 200 attendees. Domestic flights require 48-hour testing prior to boarding for all passengers. As of October 1, 2020, international flights to Nosy Be resumed with restrictions imposed on countries with high COVID-19 incidence of new cases while international flights to mainland Madagascar remain completely suspended.

Key Policy Responses as of January 6, 2021
Fiscal

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

Monetary and macro-financial

The central bank provided monetary policy support and acted to safeguard financial stability. The central bank is providing liquidity to the commercial banks, reaching MGA 609 billion (about 1.2 percent of GDP) at end December2020 and relaxed some mandatory deposit limits to encourage banks to defer delayed payments on existing loans and increase lending to businesses.

Exchange rate and balance of payments

The authorities are maintaining the flexible exchange rate regime. Based on the latest available data, the central bank made some limited interventions (guided by an algorithm based on market movements), and in 2020 the exchange rate depreciated respectively by about 6 percent vis-à-vis US$ and 16 percent vis-à-vis EUR€.

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Malawi
The first three cases of COVID-19 were confirmed on April 2 , 2020. A moderate increase in cases followed through end-May, when the number of cases accelerated. Active cases spiked in early-July and are expected to rise further as local COVID-19 testing capabilities continue to be expanded with assistance from development partners (DFID, UNICEF, and the Global Fund)—and risks from a second wave of COVID-19 pandemic in Europe gain momentum.
To curb the spread of the pandemic, on April 4, the government instituted a partial lockdown of the country, with essential services continuing to function and critical businesses working in shifts. Initially, all international flights to Malawi were suspended except those carrying essential health & other supplies and returning Malawian citizens or residents; however, since September 1, some flights have resumed. A two-week mandatory self-quarantine for people arriving from areas highly affected by coronavirus disease remains in effect. These measures combined with spillovers from the global slowdown, border closures, and economic disruption in neighboring countries have slowed domestic economic activity. As a result, growth for 2020 is expected to decline to 0.6 percent and to 2.2 percent in 2021 (0.4 and 0.3 percentage points below projections in IMF Country Report 20/168.

Key Policy Responses as of January 7, 2021
Fiscal

The government’s response plan includes US$20 million (0.25 percent of GDP) in spending on health care and targeted social assistance programs; this includes hiring 2000 additional health care workers. In addition, tax waivers are being granted on imports of essential goods to manage and contain the pandemic. An Emergency Cash Transfer Program of about $50 million (0.5 percent of GDP), mostly financed by development partners, is being implemented during May-November.

Monetary and macro-financial

The Reserve Bank of Malawi reduced the policy rate by 150 basis points to 12 percent. The domestic currency Liquidity Reserve Requirement (LRR) has been reduced by 125 basis points to 3.75 percent (aligned with the foreign currency LRR) and the Lombard Rate has been reduced to 12.2 percentage points, 0.2 percentage points above the policy rate. An Emergency Liquidity Assistance (ELA) framework has been introduced to support banks in the event of worsening liquidity conditions and to provide support to banks on a case-by-case basis. However, financial sector buffers, including banks’ capital and liquidity buffers, are expected to counter risks to the banking system. To support small and medium enterprises (SMEs), commercial banks and micro-finance institutions will be, on a case-by-case basis, restructuring SME loans and providing a moratorium on their debt service until end-2020. Fees on mobile money transactions have been temporarily waived to encourage cashless transactions.

Exchange rate and balance of payments

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Malaysia
Background. Malaysia is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. The first COVID case appeared in Malaysia in early February but a local outbreak only emerged in March, prompting the introduction of a nationwide Movement Control Order (MCO) which helped significantly reduce the spread of the virus. The authorities started easing restrictions by allowing most businesses to reopen under a Conditional Movement Control Order (CMCO) from May 4. A Recovery Movement Control Order (RMCO) took effect on June 10, lifting most restrictions on domestic activities and movement, and its end date has been extended from August 31 to March 31, 2021. A new wave of infections in Malaysia, initially associated with an outbreak following elections in the state of Sabah prompted the reinstatement of the CMCO until December 6 in most states. The CMCO was then lifted lifted in most states except in Sabah, Kuala Lumpur, most of Selangor, and some districts in Johor, Negeri Sembilan, Kelantan, Kedah, Penang and Perak until December 20. Following, the CMCO was further extended in Kuala Lumpur, Sabah and Selangor until January 14, 2021. Borders remain closed and overseas travel restricted until at least March 31, 2021 although the authorities are discussing travel bubbles with other countries in the region.

Key Policy Responses as of January 7, 2021

Fiscal

A fiscal stimulus package of RM 6 billion (0.4 percent of GDP) was approved on February 27, 2020, including increased health spending; temporary tax and social security relief; cash transfers to affected sectors; and rural infrastructure spending. Additional measures—electricity discounts and temporary pay leave—for RM 0.62 billion (less than 0.1 percent of GDP) were announced on March 16, 2020. Some investment spending planned for 2020 is being frontloaded.
A second stimulus package of RM 25 bn (1.7 percent of GDP) was released on March 27, 2020, including additional health spending; cash transfers to low income households; wage subsidies to help employers retain workers; and infrastructure spending in East Malaysia. The government also setup a RM 50 bn fund for working capital loan guarantees for all COVID-19 affected businesses. Furthermore, employees will be allowed special withdrawals from their Employment Provident Fund (EPF) account for a 12-month period and businesses will be allowed to reschedule their EPF payments. On April 6, 2020, the authorities announced a third stimulus package of RM 10 bn (0.7 percent of GDP), including grants for micro SMEs, scaled-up wage subsidies, and a 25 percent discount on foreign workers’ fees. On June 5, 2020, the authorities announced a fourth stimulus package of RM 21 bn (1.4 percent of GDP), which includes an extension of the wage subsidies scheme, hiring and training subsidies, support for business digitalization, and additional tax relief.
On September 23, 2020, the authorities announced a fifth stimulus package of RM 10 billion (0.7 percent of GDP), which includes a further extension of the wage subsidies scheme and microgrants for entrepreneurs, and a new round of cash transfer to lower income households.
On October 26, 2020, the Temporary Measures for Government Financing (COVID-19) Act 2020 was enacted. It temporarily increased the government debt ceiling by 5 percentage points to 60 percent of GDP.
On November 6, the authorities released the 2021 budget, which included RM 17 billion spending on COVID-related measures that was carried over from the packages announced earlier in 2020. These measures will be financed from the funds borrowed under the Temporary Measures for Government Financing (COVID-19) Bill 2020. The total amount of fiscal injection envisaged in five stimulus plans over 2020-2021 (RM 55 billion) remains unchanged. Of that, around RM38 billion have been spent in 2020 and the remainder, RM17billion, has been allocated to 2021.

Monetary and macro-financial

(i) In response to the crisis, (BNM) lowered the Overnight Policy Rate (OPR) in 3 consecutive MPC meetings on March 3, May 5, and July 7. Including the January rate change, the OPR has been cut in 2020 by a cumulative 125 bps to-date to 1.75 percent. The policy response was initially geared to address market disruptions and financial market volatility in March, and most recently was responding more to weak global economic conditions and subdued inflationary pressures.
(ii) BNM lowered the Statutory Reserve Requirement (SRR) Ratio by 100 basis points to 2 percent effective March 20. On May 5, the BNM announced that banking institutions can use MGS and MGII to fully meet the SRR compliance until May 2021. On March 27, BNM increased its Financing Facilities by RM4 bn to RM13.1 bn (0.9 percent of GDP). On March 25, BNM announced temporary easing of regulatory and supervisory compliance on banks to help support loan deferment and restructuring. BNM also announced relief measures for insurance policy holders and takaful participants. On June 5, the authorities announced measures to help business financing by both the private sector and public banks worth about RM 6 bn (0.4 percent of GDP).
(iii) on March 23, 2020, the Securities Commission Malaysia (SC) and Bursa Malaysia suspended short-selling. the suspension has been extended through end-2020. SC also waived annual licensing fees for capital market licensed entities. On April 16, SC announced regulatory relief measures for public listed companies. On April 10, 2020, the Companies Commission of Malaysia announced measures to enhance protection of distressed companies against liquidation.
(iv) To support the real estate sector, the Home Ownership Campaign was re-launched in June 2020, with stamp duty exemptions for properties between RM300,000 to RM 2.5 million until May 31, 2021; the Loan-to-Value requirement of 70 percent for third mortgages (properties valued above RM600,000) has been lifted until May 31, 2021; and Real Property Gains Tax exemption for disposal of residential homes until December 31, 2021.
(v) On July 29, the BNM announced that the banking industry will provide a targeted loan payment moratorium extension following the 6-month blanket moratorium expiring on September 30, 2020) and provision of repayment flexibility to borrowers affected by COVID-19 as follows:
- Individuals who have lost their jobs in 2020 and have yet to find a job will be offered an extension of the loan moratorium for a further three months by their bank.
- Individuals who are still in employment but whose salaries have been affected due to COVID-19 will be offered a reduction in loan instalment in proportion to their salary reduction, depending on the type of financing. Banks will offer the flexibility for a period of at least six months.
In addition, banks have also committed to provide repayment flexibility (e.g. allowing temporary interest-only payments and lengthening the repayment period) to other individuals and all SME borrowers affected by COVID-19. The flexibility offered by each bank will take into account the specific circumstances of borrowers.
(vi) On November 6, the BNM announced several additional facilities and enhancements for SME support, including the establishment of (i) RM2 bn Targeted Relief and Recovery Facility (TRRF); (ii) RM 500 mn High Tech Facility (HTF); and (iii) RM 110 mn enhancement to the existing Micro Enterprise Facility.

Exchange rate and balance of payments

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Maldives
Background. Maldives is being hit hard by the outbreak. Maldives’ economy is very dependent on tourism, with tourism receipts representing about 60 percent of GDP. The government declared a Public Health Emergency on March 12, 2020 that was extended to February 5 on January 4. 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 has been implementing different lockdown ease phases since July 1, 2020, is in phase three of the lockdown ease plan. International flights as well as tourism island resorts reopened on July 15, 2020. Tourists with reservations do not need to quarantine but they are required a negative COVID-19 test conducted within 96 hours prior to their arrival in the Maldives. The Health Protection Agency (HPA) shortened the standard quarantine period to 10 from 14 days, effective from December 4 onwards. Maldivians and work visa holders arriving from abroad to Malé would not be required to remain in quarantine after presenting a negative PCR test result as of December 20..

Key Policy Responses as of January 8, 2021

Fiscal

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

Monetary and macro-financial

The Maldives Monetary Authority (MMA) has been in close contact with the banks to discuss the impact on the domestic financial system and has identified the measures that can be taken through the financial institutions to reduce economic disruptions and loss of jobs and output. The announced measures include: (i) reduction of the minimum required reserves (RR) up to 5 percent as and when required (MVR RR were reduced to 7.5 percent on April 23; foreign currency RR were reduced to 5 percent on July 16); (ii) making available a short-term credit facility to financial institutions as and when required; (iii) introducing regulatory measures to enable a moratorium of 6 months on loan repayments for those impacted by the current situation (customers have to submit their requests to the banks in order to avail themselves of this moratorium). The moratorium was extended to end-2020 on September 29.

Exchange rate and balance of payments

The MMA has increased its foreign exchange interventions and used other available facilities to maintain the exchange rate peg against the US dollar. The Reserve Bank of India extended US$150 million foreign currency swap support to the MMA on April 28, under the US$ 400 million currency swap agreement framework signed between the MMA and the Reserve Bank of India in July 2019.

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Mali
Background. The outbreak reached Mali relatively late, with first confirmed cases on March 24. The number of total cases continues to rise. The spread of the pandemic has been accelerating since October, with the start of the second wave, from around 15 new cases a day to over 100 cases at end-December 2020 (calculated as a 7-day moving average due to high variability of the daily data), which is higher than during the previous peak of 45 cases in mid-June.
Since mid-March 2020, the government has introduced a number of preventive containment measures. These included the suspension of commercial flights (except cargo flights), the closure of land borders, a curfew from 9:00pm to 5:00am, the suspension of all public gatherings, the prohibition of social, sports, cultural and political gatherings of more than 50 people. In addition, the government 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 and additional containment measures. As of May 9, the night curfew was lifted and it has become mandatory to wear masks in public. Schools reopened on June 2 for final year students. The schools for other students reopened on September 1st. On July 24, the Prime Minister signed a decree putting an end to the pandemic-related containment restrictions. Air and land border reopened on July 25 and July 31, respectively. Normal working hours resumed in public administration starting from August 1st.
With the second wave in the spread of the pandemic, the authorities issued a statement on December 1, announcing reinforcement of a number of measures, including stricter application of preventive measures in public places (e.g. mandatory wearing of masks, physical distancing, promotion of teleworking, etc.); monitoring of the pandemic, through mass-testing in public places, systematic tracing of contact-persons, and stricter controls of COVID-19 testing evidence at air and land borders; enhancing awareness campaigns; improving medical care capacity, through strengthened medical human resources, better availability of medicines, respirators, and testing kits; and ensuring greater availability of financing for preventive and containment activities. As part of the new preventive measures, universities will be closed during December 22, 2020-January 4, 2021. At the beginning of the year, the government announced that all educational institutions will be closed till January 25.

Key Policy Responses as of January 7, 2021

Fiscal

The government has updated its medical response plan to prevent the spread of COVID-19 and strengthen its medical care capacity, in collaboration with the World Health Organization, now costed at about 0.6 percent of GDP (including bonuses to health workers), and the World Bank in terms of medical equipment (respirators, quarantine facilities, etc.). The government’s social measures to support the most vulnerable households included the setup of a special fund to provide targeted income support and a mass distribution of grain and food for livestock to the poorest households, the supply of electricity and water free of charge to the consumers in the social tranche for the months of April and May 2020, a 3-month exemption from VAT on electricity and water tariffs, and a 3-month exemption from customs duties on the import of basic food (rice and milk). A package of economic measures was also launched to ease liquidity constraints on ailing firms, including an SME-support guarantee fund, clearing the budget spending float, granting tax deferral and relief to ease liquidity constraints on the hardest-hit companies, especially in the hospitality sector (hotels, restaurants, transportation). On April 27, Heads of States of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU growth and stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to the COVID-19 crisis. The Heads of States' Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.
As of end-November 2020, around 92 percent of the planned COVID-19-related spending has been implemented and committed. The government has fully executed the support to electricity and water SOEs and the food distribution plans, and 60 percent of COVID prevention and medical support spending. 98 percent of the household income support has been committed but most transfers are only expected to be made in 2021 as potential beneficiaries are being identified. The slow implementation, in part, was also due to the post-coup sanctions that have cut the de facto authorities’ access to government’s Treasury Single Account at the BCEAO, hence no payments/expenditures could be made out of those accounts until the sanctions were lifted on October 5 after the nomination of a transitional government. New policy measures at around 0.8 percent of GDP have been budgeted for 2021 to combat COVID-19, that include medical support and support to households and firms.

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO had also announced: (i) an extension of the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-bills initially issued by Mali amounted to CFAF 88 bln (0.9 percent of GDP), with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basel II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks' credit to SMEs in the eight WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the COVID crisis on asset quality.

Exchange rate and balance of payments

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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 decreased from the first peak in April. However, it started to rise again from end-July and has remained above the previous peak.
Reopening of the economy. Containment measures were gradually lifted with the reopening of certain non-essential shops started on May 4. More activities and businesses have been allowed to open since May 22, including restaurants, hair salons, hotels, funerals, individual sports, outdoor pools and gatherings of up to 6 people. Most remaining measures have been lifted on June 5. On June 30, the government lifted the public health emergency and repealed the remaining restrictions including the closures of schools and the ban on mass gatherings. People are advised to maintain social distancing and wear face masks. Malta’s ports and airport reopened for international passenger travel to and from safe countries on July 1.
Following the increase in infections, containment measures were reintroduced on August 7 and 18, including a ban on mass gatherings, a closure of bars and nightclubs, limits on hospital and elderly visits, and a requirement to wear face masks in all public closed spaces. Travels from “safe corridor countries” remain permitted, while a new list of countries was created on August 21 requiring travelers from these countries to submit a negative COVID-19 test result. The lists are updated regularly. A contact tracing mobile application was launched on September 18. Gathering in public spaces was further limited to no more than 10 people on September 30. On October 16, wearing face masks became mandatory in outdoors and in offices, and bars and clubs were required to close at 11pm. The restrictions were further tightened on October 26, closing bars and further limiting the size of public gathering from 10 to 6 people.

Key Policy Responses as of January 7, 2021

Fiscal

The government has announced a series of spending measures, projected to cost €520 million (4 percent of GDP) that aim to support the healthcare sector as well as firms and households income. These include (i) more than €130 million (1 percent of GDP) healthcare spending; (ii) allowances to support individuals unable to work from home (such as families with children, persons with disabilities); (iii) special unemployment benefits; (iv) wage subsidies for businesses and self-employed individuals affected by the pandemic; (v)support for businesses to cover costs of quarantined employees and invest in teleworking facilities; and (vi) increases in rent subsidies for unemployed individuals. In addition, the government will provide deferrals of tax payments for income tax, VAT, social security and maternity fund contributions. These measures were originally issued for March and April, and later extended to cover May and June. The government also approved a direct grants scheme of €5.3 million to support investment in research and development (R&D) related to the coronavirus outbreak, and a rent subsidy scheme for SMEs with a budget allocation of €2.5 million, covering February 2020 to December 2022.
On June 8, 2020, the government announced a €900 million (7 percent of GDP) package to help the economy recover from the impacts of the pandemic. It includes (i) €400 million (3 percent of GDP) of infrastructure investment over the coming years, (ii) the extension of tax deferrals, estimated at €200 million (1.5 percent of GDP), (iii) the extension of wage subsidy schemes, (iv) subsidies for rent and electricity bills for businesses, (v) lower taxes for property transactions, (vi) cash vouchers redeemable at bars, restaurants, hotels and retail outlets, (vii) lower fuel price, (viii) tax refund for workers, (ix) additional in-work benefit and grants, and (x) various funds, grants and supporting schemes for businesses.
In October 2020, the government further extended the wage subsidy schemes until at least March 2021 and decided to issue another round of cash voucher redeemable at restaurants, accommodations and shops. The vouchers will be distributed by mid-January 2021. On January 5, modification to the wage subsidy scheme was announced. The new scheme decides the assistance level according to the losses in business turnover incurred during the pandemic.

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

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Republic of Marshall Islands
Background. As of January 7, there are zero active COVID-19 case and four recovered cases in the Marshall Islands. As of January 6, 2021, 469 people have been vaccinated (335 health care workers and 134 front liners). The government responded with swift precautionary measures early on. Travel restrictions from affected countries have been imposed since January 24, 2020. President David Kabua declared a State of Health Emergency for COVID19 on February 7th, 2020. A ban to incoming travelers established on March 8 was extended through February 7, 2021, with the possibility of extensions towards the end of the year. On August 26, the Cabinet approved the temporary suspension of non-essential departures of RMI citizens, on the back of surging number of COVID-19 cases in Hawai and Guam. All air travel between Kwajalein and Majuro on international airlines is suspended. All cruise ships and liveaboard vessels and yachts are suspended from visiting. All fishing vessels that have transited through Covid-19 infected countries are suspended from entering RMI ports. To ensure continuity of transshipment services, a limited number of carrier vessels coming from Covid19-infected countries will be allowed to enter, with strict safety requirements including prohibition of human contacts and a minimum of 14 days between departure from ten restricted countries and arrival in RMI. Fisheries, port-related activities, and the hotel and tourism sectors are experiencing significant losses.
Reopening of the economy. To ensure continuity of transshipment services, a limited number of carrier vessels and purse seiners can enter RMI for transshipment, after spending 14 days at sea and only after clearance by corresponding agencies. Container vessels and fuel tankers that have a history of entering Majuro and Ebeye ports with same crew and corresponding health records can enter ports (no disembarkation) without 14-day quarantine. Special exceptions to the ban on incoming travelers have been issued for a few returning Marshallese and essential personnel for the US Army Garrison in Kwajalein Atoll. The mandatory quarantine on anyone coming into the country has been extended to 21 days.

Key Policy Responses as of January 7, 2021

Fiscal

The Government has approved an initial budget of $42 million dollars (around 20 percent of GDP) for the national preparedness plan in response to the global health pandemic on COVID19. Much of funding will cover urgent needs for RMI’s Ministry of Health and Human Services (including infrastructure, medical supplies and equipment, and surge support) and support to the Outer Islands COVID19 preparedness plans. The authorities have received USD 44.3 million grant support to cover these expenditures (out of which USD 19.6 million from the Asian Development Bank).
To date, the RMI has spent around $ 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

Exchange rate and balance of payments

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Mauritania
Background. Mauritania has reported5,564 (149deaths and 2830 recoveries) as of July 15, 2020. The government has taken stringent containment measures to limit the spread of the virus, including suspension of all commercial flights into and from the country; closure of all land borders except for the transportation of goods; closure of schools and universities, as well as of all non- essential businesses, including restaurants and cafés; suspension of non-essential interregional movements of people; a curfew from 9 pm to 6am throughout the country; and suspension of the Friday prayer. The authorities stepped up imports of medical equipment and medicines.
Reopening of the economy. On May 7, 2020 the government took the following measures to relax the containment and reopen the economy: (i) the opening of most of the businesses, but restaurants will only operate for carry-out meals; (ii) the relaxation of the curfew that will now take place from 11pm to 6am, instead of from 9pm to 6am; (iii) the authorization for collective prayer on Friday, but with clear guidelines on social distancing, masks wearing, and hands washing. However, following the spike in new infections, the Friday collective prayer was suspended again from May 14, 2020 to June 24, 2020. Effective from September 10, 2020 all the remaining restrictions were removed. The curfew was completely lifted throughout the country; the restaurants and cafés were reopened; interregional movements of people and domestic flights also resumed.However, following the gradual increase of new COVID-19 cases since early November, the Health Minister on November 18 issued a statement alerting the population on a possible second wave underway, and strongly recommending the wear of masks in all public areas, as well as social distancing. In order to contain the resurgence of the virus, on December 2, 2020 the government instructed (i) the closure of all schools and universities for two weeks, effective from December 4, 2020; (ii) a strict minimum presence of civil servants in the offices; and (iii) the suspension of public ceremonies.

Key Policy Responses as of December 3, 2020

Fiscal

The government on March 25 announced the creation of an emergency fund of about $80 million (1.1 percent of GDP) for urgent procurements of medical supplies and equipment; subsidies to 30,000 poor households; and financial support to small individual businesses. It also waived customs duties and taxes on imports of essential goods and signaled that it will take additional measures as more resources are mobilized. On May 6, 2020 the government approved additional health, medical supplies, social protection, SME support, foodstuff stocks, and security-related expenditures to address the pandemic (about $260 million (about 3.9 percent of GDP). To help provide critical resources for health and social protection programs, the IMF Board on April 23, 2020 granted to Mauritania an emergency financing of SDR 95.68 million (about $130 million) under the Rapid Credit Facility. The fifth review of the government program supported by the IMF Extended Credit Facility was completed on September 2, 2020, making available a disbursement of SDR 36.8 million (about $52.2 million), including an augmentation of access of SDR 20.2 (about $ 28.7 million). The country secured financing of around $ 95 million from the Debt Service Suspension Initiative and has appealed to development partners for additional financing.

Monetary and macro-financial

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

Exchange rate and balance of payments

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Mauritius
Background. Mauritius reported its first cases on March 18, 2020. The authorities have implemented a range of containment measures since the outbreak, including bans on public gatherings, followed by a curfew order, closing borders, discontinuing public transportation, closing schools, universities, shopping malls and attraction sites, suspending employee attendance at government and private workplaces (except for essential staff), and increasing testing. The economy has been severely affected by the crisis, with tourism coming to a halt and slowing of activity in other sectors. Since April 26, there have been virtually no cases of domestic transmission.
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. On May 15, two Bills were passed in the parliament – Covid-19 Bill and Quarantine Bill – which specified the details of the transition process from the curfew by strengthening the surveillance control and health system preparedness. This allowed the progressive reopening of economic and other activities with strict sanitary rules and added measures to avoid a resurgence of the disease. The nationwide curfew ended on May 30. Physical distancing guidelines remained in place, as well as the requirement to wear masks in public. From June 15, most of the activities resumed, with masks and physical distancing requirements in effect. On Aug 31, it was announced that the borders would be reopened in three phases: the first phase focusing on repatriation of Mauritians from abroad; the second phase from October 1 with travel to and from certain destinations; and the third phase involving full border reopening with date to be determined in light of the evolution of the pandemic. The border has been reopened since October 1, however as all arriving passengers are required to quarantine for two weeks, there have been few travelers so far. The quarantine requirements have been extended until February 15, 2021. In late October, Mauritius announced that it was launching a new, one-year visa (Premium Travel Visa) to encourage long stays and help the tourism sector. The visa applies to both tourists and remote workers. Following the emergence of the new strain of Covid, in late December Mauritius banned entry for all travelers who have been in South Africa or the United Kingdom in the past 14 days.

Key Policy Responses as of Jan 7, 2021

Fiscal

At the beginning of the Covid outbreak, the authorities have announced plans to increase general public health spending by Rs1.3 bill (0.28 percent of GDP). A range of fiscal support measures have also 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. Since July, the scheme covers only employees in the tourism sector. It was later announced that the support to the sector would continue until the opening of borders. Some Rs25 bill were used until September. The State Investment Corporation has been raising some Rs4 bill (0.8 percent of GDP) to make equity investments in troubled firms, including SMEs. The Development Bank of Mauritius Ltd is providing Rs200 mill (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). The government provided Rs9 bill support to Air Mauritius from its National Resilience Fund. In October, it was announced that Rs9 bill would be redirected to limit the increase in unemployment. From November 1 until June 30 next year five initiatives will be funded: i) The Human Resource Development Council (HHRDC) will increase the National Training and Reskilling Intake by some 9,000 unemployed in the construction, manufacturing, logistics, ICT-BPO, agro-industry, renewable energy and the circular economy. Beneficiaries will be paid monthly stipends of Rs10,200 over a training period spanning six months; ii) Employment Support Scheme for SMEs to support 11,000 employees with a monthly payment of Rs10,200 per capita; iii) Recruitment by Landscope (Mtius) Ltd of some 2,000 technically unemployed people for the National Clean-Up Campaign; iv) The Air Freight Scheme, incorporated into the Economic Recovery Plan, has two components; namely supervision for the national airline, Air Mauritius, currently under voluntary administration and support for the export sector. As part of the Covid response, the government submitted to Parliament a supplementary spending bill of Rs17 bill (3.6% of GDP) in November.

Monetary and macro-financial

The Bank of Mauritius (BOM) reduced the Key Repo Rate from 3.35 percent to 2.85 percent on March 10, followed by a further reduction to 1.85 percent on April 16. On March 13, the BOM also adopted a set of measures focused on economic operators which are being directly impacted by COVID-19, including: i) reduction of the cash reserve ratio from 9 to 8 percent, with the amount released through the cut earmarked to be made available to affected economic operators; ii) special credit line of Rs5 bill (1.1 percent or GDP) through commercial banks for affected firms to meet their cash flow and working capital requirements; iii) commercial banks also introduced a moratorium of six months on capital repayment for existing loans of affected economic operators; iv) the BOM also eased supervisory guidelines on handling credit impairments; and v) Rs5 bill (1.1 percent of GDP) of 2.5 percent two-year BOM savings bonds which were made available to retail investors.
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 (initially $300 mill, extended by 200mill) targeting operators having foreign currency earnings, including SMEs; iii) swap arrangement to support import-oriented businesses (initial amount $100 mill); and iv) Shared ATM Services – waving ATM fees during national confinement period.
On September 7, BOM announced the extension to December 31, 2020 of the moratoriums granted to economic operators (including Small and Medium Enterprises), households and individuals under its COVID-19 Support Program. The terms and conditions of the moratoriums remained unchanged.
Following the amendments to the BOM Act adopted by the parliament as part of CoVid Bill on May 15, the BOM Board approved the following additional measures in late May: 1) a one-off exceptional contribution of Rs60 bill (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 that it would invest $2 bill of FX reserves in MIC towards the latter objective. It has also been announced Mauritius Investment Corporation (MIC) will focus on investing in the Pharmaceutical and Blue Economy as new strategic sectors.

Exchange rate and balance of payments

The central bank has maintained the flexible exchange rate regime and has intervened in the domestic foreign exchange market to prevent disorderly fluctuations and maintain FX liquidity in the financial system. In addition, BOM conducts swap transactions with commercial banks under its support program for import oriented businesses for an initial amount of $100 mill, later enlarged by another $100 mill available until December 2020. Furthermore, it has also provided the State Trading Corporation Ltd (STC) with FX to ensure adequate supply of essential goods to the public.

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Mexico
Background. The first confirmed COVID-19 case was reported on February 28, 2020.
To delay the spread of the coronavirus, the Government declared a health emergency and implemented a range of sanitary measures, including travel restrictions, social distancing, school closures, and the shutdown of non-essential activities. On April 5^thPresident 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$11.7 billion (1.1 percent of 2020 GDP), the 10-year dollar credit spread widened from 132 bps to 423 bps at peak on April 28th but has since declined to 167 bps for the sovereign and from 377 bps to 526 bps for Pemex after peaking at 1188 bps, while the peso has depreciated by 5 percent relative to the US$ (as of January 7 2020; compared to February 20th, 2020), down from a peak of 26 percent.
Reopening of the economy: On May 14, the government announced plans to begin the normalization of economic activities, including a green-yellow-orange-red color system for states to represent the extent of activities allowed (e.g. states with most active cases are red and would remain in a forced quarantine), the resumption of school and labor activities in municipalities free of infection, and the addition of construction, mining, and transport equipment manufacturing as essential activities. For the weeks of January 4-17, 5 states are in the red category, 22 states are in the orange category, 3 are in the yellow category, and 2 are in the green category.

Key Policy Responses as of January 7, 2021:

Fiscal

The Government is implementing a set of measures aimed to: 1) ensure that the Ministry of Health has sufficient financial resources and does not face red-tape in procuring medical equipment and materials; 2) support households and firms; 3) boost credit, strengthen liquidity and guarantee the proper functioning of financial markets; 4) accelerate the tender processes for public expenditure to ensure full budget execution.
Besides higher health expenditure,Mexico’s fiscal response includes the following measures: 1) frontloading payments of the old-age and disability pensions by 8 months; 2) accelerating procurement processes and VAT refunds; 3) lending to firms and workers in both formal and informal sectors; 4) providing liquidity support and guarantees by development banks (250 billion pesos).
Specifically,the Ministry of Economy granted loans with optional repayments to SMEs that maintain employees on payroll, self-employed and domestic workers (9.4 billion pesos); and loans to family businesses previously registered in the Welfare Census (26.6 billion pesos). The government is providing subsidized unemployment insurancefor 3 months to workers that hold a mortgage with the Housing Institute (5.9 billion pesos). Moreover, additional resources are allocated to social spending related to infrastructure, security, education,urban improvement, and other areas (62 billion pesos).
The Government is implementing other measures, including housing credits for government workers with low-interest rates (ISSSTE’ loans for a total amount of 34.3 billion pesos), personal loans at a low rate (3 billion pesos) and special program to reactivate the economy by Housing Fund of the Institute for Social Security and Services (Fovissste, 2 billion pesos).
Overall, the above-the-line fiscal measures amount to 0.2 percent of GDP in health spending and 0.5 percent of GDP to support households and firms. Below-the-line measures amount to around 1.3 percent of GDP comprising loans to formal workers and recently laid-off workers as well as contingent liabilities.
During the week of April 19, the President further announced an austerity program for public expenditures, including reallocation of non-priority expenditure to priority items and voluntary wage reductions for high-ranked government officials.

Monetary and macro-financial

The central bank has cut rates by 275 basis points since the pandemic outbreak, from March through September 2020. It has also introduced measures to support the functioning of the financial system amounting to up to 800 billion pesos, or 3.5 percent of 2019 GDP as described below.
To support the flow of credit, the central bank has reduced the mandatory regulatory deposit (by 50 billion pesos, or about 15 percent of the current stock). It is also opening financing facilities for commercial and development banks (350 billion pesos) that would allow them to channel resources to micro, small and medium-sized enterprises and individuals affected by lockdown measures after the COVID-19 pandemic. Credit is being provided in exchange for conventional repo collateral as well as banks’ corporate loans, which would free up liquidity in the banks’ balance sheets.
To support liquidity in financial markets, the central bank has substantially expanded its liquidity facilities, making them more affordable, accepting a broader range of collateral, and expanding the range of eligible institutions. In particular, the Central Bank opened a facility to repurchase government securities at longer maturities than those of regular open market operations for up to 100 billion pesos. The cost of the repos were reduced significantly. A debt securities temporary swap facility has been introduced to promote orderly debt markets and provide liquidity for trading instruments. The central bank also established a corporate securities repo facility to support the corporate bond market.
To ensure the full functioning of financial markets, the central bank has drawn on the US$60 billion swap line with the Fed. It held two auctions to commercial banks of US$ 5 billion each, and completed two roll-over auctions with declining demand. Increased liquidity is being provided during trading hours to avoid spikes in short-term interest rates and sterilized at the close of trading. The Central Bank is also engaging in government bond swaps to shorten government bonds’ maturities in the hands of private institutions, thereby improving their liquidity position.
On the financial side, the National Banking and Securities Commission (CNBV) has issued temporary exceptional accounting standards allowing credit providers to defer loans for up to 4 or 6 months. and taken measures related to the digital onboarding of legal persons for the opening of banking accounts and the granting of loans. The CNBV, together with the National Insurance and Surety Commission (CNSF), also recommended banking and insurance institutions not to pay dividends, carry out share buy-backs or conduct any other mechanism aimed at remunerating shareholders. It has prohibited naked short-selling, while the circuit breakers in the Mexican Stock Exchanges are working well to smooth volatility. Furthermore, the Committee on Liquidity Banking Regulation is outlining temporary flexibilities on liquidity requirements for banks, permitting the use of up to 50% of the capital buffer and announcing temporary flexibilities, including those applicable to listed companies, general financial warehouses, and Financial Support Entities.

Exchange rate and balance of payments

The flexible exchange rate has absorbed external shocks while helping ensure US$ liquidity. The non-deliverable forward hedging program (NDF, in domestic currency) was extended by $10 billion to $30 billion; two NDF auctions were conducted, offering $2 billion each (allocated $2 billion total, 0.2 percent of 2019 GDP). A new tool was added, permitting the central bank to intervene in offshore non-deliverable forwards markets in case intervention is warranted with foreign intermediaries during European or Asian trading hours.

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Federated States of Micronesia
Background Background. To date, there are no confirmed COVID-19 cases in the Federated States of Micronesia (FSM), but the country's health system has limited capacity for handling an outbreak (see U.S. Department of State travel advisory for the FSM). The public health emergency is effective from January 31, 2020 to January 31, 2021. The national and state governments introduced travel restrictions, including restricting residents from traveling aboard and banning or requiring 14-day self-quarantine in a COVID-19-free area prior to entry into the FSM.
Reopening of the economy and vaccination. On November 30, the national government has relaxed outward travel restrictions, allowing residents to travel abroad. The FSM received 1,600 doses of the Moderna vaccine on December 28, 2020 from the United States, and is expecting another 8,200 doses to arrive on January 9, 2021.

Key Policy Responses as of January 7, 2021

Fiscal

To address the emergency caused by COVID-19, the national government has prepared a US$20 million (5 percent of GDP) COVID-19 Response Framework, in order to develop quarantine and isolation facilities across the nation, provide mandatory infection control training for all first responders, and increase testing capacity and ventilators for each island state in the FSM. On April 3, 2020, the government announced the Pandemic Unemployment Assistance Program of 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

Exchange rate and balance of payments

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Moldova
Background. The first confirmed COVID-19 case was reported on March 7, 2020. Confirmed cases have risen progressively, prompting a declaration of a state of national emergency, restrictions on border crossings, and limits on economic and social activity. Among other provisions, the state of emergency allowed Moldovan authorities to impose additional border controls, limit movement, prohibit large gatherings, manage food supplies, and coordinate media messaging about the pandemic.
Reopening the economy and additional containment measures. The National Extraordinary Commission on Public Health declared an emergency situation for the whole territory of the country from November 30, 2020 to January 15, 2021. Earlier, the state of national public health emergency instituted from 15 May 2020 had been canceled by a decision of the Commission issued on 13 October 2020 that shifted into a more de-centralized risk management approach and declared emergency situation in highly affected regions (35 out of 38 territorial regions are marked code red). Some of the new restrictions include: Banning night club activities, in-door public events including conferences, sports competition, theaters and cinemas, groups of more than 3 persons including in parks and forests and limiting movements for old people aged above 63; limiting restaurants and public catering from 7 am – 10 pm; making wearing of masks mandatory in all places; Measures to prevent COVID-19 infection at the entry to the Republic of Moldova were updated on 20 November 2020 and updated rules list countries with increased risk of transmission and incoming passengers will need to observe 14-day quarantine. The commission has decreed all schools (primary, gymnasium and lyceum) to conduct classes on-line beginning December 21. On December 7, the Republic of Moldova with support from WHO and UNICEF presented its request to the COVAX Platform in order to ensure the delivery of the COVID-19 vaccine.

Key Policy Responses as of December 17, 2020

Fiscal

A comprehensive fiscal package has been adopted as per two 2020 State Budget Amendments, following several targeted fiscal measures to support businesses and vulnerable households, such as expanding unemployment benefits and strengthening existing targeted social assistance, tax relief for sectors affected by state-imposed restrictions, delaying tax payment deadlines to mid-2020, suspending tax audits and other controls, and increasing state budget allocations to the budget emergency and health funds and to a mortgage guarantee program. Discussions on the 2021 Budget are underway and the draft envisages more support to the health sector.

Monetary and macro-financial

The National Bank of Moldova decreased the base rate applied to the main short-term monetary policy operations to 2.65 percent, decreased the required reserve ratio in local currency to the level of 32.0 percent, while the required reserves ratio in freely convertible currencies increased to the level of 30.0 percent. These measures were taken with a view to support the economy, ease liquidity conditions, and enhance financial system resilience. Financial sector policy has thus far focused on providing credit institutions with flexibility to manage near-term payment obligations of individuals facing financial difficulties without recourse to adjustment of prudential provisions, including in cases of loan rescheduling.

Exchange rate and balance of payments

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Mongolia
Background. When COVID-19 hit Mongolia in early 2020, the government immediatelydeclared the state of high alert and took prompt actions to contain its spread through social distancing and closure of the border with China. Limited COVID-19 cases have been sporadically reported from individuals repatriated abroad. Domestic transmissions of the virus were reported in early November for the first time. Since then, the government has reinforced stringent measures, including a nationwide lockdown until December 14. Daily new cases remain low (around 0.1 per 100K people).

Key Policy Responses as of January 7, 2021

Fiscal

MNT17 billion (0.04 percent of GDP) of additional health spending has been approved and allocated to epidemic prevention and control, acquisition of medical supply and medical staff overtime salaries. This measure is financed by a Government Reserve Fund withdrawal.
On March 27, a comprehensive set of fiscal measures for consideration was proposed by the cabinet to protect vulnerable household and businesses and to support the economy. These include: (i) tax exemptions on several imported food and medical items; (ii) increase of child allowance and unemployment benefits; (iii) exemptions on CIT, PIT, and social security contributions until the end of September; and (iv) an increase in credit guarantees to SMEs and soft loans from the development bank to cashmere producers. On April 13, Parliament approved tax exemption measures as proposed by the cabinet.
On May 6, a second package of fiscal measures (amounting to roughly 2 percent of GDP) was announced to protect the vulnerable groups. These include: (i) a further increase in child money allowance; (ii) a scale-up of food stamp allowance; and (iii) an increase in social welfare pensions for the elderly, disabled, dwarfs, orphans, and single parents with more than 4 children. The government has indicated they expect to fully offset these measures with expenditure cuts.
On August 5, the government announced the extension or modification of COVID-19 fiscal measures. Extending measures through the end of the year include: (i) child money allowance; (ii) CIT exemption; (iii) exemption of rent income tax; and (iv) exemption of customs duty and VAT on certain imported goods. Modification of measures includes: (i) increased food stamp allowance; (ii) increased social welfare pensions; and (iii) reduced social security contribution. A supplementary budget to contain these measures (amounting to about 7½ percent of GDP in total including the previous measures) was approved by Parliament on August 28.
On November 18, the government announced further extension of selected COVID-19 fiscal measures through end-June 2021, in response to potential adverse effects of the country’s lockdown associated with domestic transmissions, These include: (i) exemption of rent income tax; and (ii) exemption of customs duty and VAT on certain imported goods.
On December 2, the government announced COVID-19 measures, which include (i) MNT3 billion financial support to selected provinces affected by domestic transmissions; (ii) temporary exemption of tax penalties and charges on late payment; and (iii) coal briquette price subsidy to ger districts in Ulaanbaatar City.
On December 13, the government announced COVID-19 measures which will be financed by selected state-owned enterprises. The measures include (i) waiving utility (electricity, heating, water, and waste disposal) payments to business entities and households; and (ii) reducing the price of coal briquettes by 75 percent.

Monetary and macro-financial

On March 11, the Bank of Mongolia (BOM) (i) reduced the policy rate by 100 bps to 10 percent; (ii) reduced the MNT reserve requirement of banks by 200 basis points to 8.5 percent; and (iii) narrowed the policy rate corridor to ±1 percent. The lower reserve requirement released MNT 324 billion (0.8 percent of GDP) of additional liquidity in the banking system. On March 18, the BOM and the Financial Regulatory Commission implemented temporary financial forbearance measures on prudential requirements, loan classifications, and restructuring standards.
On April 13, the BOM: (i) cut the policy rate by 100 bps to 9 percent and (ii) allowed existing consumption loan borrowers to defer their principal and interest payments by up to 12 months.
• The Anti-Pandemic Law approved by Parliament on April 30 compels the BOM to implement nonconventional measures, including a SOE-issued bond purchase to compensate banks’ profit loss related to pension-backed loan cancellation, short-term concessional financing to gold miners, and temporary resumption of the subsidized mortgage program which ended at end-2019. At end-December 2020, such BOM’s nonconventional quasi-fiscal operations amounted to MNT764 billion (1.9 percent of GDP).
On August 7, the BOM extended temporary financial forbearance measures, which had been supposed to expire at end-July, through the end of the year.
On September 14, the BOM cut the policy rate by 100 bps to 8 percent.
On November 23, the BOM cut the policy rate by 200 bps to 6 percent and lowered MNT reserve requirement by 250 bps to 6 percent, and further extended financial forbearance measures through end-June 2021.

Exchange rate and balance of payments

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

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Montenegro
Background:The first confirmed COVID-19 case was reported on March 17, 2020. On May 25, the Prime Minister announced that Montenegro was the first coronavirus-free country in Europe. In mid-June, the virus returned and the government declared an epidemic in the entire country on July 22. On July 15, the EU removed Montenegro from its safe list of countries, and non-essential travel by Montenegrin citizens to the EU member states is not allowed. Unified epidemiological measures have been reintroduced throughout the country in late November. Current measures in force include a nationwide curfew from 10pm to 5am (with exceptions for selected holiday dates), a prohibition on travelling between municipalities during weekends(except for business, health needs and humanitarian reasons), restricted hours of retail and hospitality facilities, a ban on mass gatherings and gatherings in residential buildings, and a prohibition on visits to patients undergoing hospital treatment and people accommodated in social or childcare institutions.
Reopening of the economy: A phased reopening of the economy began on May 4, and borders were reopened to countries with infections of less than 25 per 100,000 inhabitants on June 1. A decision was taken on June 30 to open borders to residents of all EU member states without additional conditions. The “green list” was further updated on August 3 to include Russia and Azerbaijan. From Aug 15, the land borders with Serbia, Albania, Kosovo and Bosnia and Herzegovina were reopened. Residents from these countries as well as the USA are permitted to enter Montenegro with a negative PCR test not older than 72 hours. Montenegrin residents who have traveled to regional countries are also required to undertake health supervision measures upon their return.

Key Policy Responses as of January 7, 2021

Fiscal

The Montenegrin government has extended its wage subsidy program for two additional months (October and November) to counter the effects of the pandemic. The subsidy program is part of the third package of economic measures adopted by the Government on July 23. The package, comprised of short- and long-term measures, is worth EUR 1.22 billion over four years (EUR 281.2 million in 2020). Short-term measures in 2020 amounting to EUR 82.7 million include (i) support to the tourism sector (such as interest subsidies on loans and the reduction of VAT from 21 percent to 7 percent in the hospitality industry), (ii) interest subsidies for the agriculture sector; (iii) programs for improving competitiveness; (iv) wage subsidies; and (v) one-off support to veterans and pensioners. Longer-term measures target the IT, tourism, energy, agriculture and fisheries sectors, and ports.
This follows the second package of economic measures approved on April 24, which include (i) subsidies in April and May of 70 percent of the minimum wage for employees in sectors that are closed because of the pandemic, employees who are unable to work due to childcare for children aged under 11, or people who have to be self-isolated and quarantined; (ii) a subsidy of 50 percent of the minimum wage for employees in sectors at risk due to the pandemic-related lockdown; (iii) a subsidy of 70 percent of the gross minimum wage of newly employed workers in SMEs for six months if these workers are registered as unemployed; (iv) state bodies and state-owned companies will impose a six-month moratorium on the enforcement of claims for companies that are not operating due to the pandemic; (v) energy firms will exempt the fixed portion of electricity bills for businesses that have stopped operating due to the pandemic-related lockdown; (vi) the state utility EPCG will double its electricity subsidies for vulnerable households; (vii) assistance to the agriculture and fisheries sector, including one-off assistance to fishermen and payments for the contributions of insured agricultural workers; and (viii) one-time assistance of EUR 50 to all persons recorded as unemployed in the Employment Agency of Montenegro and who did not receive any compensation.
Previously announced measures include: (i) the removal of the excise on medical alcohol sold in pharmacies; (ii) the delay of tax payments and social security contributions; (iii) the creation of a new Investment Development Fund (IRF) credit line of EUR 120 million to improve the liquidity of entrepreneurs; (iv) the deferral of lease payments for state-owned real estate; (v) advance payments to contractors for capital projects; (vi) one-off financial assistance to low-income pensioners and social welfare beneficiaries in the amount of EUR 50 each (EUR 1 million has been allocated); (vii) and an increase in the March wages of healthcare workers by up to 15 percent (EUR 0.5 million has been allocated).

Monetary and macro-financial

On October 22, the Central Bank announced a new package of support measures, aimed at helping the most affected citizens. The Central Bank will introduce a six-month moratorium on the repayment of loans for citizens who have lost their jobs after March 31 due to the COVID-19 crisis and have not delayed the repayment of their loans by more than 90 days before end-2019, and whose loans have not been classified as non-performing by end-2019. Other measures include a loan restructuring for citizens whose wages have fallen by at least 10 percent due to the pandemic, and a change in the amount of demand deposits included in the calculation of due liabilities (20 percent instead of 30 percent).
This follows the announcement of July 30 that banks are obliged to grant a moratorium to borrowers from two priority sectors: tourism, as well as agriculture, forestry, and fishing. The moratorium can be used in the period of September 1, 2020 to August 31, 2021, and is available to borrowers in these sectors who are not past due in loan repayments for more than 90 days and whose loans were not classified as non-performing assets as of December 31, 2019. Banks are also allowed to treat approved or restructured loans in these sectors as loans from category “A” during the duration specified above.
Earlier, on May 20, the Central Bank announced that banks can approve a new moratorium for borrowers facing difficulties due to the pandemic. Banks may also, under clearly specified conditions, approve the restructuring of loans, including unsecured cash loans. A previously announced moratorium on loan repayments for a period of up to 90 days (announced on March 17) was available to all borrowers.
The central bank has also announced measures to temporarily prohibit banks from paying dividends to shareholders, except in the form of equity, and to allow banks to increase exposures to a person or group of related parties beyond the prescribed exposure limits (25 percent of the bank’s own funds), with prior central bank approval.
Other measures include the decision to halve the fee that banks are required to pay for withdrawing reserve requirement liquidity (announced on May 7) and the reduction of the reserve requirement rate by 2 percentage points (announced May 12).
The Deposit Protection Fund has also increased its credit line with the EBRD to EUR 50 million (from EUR 30 million).

Exchange rate and balance of payments

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Morocco
Background. Morocco reported its first confirmed cases of COVID-19 on March 2, 2020. The government created an emergency committee chaired by the Minister of Finance in charge of monitoring the situation. The authorities declared a state of health emergency until August 10, 2020, initially, adopted containment measures, including quarantine, suspended all international passenger flights, forbid all public gatherings, and closed mosques, schools, universities, restaurants, cafes, and hammams. The authorities also decided to regulate prices and control the distribution channels of facemasks and hydro alcoholic gels.
Reopening of the economy. The authorities announced partial reopening measures starting June 11, 2020. Most businesses 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, 2000 for Moroccan nationals leaving abroad and foreigners established in Morocco. However, the increase in the number of cases in late July required to tighten restrictions in a number of urban areas that remain under a partial lockdown and now experience new restrictions to movements. Additional containment measures were reinstated on December 23, 2020 for 3 weeks, including a national night curfew. Large gatherings continue to be banned and wedding parties are not allowed in Morocco. The government also extended the state of health emergency until January 10, 2021.
COVID-19 Vaccine distribution plans. Morocco has announced a nationwide COVID-19 vaccination campaign. The campaign aims at covering 80 percent of Moroccan population over 18 years old (about 25 million people). The vaccination is expected to take place over a 3-month period, but it is not yet clear when it would start. Morocco has pre-ordered about 30 million COVID-19 vaccine doses for the vaccination campaign, and is developing partnerships to manufacture COVID-19 vaccines in Moroccan laboratories.

Key Policy Responses as of January 6, 2021

Fiscal

The authorities have created a special fund dedicated to the management of the pandemic, of about 3 percent of GDP financed by the government and by voluntary contributions from public and private entities which will be tax deductible. This fund covers the costs of upgrading medical facilities and support businesses and households impacted by the pandemic. Businesses with less than 500 employees made temporarily idle and experiencing a reduction in turnover of more than 50 percent were authorized to defer social contribution payments until June 30. Their employees who become temporarily unemployed and are registered with the pension fund received 2,000 dirhams a month and were allowed put off debt payments until June 30. In April, 2020 almost 1 million workers from 134,000 companies were eligible to these transfers. Companies and households can also defer income tax payment until September 30, 2020. In addition, the government has decided to accelerate payment to its suppliers to support businesses. The government has extended social transfers to employees temporarily unemployed and further deferred social contribution payments for some sectors (including tourism) until end-March 2021.
The government also took measures to support households working in the informal sector. Households’ benefiting from the non-contributory health insurance (RAMED) received a monthly mobile payment of DRH 800-1200 (USD 80-120) from April, depending on households’ composition. Other households which do not benefit from RAMED can claim cash support by registering online. In April, 85 percent of eligible households in the informal sectoral were covered. The government postponed the deadline for personal income tax filing from end-April to end-June 2020 and provided a tax exemption for additional compensation paid by firms to employees in the formal sector up to a limit of 50 percent of the average monthly net salary. A decree-law adopted on April 6, 2020 authorizes the government to increase external borrowing beyond the ceiling approved in the 2020 Budget Act.
On August 6,2020 the authorities announced a plan to sustain the economic recovery and employment levels. The plan envisages the mobilization of DRH 120 billion, mainly in the form of credit guarantees to firms and funding for a newly -created “Fund for Strategic Investment”, which will finance investment projects (including PPPs) and sustain the capital of firms that needs equity injections to develop their business.

Monetary and macro-financial

The central bank reduced the policy rate by 75 bps to 1.5 percent since March 2020. To support companies, loan payments are suspended for small and medium-sized businesses and self-employed people until June 30. To reduce volatility, the Capital Market Authority decided to revise downwards the maximum variation thresholds applicable to financial instruments listed in Casablanca Stock Exchange.
Given growing demand for liquidity support in the banking system (both in DRH and in EUR/USD), Bank al-Maghrib decided on a three-pronged approach to increase liquidity provision to the banking sector: (i) expand the range of collateral accepted for repos and credit guarantees to include public and private debt instruments (including mortgages), (ii) increase and lengthen central bank refinancing operations to support banking credit to (V)SMEs, and (iii) provide FX swaps to domestic banks. In addition, Bank al-Maghrib decided to bring reserve requirements to zero (from 2 percent) to increase liquidity provision, and to ease refinancing of banks’ contribution to microcredit institutions and credit unions.
On March 29, 2020 the central bank decided the following prudential and regulatory measures to support the banking sector: (i) Banks are authorized to go below the 100 percent liquidity coverage ratio (LCR) until end-June 2019; (ii) Provisioning requirements are suspended for loans’ benefiting from a temporary payment moratorium until end-June 2019; (iii) The capital conservation buffer (CCB) is reduced by 50 bps for one year. In addition, the central bank has call on banks to suspend dividend payments for FY2019.
On April 24, 2020 the Moroccan insurance supervisor relaxed some provisioning requirements to mitigate the impact of COVID-19 on the insurance sector.
In addition, Morocco has established a funding for lending facility (Damane Oxygene) which provides loans to (V)SMEs at subsidized interest rates with a guarantee of 95 percent from the Central Guarantee Fund. On May 15, this program was extended to end-2020, and collateral requirements were removed to improve access for (V)SMEs.Some 50,000 companies have benefitted from this facility, for a total outstanding amount of 1.6 percent of GDP.
In addition, the government will provide interest-free loan of up to dirham 15,000 to self-employed, with a repayment period of three years and a grace period of one year. The government also cancelled capitalized interests on mortgages (up to DRH 3000 per month) and consumer loans (up to DRH 1500 per month) accrued from March to June 2020 for all households experiencing income losses.
On May 21, 2020 the government announced a post crisis facility (Damane Relance) to support businesses that will provide financing to cover working capital needs at subsidized interest rate (with a 4 percent maximum interest rate, equivalent to the current policy rate + 200 basis points). A sovereign guarantee of 95 percent will be provided to SMEs, for an equivalent of up to ten percent of annual turnover. Larger firms will benefit from a sovereign guarantee of 80 to 90 percent of the outstanding loan, which will be capped at one month of turnover for most sectors. Firms will have 7 years to repay with a 2-year grace period. In addition, the government will guarantee state-owned enterprises’ loan that will be provided by banks exclusively to repay their suppliers. At end-October, banks provided loans worth about 2.5 percent of GDP to about 25,000 firms under this facility. On October 5, the government launched a new facility to provide financing to real estate firms (Damane Relance Promotion Immobilière). On January 6, 2021 the government extended the Damane Relance facility until end-March 2021.

Exchange rate and balance of payments

As part of a gradual and orderly transition to a more flexible exchange rate regime, the authorities broadened the dirham’s fluctuation band to +/- 5 percent (from +/- 2.5 percent) on March 6, 2020.
On April 7, 2020 the Moroccan authorities purchased all available resources (about US$ 3 billion or 240 percent of quota and about 3 percent of GDP) under the Precautionary and Liquidity Line (PLL) arrangement. This purchase will help the authorities limit the social and economic impact of the COVID-19 pandemic and allow Morocco to maintain an adequate level of official reserves to mitigate pressures on the balance of payments. On December 21, 2020 the Moroccan made an early repayment of about SDR651 million or USD936 million and about 0.8 percent of GDP.

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Mozambique
Background. Mozambique reported its first COVID-19 case on March 22, 2020. After peaking in September, daily new cases seem to be increasing again since late December.
Early on, the government took several actions to contain an outbreak of COVID-19 in the country, stating that “prevention remains the best strategy.” These actions included (i) the shutdown of schools form pre-school up to university, (ii) the ban of all gatherings – including religious services – of more than 50 persons, (iii) the ban and cancellation of all entry visas, (iv) a 14-day quarantine for all travelers entering Mozambique and (v) the creation of a technical and scientific committee to advise the government. The government has made it mandatory to wear face masks in public places.
On March 30, President Nyusi declared a state of emergency for the month of April, extended three times (until July 30). On August 5, the President declared a second state of emergency (after 3 consecutive months of State of Emergency allowed by the Constitution) to further halt the spread of the COVID-19. The measures to prevent the spread of the new coronavirus now include: (i) imposing limitations on movements within the country and border entries; (ii) ban on all types of public or private events; (iii) closure or reduction of non-essential shops; (iv) monitoring prices of essential goods for preventing price gouging; (v) redirecting the industrial sector toward the production of goods necessary for the prevention and mitigation of the COVID-19 pandemic; (vi) introducing employee rotation in the workspace; and (vii) ensuring the adoption of preventative actions in all institutions, public or private.
Reopening of the economy. The government announced the reopening of schools for 12th grade (pre-university) and teacher training colleges. The new state of emergency envisages gradual easing of restrictions in three phases starting on August 18 with low risk activities including reopening of universities and other senior level colleges and religious gathering with no more than 50 people. In October, the government introduced additional requirements for firms to ensure readiness to manage COVID cases. Mid-December, the government further eased restrictions, allowing bars to reopen and increasing the upper limit for private gatherings.

Key Policy Responses as of January 8, 2021

Fiscal

Early on, the government has asked Mozambique’s development partners for US$ 700 million to help deal with the economic impact of the pandemic. This fiscal package would finance (i) temporary and well-targeted tax exemptions to support families and the health sector (VAT and import tariff exemptions on food, medicine and medical equipment), and (ii) higher spending to respond to the health crisis and humanitarian needs, including higher health related spending on goods and services, and higher cash transfers and subsidies to the poorest households as well as micro-businesses and SMEs. In May, the government extended the VAT exemption on sugar, vegetable oil and soap until the end of the year. Some emergency spending was delayed by the government due to particular care to following appropriate budgetary procedure and putting in place a revised budget, which has been approved by the general assembly in early November.

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 10 percent against the US dollar since early March 2020. No major capital flow movements have taken place, while international reserves have been increasing over the past months.

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Myanmar
Myanmar has 123,740 confirmed COVID-19 cases (2,664 deaths and 106,121 discharged) as of December 31, 2020. Local transmissions have been rapidly increasing in Rakhine State and Yangon Region. Semi lockdown with stay-at-home instruction was issued for entire Rakhine State starting August 27, and for all townships except the isolated Cocogyun Township (located on a far island) in Yangon Region starting September 21. Factories, especially in the garment sector, instructed to close temporarily until October 21 was relaxed back to October 12 once they met Grade-A in preparation for virus prevention measures. Work from home policies are in place for all other organizations in the Yangon Region. The economy has been deeply affected by the outbreak, with sharp declines in tourist arrivals, supply chain disruptions for the garment sector, and losses for SMEs, which have resulted in large layoffs and factory closures. In response, the government has announced measures to limit the spread of the virus including travel restrictions (including quarantine requirements, suspension of visa issuances and international flights), closure of several land borders, and bans on mass public gatherings. A National Central Committee on Prevention, Control and Treatment of 2019 Novel Coronavirus has been established to coordinate the authorities’ response. A second committee, the Control and Emergency Response Committee on COVID-19, was setup on March 30 to help with stricter administrative measures to control the spread of the virus including quarantining migrant workers coming from neighboring countries. The Myanmar government has developed the COVID-19 Economic Relief Plan (CERP) consisting of seven goals, 10 strategies, 36 action plans and 76 actions that cover a range of emergency fiscal and monetary measures. The CERP seeks to mitigate the inevitable economic impact posed by COVID-19 while establishing a foundation to facilitate Myanmar’s rapid economic recovery. In addition, the government is drafting the Myanmar Economic Resilience and Reform Plan (MERRP) to extend the efforts to economic recovery and relief. All instructions (excluding some relaxations) relating COVID-19 prevention and control have been extended to January 31, 2021. Restrictions on visa issuances and international passenger flights have also been extended to January 31, 2021. Domestic flights resumed on December 16, 2020 while the relevant ministries are discussing phase-by-phase resumption of international commercial flights under the guidance of the national COVID-19 committee.

Key Policy Responses as of January 7, 2021

Fiscal

Revenue measures. (i) exemptions and subsidies of household electricity charges (MMK 109 billion); (ii) deferment of income and commercial tax payments due in the second third, and fourth quarters of FY 19/20 to January 31, 2021; (iii) exemption of the 2 percent advance income tax on exports in FY19/20 and first quarter of FY20/21; (iv) waiver of specific goods tax, customs duty and commercial tax on critical medical supplies and products related to the prevention, control and treatment of COVID-19; (v) exemption of fees for renewal license of hotels and tourism businesses for one year up to end of March 2021 and reduced custom duties for businesses operating with the Myanmar Automated Cargo Clearance System.
Expenditure measures. (i) Medical spending. Purchasing the necessary medicines, medical equipment and related items for hospital upgrade and spending on building and renovation works (MMK 268 billion); (ii) Household support. In-kind and cash transfers to the most vulnerable population (MMK 404billion)through Apr-Sep and 4th round cash transfer (MMK 164 billion) in Nov-Dec; (iii) Spending programs to support rural and agriculture sectors (MMK 93 billion).
On-lending. (i) transfer of MMK 400 billion to Myanmar Economic Bank to establish a COVID 19 Fund to provide soft loans to affected business (particularly the priority garment and tourism sectors and SMEs); (ii) provision of MMK 600 billion loans to farmers.
Loans to public servants: The government allocated about 550 billion kyat to provide two months’ salaries as the interest-free loans to about 1.1 million permanent public servants. It was disbursed on Oct 5. The moratorium is six months and the loans need to be repaid in one year.
Government guarantees. The government has announced that it would guarantee 50 percent of new loans made by private banks to enterprises which are not beneficiaries of the government COVID fund.
Up to 10 percent of FY 2019/20 initial budget expenditure (excluding those implemented by foreign loans and grants) of each ministry has been re-allocated to fight against COVID-19.In addition, unspent expenditures were also returned to the General Reserve Fund (GRF). In sum, reallocation within respective organizations accounted 306 billion kyat while reallocation through GRF reached 2,631 billion kyat.
Insured Fund for Workers: The Social Security Board, under the Ministry of Labor, Immigration and Population, will pay 40 percent of the salary to insured workers, as a family assistance fund, in accordance with the Social Security Law. Insured workers who are included in the Stay-at-Home order and worked at the private factories and businesses as of September 23 are entitled to this benefit.

Monetary and macro-financial

The Central Bank of Myanmar (CBM) cut the policy interest rate by 0.5 percentage points on March 12 and by 1 percentage point on March 24. It announced a further 1.5 percentage points reduction effective May 1. Deposit auctions have been halted to maintain adequate liquidity in the interbank market. On April 9, the CBM announced a temporary reduction in banks’ required reserve requirement ratio from 5.0% to 3.5% of deposits till September 30, 2020. This has been extended to March 31, 2021. A temporary revision to the formula for calculating the liquidity ratio, increasing the weight of government treasury bonds with a remaining maturity of more than one year from 50 percent to 90 percent, has also been extended till March 31, 2021. On April 23, CBM announced the extension of the deadline for compliance with four prudential regulations (enacted in July 2017) by three years from end-August 2020 to end-August 2023 to enable banks to support the economy cope with the impact of COVID-19.

Exchange rate and balance of payments

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Namibia
Background. Namibia reported its first case of COVID19 on March 14, 2020. Cases have increased rapidly recently and have caused one of the main ports to be temporarily closed (due to a lockdown in the region). The total number of cases remains low. The government declared a national state of emergency and adopted containment measures, including social distancing, work from home initiatives (including suspension of the parliament for 21 days), lockdowns in some regions, and closures of all points of entry and comprehensive restrictions on cross-border travel. The domestic travel lockdown was relaxed on May 4 (so people can travel inside the country with some constrains on number of vehicle occupants), points of entry remain closed, except for the transportation of goods. The authorities further eased restrictions on travel by removing the obligation to quarantine for tourists with negative PCR test result.

Key Policy Responses as of January 7, 2021
Fiscal

On April 1 the government launched the Economic Stimulus and Relief Package to mitigate the impact of COVID-19 (8 billion Namibian Dollars, or 4.25 percent of GDP), including i) expenditure measures of 2.6 bn for health, wage subsidies for affected sectors, and income grants; and ii) guarantees of up to 2.3 bn to support low interest loans for small and agricultural businesses, and individuals. On June 15, the government announced it will extend the deadline of submitting Individual Income Tax returns from June 30 to September 30 (not the payment of taxes due, which is still June 30). In August the Bank of Namibia announced it will participate in the operationalization of the loan guarantee program, providing 50 million Namibian dollars in capital targeted to SME credit.

Monetary and macro-financial

The central bank reduced the policy rate by 25 basis points to 3.75 percent on August 19, 2020 (250 bps total since the state of emergency was declared). On March 26, the central bank announced changes in the financial sector and its regulatory setting, including i) allowing banks to grant loan payment moratorium (payment holidays) ranging from 6 to 24 months, ii) regulatory and policy relief changes, such as relaxing the determination on liquidity risk management, reducing the capital conservation buffer rate to 0 percent for at least 24 months to support banking institutions to supply credit, and postponing the effective date of implementation of the 25 percent single borrower limit and concentration risk limit.

Exchange rate and balance of payments

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Nauru
As of January 4 2021, 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 mid-May. Social distancing measures have been encouraged including limiting or cancelling public gatherings and recommending working arrangements from home where possible.

Key Policy Responses as of January 4 2021

Fiscal

While mitigation measures have not been needed, containment efforts have been sizeable and expenditures on keeping the national airline and other SOEs afloat have been significant at about 8 percent of 2019 GDP. Initial estimates from the health and immigration department suggest an estimated AUD 3.5 million for health expenditures and isolation costs per 500 individuals (approximately 4 percent of the population), AUD 5.1 million on liquidity injections to Nauru Airlines, an estimated AUD 0.5 million in budget support to SOEs in managing inventory from limited freight and cargo services. The authorities have reprioritized expenditures and drawn down on cash buffers and general reserves to support the fiscal measures, including necessary medical expenditures. Apart from containment and mitigation, the government has also used its cash buffers for the repatriation of Nauruans abroad. As of January 4, 2021, the authorities have implemented a testing regime for COVID-19 and reduced the mandated time in quarantine, alleviating some of the budgetary implications of containment. The ADB has approved a US$5 million policy-based grant to support public investment management, fiscal sustainability in Nauru ; and to help the Government of Nauru improve the management of public expenditure and national infrastructure, as well as the governance of state-owned enterprises (SOEs).

Monetary and macro-financial

Exchange rate and balance of payments

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Nepal
Background. Nepal’s first confirmed COVID-19 case was on January 23, 2020, and the country continues to see a gradual increase in the number of confirmed cases. At end-March, the authorities imposed a nationwide lockdown, a ban on domestic and international flights, and a closure of land border crossings. The government lifted the national lockdown on July 22, 2020 but has since had to reimpose some restrictions because of rapidly rising Covid-19 cases. International flights resumed on September 2, 2020 and domestic flights and long-haul public transport services resumed on September 17. On November 13, the government further relaxed restrictions by opening tourist sites. Land borders remain closed except to Nepali’s returning home and for the transportation of essentials goods and services. Effective from December 23, 2020 until further notice, the Government of Nepal has restricted entry of passengers originating from or transiting through the United Kingdom due to concerns about the new strain of the corona virus.

Key Policy Responses as of January 7, 2021

Fiscal

Measures announced March 30, 2020. 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, 2020. 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, 2020. 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). In addition, the existing child grant (social support program) will be expanded by an additional 11 districts to cover 25 districts total.

Monetary and macro-financial

Measures announced on March 29, 2020. 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 on April 29, 2020. The NRB announced that banks will defer loan repayments due in April and May until mid-July. The loan deferral was further extended to January 2021 or later depending on how severely the borrower was affected. For working capital loans, banks will extend the repayment schedule of the amount due during the lockdown up to 60 days. Businesses in affected sectors, if they can show the needs, can qualify for additional working capital loans of up to 10 percent of the approved amount of their existing working capital loans, to be repaid within a year at most. The NRB directed banks to apply lower interest rates (up to 2 percentage points) when calculating the interest due for the period of mid-April to mid-July, applicable to borrowers from affected sectors.
Measures announced on July 17, 2020. The NRB lowered the policy rate from 3.5 percent to 3 percent and announced that additional liquidity support will be made available through longer-term repo facility as necessary. The limit on the loan to value ratio for personal residential home loans was raised to 60 percent and margin natured loans to 70 percent from 65 percent. The limit on banks’ total loans was raised to 85 percent of the sum of core credit and deposits from 80 percent. The NRB requires banks to extend at least 40 percent of their loans to micro, small and mid-size enterprises and borrowers in the agriculture, energy and tourism sectors by mid-July 2024.
Measures announced on December 3, 2020. The NRB announced the collateral auction process will be deferred for some time for borrowers impacted by the COVID-19 pandemic who have outstanding interest payment of less than six months. The NRB also announced that provisions will be made to allow repayment of foreign currency loans in local currency.

Exchange rate and balance of payments

On April 1, 2020, the authorities imposed a temporary ban on luxury goods imports, such as gold over 10 kg and vehicles worth over US$50 thousand and will temporarily provide a minimum currency exchange facility to qualifying students abroad (less than US$500 per student).

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The Netherlands
The first cases of COVID-19 infections were reported in the Netherlands in late February. The authorities have taken measures to limit the spread of the virus, including ordering closure of schools and many catering businesses, and advising to avoid social contact and work from home to the extent possible.
Starting on May 11, the Dutch government laid down a progressive easing of the lockdown measures under strict conditions. For example, most businesses,childcare services,primary and secondary schools were allowed to reopen, while large group gatherings were gradually permitted.
With the resurgence in the number of infections, the authorities havereintroduced measures to limit the spread of the virus. Several containment measures with gradual restrictions were announced successively on August 6, August 18, September 25, and October 2. As the number of infections continued to increase (surpassing the peak observed in the Spring), a partial lockdown was reinstated nationwide from October 14 to mid-December. Additional restrictions were imposed from November 4 for two weeks to further curb the infections curve. These stricter measures were subsequently lifted following a decline in daily infection cases while keeping the partial lockdown in place and making it mandatory to wear face masks in indoor and outdoor public spaces (e.g. shops, museums, restaurants, bus stops and airports) from December 1.
However, the virus has spread further, prompting the authorities to impose the strictest lockdown since the beginning of the pandemic. All non-essential businesses, schools (with few exceptions), daycares, and many public spaces such as parks and zoos were ordered to close from December 15 to January 19. It is required to work from home unless not possible, avoid public transportations, limit gatherings to two guests from a different household (three during Christmas celebrations), maintain social distancing, and strongly advised not to travel abroad until mid-March. In addition, a negative PCR test is required for travelers to Netherlands from high-risk countries. With vaccines now available, a vaccination plan is being deployed starting on January 6. The first wave of vaccination targets wealth care workers dealing with COVID-19 infections and ambulance services, and employees of nursing homes.

Key Policy Responses as of January 7, 2021

Fiscal

A series of fiscal measures have been introduced since the start of the pandemic to contain the economic impact of the outbreak. The two first support packages (announced in March and May, respectively) include spending measures estimated at about 31.6 billion euros (4 percent of GDP) in 2020, and covering (i) compensation of up to 90 percent of labor costs for companies expecting a reduction in revenues of 20 percent or more; (ii) compensation for affected sectors (hospitality, travel, agriculture, culture, and others); (iii) support for entrepreneurs and the self-employed, start-ups and small innovation companies; (iv) scaling up of the short-time working scheme (unemployment benefit compensation available to companies needing to reduce their staff by at least 20 percent), (v) allowances for SMEs to help them finance their fixed costs. In addition, companies can defer tax payments without penalties, and calculate provisional taxes on the basis of expected reduced activity levels. In 2020, revenue shortfalls from deferral of tax payments and other forgone revenue measures are estimated at 17.2 billion euros (or 2.2 percent of GDP). Also, public guarantee schemes (with a ceiling recently increased to 65 billion euros, or 8.3 percent of GDP), especially for SME loans but also covering large firms, are expanded to help the most vulnerable companies to manage their liquidity problems. A guarantee scheme for supplier credit has also been established. On August 28, the government announced the third support package which primarily aims at expanding and adjusting measures already in place on the expenditure side through June 2021. This new package with an initial envelope of 12.5 billion additional expenditure (of which 1.5 billion of public investment) was further expanded by 3.7 billion on December 9 (totaling about 2 percent of GDP). The authorities also aim at supporting labor mobility toward expanding sectors. Platforms to facilitate job transition are being developed, and public financing is being allocated for training of employees. The total cost of these programs will depend on demand.

Monetary and macro-financial

The ECB decided to provide monetary policy support through (i) additional asset purchases of €120 billion until end-2020 under the existing program (APP), and (ii) providing temporarily additional auctions of the full-allotment, fixed rate temporary liquidity facility at the deposit facility rate and more favorable terms on existing targeted longer-term refinancing operations (TLTRO-III) starting between June 2020 and June 2021. Further measures included an additional €750 billion asset purchase program of private and public sector securities (Pandemic Emergency Purchase Program, PEPP) until end-2020, an expanded range of eligible assets under the corporate sector purchase program (CSPP), and relaxation of collateral standards for Eurosystem refinancing operations (MROs, LTROs, TLTROs).
The ECB Banking Supervision allowed significant institutions to operate temporarily below the Pillar 2 Guidance, the capital conservation buffer, and the liquidity coverage ratio (LCR). In addition, new rules on the composition of capital to meet Pillar 2 Requirement (P2R) were front-loaded to release additional capital. The ECB considers that the appropriate release of the countercyclical buffer by the national macroprudential authorities will enhance its capital relief measures. The ECB Banking Supervision further decided to exercise – on a temporary basis – flexibility in the classification requirements and expectations on loss provisioning for non-performing loans (NPLs) that are covered by public guarantees and COVID-19 related public moratoria; it also recommended that banks avoid pro-cyclical assumptions for the determination of loss provisions and opt for the IFRS9 transitional rules. More recently, ECB Banking Supervision asked banks to not pay dividends for the financial years 2019 and 2020 or buy back shares during COVID-19 pandemic, from which the conserved capital should be used to support households, small businesses and corporate borrowers and/or to absorb losses on existing exposures to such borrowers.
In addition, the Dutch central bank has reduced systemic buffer requirements for the three largest banks to support bank lending. The central bank is also taking measures to provide temporary regulatory relief to less significant banking institutions.Banks under direct supervision of DNB are also allowed to exclude specific central bank exposures when calculating their leverage ratios. Furthermore, the planned introduction of a floor for mortgage loan risk weighting is postponed. In turn, the largest Dutch banks have agreed to grant SMEs a six-month postponement of their loan repayments. To protect homeowners, the government and relevant stakeholders agreed that there will be no mortgage foreclosures until July 1st. From July 1st, homeowners facing financial difficulties are encouraged to contact their lender to renegotiate more flexible terms for the period covering the ongoing economic crisis. On October 6, the authorities adopted a law to facilitate debt restructuring for companies facing financial difficulties. The law is intended to prevent bankruptcies.

Exchange rate and balance of payments

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New Zealand
Background. The first confirmed COVID-19 case in New Zealand was reported on February 28, 2020. On March 25, 2020, New Zealand moved to Alert Level 4 restrictions after domestic transmission of the virus was found. The authorities declared a state of emergency and implemented strong containment measures, including the closure of all non-essential businesses, cancellation of all events and gatherings, and closure of schools. This followed the closure of all borders to non-residents on March 19, 2020, with returning residents required to enter into two weeks of supervised quarantine since April 10, 2020. After a gradual reopening through Alert Levels 3 (April 28, 2020) and 2 (May 13, 2020), New Zealand moved to Alert Level 1 on June 8, 2020, lifting restrictions on personal movements, gathering, workplaces, and services. The border closure and quarantine requirement remain in place.
Following the emergence of new COVID-19 cases, Auckland returned to Alert Level 3 restrictions on August 12, 2020, and restrictions were subsequently eased to Alert Level 2.5 (Alert Level 2 with extra gathering restrictions) on August 30, 2020, and to Alert Level 2 on September 24, 2020. The rest of the country was placed under Alert Level 2 on August 12, 2020 and returned to Alert Level 1 on September 24, 2020. Auckland joined the rest of New Zealand at Alert Level 1 on October 7, 2020. People are no longer required to wear masks in public, though masks are encouraged, and people must continue to keep records of locations they visit.
After contracting by 9.5 percent q/q in Q2, 2020 (expenditure side), New Zealand's economy began to recovery quickly, with growth of 15.7 percent q/q in Q3, 2020.

Key Policy Responses as of January 7, 2021

Fiscal

The government has announced fiscal measures amounting to a total of NZ$62.1 billion (20.6 percent of GDP) through FY2024-25. The total amount includes the COVID-19 Response and Recovery Fund, of which NZ$10.3 billion have been set aside as contingency for a possible resurgence. Announced fiscal measures include: (i) healthcare-related spending, the cost of managed isolation, and the purchasing of vaccines (NZ$3.9 billion or 1.3 percent of GDP); (ii) a permanent increase in social spending to protect vulnerable people (total NZ$2.4 billion or 0.8 percent of GDP); (iii) a wage subsidy to support employers severely affected by the impact of COVID-19 (NZ$14.8 billion or 4.9 percent of GDP); (iv) income relief payments to support people who lost their jobs (NZ$0.6 billion or 0.2 percent of GDP); (v) a permanent change in business taxes to help cashflow (NZ$2.8 billion or 0.9 percent of GDP); (vi) infrastructure investment (NZ$3.8 billion or 1.3 percent of GDP); (vii) transport projects (NZ$0.6 billion or 0.2 percent of GDP); (viii) a temporary tax loss carry-back scheme (NZ$3.1 billion or 1.0 percent of GDP); (ix) support for the aviation sector (NZ$0.6 billion or 0.2 percent of GDP); (x) a tourism recovery package (NZ$0.4 billion or 0.1 percent of GDP); (xi) a government housing program (NZ$0.7 billion or 0.2 percent of GDP); and (xii) school infrastructure upgrades (NZ$0.2 billion or 0.1 percent of GDP). The government has also approved a NZ$0.9 billion debt funding agreement (convertible to equity) with Air New Zealand to ensure continued freight operations, domestic flights and limited international flights. The New Zealand government also will provide loans of up to NZ$100,000 to small businesses that employ 50 or less employees until the end of 2023. In addition, on March 28, 2020, the government announced temporary removal of tariffs on all medical and hygiene imports needed for the COVID-19 response.

Monetary and macro-financial

The Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) at 0.25 percent on November 11, 2020, unchanged since the OCR was reduced by 75 basis points on March 17, 2020. In addition to maintaining its existing Large-Scale Asset Purchase program (LSAP) program, the RBNZ announced a Funding for Lending Program (FLP) starting in December 2020, providing banks up to NZ$28 billion of three-year funding priced at 0.25 percent, which would enable financial institutions to lower borrowing costs for firms and households. In August 2020, the RBNZ had expanded the LSAP program to purchase government bonds and Local Government Funding Agency (LGFA) bonds in the secondary market from up to NZ$60 billion for 12 months to a maximum of NZ$100 billion by June 2022.
Since March 2020, the RBNZ has been providing liquidity in the FX swap market and re-established a temporary US dollar swap line (US$30 billion) with the U.S. Federal Reserve. The RBNZ has established a new Term Auction Facility (TAF), which allows banks access to collateralized loans of up to 12 months, and announced a corporate facility in which the RBNZ will offer up to NZ$500 million per week in open market operations with banks against corporate paper and asset-backed securities for 3 months. The RBNZ has also introduced a Term Lending Facility (TLF), a longer-term funding scheme for banks at 0.25 percent for up to 3 years duration initially for six months from May 26, 2020. From August 26, 2020, the lending term of the TLF has been extended to 5 years and the facility has been extended to February 1, 2021. Access to the TLF is linked to each banks’ lending under a NZ$6.25 billion Business Finance Guarantee Scheme (BFGS), in which the government covers 80 percent of the credit risk and will require approved eligible collateral. The BFGS was expanded in August 2020, increasing the maximum loan amount from NZ$0.5 million to NZ$5 million, lengthening the maximum term from three to five years, and allowing more loan access by medium-sized firms. Its availability period has been extended to June 30, 2021. The RBNZ has reduced the banks’ core funding ratio requirement to 50 percent from 75 percent to help banks make credit available.
To further support the stability of the financial system, the start date for a regulatory change requiring higher capital for banks was initially postponed for 12 months to July 2021, and subsequently for a further 12 months to July 2022. Other regulatory initiatives in the pipeline were also put on hold for at least six months. The RNBZ has also agreed with the banks that during this period there will be no dividend payments on ordinary shares and redemption of non-CET1 capital instruments. The RBNZ has temporarily removed, effective as of May 1, 2020, mortgage loan-to-value ratio (LVR) restrictions and plans to reinstate them from March 2021.
The New Zealand government, the RBNZ, and the New Zealand Bankers Association have also announced a number of financial measures to support SMEs and homeowners. These include six-month principal and interest repayment deferrals to mortgage holders and SMEs affected by COVID-19 and the BFGS.
Other related measures taken by the government included a six-month freeze on residential rent increases until September 25, 2020, and restrictions against tenancy terminations during March-June 2020. The government has extended the Business Debt Hibernation scheme, which allows businesses to place their existing debts on hold by 10 months, to October 31, 2021.

Exchange rate and balance of payments

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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. On September 19 Nicaragua resumed international commercial flights.

Key Policy Responses as of December 17, 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 by 275 bps, and the 1-day and 7-day repo window rate by 300 bps. The rate for domestic currency deposit window has been cut by 100 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

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Niger
Background. Niger registered its first confirmed COVID-19 case on March 19, 2020. On March 27, 2020, the President declared a national emergency and imposed a night curfew in the capital in addition to shortened work hours and earlier measures that include the closure of Niger’s borders and a ban on large gatherings. On November 13, 2020, in response to cases rising again, the authorities announced visitors would have to surrender their passports that would be returned only after a negative test following a one-week period of strictly monitored self-isolation.
Reopening of the economy and additional containment measures. The night curfew and restriction on religious gatherings were lifted on May 13. The quarantine of Niamey and the ban on inter-city travel were lifted on May 14. The moratorium on seminars and conferences; restricted work hours and limits on non-essential government business were lifted on May 25. The authorities lifted the air border closure as of August 1 with land borders remaining closed. A negative test result is required before arrival. Price controls for essential goods for 3 months. Niger secured US$114.5 million in emergency financing from the IMF on April 14, 2020 and relief from its debt service to the IMF on April 13, 2020.
Due to the persistence and the eminently pathogenic and contagious nature of Covid-19, the Government has decided on January 5, 2021 to extend the state of emergency for a further period of three months from January 08, 2021. The Council of Ministers has decided to renew the measure to close bars, nightclubs and entertainment venues which expires on January 6, 2021.

Key Policy Responses as of January 7, 2021

Fiscal

An updated crisis response plan has been presented to donors with an estimated cost of 18.4 percent of GDP, divided into an immediate health response and broader economic and social mitigation. Key elements are already being implemented, such as food distribution, two months of free utilities to the vulnerable households and temporary tax relief for hard-hit sectors. Finance Ministry also announced credit support to the private sector in the form of loan guarantees. The revised cost includes large-scale support for agricultural production, revenue shortfalls, and the building of liquidity buffers. On May 8, the cabinet approved a supplementary budget with 1.3 percent of GDP in resources re-allocated to additional spending toward health, security and social assistance.
On April 27, Heads of states of the West-Africa Economic and Monetary Union (WAEMU) declared a temporary suspension of the WAEMU Growth and Stability Pact setting six convergence criteria, including the 3 percent of GDP fiscal deficit rule, to help member-countries cope with the fallout of COVID-19. This temporary suspension will allow member-countries to raise their overall fiscal deficit temporarily and use the additional external support provided by donors in response to COVID-19. The Heads of States’ Declaration sets a clear expectation that fiscal consolidation will resume once the crisis is over.

Monetary and macro-financial

The regional central bank (BCEAO) for the West-African Economic and Monetary Union (WAEMU) has taken steps to better satisfy banks' demand for liquidity and mitigate the negative impact of the pandemic on economic activity. The BCEAO adopted a full allotment strategy at a fixed rate of 2.5 percent (the minimum monetary policy rate) thereby allowing banks to satisfy their liquidity needs fully at a rate about 25 basis points lower than before the crisis. On June 22, the Monetary Policy Committee cut by 50 basis points the ceiling and the floor of the monetary policy corridor, to 4 and 2 percent respectively. The BCEAO has also: (i) extended the collateral framework to access central bank refinancing to include bank loans to prequalified 1,700 private companies; (ii) set-up a framework inviting banks and microfinance institutions to accommodate demands from customers with Covid19-related repayment difficulties to postpone for a 3 month renewable period up to end-2020 debt service falling due, without the need to classify such postponed claims as non-performing; and (iii) introduced measures to promote the use of electronic payments. In addition, the BCEAO launched in April 2020 a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The total amount of such special T-Bills initially issued by Niger was equivalent to 2.7 percent of GDP, with some rollover possibility through similar bonds benefiting from a refinancing rate equivalent to the prevailing monetary policy rate but to be paid back by end-2020. Finally, WAEMU authorities have extended by one year the five-year period initiated in 2018 for the transition to Basle II/III bank prudential requirements. In particular, the regulatory capital adequacy ratio will remain unchanged at end-2020 from its 2019 level of 9.5 percent, before gradually increasing to 11.5 percent by 2023 instead of 2022 initially planned. In addition, in June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7-year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the COVID crisis on asset quality.

Exchange rate and balance of payments

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 were implemented to contain the spread of the virus, including closure of international airports, public and private schools, universities, stores and markets, and suspension of public gatherings. A “lockdown” was declared in Lagos, Abuja and Ogun states. Work at home is also encouraged in several states and government institutions while isolation centers are being expanded in Lagos state. Testing capacity is increasing as NCDC now deploys digital platforms for people to get results sooner. The president ordered the release of inmates in correctional facilities to decongest prisons. On May 4, the phase 1 of three-phase economic re-opening commenced following a full lockdown that had been placed since March 30. The phase 1 moved to phase 2 on June 2—allowing most offices and schools to reopen. However, a comprehensive list of restrictions remains in place, including night time curfew, ban on non-essential inter-state passenger travel, partial and controlled interstate movement of goods and services, and mandatory use of face masks or coverings in public. On September 4, Nigeria transitioned into phase 3. Night curfew was reduced to 12am – 4am. Groups of up to 50 people were allowed to attend parties and gathering. More opening hours were allowed for parks and gardens but clubs and bars remain closed. Schools around the country reopened on October 12. The authorities are working with the WHO to access COVID-19 vaccines and would receive 20 million doses by January 2021. With the daily cases increasing recently, Nigeria has entered a second wave of COVID-19 infections. Restrictions on mass gathering have been reinstated. Public servants have been ordered to stay at home for the period of 5 weeks effective December 23, 2021 and await further directives. Schools are expected to resume January 18 after being shut down again from mid-December.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

In response to the crisis, the Central Bank of Nigeria (CBN) cut monetary policy rate by 100 basis points in May and another 100 basis points in September while expanding liquidity available for nonbank financial institutions, leading to significant lowering of market yield of government securities. It also introduced additional measures, including: (i) reducing interest rates on all applicable CBN interventions from 9 to 5 percent and introducing a one year moratorium on CBN intervention facilities; (ii) creating a N50 billion ($139 million) targeted credit facility; and (iii) liquidity injection of 3.6 trillion (2.4 percent of GDP) into the banking system, including N100 billion to support the health sector, N2 trillion to the manufacturing sector, and N1.5 trillion to the real sector to impacted industries. Regulatory forbearance was also introduced to restructure loans in impacted sectors. The CBN is also coordinating a private sector special intervention initiative targeting N120 billion ($333 million) to fight COVID-19. As of September, the CBN has disbursed a total of N3.5 trillion in intervention funds since the onset of the COVID-19 pandemic, including N73.7 billion in targeted credit facilities to help households and small and medium enterprises exceeding their initial plans of N50 billion.

Exchange rate and balance of payments

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

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North Macedonia
The first confirmed case in North Macedonia was reported on February 26. The number of new daily cases has decreased in recent weeks but remains elevated. After a strict lockdown in the spring, followed by a gradual reopening of the economy, social-distancing restrictions were tightened again to slow down contagion. Reflecting the partial lifting of containment measures in the summer, GDP contraction eased to 3.3 percent year-on-year in the third quarter from 14.9 percent in the second quarter.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

The National Bank of the Republic of North Macedonia (NBRNM) has cut its policy rate twice since the start of the crisis by a cumulative 50 basis points to 1.5 percent. The fees for withdrawing and returning cash to the National Bank’s central vault have been abolished to minimize any risk of transmitting the virus infection by coins and bills. In addition, the NBRNM has reduced by 60 percent the amount of CB bills offered to banks, thus providing additional liquidity to the economy. On financial sector measures, the NBRNM has revised its credit risk regulation, to encourage banks to restructure loans temporarily (initially through September 2020, but later extended through March 2021), and temporarily 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

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Norway
The first confirmed COVID-19 case was reported on February 26 ,2020. The virus continued to spread, with the number of new cases reaching its peak at the end of March. The government had implemented a range of measures to mitigate the spread of coronavirus and to stabilize the economy. The former included travel restrictions, a quarantine-after-travel requirement, social distancing measures, and closures of schools, universities and businesses. The number of infections has fallen strongly since then, until the end of July when new cases started trending up again.
On May 7, 2020, the government announced its plan to reopen the economy, with a gradual timeline that remains dependent on keeping the spread of infection under control. Accordingly, employers of operating businesses are required to ensure at least one-meter distance between coworkers, bars can reopen under similar one meter social distancing rule, meetings up to 20 people and public events up to 200 are permitted, all primary and secondary schools are reopened, and quarantine requirements are reduced. In addition, non-essential travel to and from other Nordic and EEA countries have resumed subject to the quarantine requirements and conditional on the infection rate and the containment measures in place.
Starting January 4, strengthened infection prevention measures were introduced on a temporary basis for two weeks to break any new wave of infection after the holiday period. Accordingly, private social contact and travel is strongly discouraged and tightened, and other organized leisure activities and sports events are postponed. Teaching in universities is virtual and schools operate under a red level of alert.

Key Policy Responses as of January 7, 2021
Fiscal

Key implemented and proposed fiscal measures

(discretionary measures close to NOK 126.3 billion, or 4.2 percent of 2020 mainland GDP per the authorities’ estimates, excluding the government bond fund and any losses from government guarantees and loans above budgeted loss provisioning) include:

Expenditure measures: (i) household income protection scheme offering larger wage subsidies for temporary lay-offs, more generous unemployment benefits, and expanded sickness and child care; (ii) measures for business offering a scheme to compensate heavily affected but otherwise sustainable businesses for unavoidable fixed costs, the reinstatement of a government fund that buys bonds issued by Norwegian companies, grants for start-ups and subsidies of domestic air routes; (iii) strengthening of critical sectors such as healthcare.
Revenue measures: (i) lowering of reduced VAT rate from 12 to 6 percent; (ii) deferral of various tax payments and reduction of the employer tax for May and June 2020, change in CIT regulations so that lossmaking companies can re-allocate their losses towards previous years’ taxed profits, and temporary amendments to the petroleum tax system to improve liquidity in the sector; suspension of aviation charges; temporary lowering of the employers’ social insurance contributions.
Guarantee and loan schemes for businesses which include loan guarantees for SMEs, and a scheme for re-insurance of private credit insurance providers.
In addition, the government proposed new expenditure measures on May 29 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

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Oman
Background. Oman is being hit by two shocks—the spread of COVID-19 and the sharp decline in oil prices. Government policy is responding to both these developments. The number of registered COVID-19 cases stands at 129,774 as of January 5. 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. On December 31, 2020, the government extended the grace period during which employers and expatriate workers would be exempt from fees, fines charged against employment discrepancies provided the expatriate manpower leave the Sultanate terminally, until 31 March 2021.
Reopening of the economy. On April 28, the government discussed proposals that consider public health and support the reopening of some business activities and decided to open some commercial activities including car servicing, repair, and rental, money exchanges, outlets selling electrical and electronic appliances, printing houses and quarries. On May 27 government decided to end the lockdown of the Muscat governorate, let private sector employees return to their offices and government agencies to begin regular operations on May 31. On June 10 and June 23 the government further opened up commercial and industrial activities. On July 14, the government decided to facilitate Oman citizens’ travel abroad, on condition that they abide by the precautionary procedures but also decided to extend the lockdown on Governorate of Dhofar and the Wilayat of Masirah. On July 25, Oman entered into a major nationwide lockdown aimed at limiting the spread of COVID-19, which was lifted on August 7. Following the approval from the Supreme Committee tasked with tackling developments resulting from COVID-19, the government decided to resume public transport services in a phased manner starting from September 27. On October 11, the authorities imposed a complete lockdown on public movement and commercial outlets from 8 pm to 5 am every night until October 24.
COVID-19 vaccine. Oman has reserved 1 million doses of the vaccine from the Global Alliance for Vaccines and Immunization (GAVI) which represents 20 per cent of the Sultanate’s need. Sultanate has directly contracted with Pfizer and booked 370,000 vaccine doses 20,000 of which is expected to be delivered in December and the remainder will arrive at the beginning of next year. Oman plans to cover 40% of population in the 1st stage. The vaccination process has started in late December 2020.

Key Policy Responses as of January 5, 2021

Fiscal

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

Monetary and macro-financial

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

Exchange rate and balance of payments

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Pakistan
Background. COVID-19 was reported for the first time on February 26, 2020. Starting on March 23, both the federal and provincial governments implemented containment and mitigation measures, including selective quarantines, border closures, international and domestic travel restrictions, closure of educational institutions, banning of public events, social distancing, and varying levels of lockdown. Despite these measures, the number of new daily cases increased rapidly hitting the peak of 6,000 in mid-June, before slowing down in July. Between August and October, the number of daily new cases was consistently below 1,000 (reaching a low of 300 cases in early September). A second wave of infections emerged in the fall as starting in mid-November, the daily new cases have exceeded the 2,000-mark, and the positivity rate had been on an upward trend before moderating in mid-December. As a result of the COVID-19 shock, the economic activity worsened notably, with growth preliminarily estimated at –0.4 percent in FY 2020. A gradual recovery is expected in FY 2021.
Reopening of the economy and additional containment efforts. Since mid-April, the federal government, in coordination with provinces, started to gradually ease lockdown arrangements. By the end of summer, further lockdown restrictions were lifted, as educational institutions, recreational places, restaurants, malls and retail outlets were allowed to reopen. This trend was partially reversed in the last months of CY 2020 by strengthening the enforcement of Standard Operating Procedures (SOPs) and mandating the use of face masks. To mitigate the second wave, smart lockdown measures have been re-imposed, along with a general ban on public meetings and rallies, and the closure of educational institutions and venues such as cinemas, theaters and wedding halls. Educational institutions are expected to reopen in phases from January 18. In early December, the government applied to the UN’s COVAX Facility which will cover priority groups—around 20 percent of the population. It is also in discussions with several of the vaccine manufacturers and with donors (World Bank and Asian Development Bank) for the procurement of extra vaccines which will be funded with a US $ 250 million budget allocation. The launch of the vaccination drive is expected in the second quarter of CY 2021

Key Policy Responses as of January 07, 2021

Fiscal

A relief package worth PKR 1.2 trillion was announced by the federal government on March 24, which has been almost fully implemented. Key measures include: (i) elimination of import duties on emergency health equipment (recently extended until December 2020); (ii) cash transfers to 6.2 million daily wage workers (PKR 75 billion); (iii) cash transfers to more than 12 million low-income families (PKR 150 billion); (iv) accelerated tax refunds to exporters (PKR 100 billion); and (v) 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 earmarked resources for an accelerated procurement of wheat (PKR 280 billion), financial support to utility stores (PKR 50 billion), a reduction in regulated fuel prices (with a benefit for end consumers estimated at PKR 70 billion), support for health and food supplies (PKR 15 billion), electricity bill payments relief (PKR 110 billion), an emergency contingency fund (PKR 100 billion), and a transfer to the National Disaster Management Authority (NDMA) for the purchase of COVID-19 related equipment (PKR 25 billion). The unexecuted part of the relief package is being carried forward to FY2021. In addition, the FY 2021 budget includes further increases in health and social spending, tariff and custom duty reductions on food items, an allocation for ‘COVID-19 Responsive and Other Natural Calamities Control Program' (PKR 70 billion), a housing package to subsidize mortgages (PKR 30 billion), as well as the provision of tax incentives to the construction sector (retail and cement companies)) which got extended in the context of the second wave to the end of December 2021.
Provincial governments also implemented supportive fiscal measures from the onset of the shock, including cash grants to low-income households, tax relief, and additional health spending (including a salary increase for healthcare workers). The government of Punjab implemented a PKR 18 billion tax relief package and a PKR 10 billion cash grants program. The government of Sindh's measures included cash grant and ration distribution program of PKR 1.5 billion for low-income households. The FY2021 provincial budgets also provide tax relaxations and sizeable increases in expenditure allocations, especially on health services.

Monetary and macro-financial

The State Bank of Pakistan (SBP) has responded to the crisis by cutting the policy rate by a cumulative 625 basis points to 7.0 percent since March 17. The SBP has expanded the scope of existing refinancing facilities and introduced three new ones to: (i) support hospitals and medical centers to purchase COVID-19-related equipment (39 hospitals, PKR 8.36 billion, to date); (ii) stimulate investment in new manufacturing plants and machinery, as well as modernization and expansion of existing projects (346 new projects, PKR 278 billion, to date); (iii) incentivize businesses to avoid laying off their workers during the pandemic (2,958 firms , PKR 238 billion, to date). These facilities have been extended beyond their original deadline of June 2021 to September or December 2021.
Moreover, the SBP introduced temporary regulatory measures to maintain banking system soundness and sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis points to 1.5 percent; (ii) increasing the regulatory limit on extension of credit to SMEs by 44 percent to PRs 180 million ; (iii) relaxing the debt burden ratio for consumer loans from 50 percent to 60 percent; (iv) allowing banks to defer clients’ payment of principal on loan obligations by one year (PKR 659 billion being deferred to date); (v) relaxing regulatory criteria for restructured loans for borrowers who require relief beyond the extension of principal repayment for one year; and (vi) suspending bank dividends for the first two quarters of 2020 to shore up capital. The SBP has also introduced mandatory targets for banks to ensure loans to construction activities account for at least 5 percent of the private sector portfolios by December 2021.

Exchange rate and balance of payments

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

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Palau
Background. To date, there have been no confirmed cases of COVID-19 in Palau. The authorities 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.
Reopening. Schools reopened in August with safety measures. On July 31, the government announced the re-establishment of essential air services, allowing a minimum number of flights for emergencies, repatriation, medical referral, and worker recruitment. Regular commercial air travel remains temporary suspended. All travelers including essential workers and Palauan residents are subject to quarantine regulations and are required to show proof of a negative COVID test result for the 72 hours prior to arrival in Palau. Passengers from low risk areas (Taiwan) are required to observe a 7-day mandatory quarantine in a designated government facility, and are tested on days 1, 7, and 14. Passengers from high risk areas are placed under mandatory quarantine for 14 days and are tested on days 1, 7, 14, and 21.

Key Policy Responses as of January 7, 2021

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

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Panama
Background. Panama reported its first confirmed case of COVID-19 on March 10, 2020. Since then, the authorities implemented prompt and strict containment measures. They declared a national emergency on March 13; set a sanitary fence around affected areas; ordered mandatory quarantine with a 24-hour curfew (replaced with a 7 pm-5 am curfew starting June 1) with gender-based movement restrictions (April 1-May 31, resumed on June 8); suspended all construction projects except health-related; closed schools; canceled events; and banned all commercial flights (except cargo and humanitarian). The suspension of flights started with outbound flights to Europe and Asia (on March 14), extending to all commercial international flights (March 22) and later to all domestic flights with the grounding of Copa Airlines (from March 23) and Air Panama (from March 25). All labor contracts of closed businesses were suspended. On July 14, the government formalized a reduction of monthly working hours by half. The World Travel and Tourism Council granted Panama the “Safe Travels” seal on November 15, certifying its compliance with international biosecurity standards in preventing COVID-19. In January 2021, Panama introduced telemedicine services to insured individuals.
Reopening of the economy. On May 15, the Ministry of Labor and Development (Mitradel) published the guidelines for the gradual reopening of companies and the reinstatement of workers. Companies that are authorized to reopen may request Mitradel to extend labor contracts' suspensions, which may not exceed four months in total. On August 19, Mitradel extended the validity of work permits for foreign workers that expire between March and September 2020 by six months.
In August, the government authorized a limited reopening of Tocumen Airport, mainly for transit and departures, and controlled entry of Panamanians. International commercial flights resumed on October 12 (visitors must provide a negative COVID-19 test to enter Panama, those without the recent test result can get tested in the airport upon arrival).
On September 7, the government authorized a gradual reopening of the construction industry (with up to 500 workers for each project, subject to safety precautions and limitations on working hours), the free trade zones (including Panama Pacifico Special Economic Area and the Colon Free Zone), as well as the operations of private marinas, tailor and dressmaker shops, shoe stores and car washes.
Mobility restrictions by gender ended on September 14. On September 28, shopping centers and restaurants reopened for indoor commercial activity, and domestic flights resumed. Tourism activities, including cultural venues, libraries, swimming pools, cinemas, theaters, museums, galleries and other tourist sites reopened on October 12 (at 50 percent capacity). The quarantine ended on October 24, with the reactivation of beach and recreational activities (although under the strict sanitary guidelines). The 11:00 pm-5:00 am curfew remains in place.
On December 15, the government announced quarantine measures and sanitary checkpoints over the holidays and introduced a new curfew and dry law, from 7:00pm until 5:00am, starting on December 18. In addition, government agencies were mandated to work with 50 percent of workers on alternate days.
The regions of Panamá y Panamá Oeste are under mobility restrictions until January 14, prompting the National Assembly to hold virtual sessions.
Vaccination. In November, the Panamanian government announced that it will allocate US $ 48 million for the purchase of vaccines against COVID-19. On November 25, it announced that it had reached an agreement with Pfizer Panama and BIONTech SE to acquire 3 million doses of a COVID-19 vaccine, with the first batch scheduled to arrive to Panama the week of January 18. In January 2021, the government activated a platform www.vacunas.panamasolidario.gob.pa for vaccination registration, which will be rolled out in several stages

Key Policy Responses as of January 2, 2021

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 9 percent of GDP in 2020. The package of fiscal measures includes:

Expenditure side: (i) higher spending on healthcare needs, including building a new hospital, purchases of medical supplies and equipment, test kits and educational materials, and training medical personnel. On July 14, the Cabinet approved US $ 133.7 million to purchase medical supplies; (ii) an augmentation in social spending, including payments to affected workers and small business owners through the "Panama Solidarity Plan" with in-kind transfers including basic food supplies, and several programs (such as Opportunity Banking, Guarantee Fund, and the Soft Loan program) jointly valued at US $ 235 million, aimed at supporting the micro, small and medium-sized companies in restarting operations and continuing to employ workers; (iii) a suspension of payments for public services (electricity, landline phones, mobile phone and internet) for March-June; (iv) an electricity subsidy (50 percent to customers who consume up to 300 kWh per month and 30 percent to those who consume between 301 kWh and 1,000 kWh per month); (v) an expansion of the Housing Solidarity Fund program managed by the Ministry of Housing and Land Management, which provides $10,000 towards a down payment to the families in need of homes valued up to US $ 70,000 (reinforced with US $ 80 million from the Panama Savings Fund). The Government extended the electricity subsidy for three months, starting July 1, at an estimated cost of over US $ 250 million. The Panama Solidarity Plan has already benefited more than 1.5 million people. On August 23, the government began the transfer of US $ 50 to approximately 250,000 workers with suspended contracts, amounting to a total of US $ 12.5 million. Access to unemployment benefits was extended through January 2021.
Revenue side: (i) tax relief through extended income-tax filing deadlines until December 31, 2020 (originally until July 17). MEF is also proposing a 10 percent discount to individuals and entities who declare and pay their tax obligations early, under the program called “Pronto Pago”; (ii) some tax benefits and suspension of payments for public services (for 4 months, without interest) for taxpayers with income below US $ 2,000 per month, retirees, or those displaced from the labor market; and (iv) enabling 114 virtual procedures for taxpayers.

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

Monetary and macro-financial
The Superintendency of Banks of Panama (SBP) allowed banks to use the accumulated dynamic provisioning (about US $ 1.3 billion or 2 percent of GDP) to absorb the impact of credit losses. It allowed banks to undertake voluntary loan restructuring with troubled borrowers (banks can adjust existing loan conditions, grant grace periods, reduce interest rates, and eliminate some fees) and requested banks not to charge interest on unpaid interest. To provide relief to borrowers affected by the pandemic, banks agreed to extend grace periods on loan payments until December 31, 2020 (from 90-120 days offered earlier). This agreement was later enshrined in Law 156 dated June 30, which established a formal moratorium on loans granted by banks, cooperatives and finance companies for all physical and legal persons economically affected by the national emergency due to the pandemic. Borrowers have to continue paying interest, but banks will not apply late fees, charge interest on unpaid interest, or record late payments in credit history. The measure applies to mortgages, personal, auto, credit card loans, and loans to SMEs, agriculture, commerce, and transport. The moratorium is not automatic: borrowers must provide documents on the impact of the pandemic on their employment or business activities. July 1 is the start of the second phase of the moratorium (which includes additional grace periods and loan renegotiations or consolidations), with applications availaible online.
On August 6, The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) issued a guarantee on loans received by Caja de Ahorros de Panamá amounting to US $ 400 million to support affordable housing and loans to SMEs. The guarantee is for: (i) a US $ 250 million loan (maturity of 15 years) from Kairos Global Solutions S.A. (Kairos); and (ii) a US $ 150 million (maturity of 5 years) from Banco Bilbao Vizcaya Argentaria, S.A. (BBVA).
On August 7, the MEF and National Bank of Panama established two Trusts as part of the economic reactivation strategy.

The first Trust, named "Global Credit Program for the Defense of the Productive Fabric and Employment", aims to support the MSMEs in the face of the COVID-19 crisis. The initial funding amounts to US $ 150 million from the IDB and will be replenished in a second phase in 2021 by another US $ 150 million.
The second Trust, called "Special Bank Stimulus Fund", is intended to grant credit facilities to productive sectors to stimulate economic growth and meet temporary liquidity needs. The initial funding of US $ 500 million comes from the IMF’s RFI, another US $ 500 million are financed by the National Bank of Panama (BNP).

Exchange rate and balance of payments

Panama is a fully dollarized economy; BOP is expected to deteriorate as a result of the COVID-19 shock given a fall in tourism, transit through the Panama Canal and lower foreign direct investment. The Cabinet dropped import tariffs on corn used to feed animals (from 40 percent) until December 31, 2020.

Other

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

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Papua New Guinea
Background.Since early February, the PNG government has taken stringent measures to mitigate a domestic outbreak of COVID-19. Initially, these included a ban on travelers from Asian countries, reduced international flights, mandatory health declaration forms for incoming travelers and enhanced screening at designated ports of entries. On March 24th the authorities announced a State of Emergency (SoE), restricting internal bus and air travel, closure of bars, and work-from-home requirements. Following the lapse of the SoE in June, there has been a renewed outbreak of COVID-19, mainly centered on the National Capital District (NCD), but with a growing number of cases in other regions. The Government has announced that domestic travel will only be allowed for essential services and a lockdown of 14 days has been implemented in the NCD. On October 5, international travel restrictions were eased (allowing additional routes), but domestic requirements to enforce social distancing and hygiene were tightened.
On June 9, the IMF Executive Board approved the disbursement of US $ 363.6 million in emergency financing under the Rapid Credit Facility (RCF) to help PNG address urgent balance of payments needs created by COVID-19.
Press Release: covid-19-pandemic

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

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

The Bank of Papua New Guinea (BPNG) has reduced the Kina Facility Rate (KFR) – the main policy rate – by 200 basis points to 3 percent from 5 percent and asked the commercial banks to reduce their respective IndicativeLending Rates. BPNG also reduced the Cash Reserve Requirement to 7 percent from 10 percent to provide additional liquidity to the commercial banks. In addition, BPNG purchased K750 million of government securities in the secondary marketin a program to increase liquidity to the private sector. To encourage interbank activity, BPNG has increased the margin on central bank borrowing by 25 basis point to 100 basis points of both sides of KFR. All financial institutions agreed to provide relief of 3 months on loan repayments and interest payments to customers who have lost their jobs, on a case-by-case basis. To cover for the 3-month loan repayment holiday for borrowers severely affected by the COVID crisis, BPNG suspended loan-loss provisioning for affected loans during this period. A total of K806 million is expected to be paid out the members from their superannuation savings. The amendments to Superannuation Act will allow its members to withdraw up to 20 percent of their contribution or a maximum of K10,000.

Exchange rate and balance of payments

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

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Paraguay
Background. The first case of COVID-19 was confirmed in Paraguay on March 7th, 2020. The first confirmed cases were imported, though community and local transmissions quickly took off. Most cases in the past three months were imported from Brazil, although community transmission started picking up significantly in August. After reaching a peak in September, the average number of daily new cases came down gradually, but has lately been rising again. The number of deaths is about 2,340 (330 per million), with 112,000 total confirmed cases as of January 7. Starting March 12, the government implemented a series of measures to prevent the spread of the virus, including border closure and suspension of school, all activities that involve groups of people, as well as public and private events. The country implemented a total quarantine from March 20 to May 3, 2020.
Reopening of the economy. On June 15, 2020, Paraguay moved into the third stage of re-opening, under the country’s phased plan labeled “Smart Quarantine”. It allows the rehabilitation of commercial stores and shopping centers, corporate offices, general construction works, and sports in gyms at fresh air. Stage three also allows the reopening of restaurants. The main remaining restrictions are border closures, cancellation of large public events, face mask requirements, and limited seating and extended sanitary protocols for restaurants, gyms, religious services, and public offices. On July 20, the country moved to phase 4 of the reopening, which allows reopening of hotels under strict protocol, religious services with up to 50 persons and some further relaxation on public and private event protocols. On October 3, the government officially lifted phase 4, though restrictions remain such as social distancing, mask-wearing in public spaces, sanitary protocols, limited night-time circulation, and others. On October 15, Paraguay opened three border posts with Brazil, for circulation of cars only, at limited timetables, and a week later the airports of Asunción and Ciudad del Este officially reopened, with a limited number of flights. Travellers from the U.K. were banned from entering the country on December 21, following the discovery of the new SARS-CoV-2 variety. Physical-presence school classes will partially resume in March 2021.

Key Policy Responses as of January 7, 2021

Fiscal

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

Monetary and macro-financial

Since early March, the central bank has lowered the policy rate by 325 basis points, to 0.75 percent. The interest rate for the central bank’s overnight liquidity facility window has also been reduced, by 200 basis points, from 4.5 percent to 2.5 percent. The Central Bank has also reduced the minimum reserve requirements on domestic and foreign currency deposits, freeing up $959 million in the process for banks to make new loans. In addition, a National Emergency Special Credit Facility (FCE) was created to channel up to $760 million in liquidity support to SMEs. The government has also allowed banks to automatically refinance loans to private sector companies that are in repayment difficulties, and postponed collection of taxes and user fees for 2 months.
The Development Finance Agency (AFD) has started programs to help refinance home loans for a period of 60 months, and to help SMEs finance working capital needs. A US $ 500 million MSME Guarantee Fund has been set up to support credit creation in the SME sector.

Exchange rate and balance of payments

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

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

Key Policy Responses as of January 7, 2021

Fiscal

The government authorized withdrawals of up to S/2,000 from private pension fund accounts by members who had not contributed for six consecutive months or employees on furlough in April under emergency decrees. Congress-led legislation in May allowed access of up to 25 percent of the savings accounts, subject to a maximum of S/12,900. An additional withdrawal allowing those who have not contributed to the system in the past twelve months and others with health conditions to withdraw up to S/17,200 from their private pension accounts was approved in November. In December, Congress passed legislation authorizing exceptional payments by the public pension fund of up of S/4,300. The law also authorizes additional one-off payments to current retirees, and allows those over 65 years of age that have not met the requisites for a pension to withdraw the full amount of their contribution. The government has challenged the constitutionality of the law, and payments are pending awaiting the Constitutional Tribunal's ruling.

Monetary and macro-financial

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

Exchange rate and balance of payments

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

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Philippines
Background. The Philippines reported its first cases of confirmed COVID-19 on January 30, 2020. Starting on August 19, the government moved Metro Manila and other high-risk areas from a “modified enhanced community quarantine” to a “general community quarantine,” which allows more businesses to reopen and mass transportation to resume in phases. International travel restrictions largely remain in place, but domestic flights are allowed under limited capacity. Schools in the country have reopened from October 5. Hotels in areas under general community quarantine and modified GCQ can now accept guests at full capacity to allow the tourism industry to recover.
Financial market volatility has subsided recently, with the peso/US $ exchange rate staying stable. Meanwhile, real GDP in the first three quarters of 2020 contracted by 0.7 percent, 16.5 percent, and 11.5 percent respectively, on a year-on-year basis.

Key Policy Responses as of January 7, 2021
The government launched a 4-pillar socioeconomic strategy against COVID-19, which includes support to vulnerable groups and individuals, expanded resources for frontline medical workers, as well as fiscal and monetary measures.
Fiscal

The government launched a PHP 595.6 billion fiscal package (about 3.1 percent of 2019 GDP) for vulnerable individuals and groups, which includes the following measures that had been implemented during the first half of 2020: (1) PHP 205 billion cash aid program (1.1 percent of 2019 GDP) for 18 million low-income households; (2) almost PHP 57 billion social protection measures for vulnerable workers, including for displaced and overseas Filipino workers (0.3 percent of 2019 GDP); (3) over PHP 58 billion on COVID 19 related medical response (0.3 percent of 2019 GDP); and (4) PHP 120 billion (0.6 percent of 2019 GDP) credit guarantee for small businesses and support to the agriculture sector. Financial assistance will also be provided to affected micro-, small-, and medium-size enterprises (MSMEs) and vulnerable households through specialized microfinancing loans and loan restructuring. The “Bayanihan II” Act, which has been signed into law on September 11, targeted additional fiscal support (about 0.8 percent of 2019 GDP) to vulnerable households and to workers and businesses in hard-hit industries, such as agriculture, transportation, and tourism. The use of the unspent Bayanihan II funds has been extended to June 30, 2021.

Monetary and macro-financial

The Bangko Sentral ng Pilipinas (BSP) has reduced its policy rate five times in 2020 by a cumulative 200 bps to 2.00 percent, with the latest cut of 25 bps to become effective on November 20. Earlier BSP had lowered the reserve requirement ratio for commercial banks by 200 bps to 12 percent, effective from April 3. At the same time, to ensure the availability of sufficient short-term liquidity in the financial system, the BSP also made purchases of government securities in the secondary market.
Meanwhile, to support the government’s programs to counter the impacts of COVID 19, the BSP purchased PHP 300 billion worth government securities (about 1.5 percent of 2019 GDP) through a repurchase agreement with the government, which was fully settled in September. A fresh provisional advance amounting to PHP 540 billion was also approved in October. In addition, the BSP also remitted PHP 20 billion as dividend to the government even though it is no longer required to make dividend payments to the government under the newly amended BSP charter.
The BSP has also announced a series of regulatory relief measures for the banking sector, including: (1) a temporary relaxation of requirements on compliance reporting, penalties on required reserves, and single borrower limits; (2) easier access to the BSP’s rediscounting facility; (3) a temporary relaxation of provisioning requirements (subject to the BSP approval), and (4) a relaxation of prudential regulations regarding marking-to-market of debt securities. These relief measures are intended to encourage banks, in turn, to provide financial relief to their borrowers (e.g., temporary grace period for loan payments). To encourage extension of loans to enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed loans to MSMEs to be counted as part of banks’ compliance with reserve requirements, temporarily reduced their credit risk weights to 50 percent, and assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corporation. Also, loans to certain large enterprises that were critically impacted by the pandemic (but not part of a conglomerate) will now be recognized as forms of alternative compliance with banks’ reserve requirements. Finally, the BSP increased the limit on banks’ real estate loan share from 20 percent of their total loan portfolio (net of interbank loans) to 25 percent.

Exchange rate and balance of payments

Structural Policy

Under Bayanihan II, private projects determined to be nationally significant with high economic returns or with high employment potential may have certain permits, licenses or other requirements waived, to avoid delays in their implementation. These regulatory relief measures are expected to fast-track high impact investments and create jobs.

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Poland, Republic of
Background. Poland reported its first confirmed COVID-19 case on March 5, 2021. A second wave firmly established itself in October and surpassing the first wave by a large margin, albeit new infections moderated visibly in late November/December. In March 2021, the government introduced containment measures, including closures of schools, universities, restaurants, and all non-essential retail trade and service outlets, as well as bans on large gatherings, border controls, and travel restrictions. Following a quarter-on-quarter (q/q) contraction of 0.3 percent in Q1 2021, GDP contracted a further 9.0 percent q/q in Q2, led by declines in private consumption and fixed investment. The economy expanded 7.9 percent (q/q) in Q3 driven primarily by private consumption, and output reached a level only 2 percent below the pre-crisis peak.
Reopening of the economy and additional containment measures. On April 16, the government outlined a four-stage plan to reopen the economy. Starting on April 20 a larger number of people was allowed in shops and at religious gatherings, and public parks and forests were re-opened. The second phase of the lockdown easing plan was launched on May 4 with the re-opening of hotels and shopping malls (with limitations on the number of persons), the opening of daycares and pre-schools (as of May 6), as well as softening quarantine rules for cross-border workers and students. The third phase was launched on May 18, entailing reopening of restaurants, hairdressers and cosmetic salons, and permission for outdoor sport events with up to 50 persons with no audience. Grades 1-3 in primary schools opened on May 25 with strict sanitary rules, with a maximum number of children allowed in class. The fourth stage started on May 30, with the opening of cinemas, playgrounds, and gyms, all with stricter sanitary regimes than normal. Outdoor events are allowed with up to 150 people, with social distancing or face masks. Internal EU borders were opened on June 13, in with line EU recommendations.
In response to the second wave of the pandemic, the authorities initially tightened restrictions on a regional basis, grouping countries into “yellow” and “red” zones based on the local severity of the outbreak. By October 24, the entire country had been placed in a “red” zone. Following a further acceleration of cases, additional restrictions were announced on November 4 (in effect from November 6 to December 27). The restrictions included tighter limits in smaller retail stores. Hotels were opened only for business travel. Restaurants were open for takeout/delivery only, remote learning was implemented for children at all grades, social gatherings of over 5 people were banned, wedding receptions were not permitted, religious service attendance faced limits, and public transport was limited to 50 percent of seats. Water parks, swimming pools, and gyms were closed. Cultural services were closed, including cinemas and museums. Shopping malls were closed between November 6 to November 28, and reopened after, with a limit on capacity. The government restricted Christmas meetings to five persons and imposed a curfew on New Year’s eve. The authorities subsequently announced a national quarantine from December 28 to January 18, including the shutdown of hotels, ski resorts, and shopping malls with limited exceptions. Persons entering Poland using public transport will be put under 10-day quaratine. The dates coincide with winter school break, which was shifted to early 2021 for all regions, implying a one-month shutdown of schools, starting from the Christmas break on December 23. The SARS-CoV-2 vaccination program was launched on December 27th with medical staff being the top priority group. The National Vaccination Strategy aims for all 31 million adult Poles to be vaccinated by no later than early 2023, though if the five vaccines to be chosen are made more quickly this could be sped up to mid-2022.

Key Policy Responses as of January 6, 2021

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

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

Additional support for public investment in road and railway infrastructure. As well as PLN 1 bn to support operational situation of companies managing airports.
In response to the second wave of the pandemic, on November 4th the anti-crisis shield 6.0 was announced which was approved by the president on December 15th. The additional fiscal measures are targeted to themost affected sectors of the economy and includes exemption from social security contributions, subsidized loans, wage subsidies and benefits for self-employed.The estimated cost of such support is around 1.5 percent of GDP, with EU Commission notification for some measures still pending. The key measures include:

Co-financing of fixed costs for SMEs in the industries most affected by the restrictions. Subsidies under the PFR Financial Shield of up to 70 percent of fixed costs not covered by revenues, provided that revenues decreased by 30 percent compared to the same period in 2019.
Writing-off of the subsidies and the repayable part of the PFR liquidity loans to micro firms and SMEs, which are affected by the new sanitary restrictions iftheir revenues in March-2020 to March-2021 drop by at least 30 percent year on year.
Extension of the Financial Shield program for large Companies until March 31, 2021 (applications) and June 31, 2021 (payments). Change in the rules for calculating the damage due to COVID-19 in preferential loans from the current March – August 2020 to March 2020 – March 2021, in accordance with the original shape of the program.
Continuation of de minimis guarantees for SMEs and liquidity guarantees for large companies, which requires coordination with the European Commission on the possibility of subsidies to cover installments for loans with maturity of 6 years for industries affected by the restrictions.
Continuation of subsidies to jobs in the form of standstills and reduced working time.
Extension of the standstill benefit for self-employed persons in the industries subject to restrictions.
Exemption from social security contributions for industries affected by the restrictions.
Co-financing of a change in the scope of activities under grants for business; increasing the amount of the subsidy from 6 to 8 times the average salary and extending it by co-financing not only new activities, but also changes in the scope of current activities for industries affected by the restrictions.
Second chance policy: Co-financing by the Industry Development Agency (ARP) of costs related to the restructuring of enterprises.
Co-financing of leasing in transportation sector.
The voucher of PLN 500 for all teachers to cover expenses for the IT equipment necessary to provide remote teaching.

Monetary and macro-financial

The National Bank of Poland (NBP) reduced its policy interest rate by 140 bps to 10 bps, with rate cuts on March 17 (50 bps), April 8 (50 bps), and May 28 (40 bps), since March 17. The NBP has provided 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 purchased 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 January 6, the NBP had purchased PLN 107.4 billion (4.7 percent of GDP) in Treasury and 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 to the 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

The NBP intervened in the foreign exchange market in the second half of December 2021 by purchasing foreign exchange, with the purpose of strengthening the transmission of accommodative monetary policy.

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Portugal
Background. The first confirmed COVID-19 case was reported on March 2, 2020. Following a successful slowdown of the outbreak, new cases and the test positivity rate have picked up markedly in recent weeks.
The economy has been significantly affected by the pandemic, with a second-quarter GDP decline of 16.3 percent from the previous year. The government has responded with a range of measures to support the economy and jobs, and facilitate progressive resumption of economic activity, as outlined below. Many sectors of the economy reopened, including stores, restaurants/cafes, public-facing government services and school for certain age groups. Consequently, the contraction of GDP slowed in the third quarter to 5.8 percent from the previous year.
However, the recent intensification of the virus outbreak has led to progressive reinforcement of social distancing rules and limitations on economic activity. Social distancing measures and the use of masks on public transport are mandatory. On November 7, the State of Calamity was reactivated throughout mainland Portugal as of October 14, which tightened limitations on gatherings, such as in commercial and catering establishments. 15-day long night and weekend afternoon curfews starting November 9 were introduced in high-risk localities, following parliamentary declaration of the State of Emergency.

Key Policy Responses as of January 7, 2021

Fiscal

Key fiscal measures in 2020 include: i) additional resources for virus-related health and education spending; ii) over €600 million per month (0.3 percent GDP) in financial support for those temporarily furloughed by their employer, as well as financial incentives to support progressive reopening and to normalize business activity (about €1.3 billion equivalent to {0.6] percent of GDP); iii) up to €13 billion (6.8 percent 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 percent GDP) of 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, the national airline and; those sick or in isolation due to the virus. The national airline has also received 0.6 percent of GDP in government loans, but it is expected to need further significant support according to the company restructuring plan that the government has submitted to the EC. On November 5, the Council of Ministers approved additional measures to support the economy, such as €0.8 bn in grants to micro and small companies, and €0.8 bn in credit line guarantees, and expanded eligibility for affected companies to financial support for progressive recovery.

The 2021 state budget adopted on November 26 foresees further support to the national health system, employment and incomes of households and firms. Key measures include: (i) income support measures, such as temporary reduction of PIT withholdings (0.1 percent of GDP); (ii) expanded subsidy for employment and resumption of activity (0.5 percent of GDP) and extended support for workers' lost income and coverage for those without access to unemployment protection (0.2 percent of GDP); (iii) staff reinforcement in the civil service, particularly in health and education (0.1 percent of GDP) and an extraordinary risk subsidy in the amount of 20 percent of base salary for health professionals at the forefront of the response to COVID-19; and (iv) VAT tax rebate to stimulate consumption in the catering sectors, accommodation and culture by returning the VAT paid on consumption in these sectors (0.1 percent GDP). In addition, public investment is budgeted to grow at over 20 percent. The government has submitted the Recovery and Resilience Plan to the European Commission, but related measures and investment projects are not reflected here as the Plan is not yet finalized.
Further policy measures for the first half of 2021
adopted on December 10 and December 22, , including towards carrying out the 2021 state budget, comprise: (i) employment support measures via an extension of the support for progressive resumption of economic activity for micro, small and medium-sized enterprises (50% reduction in social contributions, with wages for hours not worked paid at 100%, up to the limit of three monthly minimum wages), and renewed incentives for the normalization of activity (up to 2 national minimum wages per worker) for micro-companies with a drop in turnover above 25 percent; (ii) enlarged and more flexible business support programs, such as an expansion of Apoiar.pt
program (non-repayable subsidies) to medium- and large-size enterprises and easing of the access qualifications; (iii) support for payment of non-housing rents (for businesses with a drop in turnover above 25 percent), via non-repayable subsidies up to a limit of 50% of the rent; (iv) tax deferrals, specifically monthly or quarterly VAT in the first half of 2021 for businesses with a drop in turnover above 25 percent; and (v) new and expanded credit lines, targeting SMEs (€750 mln), exporters (€1,050 mln, with loans up to €4,000 per worker, of which 20 percent can be converted into a non-refundable subsidy if jobs are maintained), large companies in affected sectors (750 mln), tourism sector, including microcredit to small companies (€400 mln). ); (vii) an amendment to the legal regime of residence permits for investment; and (vii) extension of tax benefits for investment and the entertainment and cultural sectors.

Monetary and Macro-Financial

Exchange rate and balance of payments

Q
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Qatar
Healthcare response. Qatar is being impacted by two shocks—the spread of COVID-19 and the sharp decline in hydrocarbon prices. The authorities have put in place policies to dampen the negative impact of the shocks in the economy. The first confirmed COVID-19 case was reported on February 29, 2020. Measures implemented to contain the spread of the virus included: 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. These measures were complemented by requiring 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 enhanced cleaning in the Industrial Area. Home delivery medical services have been expanded. 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, all residents are required to wear a facemask in public places. Starting May 22, all residents are required to install the Ehteraz App on their mobile phones, which will help track COVID-19 transmission, 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. Following these measures, the authorities fully opened the Industrial Area on May 6 under strict and specific entry and exit regulations, only for employers and employees, and for goods and materials, which may only enter or exit with an application to relevant authorities. Entry and exit regulations are partly implemented with a mobile application. On June 8, the government announced a 4-phase plan to reopen the economy. On August 30, authorities announced new labor-market reforms that would dismantle the “kafala” employment system by allowing workers to take new jobs without their current employers’ approval; imposing a permanent, universal minimum wage; and beefing up enforcement systems around labor protections. On September 1, the economy moved into phase 4 with full economic reopening with social distancing and medical precautions in place. On October 13, the authorities announced the extension of quarantine requirements for all arrivals in Qatar up to December 31.A rotational in-person school attendance has been implemented since November 1. On November 17, the authorities announced that Qatar would receive early supplies of the Pfizer and Moderna vaccines by end-2020, priority to be given to the elderly, those with chronic diseases and frontline workers. Qatar began COVID vaccination campaign at the end-December 2021.

Key Policy Responses as of December 17, 2021
Qatar’s QR 75 billion (about 12 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 were exempt from rent payments for six months. On September 16, all these exemptions were extended to end-2020.
Fiscal

Food and medical goods were exempted from custom duties for three more months effective September 16. A waiver of rental and utilities fees was granted to households and businesses until February 2021. Migrant workers who are in quarantine or undergoing treatment will receive full salaries. The fiscal support package is expected to reach QR2.1billion (0.4 percent of GDP) in 2020. On June 1, the government entities were directed to reduce non-Qatari employees’ wage bill by 30 percent.

Monetary

The Qatar Central Bank (QCB) lowered its policy rates twice in March in line with the U.S. Federal Reserve (to maintain the currency peg). The deposit rate was then reduced by 100 bps to 1 percent; the lending rate by 175 bps to 2.5 percent; and the repo rate by 100 bps to 1 percent. The QCB is also providing liquidity to banks operating in the country through a special repo window at zero interest rate (QR50 billion).

Macro-Financial

QCB introduced a zero-interest repo window of QR50 bill (9.3% of GDP) to provide liquidity to banks for postponing loan installments or granting new bank loans. The Qatar Development Bank (QDB) is postponing installments of all borrowers for six months and is administering the National Guarantee Program (NGP) by allocating QR5 billion (0.9 percent of GDP) in government guarantees for a period of 12 months to local banks for loans to private sector companies to help them pay wages and rental fees. QDB has announced that the NGP is extended until June 15, 2021. Qatar Islamic Bank is providing interest-free loans to private companies under this program. The Qatar Financial Center 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 until August 30, 2020. The government directed financing to increase investments in the stock market by QR 10 billion (1.8 percent of GDP).

Exchange rate and balance of payments
No measures.
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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 estimate of GDP in Q3 2020 rebounded by 5.6 percent compared to Q2 (albeit still lower by 6 percent compared to the same quarter a year earlier). This reflected the easing of lockdown restrictions, including the rebound in EU trading partners, and growth also continued to be supported by COVID-19 support measures and the lagging effects of last year’s construction sector stimulus.
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. 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. 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. Schools reopened on September 14th, subject to certain conditions. The national alert period which started May 15th has been extended to December 16th. Following the increase in the number of new cases, new prevention measures became effective August 1st, including mandatory wearing of masks in certain open spaces and limited hours for outdoor restaurants and clubs. Further restrictions were introduced locally in early October: closing again the restaurants, bars, theaters and movie theaters in capital city Bucharest, and mandatory wearing of masks within 50 meters from schools. With the number of infections on the rise, new restrictions have been imposed in areas exceeding 1.5 cases per 1000 population, including closing schools and mandatory masks in all public places (indoors and outdoors). Starting November 9th, circulation during night hours is limited only for emergencies and with a sworn statement on the purposes of travelling. The vaccination program was launched on December 27th, with the healthcare workers as the first priority. The second stage of the program – the vulnerable groups – will begin mid-January. It is expected that the vaccine will be made available to the general public in April.

Key Policy Responses as of January 7th, 2021
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 partially subsidizing the wages of those returning to work, 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). While not directly COVID-19 related, a portion of the new pension law increase was implemented in September, raising pension spending on average by 14 percent. In late December, the government announced the continuation of some of the previously adopted measures until June 2021. The government announced that support measures will continue in 2021, with the actual size of the package to be defined in the upcoming budget.

Monetary and macro-financial

Key measures include: (i) reducing the monetary policy rate by 1 percentage point to 1.5 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 42 billion in the period from March to November while the total volume of government securities purchased on the secondary market amounted lei 5.3 billion as of November 2021. See also: 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)It was initially agreed that the repo line would remain in place until end 2020, but was extended until end-June 2021. 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 2021.

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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 contracted by 8.0 percent in Q2 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 had announced a three-stage reopening plan giving regional governors discretion on the pace. Criteria for lifting restrictions in specific regions included infection rates, the availability of hospital beds, and testing capacity.
After the reopening in summer.summerthe Russian authorities are progressively albeit tentatively reinstating restrictions amid a steep rise in daily infections and hospitalizationsthat started in September 2020. While still resisting a tough lockdown , the regions are extending and increasingly reinstating a limited number of restrictions: : self-isolation (81 regions out of 85), remote work (63), mass gatherings (74), entertainment and eating establishments (82), unaccompanied child mobility (40), non-emergency medical care (36); and online learning. The only region that imposed a strict lockdown during the second wave, has lifted it.Most regions will ban New Year mass festivities, fairs and children's parties, but theaters, concert halls, restaurants and bars will work with restrictions. Hotels and ski resorts remain open.
Industrial enterprises and construction sites are back in business nationwide. After rebounding in summer, domestic tourism is facing problems again, albeit with strong regional variation of hotel occupancy; ski resorts are reportedly fully bookedOver 30 percent of fitness clubs have not reopened after restrictions were lifted and more are facing closure now as attendance is drying up.Domestic flights have been largely resumed but passenger traffic halved y/y. The authorities are increasing the number of international flights and reopening new travel destinations, but on a very limited scale. The second wave of infections has hit hardest the touristindustry (-61.1 percent y/y), eating establishments (-29.6 percent y/y), entertainment (-61.5 percent) and beauty industry (-21.4 percent). The situation is not expected to improve any time soon due to New Year festivities restrictions imposed by 56 regions. Retail trade rebounded close to pre-crisis levels– with regional variations. After some decline since mid-September, retail chains confirm marginally increased purchases of essentials, but deny panic demand. Shopping malls are increasingly losing buyers (-30-40 percent), and various indices suggest demand shifting to online purchases.Office space rent and purchase deals are at a 13 year low. The government has increased the cost of the National Economic Recovery Plan to Rub6.4 trillion.

Key Policy Responses as of December 16, 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 6 months if a parent loses job (for up to 4 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(extended for three more months for selected affected sectors); (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; (xvii) state-owned bank, airlines and development institution re-capitalizationand (xviii) expanded eligibility for subsidized mortgage lending.The total cost of the 2020 fiscal package is currently estimated atabout 3½ percent of GDP— 4½ percent if debt guarantees and capital injections are also included.

Monetary and macro-financial

On July24, the CBR cut the policy rate by 25 bps to 4.25 percent, year-to-date rate cut amounted to 200 b.p. 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.From end-October 2020, FX operations of the Central bank in the open market consist ofregular FX sales by the fiscal rule and of mirroring FX sales forSberbank deal and for NWF investments in Ruble assets. The latter are limited to Ruble 4 billion daily.Also, CBR increased the limit on its FX swap operations and temporarily introduced a long-term refinancing instrument (one month and one-year Ruble repos).
Most of the regulatory support measures were effective from March 1 to September 30, 2020, some were extended till end-2020 or mid-2021. Meanwhile, the Central bank encouraged banks to further support affected borrowers.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 was grantedto all sectors. The deadline for full provisioning of restructured corporate loans was extended until April 1, 2021 (until July 1, 2021, for restructured SME loans). The CBR has introduced a RUB 500bn facility for SME lending (including 150 billion rubles to provide loans to SMEs to support and maintain employment).From July 27, 2020, the interest rate on CBR loans aimed at supporting lending to SMEs, to support and maintain employment,was reduced to 2.25 percent.
Banks have been allowed to value securities at their March 1pricesuntil end-2020. FX operations could also be valued at the exchange rate of March 1until September 30, 2020, except for those on open forex positions. The Deposit Insurance Fund contribution were 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 untilDecember 31, 2020. Full provisioning of restructured retail loans is postponed until July 1, 2021. Measures to support retail and mortgage lending 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 percentfrom 150 percent. To stimulate conversion of problem loans to 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 percentfor 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.
Additionally, the CBR reduced risk buffers for unsecured loans to be issued since September 1, 2020, and cancels risk buffers for consumer loans issued by August 31, 2019. The CBR lifted its cap on banks' fees for online retailers implemented during the lockdown.

Exchange rate and balance of payments

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Rwanda
Background. The first confirmed case was reported on March 14, 2020. Rwanda is currently experiencing a spike in the number of COVID-19 cases. 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 and schools remain closed. 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 resumed on August 1. Following a hike in infections in Kigali, two major markets were closed for 14 days, public transportation between the capital and other districts prohibited, the nighttime curfew temporarily lengthened, and public offices mandated to work at a further reduced capacity to reinforce social distancing. While a phase of accelerated reopening followed progress in containing the virus, including a gradual reopening of schools, the recent spike in infections has urged the government to reverse previously eased restrictions by tightening movement restrictions, banning social gatherings, limiting office operations and conference activity, and closing recreation facilities.

Key Policy Responses as of January 4, 2021

Fiscal

The pandemic is expected to cause a revenue shortfall of 2.2 percent of GDP. The government’s Economic Recovery Plan in response to the pandemic is estimated at about 6.3 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. 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. The central bank restricted dividend distribution by banks and insurers to preserve capital positions. It also issued guidelines to banks and microfinance institutions on the classification and provisioning of restructured loans. The extended lending facility and the T-bond rediscounting window were extended until further notice.

Exchange rate and balance of payments

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Samoa
Background.. Samoa is currently COVID-19 free. 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 December 3, the government extended the State of Emergency Orders with amendments including inbound travel restrictions, which is extended to January 17, 2021. The repatriation flights from New Zealand and Australia arrived in September 18, October 6 and 30, to bring home the citizens, workers under the seasonal employment programs, and scholarship students in the region. Additional repatriation flights for returning citizens from Europe, and the US arrived throughout November 27 to December 11. All passengers are required to show proof of three negative COVID-19 test results seven days apart and another test result five days before their departure. The travelers need to be quarantined for 21 days upon arrival into Samoa at a designated location. As of November 18, the government has approximately 4,000 COVID-19 test kits available with assistant from the WHO.

Key Policy Responses as of January 7, 2021

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

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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. 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. 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. After experiencing a second wave, the government has declared a new health emergency at end-October. New restrictions have since then implemented which included compulsory use of masks, limits to indoor dining and private gatherings. Until mid-January, a nationwide curfew is in place from 10pm to 5am. Restaurants and bars are not allowed to serve food after 6pm. Retails shops, services, must close by 8pm. Mask use remains compulsory in schools for students older than 6 years. Distance learning remain in place for high schools until January 9, with possibility to extend the period. Traveling to high risk regions in Italy remains restricted.

Key Policy Responses as of December 3, 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). Supplemental wage measures instituted to tackle the pandemic have been extended to February 2021.

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

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São Tomé and Príncipe
Background. The first confirmed COVID-19 cases were reported on April 6, 2020. With the help of the 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. Economic conditions have deteriorated since the introduction of confinement measures. Real GDP is expected to contract by about 6 percent in 2020 due to weak external demand and pandemic-containment measures.
Reopening of the economy.The government moved from a state of emergency to a state of alert in October, in the final phase of reopening the economy. The country reopened hotels, restaurants, commercial flights, and extended the operation of commerce and public service to normal hours. They also started in-person classes at schools and universities, while taking steps to ensure social distancing and prevent re-emergence of the virus.

Key Policy Responses as of January 7, 2021

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; (iv) Financial assistance to workers who lost their jobs in both the formal and 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 workers, including 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 temporarily eased some prudential ratios for three months to ensure adequate provision of liquidity in the market.
The BCSTP has encouraged commercial banks to reduce some banking fees and grant a temporary moratorium on debt repayments for 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 and have established, in coordination with AfDB, a new credit line for banks to provide lending to small and medium enterprises affected by the pandemic.

Exchange rate and balance of payments

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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 authorities 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. New makeshift hospitals were built to accommodate any potential surge in patients. Temporary housing accommodation and repatriation flights were offered to expatriate workers. The government also restricted this year's Hajj season to only around 1000 pilgrims. The economy contracted by 4.2 percent year-on-year in 2020Q3 after declining by 7 percent year-on-year in 2020Q2, while high frequency data such as the PMI point to further recovery in 2020Q4.
Reopening of the economy.On May 26, the authorities announced a 3-phase plan for removing coronavirus-related restrictions. On June 21, the third and 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 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. On August 2, only 1000 pilgrims completed the 2020 Hajj ritual. On August 4, it was announced that travel restrictions on trucks carrying goods from neighboring GCC countries were lifted. On August 24, land borders reopened to Saudi citizens and their non-Saudi family members. On August 30, public sector employees returned to work. International travel bans have been partially lifted since September 15 and Saudi Arabia’s national airline has resumed flights to 20 international destinations. Umrah pilgrimage resumed on October 4 for nationals and residents with an initial capacity of 30 percent and entered the second phase on October 18 with a capacity of 75 percent. On November 1, Umrah resumed for foreign pilgrims between 18-50 years of age. On November 11, the authorities announced that Saudi has signed an agreement to receive early supplies of 3 vaccines. On December 10, the authorities approved the registration of the Pfizer-BioNTech vaccine. Registration for free vaccination began on December 15 and inoculation started on December 17. On January 3, the authorities announced the reopening of borders and resumption of international flights after a two-week suspension aimed at containing the spread of the new COVID-19 strain.

Key Policy Responses as of January 6, 2021

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. 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 and rationalize spending. These measures consist of the 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 a range of imported goods, which came into effect on June 20. 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. On September 29, GOSI announced another 3-month extension (beginning November 1, 2020) of support to Saudis working in economic sectors affected by COVID (limited to a maximum of 50 percent of Saudi workers per establishment). On October 5, the Minister of Finance announced the extension of penalty waivers for all tax filing and payment for an additional 3 months until 31 December 2020.

Monetary and macro-financial

The Saudi Central Bank (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. 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. A total amount of SAR 100 billion had been used under these programs. SAMA has also instructed banks to delay payments of loans extended to all Saudi employees by 3 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. On September 1, SAMA extended the deferred loan payments program for 3 months until December 14, 2020. On November 3 , SAMA announced the extension of the payment deferral program to support the private sector until end-March 2021.

Exchange rate and balance of payments

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Senegal
Background. A first positive case was reported on March 2. The government declared a national state of emergency in early 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. These measures succeeded in reducing the daily number of new positive cases to an average of under 20 in September-October after hovering around 100 from May to August. However, like in most other sub-Saharan African countries, a second wave of the pandemic is underway since November 2021, with growth in new daily cases up to 0.6 percent (about 100 new daily cases).
Reopening of the economy. The containment measures and the sudden stop of travel and tourism contributed to a significant economic slowdown in the first half of 2020, exacerbated by declining export demand and lower remittances. The President lifted the state of emergency and curfew on June 30. International air travel has resumed, while some restrictions on travel from and to the EU countries which apply restrictions to Senegal. The government adopted a revised 2020 budget to make space for an economic and social resilience program to respond to COVID-19 crisis; execution of the revised 2020 budget was marked by the robust implementation of measures covered by this program. Economic activity started to rebound in May 2020 and a V-shaped recovery appeared to take hold in Q3.

Key Policy Responses as of December 17, 2021

Fiscal

The government implemented and economic and 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.

Social protection: One million households received 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 received direct support of about FCFA 100 billion. The government has also set up a partial credit guarantee scheme for companies affected by the COVID-19 crisis for a total amount of CFAF 200 billion (CFAF 100 billion for credit to large companies with a 20 percent state guarantee and CFAF 100 billion for small enterprises with a state guarantee of 50 percent). However, the uptake has been low and the government has revised the design of this mechanism to make it more attractive in the context of the 2021-21 recovery plan. An expedited payment of unmet obligations aimed at strengthening 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.
The policy focus is shifting to supporting the nascent recovery and the government has revised its flagship national development strategy “Plan Senegal Emergent” to reflect lessons from the pandemic. This has resulted in a new action plan (PAP2A) with a renewed emphasis on reaching self-sufficiency and reduce the reliance on imports for food (notably rice), pharmaceutical products, and health services; the plan also aims to support a return to strong and inclusive private sector-led growth, by accelerating structural transformation.

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 initially issued by Senegal was equivalent to 1.4 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but to be all paid back by end-2020. 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. In addition, in June 2020 the West African Development Bank (BOAD) created a CFAF 100 billion window to extend 5 to 7 year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the COVID-19 crisis on asset quality.

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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 reached -0.6 percent in Q1 and -9.2 percent in Q2 (s.a. qoq)—+5 percent and -6.4 percent in yoy terms in Q1 and Q2, respectively.
Reopening of the economy. Since April 21, containment measures were 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. In light of the declining number of new positive cases in August, some of the measures have been relaxed. On August 24, cinemas and theater reopened, with safety measures in place (max. 500 spectators, mandatory use of masks, etc.). Working hours of all establishments will be restricted to 11:00 pm as of October 8. New measures were introduced on November 15, limiting the hours of operation of restaurants, catering facilities, cafés, nightclubs, as well as shopping centers and shops, which will be closed from 9pm to 5am. Moreover, the number of people allowed in gatherings is restricted to 5. November 25: Secondary and high schools are required to move to virtual learning. December 3: shopping malls, restaurants, bars, cafes, hairdressing and beauty salons, and all indoor sport facilities can be open until 5pm during the week and should be closed during the weekend. December 15: starting on December 20, visitors from abroad (domestic and foreign nationals) can enter Serbia only with a negative PCR test not older than 48 hours; Serbian citizens who do not possess negative PCR tests must spend ten days in isolation at home. December 21: restrictions on shopping malls, restaurants, coffee shops and various service providers were loosened on a trial basis, allowing them to be open until 8pm on weekdays.

Key Policy Responses as of January 7, 2021

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).

In late August, the authorities announced one-off fiscal support to help hotels in cities, through a fixed subsidy per room and per bed, with a cost of about 0.02 percent of GDP.
In early November, the authorities announced that public-sector health workers will receive a one-off assistance of RSD 10,000 by the end of the year (estimated cost of about 0.02 percent of GDP).

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 1.25 pp to 1 pp 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.
In August, the NBS adopted a new set of temporary measures through 2021 intended to provide easier access to housing loans for individuals. These measures include the earlier approval of mortgages before construction is completed, the possibility of extending mortgage repayment periods, and a temporary relaxation of the approval procedure for short-term dinar loans up to a certain amount.
In November, the NBS announced additional FX-purchase swap auctions and securities purchase repo auctions on a weekly basis to provide liquidity to the system.
In December, the NBS adopted new measures to support debtors (corporates and households) affected by the pandemic. These measures envisage rescheduling and refinancing of bank loans and a six-month grace period with extension of repayment terms.

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Seychelles
Background. Seychelles has avoided outbreak of COVID-19 inside the country, following the first cases recorded in early March. 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 and medium risk countries have been allowed to enter the country starting on August 1. After Seychelles started experiencing community transmission in December 2020, some restrictions on movement have been reimposed and to be in place until end of January 2021 – subject to reviews before that date. All who have tested positive are in isolation and contact-tracing and testing efforts continue. Additionally, given emergence of the new strain of the virus, with effect from December 31, South Africa has been removed from the list of countries from which visitors may travel to Seychelles. The authorities are to unveil vaccination plan this week, following the recent delivery of the first batches of vaccines from multiple sources.

Key Policy Responses as of November 19, 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 budget was approved by the National Assembly in late April. From July, Seychelles Employee Transition Scheme (SETS) was set up to facilitate the reskilling and placement in an economic activity of persons made redundant as a result of economic decline following the COVID-19 pandemic. It is an emergency support mechanism put in place by the government to work alongside the Financial Assistance for Job Retention (FA4JR) set up to help businesses pay the salaries of their employees and extended until February 2021. From March 2021, FA4JR will be phased down and only those that fall under an affirmative list (such as accommodation and food service, administrative and support services such as airlines, yacht charters, DMCs, tour guides, travel agents, arts, entertainment and recreation, and transportation and storage) will benefit. According to the Ministry of Finance, a total of SCR1.2 billion ($52 million) has been disbursed since the scheme was set up in April. However, the new budget implication that will go towards the scheme for 2021 has been reduced to SCR 777. 8 million ($37 million). In early September, additional measures were introduced to support households and firms: Clients of the Home Finance Company (HFC) and the Property Management Corporation (PMC) will benefit from a 25 percent support on their loan repayments between Sep 1, 2020 and Dec 31, 2021; from Sep 10, Small Business Support Fund (SBSF) facility was launched, which will provide interest-free loans to small businesses.
In early September, additional measures were introduced to support households and firms: Clients of the Home Finance Company (HFC) and the Property Management Corporation (PMC) will benefit from a 25 percent support on their loan repayments between Sep 1, 2020 and Dec 31, 2021; from Sep 10, Small Business Support Fund (SBSF) facility was launched, which will provide interest-free loans to small businesses.

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 SCR500 m would be set up to assist commercial banks with emergency relief measures to support 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 up to six months on the repayment of principal and interest on loans to assist businesses in impacted sectors. The moratorium for individuals is up to three months. In early September, the banking community has agreed to continue offering and prolonging the measures announced in March to assist their individual as well as business customers who have been impacted by the COVID-19 pandemic.
The National Assembly has allowed the Central Bank to provide (i) a limited credit to government up to SCR 500 mill, 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. In May, a credit facility was established to assist commercial banks with emergency relief measures to support small- and medium-sized enterprises and another credit facility to support large enterprises was established. As of Nov 26, 11.5% of SCR500 mill allocated for MSMEs and 6.37% of SCR750 mill allocated for large enterprises has been used. On October 29, CBS extended the credit facilities until May 16, 2021 and June 20, 2021 respectively. 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. In the Governor's own words
, another financial instrument put in place to help the economy and business affected by the pandemic is treasury bills which the economic agents can invest in and convert into liquidity at need.

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Sierra Leone
Background. After peaking in May June, COVID-19 cases declined and stabilized at low levels. However, case numbers have picked up since mid-December, with the cumulative cases exceeding 2700 by early January. The Government partnered with the WHO to increase testing capacity, which remains constrained. At the onset of the pandemic, the Government decisively implemented prevention measures, including a 12-month national state of emergency, declared on March 24. The Government progressively eased restrictions since late June, but may reintroduce measures if a second wave gains momentum.

Border controls and closure. Mandatory quarantine on entering the country and closure of land borders. International passenger flights were suspended from March until July.
Social distancing. Closed education institutions on March 31; schools reopened for six weeks starting July 1 for exams and reopened normally in September. 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.
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 curfew (initially 9pm-7am, later shortened to 11pm-5am). The country implemented two full lockdowns (April 5-7 and May 3–5) during which all were required to stay home. The Government lifted restrictions on inter-district travel on June 23 and lifted the curfew on October 26, though restrictions on large gatherings remain in place.

Key Policy Responses as of Early January 2021

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 was 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 introduced 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) 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. At the December 17 MPC meeting, the BSL reduced the policy rate another percentage point to 14 percent.

Exchange rate and balance of payments

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Singapore
Background. Singapore experienced a sharp increase in COVID-19 infections in April 2020 andsafe distancing measures were considerably intensified to break the trend of increasing local transmission. In view of a sustained decrease in community transmissions, the Government announced a three-phased approach to resume activities starting June 2.As community infection rates have remained low and generally stable,Phase Two commenced on June 19, and Phase Three, with further relaxation of social distancing measures, is scheduled for December 28. Real GDP contracted by 5.8 percent in 2020Q3 on a year-on-year basis, following a contraction of13.3 percent in 2020Q2.

Key Policy Responses as of January 7, 2021

Fiscal

The authorities have announced several packages of fiscal support measures (February 18, March 26, April 6, April 21, May 26, August 17) amounting to about $100 billion. Support to households includes a cash payout to all Singaporeans (higher for families with children under 20), and additional payments for lower-income individuals and the unemployed. Support to businesses includes wage subsidies (extended through March 2021, with levels of support depending on the sector), support to cover rental costs, an enhancement of financing schemes, and additional support for the self-employed and industries most directly affected (aviation, tourism, construction, transportation, arts and culture). The authorities have increased their contingencies funds for unforeseen expenditure needs and also set aside loan capital of $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.
On December 16, the authorities announced the COVID-19 Recovery Grant for low and middle income workers. The support of up to $700 per month for three monthsduring 2021 will be provided to individuals who remain significantly affected by the pandemic while they actively search for a new job or training opportunities.

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 December 17, MAS announced that the swap facility has been further extended to end-September 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 $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 $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. On Aug 7 MAS urged Finance companies incorporated in Singapore to also cap their total dividends per share for FY2020 at 60 percent of FY2019’s level.
On September 3, the MAS announced measures to enhance the banking system’s access to Singapore dollar (SGD) and US dollar (USD) funding effective September 28. A new MAS SGD term facility will offer SGD funds in the 1-month and 3-month tenors, complementing the existing overnight MAS Standing Facility. A wider range of collateral comprising cash and marketable securities in SGD and major currencies will be accepted. Domestic systemically important banks that are incorporated in Singapore will be able to also pledge eligible residential property loans as collateral at the term facility. Pricing will be set above prevailing market rates, in line with the facility’s objective to serve as a liquidity backstop. MAS will also expand the range of collateral that banks in Singapore can use to access USD liquidity from the MAS USD facility, in line with what is accepted at the new SGD term facility.
On October 5, the MAS and the financial industry announced extended support for individuals and (SMEs) that need more time to resume loan repayments. Individuals with residential, commercial and industrial property loans who are unable to resume making full loan repayments can apply to make reduced instalment payments pegged at 60 percent of their monthly instalment, and eligible SMEs may opt to defer 80 percent of principal payments on secured loans. These measures will gradually expire in 2021.
On November 23, the MAS announced that it will provide up to RMB 25 billion ($5.1 billion) of funding to banks in Singapore, in an effort to deepen renminbi liquidity and further strengthen banks' ability to meet the growing renminbi business needs of their customers in Singapore and the region.

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The Kingdom of the Netherlands—Sint Maarten
Background. The authorities implemented a set of measures and travel restrictions to control the spread of COVID-19 on March 6. 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 and the border between Sint Maarten and Saint Martin was re-opened on September 18 after almost two months of closure to slow down the spread of the virus. The second wave of COVID-19 started in late July. It surpassed the first wave in the number of active cases, but has lower mortality.
Reopening of the economy.The government lifted the state of emergency and allowed all businesses to reopen. The first and second phases (June 15 and 22) allowed travel between Sint Maarten and several regional island nations and territories, including Anguilla, Antigua and Barbuda, Aruba, British Virgin Islands, Curaçao, Dominica, Saint Kitts and Nevis, and Saint Lucia. Nationals and visitors from Saba, Sint Eustatius, Bonaire, Anguilla, St. Barthelemy, Martinique and Guadeloupe who did not travel 21 days prior to the date of departure will be accepted. The third phase (July 1) allowed travel from additional Caribbean countries, Belgium, Canada, China, France, Germany, Italy and the Netherlands, assessed as posing a medium risk of transmission. The fourth phase (August 1) allowed travel from several high-risk countries, including the United States (the main tourism market), although the border remains closed to travelers from Latin America. Despite allowing travel from the US, stayover arrivals reached only 10 percent of their 2019 level in Q3 and 27 percent in November.
An electronic Health Authorization application must be filled by every visitor whether arriving by air, boat or in transit. Without the health authorization, entry into the country will be denied. Travelers originating from moderate or high-risk countries in the 14 days prior to coming to St. Maarten are requested to have a COVID-19 PCR test performed within 72 hours prior to departure to St. Maarten. Travelers from high-risk countries are also required to self-monitor their body temperature and possible flu-like symptoms for 14 consecutive days while those coming from a moderate risk country are only required to self-monitor for 8 days. Travelers coming to Sint Maarten from a low-risk country such as Anguilla, Aruba, Bonaire, Curaçao, Guadeloupe, Martinique, Saba, St. Barths, St. Martin and St. Eustatius will be exempted from the mandatory PCR test. For arriving vessels, if a vessel is arriving from a country with a low risk of transmission, no test is required. If the vessel is arriving from a moderate or high risk country, a PCR test is required 120 hours prior to departure from the last port of call.

Key Policy Responses as of January 7, 2021

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 114 million (6½ percent of GDP) for the second quarter. 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 remainder of the year 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), and by 8.3 percent q/q in Q2 (12.1 percent y/y). Activity rebounded strongly in Q3, with GDP growing by 11.7 percent q/q.
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 being lifted over the summer. With the sharp rise in new Covid-19 cases since September, the government re-introduced a 90-day state of emergency on October 1st and implemented a partial lockdown between October 24 and November 14. A first-of-its-kind nation-wide mass testing of the adult population was conducted on October 31−Novermber 1, followed by smaller-scale testing in regions with high positivity rates. Slovakia went under curfew again starting December 19 (to expire on January 24) and the state of emergency was extended by 40 days (from December 29). All shops except for essential ones (e.g. groceries and pharmacies) will close. People will be recommended to stay home. The government also approved a COVID alert system which, based on the severity of the pandemic, will dictate anti-virus measures, including whether the measures will be at the regional level or nationwide. Stricter containment measures have been adopted in the Nitra district starting January 5.

Key Policy Responses as of January 6, 2021

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' social security contributions for some months for affected companies and self-employed (deferral extended to June 2021); (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; (vii) rental subsidies; and (viii) higher medical spending. These measures (the wage compensation program was subsequently extended to end-March 2021 and augmented in size) are estimated to amount to EUR 2.54 billion, or 2.7 percent of 2019 GDP. The 2021 Budget also allocated 1.1 billion reserve for impacts of the pandemic. To ease liquidity pressures, the government introduced several state-guarantee schemes, up to a total of EUR 4 billion or 4.3 percent of 2019 GDP, 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. The government also introduced temporary state protection from creditors for affected businesses, with was subsequently extended to end-year.

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

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Republic of Slovenia
Background.The COVID-19 pandemic has significantly affected Slovenia, a small country with a population of 2.08million. Since the first confirmed COVID-19 case on March 4, there have been100,401confirmed infections and2,190deaths with or from COVID-19. Slovenia is currently experiencing a second wave of Covid -19 cases. The number of tests has increased, and their positivity rate reached 32 percent onDecember 16.As of that date, there were 20,758active cases, including 1,251hospitalized (including 211 people in intensive care);289deaths occurred in the past week.Real GDP contracted by13percent in 2020:Q2 and by 2.6 percent in Q3. The authorities currently project the 2020 growth at – 6.7 percent (IMAD Autumn Forecast).Since March, the authorities have implemented a range of measures through six packages to delay the spread of coronavirus and cushion the adverse impact on people and businesses
Reopening of the economy and additional containment measures. The first wave of coronavirus infections in the spring of 2020 was followed by a gradual reopening facilitated by the containment measures and regression in the number of cases. Restrictions oncity-to city travel and some public transitforbusinesseswere relaxed in April. The easing of the restrictionsthen broadened to some services, which were in May expanded to fullyreopen in-city public transportation,schools, and some sport activities. In the process, the authoritiesissued detailed guidelines on protective measures.On May 15, Slovenia became the first EU country to declare the end of the COVID-19 epidemic in the country,although some anti-COVID-19 restrictions remained in place.With the deterioration of the epidemiological situation in the fall,stores for non-essential goods, restaurants and bars, gyms, indoor sports centers, theaters, cultural institutions and hair salons, among others, were closed. The government decided to relax some of the containment measures in mid-December — public transport would resume at reduced capacity and certain businesses would be allowed to open. Schools, however, will remained closed at least till the end of the year.

In the face of a second wave of infections, the authorities have set the economy in a partial lockdown from October. Residents are to demonstrate a valid reason to leave their region and a nighttime curfew (from 9pm to 6am) was imposed for the whole of Slovenia on October 20. Exceptions on movements include work, emergency situations, and services, family assistance, and farm work. Since October 22 movie theatres, and cultural venues are closed. In the red-codes areas, gathering sizes are capped to six indoors, and large social gatherings are temporarily banned, including weddings, public events, religious gatherings, and meetings. Since Monday October 26, a country-wide epidemic has been declared. Mouth-nose coverings must be worn outdoors. Cross-border restrictions remain in place; in particular, citizens from countries included in the "red list" are required to be quarantined for 10 days, unless they present a negative COVID-19 test performed by a recognized organization and not older than 48 hours prior to entry. On November 16, the government extended the state of epidemics for another 30 days

Key Policy Responses as of January 7, 2021

Fiscal

A wide support program during Spring 2020. As part of an economic stimulus package of € 1 billion (2.2 percent of GDP) announced on March 9, the authorities have adopted 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 employees due to pandemic-related closures and quarantined people (about €50 million). (iii) Other support to household income included providing a monthly basic income, support to self-employed; one-off support to pensioners and students, and subsidies to kindergarten and large families. (iv) Support to corporate liquidity was provided through grants, equity purchase, and government guarantees and credit lines open to the affected businesses, particularly SMEs (€600 million). In addition, corporate income tax and social security contributions could be deferred. Lastly, the administered price for electricity was cut by a third to ease the burden of the pandemic crisis. 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, the 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. Accordingly, in early June, each adult in Slovenia received a € 200 voucher (€ 50 per child) to be spent in accommodation in Slovenia, as a measure to support tourism. The amount earmarked is € 345 million and can be used until end-2020.On June 28, the government adopted an emergency bill to address the surge in new cases, including an extension of the furlough support scheme until end-September and a legal basis for the tracking app.

Further support in the Fall to address the second wave. The authorities rolled out a fifth COVID-19 stimulus package on September 30 to mitigate the effects of the crisis and extend certain existing measures until end-2020. These include measures (i) to extend furlough funding and full pay compensation until the end of 2020, (ii) to support self-employed and micro-companies through monthly income compensation, (iii) support employees who have to be quarantined with full salary replacement, and (iv) further support families, with parents receiving 80 percent of their salaries in case of school quarantine. In addition, € 95 million from the existing resources in the COVID-19 fund will serve to fund microloans and loans for R&D and innovation. On November 11, the government announced the sixth anti-crisis package, estimated at € 1 billion and including an extension of the furlough scheme, compensation to businesses that are losing revenue due to the pandemic and partial or full waivers of rent payments for renters of state and local governments property. Most measures that have been already introduced will remain in place till the end of the year with the possibility for further extension.

Monetary and macro-financial

On March 20, the National Assembly adopted a Law allowing the deferral of loan payments for at least 12 months on capital and interest coming due and covering businesses and part of households facing liquidity problems attributed to the COVID-19 epidemic. At end-July, banks had received about 23,000 applications with an aggregate deferred amount reaching about € 330 million. The authorities also created a public guarantee amounting to € 2.2 billion to cover loans extended to non-banking corporations to facilitate access to lending, with first publicly guaranteed loans from mid-July.
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) The Bank of Slovenia (BoS) extended all ECB measures to all banks and savings banks in Slovenia; (iii) The BoS restricted profit distribution at banks and savings banks; (iv) The 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

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Solomon Islands
Background. The first confirmed COVID-19 case was reported on October 3. All the confirmed cases so far have been amongst repatriated citizens contained within the isolation stations. COVID-19 preventative measures implemented by the government include suspension of all commercial international flights, temporary ban on entry of non-citizens, and strict mandatory quarantine for all returning passengers. In addition, the government has extended the state of public emergency until March 24, 2021 and the international border closures until January 31, 2021. It also temporarily scaled down public services to essential services only, closed schools and suspended some services as well as restricting domestic travel in April.
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 (the capital). On May 20, the emergency zones, including 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. After confirming its in-country COVID-19 testing capability, the government began repatriation of its stranded nationals from Australia, New Zealand, China, Philippines and other countries from May onwards. The government has also begun to allow the entry of foreign technical staff to work on donor-funded projects, including for Pacific Games 2023. The national airline, Solomon Airlines, announced on November 30, the suspension of all international flights has been extended until March 27, 2021, but it will continue to operate government approved cargo and repatriation flights as needed. On August 28, the national airline laid off 20 percent of its workforce. A Public Health Emergency Bill that was expected to pass in November has now been deferred to 2021. The proposed bill should enable government to promptly and effectively respond to a potential public health threat, an outbreak or spread of an infection or disease, or the risk of the outbreak or spread of infection or disease, within Solomon Islands. In November, the government approved 4 additional quarantine facilities in Choiseul and Western Provinces apart from the existing capacity in Honiara and the western province of Gizo.

Key Policy Responses as of January 7, 2021

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. The fiscal response triggered a supplemental 2020 budget appropriation bill, which has been approved by parliament on September 3.
On April 25, the government issued its first covid-19 domestic development bond of SI$120 million to finance its COVID-19 economic stimulus package. The government has also reallocated SI$156 million in previously budgeted spending to fund the COVID-19 preparedness and response plan. 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. Additional support was provided through exceptional early withdrawals from the Solomon Islands National Provident Fund (SINPF) until end-June, amounting to SI$95 million. The government is receiving funds and medical supplies from several countries, including Australia, China, Japan, 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 Finance Facility to assist exporters in the country and has implemented a new repurchase facility for participating commercial banks. The bank has also 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

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Somalia
Background. Somalia recorded its first confirmed COVID-19 case on March 16, 2020. In early March, the authorities 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. After falling since June, new COVID-19 cases appear to be picking up again in August and September.
Reopening of the economy. The Somali authorities have started a phased approach to reopening the economy. Domestic and international flights have resumed on July 5 and August 3, respectively, and public schools reopened on August 15.

Key Policy Responses as of January 7, 2021

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 the 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. To better monitor financial and liquidity conditions, the Central Bank has increased the frequency and granularity of data collection, including employing one-off surveys. In coordination with international partners, it is exploring measures to ease the inflow of current transfers, including remittances.

Exchange rate and balance of payments

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South Africa
Background. South Africa reported its first confirmed COVID-19 case on March 5, 2020. The government declared a national state of disaster, which at present extends to January 15, 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. A nationwide lockdown was put in place from midnight March 26, with only critical workers, transport services, banking, essential food and medicine production, and retail operating. On April 27, a delegation of 217 infectious disease experts arrived upon the request of the government to support its health response to COVID-19.
On May 1, 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. The sale of alcohol was allowed on a restricted basis while the sale of tobacco remained banned. Remote work has always been encouraged where possible. On June 8, schools 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. On July 23, it was announced that, starting from July 27, most public schools would be closed for one month.
On August 17, after the number of daily cases declined, the sale of alcohol was allowed to resume subject to certain restrictions. Restrictions on inter-provincial travel and the operation of accommodation, hospitality venues, beaches, restaurants, bars, and taverns were relaxed subject to strict adherence to health protocols and social distancing. On September 21, following a flattening of the infection curve, restrictions were further relaxed. Almost all restrictions including on international travel to certain countries were lifted from October 1. On October 20, the list of high-risk countries for international travel was revised where the number of such countries was reduced from 60 to 22.
On December 3, the Nelson Mandela Bay was declared as a hotspot and new restrictions were introduced. On December 9, the Health Minister acknowledged the start of the second wave. On December 14, President Ramaphosa enforced further restrictions in locations with high infections. The curfew was extended to the entire nation (between 11pm and 4 am). To combat the increase in infections driven by the faster-spreading new variant, on December 28 the President tightened restrictions (adjusted Level 3) through January 15, after which the situation will be reviewed.
To devise vaccine strategies, the Ministerial Advisory Committee on COVID-19 Vaccines was introduced in September. On November 3, South Africa’s participation in the World Health Organization’s COVID-19 Global Vaccine Access Facility was announced. South Africa’s vaccine strategy, released on January 3, targets a minimum of 67 percent of the population to achieve herd immunity in three phases by the end of 2021, beginning with the most vulnerable. South Africa has secured vaccines through COVAX for 10 percent of the population and is in the process of procuring for the rest of the targeted population (57 percent of the population).
Since the beginning of the pandemic, net nonresident portfolio outflows (bonds and equities) have amounted to around $ 11 billion (3.8 percent of GDP), the sovereign’s dollar credit spread increased more than 35 percent to 227 basis points, and the rand depreciated by about 2 percent against the US dollar. Following the government’s request, on July 27 the IMF approved emergency assistance under the Rapid Financing Instrument equivalent to US $ 4.3 billion.

Key Policy Responses as of January 7, 2021

Fiscal

The government assisted companies and workers facing distress through the Unemployment Insurance Fund (UIF) and special programs from the Industrial Development Corporation. Additional funds were made available for the health response to COVID-19, workers with an income below a certain threshold received a small tax subsidy for four months, and the most vulnerable families received temporarily higher social grant amounts until end-October 2020. A new temporary COVID-19 grant, created to cover unemployed workers that do not receive grants or UIF benefits, was extended for another 3 months through January 2021. The number of food parcels for distribution was increased. Funds were made 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. An official loan guarantee scheme was introduced to provide bank loans, guaranteed by the government, to eligible businesses to assist them during the pandemic with operational expenses. Allocations were 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 accelerated reimbursements and tax credits, allowing SMEs to defer certain tax liabilities, and 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 was also implemented.

Monetary and macro-financial

The central bank (SARB) reduced the policy rate progressively during the pandemic, by 100 basis points on March 19, another 100 basis points on April 14, 50 basis points on May 21, and 25 basis points to 3.5 percent on July 23. On March 20, the SARB 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 the repo rate and borrow at 200 basis below the repo rate; 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. On April 6, the SARB issued guidance on dividend and cash bonuses distribution to ensure bank capital is preserved. 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 cooperative financial institutions on prudential matters, supervisory activities, and governance and operational issues. On August 3, the SARB announced that macro-prudential policy easing would be extended until further notice. As of August 19, as liquidity conditions normalized, the SARB reverted to standard standing facility borrowing rates (the repo rate less 100 basis points).

Exchange rate and balance of payments

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 also outlined measures for COVID-19 emergency procurement including the specifications of the health essentials and the maximum prices for the personal protective equipment.

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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 eventually. 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.
Reopening of the economy. Lockdown measures were first partially lifted on May 7. More recently, the Council of Ministers instructed the Ministry of Education to reopen schools and higher learning institutions in an announcement made on September 18. International flights and cross-border travel by buses resumed on October 1. Other public health measures including social distancing, handwashing and face covering are still being enforced. Curfews up to 10pm are also in place.

Key Policy Responses as of January 7, 2021

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 the USD7.6 million grant from the World Bank to UNICEF and International Committee of the Red Cross (ICRC), the third-party agencies implementing the grant. The grant was used to purchase items for COVID-19 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 encouraged banks to restructure loans if needed. (Circular No. SDR/S/4/2020).
On November 6, 2020, the BSS increased the Central Bank Rate to 15 percent and the Reserve Requirement Ratio to 20 percent, fully reverting the earlier monetary policy loosening in response to the pandemic.

Exchange rate and balance of payments

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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 a steady decline from April through mid-July, daily new infections were surging again, reaching a peak in mid-November. During the first wave, a state of emergency took effect on March 14, initially for 15 days and then was repeatedly extended until June 21, withrestrictions 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 placefrom May 15 to June 21, with a few exceptions.The spread of the virus and necessary containment measures led to a significant drop in activity in the first half of 2020, followed by a partial rebound in the third quarter.
Reopening of the economy.The first state of emergency was lifted on June 21, allowing for unconstrained mobility across all provinces and reopening of EU borders. Schools reopened for face-to-face teaching at all levels from September, with a series of preventive and hygienic measures in place including mandatory use of masks for 6 years and older. 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. In response to the second wave of outbreaks, a national closure of night clubs and bars was reintroduced on August 14, and restrictions on sports events gathering were reinstated on October 28. Most regions re-imposed localized restrictions on non-essential activities including closure of the hospitality sector and temporary lockdowns. A coordinated action plan was agreed between the government and the autonomous communities on September 30, which include triggers for regional containment measures from October. The government declared a new state of emergency on October 25, initially for 15 days and then extended it until May 9, 2021 with an option of lifting it in four months depending on the epidemiological developments. Developments in recent weeks have been uneven across regions, with some re-imposing confinement measures after the holiday break.

Key Policy Responses as of January 7, 2021

Fiscal

Key measures (about 4.2 percent of GDP, €47 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 (€2.9 billion); additional healthcare related spending including research related to COVID-19 (€160million); 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 (about€19billion depending on the duration);an extraordinary benefit for self-employed workers, including seasonal self-employed, affected by economic activity suspension (about €5¾ billion depending on the duration); 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); introduction of a new means-tested "Minimum Income Scheme" (about €3 billion annually); new rental assistance programs for vulnerable renters and additional state contribution to the State Housing Plan 2018-21 (€800 million); additional budgetary funds of €300 million and further budget flexibility for the provision of assistance to dependents; subsidy for vehicle renewal under the MOVE II program (€250 million); strengthened unemployment protection for workers under permanent discontinuous contracts who cannot resume work but are not qualified for unemployment benefits (€85 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 (€18million); a temporary subsidy for household employees affected by COVID-19 with an amount equal to 70 percent of their contribution base (€3 million); transfer of €25 million to autonomous communities funding meals for children affected by the school closure; extension of the social benefit for energy provision; financial assistance to the education system (€40 million); and other industry and sectoral support measures (€375 million). Further measures include exemptions of social contributions exemptions of social contributions for impacted companies that maintain employment under the ERTE and those that reinstate jobs for ERTE workers (around €6.8 billion depending on the duration); exemption of social contributions for self-employed that receive the extraordinary benefits (about €2.9 billion or more depending on the duration); deferral of social security debts for companies and the self-employed (€533 million); moratoria of social security contributions for the self-employed and companies in selected industries; tax incentives for some landlords that reduce rents of properties used for activities related to the hotel, restaurant and tourism industries (€324 million); tax payment deferrals for small and medium enterprises and self-employed, with the first three/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 (about €200 million); temporary increases in the reduction of taxation by the module system in income tax and VAT (€117 million); reduction in the contribution for employed agricultural workers who have completed a maximum of 55 real days of contribution in 2019; temporary zero VAT rate on purchases of medical material essential to combat the COVID-19, as well as on COVID-19 tests and vaccines(€70 million); reduction in VAT on digital publications from 21 to 4 percent (€5 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—and liquidity provision (€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), (iv) additional loan guarantees for SMEs and self-employed through the Compañía Española de Reafianzamiento (€1 billion, subsequently increased to €1.1 billion), as well as (v) line of guarantees for listed companies (€1 billion). Other measures include additional funding for the ICO credit lines (€10 billion); guarantees for financing operations carried out by the European investment Bank (€2.8 billion); endorsement to the European SURE instrument (€2.3 billion); loans through the State Financial Fund for Tourism Competitiveness (FOCIT) to promote sustainability in the tourism sector (€515 million); 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 or reduction of 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

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Sri Lanka
The spread of COVID-19 was limited to 3380 cases by end-September, but a cluster associated with a garment factory and fish market in early October has caused significant further transmission and more than 40000 additional cases, leading to containment measures in the affected areas. As of late December, there had been net capital outflows of around US$540 million (0.7 percent of GDP) since mid February, mostly from the treasury securities market. The Sri Lankan currency has also depreciated by around 3.8 percent against the US dollar since that time. Sri Lanka’s EMBIG spread has risen to above three times its mid-February level.

Key Policy Responses as of January 7, 2021

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. 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.

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 could not declare dividends, share buy backs or increase payments to directors until end-2020. There has been a debt repayment moratorium, including a moratorium until April 2021 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 was a three-month moratorium on small-value personal banking and leasing loans. The interest rate on credit cards, overdrafts and pawning facilities will be capped. Financial institutions are also requested to reschedule non-performing loans, while capital conservation buffers and loan classification rules have been relaxed.

Exchange rate and balance of payments

The Sri Lankan authorities have introduced measures aimed at restricting capital outflows, through suspension of outward investment payments until July 2021. There are also import restrictions of certain goods, as well as prohibiting commercial banks facilitating imports of vehicles. Outward remittances have been limited, while inward remittances will be exempted from certain regulations and taxes. A scheme has also been introduced to insure investors against foreign exchange risk, by allowing domestic currency proceeds from qualified investments in treasury bonds to be converted at the same exchange rate as prevailed at the time of initial investment. Commercial banks are prohibited from purchasing foreign currency denominated Sri Lanka International Sovereign Bonds (ISBs) until June 2021, unless the transaction is financed by new foreign exchange inflows. 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. The second wave of COVID-19 has hit, with total infections rising. While rejecting re-imposition of a lockdown, the council of ministers approved a reduction in the working days of the staff, various ministries have reduced their workforce by 50 percent, while also allowing pregnant and breast feeding women and those over the age of fifty not to come to work; officials have also encouraged people to take precautionary measures including social distancing, wearing masks, and sterilizing surfaces. Various universities have suspended classes. While the mutated strain has not been detected yet in Sudan, medical officials fear an increase in COVID cases if the strain enters Sudan.
While the economy appears to have bounced back following the COVID-19 lockdown, the second wave brings renewed uncertainty. The economic impact from COVID-19 and nearly 6- months of containment measures included increased price of basic foods, rising unemployment and falling exports, exacerbating the macroeconomic challenges the country was already facing. Fiscal revenues reportedly declined by 46 percent. The negative supply shock combined with continued monetization of the fiscal deficit has led to massive depreciation and inflation (254 percent as of November 2020). The gap between the parallel exchange rate (around 263 SDG/USD) and official rate (55 SDG/USD) persists. The already weak health system in Sudan has also suffered from the loss of lives of medical professionals.

Key Policy Responses as of January 7, 2021

Fiscal

The Prime Minister has denied reports that the government plans to lift subsidies on medicines. He also stated that an agreement has been reached with the Central Bank of Sudan to provide $55 million in foreign currency to support both the local production and the imports of medicines. This announcement followed an announcement of work stoppage by Medics working in the isolation ward of a Hospital in Khartoum, demanding improvement of their working environment and complaining about the lack of medicines, including basic medicines for coronavirus patients
While not directly related COVID-19, the international community also pledged support of US $ 1.8 billion for the authorities’ broader macroeconomic reform agenda during a Partnership Conference held in Berlin, Germany on June 25, 2020. While most of the funds will go to the humanitarian assistance and related projects, a sizable portion will support a 12-month Sudan Family Support program to provide direct cash transfer to 80 percent of the population. The disbursement of these funds has not taken place yet, as the donors are waiting for exchange rate reforms to be implemented.

Monetary and macro-financial

Exchange rate and balance of payments

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Suriname
Background. Suriname had a second surge of COVID cases having eradicated the disease but got the spread under control and the number of active cases is declining As of December 17, there have been 5401 cases, 117 deaths, and 1111 persons in quarantine. Despite this, the past week in Suriname has seen an uptick and lockdown measures continue. These include: a ban on entertainment, gatherings limited to 20 or fewer people, curfew from 9pm to 5am; controls on the border with French Guiana will be tightened, funerals and religious gatherings are allowed only if following capacity guidelines, outdoor recreation may take place without referees or spectators and contact sports are not allowed, public transport must follow protocols with reduced capacity, restaurants may only open for takeout or delivery or outdoor dining. International flights are have resumed in a very limited way under strict protocols. Domestic flights of persons and goods are allowed under strict guidelines and protocols 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 January 7, 2021

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 was in force for 3 months and was extended for another 3 months. The Act supersedes all prior law and consisted of the following measures: provided 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

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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 January 7, 2021
Fiscal

Based on the authorities’ estimates, the announced and implemented fiscal measures for 2020 including capital injections, liquidity support and guarantees amount to SEK 803 billion (16.0 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 257 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 (extended until December 31, 2020), guarantees to the EU for loans to member states, SURE, and to the European Investment Bank for a guarantee fund to support companies (in total SEK 250 billion). To support the international response, Sweden will contribute SEK 40 million to the WHO’s Contingency Fund for Emergencies. In September, authorities approved additional support to municipalities to cover COVID-19-related costs (SEK 5.5. billion in 2020) and to sole traders (SEK 3.5 billion in 2020 and SEK 1.5 billion in 2021).
For 2021 and 2022, the Government proposed extensive fiscal stimulus measures and reforms worth SEK 105 billion and SEK 85 billion (2.1 and 1.7 percent of 2019 GDP, respectively).
On November 9, the Government proposed the extension of short-term lay-offs by seven months (until June 30, 2021), reorientation support and turnover-based support to sole traders by three months (until October 2020), and tax deferrals by one year (until March 2022).
On December 10, the Government proposed to extend the state credit guarantee program for loans to companies until June 30, 2021.

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 and subsequently to 0.1 percent(while leaving the repo rate unchanged at 0 percent); (ii) lending of up to SEK 500 billion to companies via banks (Funding for lending); (iii) introduction of a new lending facility whereby monetary policy counterparties can borrow unlimited amounts (given adequate collateral) with a maturity of 3 and 6 months at an interest rate corresponding to the Riksbank's repo rate; (iv) increase of purchases of securities of up to SEK 700billion 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 (extended until March 31, 2021); (vii) easing rules for the use of covered bonds as collateral; and (viii) temporarily recognizing that all credit institutions under the supervision of the Swedish FSA can apply to become temporary monetary policy counterparties, and given that they are accepted as a temporary monetary policy counterparty, enabling them to access the new Funding for 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). This includes the requirement to replace unsecured bonds with subordinated bonds. Furthermore, the Swedish FSA has urged supervised banks and credit institutions to refrain from paying dividends. On December 18, the FSA issued a recommendation to banks and credit institutions to be restrictive with dividends and share buybacks until September 30, 2021 (total dividends and buybacks should not exceed 25 percent of aggregate net earnings for 2019-2020).

Exchange rate and balance of payments

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Switzerland
Background. Switzerland was one of the countries in Europe hit early and hard by COVID-19. The first confirmed case of COVID-19 was reported on February 24. 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 borders, with entry restrictions in place for citizens of both Schengen and non-Schengen countries. The number of active and new cases decreased sharply from mid/late April, but has been on a rise since mid-June with greater mobility and more testing (particularly in some cantons). 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 1.7 and 7.0 percent quarter-on-quarter in 2020Q1 and Q2, respectively, but grew by 7.2 percent quarter-on-quarter in Q3.
Reopening the economy. From mid-April, the authorities followed a well-articulated 3-phase plan to gradually reopen the economy, making adjustments depending on developments. As noted in the “second wave” section below, many eased restrictions have been restored since mid-October. Previously, 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. 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 it 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 from June 22, and events with with 1,000+ people resumed from October 1 (but were prohibited again shortly after due to the second wave). Border restrictions were 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. 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 on all flights taking off or landing in Switzerland from August 15. Some cantons reintroduced additional restrictions, such as limiting public events to 100 people. On September 18, Switzerland confirmed its participation in the COVID-19 Vaccine Global Access Facility (COVAX) initiative, a procurement mechanism joined by countries around the world to ensure a fair distribution of COVID-19 vaccines globally.
Second wave.The number of new cases started to surge again in mid-September. By mid-October, the daily infections had reached a level well above Spring 2020 highs. On October 19, the FC re-introducedseveral containment measures, including mandatory mask requirement for all publicly accessible indoor spaces and public transport areas, restrictions on public gatherings, and reactivation of working-from-home recommendations. On October 28, the FC took further measures to counter the rapid spread of the coronavirus, including: (i) expanding mask requirement and introducing rapid COVID-19 tests; (ii)closing discos and dance halls, (iii) requiring bars and restaurants to close at 11 p.m.; (iv) prohibiting all publicevents with more than 50 people as well as sporting and cultural leisure activities with more than 15 people; and (v) requiring universities to switch to distance learning from November 2nd.The FCdecided to use the army again to support the health system on November 4, and announced a second civil protection mandate on November 18.On November 18, the FC also amended the ordinance on proximity tracing, to further facilitate COVID-19 contact tracing through the SwissCovid app. Some cantons once again imposed tighter restrictions. Notably, Geneva and Juradeclared cantonal state of emergencies with additional measures coming into force on November 2, as intensive care hospital beds in these regions filled up with COVID-19 patients. As the number of new infection cases remained high, and hospitals were approaching their capacity, the FC announced tighter restrictions on December 11, including: (a) 7:00 pm and Sunday closure for places such as museums, libraries, shops, and markets, and 7:00 pm closure for restaurants and bars, with exceptions for cantons with an improved epidemiological situation; (b) a ban on public events, with exceptions for small religious services and funerals; (c) a recommendation of a two-household limit for private gatherings; and (d) a limit of 5 people for sports and culture group activities.. With daily new infections remaining at an elevated level, the FC tightened restrictions again on December 18, closing restaurants as well as cultural, leisure and sports facilities. On December 21, to contain the spread of the new variant of the virus from the UK and South Africa, the FC introduced entry ban and retroactive quarantine for people from the two countries. On January 6, the FC decided to remove the exception rule for tightened restrictions previously allowed for cantons with improved Covid-19 situations. At the same meeting, it also proposed to extend the effective period of current restrictions by five weeks to the end of February, and announced consultation with cantons on possibilities of even tighter measures. The vaccination process has gotten off to relatively a slow start, but is expected to pick up going forward.

Key Policy Responses as of January 7, 2021

FISCAL (FEDERAL LEVEL)

During the first wave of the pandemic, the FC announced a series of federal-level support packages amounting to CHF73 billion (10.4 percent of 2019 GDP). 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. The take-up of bridge loans under the federal guarantee program, which expired on July 31 (the program for startups will expire at the end of August), and assistance to self-employed, which was originally scheduled to expire on September 16, had been lower than budgeted.
In the reopening phase, the focus of the government has shifted from providing an 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, including, for instance, preparing the COVID-19 Act. so that some ordinances issued during the national emergency do not automatically expire after six months. 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. On August 12, the government announced a new set of fiscal measures , including CHF400 million financial support to air traffic control company Skyguide in 2020-21. On August 26, the FC decided to extend the legal standstill for travel agencies and the simplified regulation for unemployment insurance to the end of 2020.
As more restrictions on economic activities are put in place to contain the second wave of the pandemic, the government continues its efforts to support the economy, by extending and/or expanding measures already in place and with a focus on helping groups and sectors that are suffering prolonged negative impact from the crisis. On October 14, the FC announced an extension of the support to the cultural sector to the end of 2021. On November 4, the FC issued guidelines for government loans to support professional and semi-professional sport clubs. In addition, the FC also extended the short-time work scheme coverage for employees on demand and the compensation of income losses for SE, both to June 31, 2021. In a “package” announced on November 11, the FC increased credit for procurement of COVID-19 vaccine, renewed measures in the area of occupational benefits, extended transitional supports to the media, and launched a stimulus program, “Innovation Switzerland”, aimed at helping companies to maintain their innovative strength during the pandemic. On November 18, the FC announced proposals for additional COVID-19 support measures, including joint hardship support programs with cantons, wider coverage of the short-time work scheme, and grants for professional and semi-professional sport clubs. On November 25, the FC announced the adoption of the COVID-19 Hardship Assistance Ordinance, a joint effort with cantonal governments to support viable firms that suffered severe losses from the COVID-19 pandemic. On December 11, the FCmade a request to the Parliament for more flexibility regarding theeligibility to receive the hardship support, and proposed to expand the total size of this program from CHF1 billion to CHF2.5 billion. On December 18, the FC: (i) further adjusted the hardship ordinance, lowering the turnover threshold for support from CHF100,000 to CHF50,000, allowing qualifying companies to receive double subsidies, while imposing a tighter ban of dividends; (ii) reduced the income loss requirement for self-employed persons to receive compensations; (iii) increased the support for the cultural sector; and (iv) further loosened, or extended the already-loosened,regulations on the short-time work program.

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 and to once a week from September 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-August, 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 and bought an equivalent to CHF 90 billion in H1 2020. Sight deposits held at the SNB have increased by around CHF114 billion (or 15.7 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 September 23, 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 in April and 100 basis points in August to 10.75 percent. 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 7percent in August. 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 46 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

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Tanzania
Background. The first confirmed cases was reported on March 17, 2020. Since early May, the authorities stopped reporting 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 January 7, 2021

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

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Thailand
Background.The first confirmed COVID-19 case was reported on January 13, 2020. Daily new COVID-19 cases have been in double digits lately. A state of emergency,instituted on March 26, has been extended to mid-January. International flights transporting COVID-19 passengers are banned from transiting through Thailand and the government has stepped up border surveillance to stem the import of COVID-19 cases from neighboring countries.
Reopening of the economy.Phase 6 of the reopening began on August 1 allowing entry to certain non-Thai visitors, including: medical tourists, filming crews, Thailand Elite card members, foreigners who have work permits, foreigners married to Thai nationals and foreigners studying at educational institutions. The mandatory 14-day quarantine does not apply to diplomats, but they must get tested at the airport. More than 100,000 migrant workers from nearby Myanmar, Cambodia and Laos have been allowed entry starting on August 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 special tourist visa(STV) for leisure travelers began on October 20 allowing touriststo stay in Thailand for up to 90 days,with two further extensions of 90 days each.The first group of 33 Chinese tourists from Shanghai, completed a mandatory 14-day quarantine and testing regime at a hotel in Bangkokbefore touring the country.On December 8, Thailand eased travel restrictions for citizens from 56 countries. Citizens from these countries couldapply for anormal 30-day visa, which would be extended to 45 days. In addition, the government amended the Special Tourist Visato allow travelers from all countries to apply for it.All tourists should have a negative test result within 72 hours of their arrival,go through a second test once they land, and stay in acompulsory quarantine of 14 days on arrival.If any visitors test positive, they should be quarantined for 14 days in a state hospital.

Key Policy Responses as of January 7, 2021

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. The Cabinet has extended several soft-loan schemes, including those targeted for micro firms engaged in tourism activities and supply chains, until June 30, 2021. 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. From July 15 until end-October, there was 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. In addition, on September 22 the government passed a new shopping subsidy package for welfare cardholders worth THB 51 billion, financed by the government’s additional borrowing. The government complemented this on October 8 with income tax deductions (to rebate VAT) on products worth THB 30,000 per person running from October 23 to December 31, to help boost spending on goods and services. The Cabinet reinstated an early tax cut on jet fuel from THB 4.726 per liter to THB 0.20, which had lapsed at the end of September, until April 30, 2021. The FY 2021 Budget bill (THB 3.2 trillion) was approved effective October 1, the first day of the fiscal year.

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 that expired on October 22; and suspension of principal and reduction of interest on the debts to SFIs. With the expiry of the payment holiday, the BOT has extended its standstill for commercial banks on updating their asset classifications and provisioning to the end of the year, to give additional time for any necessary debt restructuring with SME clients.
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 billionby December 31, 2021to high-quality firms with bonds maturing during 2021, at higher-than-market ‘penalty’ rates; (ii) BOT purchase ofgovernment bonds to ensure the normal functioning of the government bond market (THB 100 billion in March 2020); (iii) reduction in BOT bond issuances; and (iv) a special facility to provide liquidity for mutual funds through banks.On November 12, the BOT lifted restrictions on dividends payouts by financial institutions, which was imposed in June 2020. However, the distribution of dividends should not exceed the last years payout ratio and half of this year's net profit.

Exchange rate and balance of payments

Vaccine Plans

Thailand recently signed a 6 billion baht deal to buy 26 million doses of the AstraZeneca and Oxford University vaccine, enough for 13 million people (about 20 percent of the population). Vaccinations will begin in May 2021. A local company, Siam Bioscience is lined up to receive technology developed by Oxford University and AstraZeneca and produce the vaccine locally. Siam Bioscience will have the capacity to produce 180 million to 200 million doses per year, enough to distribute throughout Southeast Asia.

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TIMOR-LESTE
Background.The Democratic Republic of Timor-Leste extended the state of emergency until February 1, 2021. It covers the entire national territory and entails restrictions on the entry of people by land, sea or air to prevent the spread of the virus. Citizens should maintain social distance, wear a face mask in places of collective use, and wash their hands when entering public buildings. Gatherings of more than ten people are prohibited. Although domestic economic activity is not restricted, citizens are recommended to limit their outings to the minimum necessary. There have been as of January 7 a total of 49 confirmed cases of COVID-19. It is one of the few countries to have a COVID-19 death toll of zero.

Key Policy Responses as of January 7, 2021

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. On September 23, the government decided to distribute cash transfers for basic staple foods to eligible households, worth US $ 25 per month per household, lasting for 2 months (November and December).

Monetary and macro-financial

On April 29, 2020, 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

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Togo
Background. The first confirmed COVID-19 case was reported on March 7, 2020. 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. The number of active COVID-19 cases has declined significantly in recent weeks and the total number of cases per habitant is less than the WAEMU average. The health and containment measures, which are the most stringent in the region, include the following: (i) all travelers entering Lomé airport are required to present a negative test result from a COVID-19 PCR test taken no more than five days before boarding their flights and either install a contract tracing mobile application or remain in quarantine in a state-provided containment facility for at least 14 days; (ii) gatherings of more than 100 people are banned; and (iii) schools remain closed. Furthermore, all sport or cultural events have been adjourned. In response to the worrying situation in the central region, the government ordered the closure of the towns of Sokodé, Tchamba and Adjengré and instituted a curfew in the prefectures of Tchaoudjo, Sotouboua and Tchamba as of August 25, 2020.
Reopening of the economy. The curfew affecting Lomé and its surroundings waslifted on June 9. The airport in Loméreopened for international air traffic on August 1, 2020 and the closure of land borders and airspace for flights from high-infection countries has been lifted.Churches and mosques in all areas except the Greater Lomé (the epicenter of the epidemic)were authorized to reopen in late October.

Key Policy Responses as of January 7, 2021

Fiscal

The National Assembly hasextended the state of health emergency until March 2021, and during this period the Government remains authorized to rule by decrees 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: The state of health emergency declared on April 1 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. Budget allocation of about 1 percent of GDP in 2020.
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. The Government did also subsidize water and electricity use for groups paying social tariffs for three months. Budget allocation 0.4 percent of GDP in 2020.
Economic recovery: The Government adopted a series of tax policy and administrative measures to prepare the country for the future economic recovery, including: (i) all procedures for forced tax collections and ongoing tax prosecutions remain suspended during the state of emergency; (ii) the standard VAT rate of 18 percent was reduced to 10 percent for firms in the hospitality and catering sectors; and (iii) tax audits and penalties for the late payment of taxes due in the second quarter of 2020 were suspended. In addition, submission deadlines for businesses that cannot submit their tax declarations on time were rescheduled and small- and medium-sized enterprises are allowed to pay taxes in tranches and enjoy more flexibility regarding outstanding taxes due. Small-scale farmers received vouchers for the purchase of inputs.
Financing for the response is severely constrained. Revenue collections are estimated to have been about CFAF 90 billion (2.1 percent of GDP) less than projected in the original budget. The decline is attributed to both slower economic growth and tax measures in response to the pandemic. The overall fiscal deficit is estimated at about 6 percent of GDP in 2020. To meet these needs, the Government 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. As of December 15, 2020, the national solidarity fund had mobilized an amount of about 4.1 percent of GDP. The IMF provided significant financing, approving an ECF disbursement (with an augmented quota) of US $ 131 million (1.9 percent of GDP) in 2020. The World Bank provided budget support of US $ 70 million (1.0 percent of GDP) and project support for Covid-19 measures equivalent of about 0.5 percent of GDP. Other sources of donor financing include the West African Development Bank (BOAD), the European Investment Bank (EIB), and the African Development Bank (ADB).
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 up to end-2020 debt service falling due, without the need to classify such postponed claims as non performing; and (iii) measures to promote the use of electronic payments. In addition, the BCEAO launched a special 3-month refinancing window at a fixed rate of 2.5 percent for limited amounts of 3-month "COVID-19 T-Bills" to be issued by each WAEMU sovereign to help meet immediate funding needs related to the current pandemic. The amount of such special T-Bills initially issued by Togo was the equivalent of 3.2 percent of GDP, with some rollover possibility through similar bonds benefitting from a refinancing rate equivalent to the prevailing monetary policy rate but all to be paid back by end-2020. In June 2020, the West African Development Bank (BOAD) decided to create a CFAF 100 billion window for extending 5 to 7 year refinancing of banks' credit to SMEs in the 8 WAEMU member countries. In addition, 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. In December 2020, the BCEAO instructed WAEMU banks to refrain from distributing dividends with a view to strengthening their capital buffers in anticipation of the impact of the Covid crisis on asset quality.

Exchange rate and balance of payments

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Tonga
Background. To date, 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 introduced restrictive containment measures starting in 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 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 have been extended until January 18 and the border closure until further notice.

Key Policy Responses as of January 7, 2021

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. It placed monetary policy, which was accommodative given low inflation and slow economic recovery, on hold. The NRBT started 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. At end-August, the NRBT announced that its monetary and financial sector policy stance will continue unchanged, given the weak economy.

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 have risen to 9.9 months of imports (590.2 million pa’anga) by end-November 2020 – due to inflows of remittances and 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 since August the contagion rate has increased substantially. The government had adopted containment measures, including border closures, travel restrictions, school and university closures, and limits on social gatherings. From November 15, citizens returning home are required to provide a negative COVID-19 test and enter a mandatory 7-day quarantine in a state or state-supervised facility, followed by 7 days home quarantine; on December 21 the mandatory quarantine for visitors from the United Kingdom was extended to 14 days, to prevent spread of a new coronavirus variant. Non-nationals are still not permitted to enter Trinidad and Tobago with limited exceptions.
Reopening the economy. The government had put in place a reopening plan in phases starting May 10, and most economic activities had resumed by end-June. On October 11, the government announced a minor relaxation in some of the measures aimed at curbing the second wave of the COVID-19 pandemic, but churches, restaurants and bars would remain closed. These measures were subsequently relaxed, with places of worship, gyms, casinos, and cinemas to reopen at 50 percent capacity. Public transport is operating at 50 percent capacity. The country’s borders will remain closed until further notice. Travel between Trinidad and Tobago is restricted to essential reasons with a reduced inter-island service.

Key Policy Responses as of January 7, 2021
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 would receive additional funding to deal with COVID-19, including spending on medical equipment and supplies, human resources, and infrastructure. On October 5, the Ministry of Finance announced an extension to December 2020 of salary relief and income support grants for workers in the creative and cultural industries.

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 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 reduced interest rates and increased credit limits.

Exchange rate and balance of payments

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Tunisia
Background. Tunisia reported its first confirmed case on March 2, 2020. Thanks to proactive actions from the Tunisian authorities in taking the necessary sanitary steps, declaring a national state of emergency, and adopting confinement measures, the pandemic has remained contained, with a low number of daily contamination cases mostly coming from abroad. Tunisia began on June 4, 2020 a strategy of deconfinement and the reopening of borders was effective on June 27, 2020. The COVID-19 shock came at a time when Tunisia was 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-phased plan depending on the activity sector. The first phase started on May 4 and concerned the most affected sectors–individuals and craftsmen, manufacturers especially export firms, with the obligation of adopting sanitary measures. The second phase began on May 24 and concerned supermarkets, cafés, and other individuals for which the social distancing would be hard to establish. The third phase of full deconfinement started on June 4. During the transition period, only 50 percent of the public sector got back to business. On June 27 Tunisia started easing international travel restrictions and opening frontiers progressively, classifying countries in three lists according to the pandemic risk and applying different measures for each list.
On August 21st, the government has decided to make mandatory the wearing of masks in administrations and most public and commercial places following the reopening of the borders which led to a further increase in the number of new cases in Tunisia.
Tunisia is facing a second wave of the COVID-19 propagation, with an exponential increase of new cases, as well as deaths. Accordingly, the new government announced a series of measures, including (1) prohibition of gathering of groups in public/private places (e.g., sports, culture); (2) mandatory mask wearing in public (e.g., transport, workplace); (3) cohort work arrangement and reduced hours for government personnel; (4) targeted confinement or curfew; and (5) increasing the number of treatment beds to 1,200 by end-October.

Key Policy Responses as of January 7, 2021

Fiscal

A TND 2.5 billion emergency plan ($0.71 billion or 1.8 percent of GDP) was announced on March 21. The package includes delays in the payment of CIT and other taxes and social contributions; VAT exemptions; the acceleration of VAT refund procedures; the rescheduling taxes and custom arrears; and liquidity easing measures for the private sector, in order to limit layoffs and protect the most vulnerable, especially in the informal sector. The plan also includes an expansion of the budget allocation for health expenses and the creation of a TND 100 million fund for public hospitals to purchase equipment. On the social side, the package included cash transfers for low-income households and for disabled and homeless people (TND 450 million for three months). The plan also includes a support for temporary unemployed because of the COVID-19 shock (TND 300 million).

Monetary and macro-financial

The CBT reduced its policy rate in March by 100 bps. On March 20, the CBT announced a package to support the private sector, requesting banks to defer payments on existing loans and suspend any fees for electronic payments and withdrawals. The central bank asked banks to postpone credit reimbursement by employees for a period of 3 to 6 months, depending on the net revenue level. Besides, the government announced a set of financial measures including the creation of investment funds (TND 600 million), a state guarantee for new credits (TND 1,500 million), the activation of a mechanism for the state to cover the difference between the policy rate and the effective interest rate on investment loans (capped at 3 percentage points).
On October 5, 2020, The CBT decided an additional 50 bps cut in the policy rate. Furthermore, The CBT has also decided to extend the deferral of loan repayments for the tourism sector hardly hit by the crisis to September 2021.
On October 29, the parliament approved a derogation of the article 25 of the CBT statutes, by allowing a direct monetary financing plan from the CBT to the government budget. The agreement stipulates an interest-free facility, for a maturity up to 5 years, of which one year’s grace.

Exchange rate and balance of payments

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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. GDP contracted by 9.9% y-o-y in Q2, but then rebounded in Q3 by 6.7% y-o-y.
Reopening of the economy.On May 4, the government announced a phased approach to lifting lockdown measures. This included the reopening of retail stores, the removal of travel restrictions between major cities, the reopening of restaurants, cafes, sporting facilities and government institutions, and the resumption of domestic flights. On June 10, further reopening measures were announced, including the phased resumption of international flights and the reopening of most land borders. Schools restarted in end-August, mostly on a virtual basis until the end of the year.
Following the onset of the second wave of infections, containment measures were reintroduced from September onwards (e.g.the mandatory wearing of masks in public areas), before being tightened further in November, including: age-based stay-at-home orders, weekend curfews, restaurant and cafe closures (except for pick-up), closures of some entertainment venues e.g. cinemas, along with restricted opening hours for retail establishments; and again in December, including: extension of curfews, closing pre-schools and restricting gatherings. In December, the government temporarily suspended flights from the UK, Denmark, the Netherlands and South Africa due to new fast-spreading coronavirus strain.

Key Policy Responses as of January 7, 2021
Fiscal

As of early-October, the authorities estimate that the entire discretionary fiscal support package will amount to TL573.7 billion (12.8 percent of GDP) in 2020. Of this, around TL123 billion (2.7 percent of GDP) is in the form of ’on-budget’ measures. Key fiscal measures include – i) loan guarantees to firms and households (6.8 percent of GDP); ii) loan service deferrals by state-owned banks (1.5 percent of GDP); iii) tax deferrals for businesses (1.5 percent of GDP; iv) equity injections into public banks (0.5 percent of GDP); and, v) a short-term work scheme (0.4 percent of GDP), which was reopened in December and extended into February 2021. In addition, VAT has been reduced on certain goods (e.g. food and accommodation services) until May 2021. Finally, a nationwide ban on employee layoffs is in force until January 2021. The government announced a new subsidy scheme of TL 5 billion for tradesmen that will include TL 3.7 billion of monthly grants and TL 1.3 billion of monthly rent subsidy over 2021.

Monetary and macro-financial

In response to the coronavirus shock, the policy rate was cut by 300bps; these cuts were subsequently reversed, and the policy rate now stands at 17 percent. Furthermore, on March 31 , the CBRT introduced a program of outright purchases of sovereign bonds, and has substantially increased its liquidity facilities to banks.
The bank regulator announced a number of forbearance measures, primarily to limit the accounting impact of the Turkish Lira depreciation and fall in securities’ prices. In addition, 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. The regulator implemented a new regulatory ratio to incentivize banks to support the real economy, which was removed in November. In December, the bank regulator tightened the maximum tenure of retail auto loans and credit card instalment plans for purchases of certain types of goods.

Other macro-financial measures include – i) debt enforcement and bankruptcy proceedings (except in alimony cases) were suspended up to June; ii) firms’ dividend payments have been limited to 25 percent of 2019 profits; iii) a new Turkish Lira lending facility for SMEs in the export sector was established to support trade finance.

Exchange rate and balance of payments

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.

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Turkmenistan
Background. According to official media, there have been no diagnosed cases of COVID-19 as of September 22, 2020. However, Petronas, the Malaysian oil and gas company, closed its office in Ashgabat on July 29, after 10 of its employees had tested positive for the coronavirus. In January 2020, the Extraordinary Commission on combatting the spread of disease was set up.
In consultation with the WHO, the authorities issued guidelines for preventing the spread of COVID-19 in March 2020. 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 until April 6. Restrictions were imposed over the summer season on holding cultural events in the National tourist zone Avaza, as well as swimming in the coastal zone of the Caspian. On July 16, a number of public health care measures were taken, including mandating mask wearing in public places and providing mobile health care services to remote and rural areas.
As of September 7, the government has introduced a new legislation for those who avoid treatment for conditions "recognized as dangerous or infectious diseases of an epidemic or pandemic nature" now face jail terms of two to five years
In addition, the government built quarantine control rooms for 80 places at the border checkpoints while also constructing disinfection facilities.
The production of masks, protective equipment and disinfectants is incentivized. Besides, a new hospital with a variety of medical services is being constructed.
Turkmenistan has extended until 1 January 2021 temporary restrictions on crossing Turkmenistan's state borders as well as restrictions on international air, sea, rail and road communications. Turkmenistan also extended until 1 December 2020 restrictions on holding mass events related to religious ceremonies.
The authorities stepped up efforts to digitalize government services, expand e-commerce, and facilitate online and phone payments by SMEs and SOEs through banks.
Turkmenistan is working with UN agencies to develop a third national plan that covers the humanitarian component of the country's measures to combat COVID-19.
On December 30, 2020, restrictions on domestic and international travel were extended until at least January 31, 2021.

On December 30, 2020, a requirement was introduced that all outbound travelers have a signed negative COVID-19 test result within the previous 24 hours.

Key Policy Responses as of January 7 2021

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.
The government announced that the bonus salary of 20, 15, and 10 percent will be given to healthcare professionals working in the remote rural facilities, frontline facilities, and other rural facilities, respectively.
The authorities raised excises on both tobacco and alcohol products with varying rates based on the origin and type of product.

Monetary and macro-financial

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. Resources in the fund will be used for essential imports of food and materials for priority projects.

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Tuvalu
Background. As of January 7, 2021, Tuvalu has no reported cases of COVID-19 within its borders. Tuvalu has established a COVID-19 National Health 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 months on March 26, 2020. The government has subsequently imposed restrictions on any aircraft and vessels traveling to the country. The government further announced on April 13, 2020 that it is intending to repatriate all Tuvaluan students studying overseas. Financial and economic support have been included the first supplementary budget to provide employment opportunities, promote local production of food in the agriculture sector, improve financing to the private sector in rural areas and maintain welfare.
The Government encourage those who are unemployed, living on the capital and are not residents of the capital, to temporary migrate to their home island with the Government to finance their boat fares. This is to ease pressure on key Government services on the capital such as water and medical services and to minimize the risk of spreading any communicable disease.

Key Policy Responses as of January 7, 2021

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 exposed by citizens 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.
Out of the total $18.9 million under the first supplementary budget for 2020 that was approved by Parliament on March 24, 2020, a total amount A$10.5 million (17.8% of GDP) was for COVID-19 response. Out of this, A$5.7 million was allocated to the Ministry of Health and Social Welfare for the procurement of personal protection equipment, ventilators, COVID-19 testing equipment and other essential specialize equipment in response to the COVID-19. By end-November 2020, total COVID-19 related expenditure was A$6.77 million (about 10% of GDP) of which health-related expenditure was A$1.88 million. This was used for largely for purchasing medical equipment, as well as enhancing readiness of the health system and renovating peripheral clinics.
Another $4.9 million was allocated for other expenses including the relocation to outer islands, repatriation of Tuvalu students studying abroad, maintenance of relevant infrastructures for quarantine purposes, maintenance of schools, improving broadband for internet connectivity, additional police personnel and a grant to assist the private sector.
An amount of $300,000 was allocated under the Ministry of Finance for a grant to assist the private sector in response to the effects of the COVID-19. This grant is provided to the Development Bank of Tuvalu.
In addition, an amount of A$670 thousand was allocated to finance other relevant COVID-19 measures across the Government including risk allowances and civil servant allowances.

Monetary and macro-financial

Exchange rate and balance of payments

U
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Uganda
Background. Corona virus positivity rates have increased since the easing of most of the lockdown measures. Community infections are on the rise, but the death rate has remained low. The increasing number of cases have somewhat strained hospital capacity though the authorities have identified additional space for patient management.The authorities have recruited additional staff/ volunteers to assist with the management of the pandemic. Funding for scaling up of testing continues to be 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. Schools have reopened for candidate classes, universities and other tertiary institutions for all final year students. International commercial flights resumed on October 1. Political rallies, processions, and weddings may gather up to 200 people since Nov. 14 while mobile markets and gaming outlets may operate for 30 minutes a day.
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 January 7, 2021

Fiscal

In FY19/20, two supplementary budgets increased the spending envelope for critical sectors and vulnerable groups by about US $ 270 million (0.7 percent of GDP), of which around US $ 110 million (0.3 percent of GDP) is estimated to have been executed. In addition, tax measures in response to COVID-19 contributed to the revenue shortfall by close to US $ 70 million (0.2 percent of GDP). In FY20/21, a supplementary budget increased the COVID-19-related spending by around US $ 310 million (0.8 percent of GDP), partly driven by the delayed execution of some measures originally planned for FY19/20. Among others, the fiscal support has included the following measures:
i. accelerating import substitution and export promotion by providing additional funding to the Uganda Development Bank, recapitalizing the Uganda Development Cooperation 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 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.

Initially, the authorities have used US $ 1.3 million from their Contingency Fund in the FY2019/20 budget to finance the Ministry of Health Preparedness and Response Plan. On May 6, 2020, Uganda secured US $ 491.5 million in emergency financing from the IMF under the Rapid Credit Facility, of which 30 percent was provided as budget support considering the impact of COVID-19. Finally, on June 29, 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) maintained its policy rate at 7 percent in August 2020, following two consecutive 100 basis points reduction in April and June. The BoU remains committed to providing liquidity support to for a period of up to one year to supervised financial institutions in need and putting in place a mechanism to minimize the likelihood of 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 was devoted to boosting international reserves and thus preserving macroeconomic stability (see Fiscal section). 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 banned export of certain medical essentials, such as facial masks, personal protective equipment and ethyl alcohol, as well as some essential food stuffs, but these bans are no longer in force.
Reopening the economy. The government has extended the quarantine until February 28, 2021.While part of the restrictive measures has been softened starting May 11, the recent increase in the number of cases led authorities to consider imposing a lockdown in for the period between January 8-24 2021.
Ukraine has opened up from the spring lockdown gradually.On May 11 beauty salons, most shops, museums, and outdoor terraces in restaurants were allowed to reopen, provided that certain sanitary norms were observed. Subways in large cities were opened on May 25. 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 cafesare 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). Restaurants, bars and entertainment facilities are banned from hosting clients from 11pm to 7 am. A ban on night clubs, entertainment centers, and most concerts was reintroduced on August 26.Schools and daycare are open but students have shifted to distance learning if there are infections among students or teachers.
The authorities introduced a week-end quarantine, with a curfew on shops, sit-in restaurants and entertainment. The measure was in place from November 14 to November 30. The government has announced that stricter rules on hosting people in cultural institutions and conducting religious events and events inside public spaces will apply from December 19. In addition, on December 17 the Ukrainian parliament voted that enterprises, entrepreneurs, institutions, organizations will be liable for violations of sanitary legislation for admitting people without masks and respirators to public transport and premises during the quarantine period.
Starting end-October, Cabinet has switched its meetings to an online format.
https://covid19.com.ua/

Key Policy Responses as of January 7, 2021
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. Payments for the lease of state property have been either waived altogether in case of essential services for the time of quarantine, or have been halved or set at 25 percent, depending on the use of property.
Parliament has adopted legislation increasing the thresholds for the simplified taxation regime. A holiday was introduced for small and medium sized companies 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 atop-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(incorporating seniors 75+ with a UAH 400 top up starting next July). 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. For the purpose of 2020 fiscal year only, the government has created a 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. As of end-year, UAH 66.5 billion out of UAH 80.9 billion of appropriated funds were spent, or 82 percent. The Accounting Chamber has been 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://www.mof.gov.ua/uk/data_and_analytics-433
In parallel, as of early December, local budgets spent UAH 4.4 billion on the purchase of COVID-related equipment and services, and the National Health Service disbursed UAH 10.6 billion to finance top-ups to health care personnel treating patients with COVID.
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. Overall, 236health care professionals have fallen victim of COVID-19 while some 23,626 have been infected.
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 the end of December 2020, 7,575 loans were extended under the program worth UAH 17.4 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 subsidiesprogram 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 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. Overall, UAH 10.7 billion has been disbursed to fund unemployment and furlough benefits as of the end of 2020.
At the beginning of the quarantine in March, 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. Subsequently, there have been no reports of transgressions of this regulation.
In preparing for the January 2021 lockdown, the legislature supported a set of measures to prop up small businesses. If certain conditions are met (e.g a history of contribution to the pension system is in place), eligible entrepreneurs can count on UAH 8,000 in a one-off state aid and a single tax holidays through December 2020-May 2021. Employers affected by a lockdown can be reimbursed from the budget the amount equal to an average monthly payment of the social security which they have been making on behalf of their employees in the 10 months of 2020. Also, tax debts (up to UAH 3,030) are written off. Penalties charged on overdue taxes are forgiven if the principle is paid. While the results of this program are being evaluated, flash data indicate that around 40 percent of expected applicants among self-employed entrepreneurs used their right to access the government’s aid of UAH 8,000.

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 end of 2020 (initially October), ensuring that financial institutions have an additional margin of safety. The waiver (until June 2021) on breaches of regulatory requirements (on capital, liquidity, credit risk requirements and limitations on operations related to subordinated debt investor parties) caused by the COVID lockdown will not be applicable to those banks that will not follow such advice. The waiver does not exempt from sanctions foreseen in Law (problematic status and insolvency).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 1 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 (No351), 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).
Given the increased consumer lending and the current experience with an increase in NPLs during the Corona-crisis, in September the NBU repeatedly pre-announced plans to increase risks weights on consumer lending from 100 percent up to 150 percent starting in the second half of 2021. At the same time, the NBU is planning to simplify the rules for assessing the credit risk on specialized lending, allowing the assessment of clients on a group basis.
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, later extended until March 1, 2021). Business recovery plans can be based on one (the most severe) stress-test only. Systemic banks were allowed to postpone the submission of their business recovery plans by two months (to December 1, 2020). Business recovery plans do not need to include a list of critical functions, the termination of which may threaten financial stability or may significantly negatively affect the economy. 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 cancelled the fee for SEP’s services related to payments of state aid to businesses and individuals linked to the quarantine (lockdown).
The National Bank of Ukraine (NBU) has approved a set of anti-crisis measures to support banks and the economy, when tougher restrictive measures are introduced, including a stricter quarantine regime (from January 8 to 24 2021).
1.Banks are recommended to restructure loans of borrowers facing financial difficulties from restrictive measures and who are unable to repay their loans. Banks are permitted to apply some default triggers to loans that will be restructured:

Restructuring should mitigate the impact of the crisis on the financial standing of borrowers. It should also prevent risks of banks’ capital loss. Restructuring should neither impair conditions for borrowers nor increase the effective interest rate. Banks should not charge a commission for restructuring.

Restructuring is recommended to be done remotely. To become eligible for restructuring corporate borrowers should confirm the reduction of income or cessation of operation. For medium and big businesses, banks should apply an individual restructuring approach considering financial statements and business recovery prospects. For individuals, banks should apply portfolio-based assessment (save for mortgages and car loans).

Also banks will be permitted:
- not to downgrade the class of borrowers considering information from the Credit register until April 29 2021;
- not to revaluate or check the condition of pledge until March 30 2021; and
- to omit during assessment of budget-funded entities the performance indicators of budgets 2020 and 2021 until January 4 2023.
2.Restructuring debts of green energy producers. Banks are permitted not to apply some default triggers, if restructurings take place until April 30 2021 (before February 28).
3. Managing problem assets. Banks are authorized to define and set for the troubled assets management strategy a target level of NPLs for 2021 considering expected economic implications of the quarantine and restrictions in the short run.
4. Drawing up and submitting business recovery plans. Banks are permitted:
- stress testing using only one stress-testing scenario foreseeing a prolonged negative economic effect of the pandemic;
- submit a business recovery plan in test mode before March 1 2021; and
- not to include into business recovery plans a list of critical functions.
5. Approving candidates for bank top management positions. The NBU will continue distant testing procedure of top managers and candidates for top management positions with an interview with candidates by means of videoconference.
6. Submitting documents to the NBU. Banks and nonbank financial institutions are permitted to submit documents by e-mail with affixed qualified electronic signature.
Respective measures were approved by the NBU Board Resolution No. 160 dated December 21 2020 that takes effect on December 22 2020.The Resolution shall supplement measures previously introduced by the NBU to support the banking system for the restriction period associated with the spread of COVID-19.
- Imposing corrective measures. Until June 2021, no penalties on banks and banking groups will be imposed for their failure to comply with indicators for capital, liquidity, credit risk, and so on.
- Such decision will only cover violations as a result of adverse effects of quarantine, provided that a bank or banking group complies with capital adequacy and liquidity ratios under Articles 75 and 76 of the Law On Banks and Banking. The decision shall not apply to banks that distributed profits for 2019 by paying out dividends.
- Capital buffers. In March 2020, the introduction was postponed due to the developing coronavirus crisis. Gradually the NBU will settle on the realization schedule for these buffers and release a prior notice on the website.
- Inspections. Conducting all types of onsite inspections will be suspended untill the last day of the month, when the quarantine is lifted.
- LCR. The NBU has postponed for two year the introduction of provision on considering in the structure of high-quality liquid assets in foreign currency not more then 80 percent of correspondent account balances in foreign banks with the rating beyond the investment grade.
- Managing noncore assets. Banks were given more time to clean-up their balance sheet from assets not used for banking. These are mainly residential and commercial real estate that banks recognize on the balance sheet for foreclosing collateral.
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 1^st. 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 23^rdthe 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 8.
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.
In September, the NBU expanded the list of collateral eligible for ELA facility to also include property rights on credit agreements with legal entities denominated in FX, as well as property rights on credit agreements with legal entities of a lower class of borrowers (fifth class).
Following the April expansion of the list of eligible collateral for refinancing loans and repo transactions, in September the NBU clarified the methodology for evaluating municipal bonds. In addition, the NBU revised the haircuts for domestic government bonds pledged as collateral under refinancing loans, direct repo, IRS and transactions on cash storage agreements.
In order to foster banks' support to municipalities, development of infrastructure and the securities market, the NBU revised/relaxed certain requirements on the assessment of the financial stance of the municipal borrowers in the calculations of the credit risk. The class of a borrower/municipality that issued securities is allowed to be identified based on the credit rating. In the case of an absence of such a rating for UAH-denominated bonds, it is allowed to assign a rating one class lower than of Ukraine's international credit rating. The lower bound of LGD for both Government and municipal securities is lowered down to 0.6. For the sake of calculating credit risk, haircuts on municipal bonds have been lowered. The allowed absence of an insurance agreement on the collateral when banks apply eligibility criteria to the collateral was extended into 2021.

Given the negative effect of the pandemic on the real estate market, the NBU extended the period for cleaning up banks' balance sheets from the non-profile banking assets, mainly residential and commercial real estate foreclosed as the collateral on loans. Balance value of the assets acquired (1) before end-2021 should not be excluded from the capital during 3 years in case of all non-profile assets; (2) after (starting) Dec. 31, 2021 – during 2 years in case of residential real estate and 1 year for other non-profile assets.

Exchange rate and balance of payments

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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. As of January 7, 2021, the number of COVID-19 cases stood at 221,754 with 694 deaths. At the onset of the pandemic, 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, 2020, 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, 2020. Dubai reopened to international tourists on July 7, 2020. Starting July 29, 2020, restaurants, coffee shops, cafes and other licensed food outlets in Abu Dhabi can now operate at 80 per cent capacity. Schools re-opened in September. On September 23rd, 2020, the Abu Dhabi government reopened recreational, entertainment play halls inside and outside malls. At the end of September, 2020, UAE authorities resumed issuing visas to foreign visitors. In October, 2020, UAE has started issuing employment visas for vital government and semi-government sectors, as well as entry permits for domestic workers. UAE also reopened some cultural landmarks to visitors. On December 9, 2020, Abu Dhabi authorities announced that they will resume all economic, touristic, cultural, and entertainment activities in two weeks. As of January 6th, 2021, about 8 percent of the population has been vaccinated.

Key Policy Responses as of January 7, 2021

Fiscal

The authorities have so far announced about AED 32 billion ($ 8.7 billion or 2.8 percent of GDP) in various fiscal measures. These include: (i.) AED 16 billion ($4.4 billion) approved by the federal government to support the private sector by reducing various government fees, labor and other charges, refunding 50% of bank and financial guarantees to some establishments, 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. They also include deferral of payment of outstanding installments and interests on loans and credit cards for a period of 3 months, suspension of all rental property eviction cases and deferral of the collection of rent payments and service fees for tenants. 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, 2020 Dubai has announced a new package worth AED 1.5 billion ($0.4 billion), which includes cancelling certain fines imposed by the government and the customs department, tax reimbursements to hotels and restaurants, and providing various banking facilities to individuals and corporates. End October, 2020, Dubai announced additional AED 500 million ($136.14 million) stimulus package to support the local economy, taking Dubai’s total stimulus measures in 2020 to AED 6.8 billion. On January 6th, 2021, Dubai announced additional stimulus for January-June 2021 in an amount of AED 315 million. Other Emirates employed similar measures to support trade and businesses and provide advantages to sectors that suffered the most from the current pandemic. Sharjah’s value of the two packages of incentives amounts to AED 993 million ($0.27 billion).

Monetary and macro-financial

The Central Bank of the UAE (CBUAE) has reduced its policy interest rate twice by a combined 125 basis points in 2020. Furthermore, CBUAE has announced an AED 256 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 20% to 30% of risk-weighted assets, subject to adequate provisioning; ix) allowing banks to defer loan repayments till end-2020. On November 16, 2020, the Central Bank announced the extension of the initial package of measures to June 2021. On August 8, CBUAE announced further measures to facilitate banks’ lending to the economy: relaxation of the Net Stable Funding Ratio and the Advances to Stable Resources Ratio effective through end-2021.

Exchange rate and balance of payments

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United Kingdom
Background. The first confirmed case was reported on January 31, 2020. Cases initially peaked in April/May, but after weeks of decline, a second wave has taken hold with the number of cases significantly above those seen during the initial peak. Deaths associated with COVID-19 have remained below the peak but have been on the rise. In response to the outbreak, on March 23 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 2.5 percent relative to the previous quarter, with a 6.9 percent month-on-month contraction in March. The economy contracted by 19.8 percent q-o-q in the second quarter, reflecting a sharp contraction in April. GDP grew by 15 ½ percent in the third quarter but remained some 10 percent below the pre-pandemic level. Recent indicators suggest a renewed slowdown since October.
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). Reopening too place in three steps starting on May 13 and continuing through July, with educational facilities reopening in September. The relapse of infections led initially to localized restrictions based on a 3-tier system of intensity, but eventually a second country-wide lockdown was put in place on November 5 (similar restrictions were established in Scotland, Wales and Northern Ireland). Educational facilities, construction and manufacturing remained open. Starting December 2, the government introduced a revised three-tier system of restrictions in England to run until spring, with most of the country classified under the stricter tiers 2 and 3. The tier level of each area will be reviewed every 14 days. Under the new setting, shops and gyms can reopen, with tougher restrictions on hospitality venues. Scotland, Wales and Northern Ireland maintain separate rules. As of December 16, most parts of England are in tier 3.
New restrictions: On January 4th, amidst rising contagions and the rapid spread of a new string of the virus and dire warnings that the National Health Service is being pushed to breaking point, PM Boris Johnson imposed a third coronavirus lockdown across England, moving it up to tier 4, shutting schools and ordering the public to stay at home. The full emergency lockdown will last until at least February 15. Northern Ireland, Scotland and Wales also went into lockdown. According to the new guidelines, everyone must stay at home unless they are medics or other key workers who cannot work from home. People can only leave home to buy essential supplies or take exercise, ideally only once a day. All primary and secondary schools and colleges will close and move to online teaching. All restaurants, bars and non-essential shops will stay closed, except where they sell takeaway food. Sales of takeaway alcohol are banned. Only essential retailers such as supermarkets and pharmacies, and nurseries will remain open.

Key Policy Responses as of January 7th, 2021

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 (Self Employment Income Support Scheme, SEISS) and furloughed (Coronavirus Job Retention Scheme, CJRS) 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 .
In July, 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. Low-income people who need to self-isolate and are unable to work, as well as members of their household, will receive £130 and £182, respectively. Businesses required to shut down due to localized lockdowns will receive up to £1,500 every three weeks.
A package of measures announced on September 24 entailed the following: (i) a 6-month Job Support Scheme whereby employers will pay the wages of staff for the hours they work while for the hours not worked the government and the employer will each pay one third of their equivalent salary, up to £697.92 per month each. Employees must be working at least 33% of their usual hours; (ii) Extending the Self Employment Income Support Scheme for those continuing to actively trade but face reduced demand due to coronavirus, with the initial lump sum covering 20 percent of three months’ worth of profits for the period from November to the end of January next year up to a total of £1,875 (an additional second grant, will be available for the period from February 2021 to the end of April); (iii) extending the temporary 15% VAT cut (from 20 to 5%) for the tourism and hospitality sectors to the end of March next year; (iv) allowing to pay VAT payments deferred until end-March to be paid in 11 installments and self-assessed income tax due in July 2020 and January 2021 to be paid in 12 installments, (v) extending the maturity of loans under the CBILS and BBLs to up to 10 years; (vi) extending the application period for loans under the CBILS, CLBILS, and BBLS until end-November. In addition, the government launched a new program (JETS) to help the job search of people receiving unemployment benefits for at least 13 weeks.
Some of the measures announced in the September package were subsequently modified to be consistent with the tighter containment measures. For businesses that stay open, the JSS was modified, with minimum worked hours reduced to 20 percent, the government paying 62 percent for non-worked hours and employers paying 5 percent of non-worked hours. For businesses required to close due to the restrictions the government will pay two thirds of the employees’ salaries (or 67%) up to a maximum of £2,100 a month and the employers will cover social contributions. The scheme will run for 6 months starting on 1 November. The value of the grant for self-employed was increased from 20 to 40 percent of profits, up to £3,750. The grant for businesses required to close was increased to up to £3,000 per month for businesses in England, while additional funds were allocated to the devolved administrations. Businesses in the hospitality, accommodation and leisure sectors in high alert areas will receive grants of up to £2,100.
In view of the second lockdown, the government launched a new package of measures in November, including the following: postponing the JSS, canceling the Job Retention Bonus, extending the CJRS until end-March with the replacement ratio back at 80 percent, increasing the grant of the SEISS also to 80 percent of earnings, and prolonging the deadline to apply for government guaranteed loans until end-January. On December 17, the government announced that it would extend the furlough scheme and the business support program one more month, until April 2021.
On November 25, the government published the 2020 Spending Review setting expenditure limits for FY2021-22, while the OBR presented its revised fiscal outlook. For FY2020-21, COVID-19 support measures are estimated at £280 billion. For FY2021-22, the government allocated £55 billion for this purpose. Among other uses, these funds will be allocated to Covid testing, PPE and vaccines, as well as the new 3-year Restart scheme to help the long term unemployed find work.
On January 5th, a day after the government imposed its toughest Covid-19 restrictions since last spring (expected to last until mid-February) Chancellor Sunak announced a £4.6bn fresh financial support package for struggling UK companies. This would be divided in two parts: £4bn of one-off “top-up grants” for an estimated 600,000 retail, hospitality and leisure companies, which can each claim up to £9,000; There will also be a new £594m discretionary fund made available for councils to support other businesses that are not eligible for those grants but are affected by the restrictions.

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 £450 billion (in three tranches announced in March, June and November); (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.In November, the mortgage moratorium was extended until end-April and the FCA also extended for 6 months the period to request a payment deferral for consumer credit.

Exchange rate and balance of payments

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United States of America
Background. The US confirmed the first case of COVID-19 in January. Following a widening outbreak in March and April, the number of new cases declined after a range of containment measures were put in place. Infections rose again in early summer as economic activity and travelling resumed, but gradually declined over the summer following stricter prevention measures. However, new cases picked up again in September and continued on an upward trend as of mid-December. Following a deep contraction in the second quarter that reflected the impact of the containment measures, the U.S. economy rebounded strongly by an annualized rate of 33.1 percent. The unemployment rate stayed at 6.7 percent in November.
Reopening of the economy.The containment measures in place vary by state and geographical area. As of mid-December, many states had imposed new restrictions on business and activities. Some states closed indoor dining and entertainment venues and banned indoor gatherings in the whole state or in some regions (e.g. Washington, California, Michigan). Schools have reopened in most states with varying approaches (in-person instruction, virtual or hybrid).

Key Policy Responses as of January 7, 2021

Fiscal

On December 28 President Trump signed a US $ 877bn (about 4½ percent of GDP) coronavirus relief and government funding bill which includes enhanced unemployment benefits of US $ 300 weekly federal enhancement in benefits through March 14, direct stimulus payments of $600 to individuals, another round of PPP loans, resources for vaccines, testing and tracing, and funding for K-12 education.
On August 8, President Trump issued executive orders mostly to address the expirations of certain Coronavirus reliefs provided by previous legislations. These included i) using $44 billion from the Disaster Relief Fund to provide extra unemployment benefits ; ii) continuing student loan payment relief ; iii) deferring collections of employee social security payroll taxes ; and iv) identifying options to help renters and homeowners avoid evictions and foreclosures.
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 t.. 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

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Uruguay
Background. The first cases of COVID-19 were reported on March 13. 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 months of relative stability, the number of new infections has increased sharply. In early and in mid-December, and again in January, the authorities introduced a series of additional public health measures to limit the spread of the virus.
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 began 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 were extended to be closer to normal hours. Borders, however, will remain largely closed for the foreseeable future.

Key Policy Responses as of January 7, 2021

Fiscal

Additional resources to address the public health emergency have been mobilized, including by resorting to contingent credit lines from other international financial institutions. The overall above-the-budget-line fiscal cost is estimated at $800 million (1.6 percent of GDP). The measures include (i) relaxation of rules for claiming the unemployment insurance (0.8 percent of GDP); (ii) expanded assistance to the most vulnerable groups (cash and direct provision of food, 0.2 percent of GDP); (iii) expanded sick leave benefits, including for older workers, so they do not have to leave home (0.1 percent of GDP). Furthermore, some tax and pension obligations are being postponed or reduced and utility payments are being cancelled or reduced for some companies. 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. 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 has injected about US $ 150 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 has been expanded from US $ 50 million to US $ 500 million (utilizing financing from international organizations). That is expected to allow to guarantee the SME loans up to US $ 2.5 billion. In addition, the rate of commission charged by the fund will be reduced substantially. Moreover, two more guarantee lines are being established, one for larger enterprises and another for enterprises in the sectors (such as tourism) that are directly affected by border closures.
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

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Uzbekistan
Background. Uzbekistan reported its first confirmed case of COVID-19 on March 16, 2020. The authorities 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, universities, and all stores except grocery stores and pharmacies, and cancelling public events and religious gatherings. Government employees were asked to telework or to stay home. As a result, new cases peaked at about 750 per week in mid-April (out of a population of 34 million). New cases continued to decline to about 300 new cases per week in mid-May.
Reopening of the economy. In May some restrictions on individual and business activities were lifted. However, in July the number of new cases accelerated, particularly in the capital region (Tashkent). The government reimposed quarantine restrictions (including on travel between regions, public events, and large non-food markets, stores, and restaurants). In early August, the number of new cases reached a second peak of about 6,000 new cases per week, before subsiding again.
Economic impact. As elsewhere, the global pandemic has significantly impacted Uzbekistan’s economy. Uzbekistan has faced weaker trading partner demand (particularly for natural gas) and lower domestic demand due to quarantine restrictions and uncertainty leading to lower private consumption and investment. These effects have been partly offset by the increase in gold prices (Uzbekistan’s largest export) and a recovery in remittances. In the first half of 2020, Uzbekistan’s real GDP growth was 0.2 percent, compared with 4.1 percent in the first quarter. Uzbekistan’s exchange rate was relatively steady in the first quarter. As COVID crisis spread to global markets, the exchange rate depreciated 5½ percent in April, and has remained relatively stable since.

Key Policy Responses as of October 22, 2020

Fiscal

To deal with the crisis, Uzbekistan’s government created an Anti-Crisis Fund of US $ 1 billion (about 2 percent of GDP) to support the economy and help those most affected by the crisis. In addition to the Anti-Crisis Fund, the government temporary reduced some taxes and the Fund for Reconstruction and Development increased lending. Specific crisis response measures have included: (i) expanded funding for healthcare, including for medicines, the costs of quarantines, and salary supplements for healthcare works; (ii) an increase in the number of families with children and low-income families receiving social benefits; (iii) assistance to affected businesses via interest subsidies; and (iv) additional public works for infrastructure and to support employment. The authorities also temporary reduced social contributions for individual entrepreneurs, postponed the payment of property and land taxes, extended a moratorium on tax audits, and delayed tax declarations for 2019 income taxes. 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 have extended deadlines for loan repayments for affected sectors, including for the national air carrier. The central bank reduced its policy rate by 200 basis points in 2020. The policy rate was reduced from 16 to 15 percent in April 15, and from 15 to 14 percent in September 8. While the central bank has not changed requirements for regulatory capital or liquidity, it continues monitoring financial conditions.

Exchange rate and balance of payments

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Vanuatu
Background. There is 1confirmed case but no deaths from COVID-19 as of December 17, 2020. Currently, there are no active COVID-19 cases in Vanuatu.On November 10, the first confirmed case of COVID-19 was detected during quarantine. Risk assessment and contact tracing were conducted by the Ministry of Health with all test results for any potential contacts confirmed to be negative.
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; temporarily 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 cargocan 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 abroadafter strengthening in-country COVID-19 screening, testing and containment measures. Repatriation and return of vessels registered locally or internationally as Vanuatu vesselsoutside Vanuatu waterswere suspended from July 11 till July 31.The second phase of government's repatriation plan has resumed in August and continued until December 7, 2020. As part of the second phase, the seaport and wharf in Port Vila has now received ships returning to Vanuatu and the mandatory quarantine process has been carried out offshore.The government confirmed on September 18that targeted testing in quarantine for COVID-19 is being conducted as an additional precaution for those entering Vanuatu from areas classified as high risk.After confirming its first COVID-19 border case in November, people returning on repatriation flights from medium and high risk COVID-19 countries must have a negative COVID-19 test 72 hours before boarding. The government announced on July 16 that it wants to create a travel bubble – the Tamtam travel bubble – although it may not do so until 2021. On September 3, Vanuatu began a trial Seasonal Workers Program (SWP) with Australia, called the Mango Pilot project.To date the project has provided employment for more than 300 ni-Vanuatu (as mango pickers) in Northern Territory. Given the potential for further recruitment of seasonal workers in Australia, the government approved in October for Vanuatu's broader participation in the SWP and the Pacific Labour Scheme (PLS).

Key Policy Responses as of January 7, 2021

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. The government closed the reception for new ESP applications on September 15.

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

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Vietnam
Background. Since the first case is reported on January 23, Vietnam has more than one thousand infected cases and more than 16,000 people are currently quarantined in centralized facilities or in self-isolation. Social isolation measures introduced to combat local outbreaks in Da Nang and Hai Duong province have been lifted. After not having new domestic transmission cases in the last 88 days, Vietnam reports to have 3 domestic transmission cases in Ho Chi Minh city. Mobile apps are available (installed by around 60 percent of population) to provide alerts on positive cases and potential exposures in big cities. Bluezone app, a newly developed app on contact tracing has been downloaded by 20 million people (20 percent of population) in 4 weeks. GDP growth hit the lowest level in last two decades in first 9 months, 2020 (2.12 percent y/y), mainly reflecting substantial slowdown in manufacturing, and a contraction in the service sector, in particular transport, tourism and hospitality industries. Vietnam is negotiating to buy 30 million vaccine doses from UK to vaccinate 15 million people in 2021. The country is also seeking to purchase vaccine from US, Russia and China.
Reopening of the economy. While the nationwide lockdown was lifted on April 23 and social distancing rules have been eased, a local outbreak in Da Nang and Hoi An led to the temporary re-introduction of social isolation measures on July 28 in these areas and few other local provinces later on. Domestic travel to/from Da Nang and Hai Duong province and few other local cities after being curtailed for 5 weeks have resumed since September 5. All targeted social isolation areas with non-essential services bans have been removed since late September. A new guideline on epidemic protection has just been issued for normalization of people life. International tourist travel continues to be banned. In the meantime, the authorities have allowed limited international commercial travels for some selected regional destinations since September 19, while applying less restrictive 14 day quarantine requirement for short stay selected international visitors. Vietnam has strengthened its policy on covid-19 prevention i.e. since November 15, anyone not wearing face masks in specified public space, can be fined from VND 1 million (about USD43) to VND 3 million (about USD120). It has been 35 days with no further domestic transmission since a few cases emerged in Ho chi Minh city on December 1, thanks to strict containment measures including strengthening cross-border checking of illegally immigration and quarantine, suspending limited international commercial flights and temporarily closing some universities and schools located in Ho Chi Minh city for a week. Vietnam has decided to temporarily suspend flights from countries with the new virus strain, starting with the UK and South Africa.

Key Policy Responses as of January 7, 2021
Fiscal

The government introduced a fiscal support package valued VND 291.7 trillion (3.6 percent of GDP) to support the economy. Measures include deferring payment of VAT and CIT tax obligations and land rental fees by 5 months, deferring PIT payment to year-end based on Decree 41/CP (the estimated amount of payments deferred is VND 180 trillion, or 2.4 percent of GDP). More than 37 percent (VND 66.7 trillion) of total tax and land rental deferral package has been disbursed as of October 31. Newly approved measures include cutting registration tax by 50 percent and deferring excise tax on domestically produced cars, lowering land rental by 15 percent, deducting 30 percent of current environmental protection tax on jet-fuel from August to December 2020, cutting or exempting various fees and charges, cutting CIT rate for small and micro firms by 30 percent, and raising PIT deduction ahead of the plan. MOF has recently proposed to extend the timing for some fee and charge reduction till June 2021 and deducting 30 percent of environmental protection tax on jet-fuel till end of 2021.
Other implemented measures include: tax exemptions for medical equipment; lower business registration fee effective from February 25 (one-year exemption of business registration tax for newly established household business; first 3-year exemption of business registration tax for SMEs); streamlined tax and custom audit and inspection at firms; and allowing firms and workers to defer (up to 3 months) contributions to the pension fund and survivorship fund without interest penalty (total delayed contribution is estimated at VND 9.5 trillion or 0.1 percent of GDP). Based on Resolution 42/CP, the government also approved a cash transfer package worth VND 36 trillion (0.5 percent of GDP) for affected workers and households with monthly cash transfers provided for no more than 3 months, from April to June. More than 10 percent of the population is estimated to benefit from this program. The Ministry of Finance estimated that approximately VND 12.7 trillion (35 percent of total package value) has been disbursed as of October 31 to the beneficiaries under this Resolution. Coverage of cash transfer program has been expanded to cover also the teachers of private schools.
The government is also targeting a 100 percent disbursement of public investment capital valued VND 686 trillion or nearly 9 percent of GDP (of which VND 225 trillion is carried over from previous years). Despite government’s efforts, disbursement of public investment still remained slow, meeting merely 83 percent of the budget plan as of December 31.

Monetary and macro-financial

Effective October 1, the State Bank of Vietnam (SBV) cut its benchmark policy rates by 50 bps, the third time in the year, after the first two cuts by 100-150 bps in March 17 and in May 13. The short-term deposit rates cap was also cut further by 0.25 bps, while the short- term lending rate cap for priority sectors is trimmed further by 50 bps.
The SBV has also issued guidelines to commercial banks to reschedule loans, reduce/exempt interest, and provide loan forbearance. As of mid-December , banks have registered a credit package totaling VND 300 trillion (about 3.8 percent of GDP) at lower interest rates, and supported more than 1.25 million customers( with outstanding loans of nearly VND 2,450 trillion), by rescheduling repayment, exempting, and reducing interest on existing debts, and extending new loans. Recently the SBV also asked Credit Institutions to not only channel credit to 5 priority economic sectors, but also to accelerate consumer loans to meet legitimate demand of individuals and households. The SBV has delayed the phased reduction of the ratio of short-term funding to finance long term loans for one year, to help credit institutions reduce their cost of funding and maintain medium and long term loan outstanding. Financial institutions have been exempting and reducing payments fees until June 30, 2021. Several securities service fees cut and exemption have been extended through June 30, 2021.
Affected firms are eligible to concessional loans from Vietnam Social Policy Bank (VSPB) with no interest during May 2020 -January 2021 for making salary payment to their workers who temporarily stopped working. The total loan value is planned at VND 16.2 trillion (around 0.2 percent of GDP). Given the low disbursement of this lending program, conditions for concessional loans have been relaxed in late October , since then to November 27, 75 firms (with total workers of 3,851 people) have signed contract and received disbursement of more than VND 13.4 billion (equivalent to 0.1 percent of the package)
Effective March 31, SBV instructed Credit Institutions (CIs) to actively reduce bonus and salary, cut other operating costs, adjust business plans in a timely manner (including not paying dividend in cash), and use the saved resources to reduce interest. The SBV stated that it is ready to inject liquidity, including through refinancing windows, for VSPB and other CIs to implement the government’s programs and help CIs address NPLs. The SBV has issued a circular on refinancing the VSPB up to VND 16 trillion at zero percent interest rate.

Exchange rate and cfm

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West Bank and Gaza
Background. The first confirmed COVID-19 case was reported on March 5, 2020 (WHO). During the early stages, the authorities implemented several measures to limit the spread of the virus including: restricting movement of all residents from homes; closing public places, including schools, universities, tourist attractions, coffee shops, and stores except for drug stores, bakeries, and supermarkets; limiting bank services and hours of operation; restricting travel within West Bank (among governorates and villages); limiting employee attendance at government and private workplaces (except for critical staff); and imposing mandatory quarantines for those returning from abroad. On April 2 President Abbas issued a decree extending the state of emergency, initially issued on March 5, for another 30 days. On June 3, President Abbas issued a decree extending the state of emergency until July 4, 2020.
A second wave of coronavirus spread has been hitting WBG since June 22 with several hundred cases reported in a few days. PM Shtayeh reinstated a five-day lockdown of Hebron Governorate, and a two-day closure of Nablus. Only pharmacies, bakery shops, and factories would be allowed to operate. In addition, he declared an immediate ban in all forms of public gatherings in all West Bank governorates. Work in Israeli settlements would be forbidden. On July 1, the authorities announced a five-day closure in all governorates from July 3 to July8 which was subsequently renewed for five more days. All institutions, movement and traffic would be halted, both within and across all governorates. Only pharmacists, bakeries and supermarkets would be allowed to operate during the five-day period. On July 12, the authorities announced a prohibition of all movement between districts for another two weeks. Total closure was extended on Hebron, Bethlehem, Ramallah and Nablus Districts for another four days for a total of 14 days. Movement between the hours of 8pm-6am was prohibited in all districts for two weeks. On August 28, President Abbas instructed the Coronavirus Emergency Committee to send a ministerial delegation to the Gaza Strip to follow up on the situation there and provide needed assistance. On November 3, President Abbas signed a decree declaring a new state of emergency for 30 days. On November 23, the PA government decided to shut down on weekends and at night for 14 days, due to the sharp increase in COVID-19 cases. A full lockdown will be imposed every Friday and Saturday and a lockdown will also be imposed every day of the week between 7 pm and 6 am for the next two weeks. On December 7, The PA decided to close down the governorates of Nablus, Hebron, Bethlehem, and Tulkarem during December 10-17, including all commercial activities except for groceries, supermarkets, pharmacies and bakeries. Movement between governorates in all West Bank would not be allowed except for essential services. Private and government agencies would operate with thirty percent capacity during the period December 12-17. Nighttime closures would apply in all of the West Bank until December 17. On January 3, the PA extended the lockdown (shutdown on weekends and every night between 7 pm and 6 am) for another two weeks.
Reopening the economy. On April 20, PM Mohammad Shtayyeh announced several measures to ease economic restrictions depending on prevailing conditions in individual governorates. Small businesses with 3 workers or less will be allowed to operate between 10am-5pm; clothes and shoes stores will open twice a week; taxis will operate subject to passenger restrictions; pharmaceutical factories will operate at 50 percent capacity; and sweets shops can resume delivery services. On May 5, PM Shtayyeh announced a partial ease of the lockdown and gradual and phased exit from COVID-19. The public would be allowed to go around during daytime, but not at nighttime. Construction sites will reopen in all governorates. Hair salons will reopen in all governorates on Saturdays and Sundays (two customers by prior reservation) except in governorates infected with COVID-19. Clothing, footwear and home appliance stores will reopen throughout the week except in governorates infected with the virus where they will open for three days. Banks will open except in infected areas where they will continue to operate according to emergency procedures. Public transport will return in non-infected governorates, and private transportation among non-infected governorates will also resume. Wearing masks, gloves and social distancing will be mandatory.
On July 28, the PA government announced the temporary easing of lockdown measures ahead of Eid al Adha reverting to a full lockdown after the holiday. On August 5, the PA government eased restrictions and allowed cafes, restaurants, gyms to reopen at 50 percent capacity. It tightened monitoring of public places, imposing penalties on violators. The government also formed a daily follow-up committee comprising of all ministries and security agencies to conduct field inspection and oversight operations through special committees. The government decided to maintain the ban on events, including weddings and condolence gatherings, and the closure of events halls.

Key Policy Responses as of January 7, 20210
Fiscal

The Palestinian Authority (PA) is planning to spend NIS 410 million (0.7 percent of GDP) to cover short-term (1-3 months) critical gaps related to COVID-19. Among other things, the PA is recruiting 51 doctors, medical specialists and general practitioners and plans to purchase of testing toolkits, quarantine facilities, respirators, masks, medicines, and disinfectants. In addition, it plans to allocate additional resources to support poor families and those in need. The authorities plan to spend NIS 20 million (0.1 percent of GDP) to support workers and for unemployment benefits. On the tax side, the PA is cancelling penalties for late submission of tax returns, extending the tax filing deadline to June, and the period of quittance issued by the value added tax from March 1 to April 15, 2020.
On May 5, PM Shtayyeh said that following an earlier understanding with a Palestinian labor union, private sector employees have been paid half of their salaries by their employers. The government also distributed some 98,000 food baskets and paid financial assistance to about 125,000 households.
The government started on May 17 the disbursement of aid to 40,202 laborers affected by the Corona pandemic. Laborers in eligible sectors (e.g., construction, tourism, services, transport) would receive text messages to go to the bank and receive NIS 700. The process would take place over five days.
Total COVID-related spending in 2020 is currently estimated at NIS 659 million (1.1 percent of GDP), of which NIS 499 million (0.8 percent of GDP) for health, NIS 107 million (0.2 percent of GDP) for social protection, and NIS 53 million (0.1 percent of GDP) for workers who lost their income.

Monetary and macro-financial

The Palestine Monetary Authority has postponed monthly/periodic loan repayments to all borrowers for the next four months, and for the tourism and hotel sectors for the next six months. It has also prohibited the collection of fees, commissions or additional interest on deferred payments. These measures are subject to extension.
On July 21, the PMA issued new instructions to banks to mitigate the economic effects of COVID-19. The new instructions apply to borrowers which banks consider to have been directly affected by the crisis. The new instructions give borrowers the possibility to postpone the payment of their obligations with multiple options (e.g., overdraft, restructuring, rescheduling, a temporary Tawarruq ceiling for Islamic banks). The PMA also lowered the liquidity requirement by 1 percent which frees up about USD 100 million of liquidity that banks could pump to the market.
On July 22, the PMA issued an instruction lowering the bank charge for a declined or “bounced” cheque, since COVID-19 left many businesses with insufficient funds to meet their obligations.
The PMA launched an SME fund to provide soft loans to SMEs impacted by the crisis. Loans are to be disbursed under the 3% interest rate and a repayment period of 36 months. The size of the SME fund will be USD 300 million of which USD 210 comes from banks’ reserves at the PMA.
On 25 August, the PMA announced that $32m in credit facilities had been extended to SMEs affected by the COVID-19 pandemic through the ‘Estidama’ (sustainability) program.

Exchange rate and balance of payments

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Yemen
Background. Yemeni authorities reported the first confirmed case of COVID-19 on April 10, 2020 in areas under its control. The de facto administration has reported only a few cases in Sana’a. The UN expressed concerns on large undetected spreading of the disease in Yemen. The ongoing spread of COVID-19 could be devastating for Yemen as the possibility of rapid spread of the virus will be confronted with a poor health system that has already collapsed. After five years of conflict, the country is facing a humanitarian crisis already, with severely damaged health and general infrastructure. UN estimates that only half of the health centers in Yemen are fully functional, and there are limited testing facilities in a collapsed health system. The cease fire initiated by the Saudi-led coalition government since April 9, has ended, with some signs of conflict escalation with the Houthi rebels, but some de-escalation inside the coalition. The UN response to the COVID-19 crisis is hampered by the conflict. Shops and restaurants in Aden were closed following the news of the first outbreak in Aden, but quickly reopened on fears of food shortages.
Reopening of the economy. Cases have largely stabilized however testing capacity is limited and may mask the true levels. The government efforts and measures are focused on cautious reopening, in the context of the conflict. Some governorates started lifting the curfew, but some precautionary measures remain in place with screening and quarantining.

Key Policy Responses as of January 7, 2021

Fiscal

Government created a commission to deal with COVID-19 issues at the start of the crisis. Ministry of Health has provided medical equipment to quarantine centers in some governorates. The ministry of Health has received some respirators and medical safety tools from the World Bank, through the World Health Organization. The government has allocated some limited budget resources to respond to the COVID-19 crisis.

Monetary and macro-financial

Exchange rate and balance of payments

No measures. The Saudi government has offered to contribute with US $ 500 million to the UN for the humanitarian response, and US $ 25 million to fight the spread of the coronavirus. The United States announced it will provide $225 million in emergency aid through the UN World Food Program. Humanitarian programs are largely underfunded.

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Zambia
Background. Zambia recorded its first COVID-19 cases on March 18 and the number of daily new cases has been on a downward trajectory since early August, but the second wave has started in mid-December. Early actions to contain the spread of the virus included: (i) closure of schools and universities; (ii) suspension of non-essential foreign travel; (iii) mandatory quarantine for all foreign travelers; (iv) closure of bars, cinemas, and casinos; (v) delivery and take-out regime for restaurants; (vi) restriction on public gatherings to at most 50 people; (vii) restriction on sports activities; (viii) a temporary lockdown on the towns of Kafue and Nakonde; and (ix) a partial closure of the border with Tanzania. In addition, the Zambian economy will be adversely impacted by the sharp depreciation of the local currency, increases in yields on public debt, and economic disruptions due to lockdowns in trading partners.
Reopening of the economy.Since April 24, the government has been slowly lifting lockdowns, border closures, and restrictions, subject to social distancing, including on churches, some non-contact sports, and barber shops and salons. On May 8, cinemas, gyms, casinos, tourist spots, and restaurants were allowed to open as long as they adhere to strict social distancing and sanitary guidelines. Bars and nightclubs were allowed to reopen on September 12. Primary and secondary school examination classes reopened on June 1. On September 14 all schools, colleges, and universities were reopened. A reopening of international airports was announced on June 25. Lusaka city council suspended all special gatherings and ordered bars and restaurants to work on takeout basis for two weeks on January 6 to curb the second wave of the pandemic.

Key Policy Responses as of January 5, 2021

Fiscal

Import duties on mineral concentrate and export duties on precious metals were suspended to support the mining sector (the first measure was extended permanently with the 2021 Budget). The government has waived tax penalties and fees on outstanding tax liabilities resulting from CoVID-19. It has suspended customs duties and VAT on some medical supplies and medical related commodities. It has alsoremoved provisions related to claiming VAT on imported spare parts, lubricants, and stationery, in order to ease pressure on companies. The government has also issued an 8billionkwacha bond (2.4 percent of GDP) to finance CoVID-19 related expenses, including health spending, arrears clearance, and grain purchases, as well as a recapitalization ofa non-bank financial institution (NATSAVE). The 2021 Budget envisions zeroratingunder the VAT for equipment used for full body sanitization for a period of one year, as well as tax breaks for tourism: a permanently lower CIT rate and suspended import duties and fees.

Monetary and macro-financial

The Bank of Zambia’s Monetary Policy Committee lowered the policy rate by 225 bps to 9.25 percent on May 19and by 125 bps on August 19 to mitigate the adverse impact of the pandemic. The BoZ plans to provide 10 billion kwacha (3.1 percent of GDP) of medium-term liquidity support to eligible financial services providers. It alsoscaled up open-market operations to provide short-term liquidity support to commercial banks and embarked on abond purchase program worth 8 billion kwacha to provide liquidity to the financial sector. In addition, BoZ implemented several measures to stimulate the use of e-money and reduce the use of cash, revised the rules governing the operations of the interbank foreign exchange market to support its smooth functioning by strengthening market discipline and providing a mechanism to address heightened volatility, revised loan classification and provisioning rules, and extended the transitional arrangement to IFRS9.The BoZ has allowed financial service providers to renegotiate the terms of credit facilities with borrowers affected by the pandemic. Non-bank financial institutions were allowed to use capital instruments that do not qualify as common equity Tier 1 and Tier 2 capital for the purposes of computing regulatory capital.

Exchange rate and balance of payments

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Zimbabwe
Background. Even before the COVID-19 pandemic, Zimbabwe was facing a severe drought and macroeconomic policy missteps with significant adverse implications for economic stability and growth and the humanitarian situation. Most sectors of the economy have been affected by the COVID–19 pandemic, especially tourism, non-food manufacturing, mining, financial services and transport. More than 8 million (approximately half of the population) need food assistance, and at least 1.7 million require additional social protection. As of December 17, 2020, there were 11,749 confirmed COVID-19 cases, with 9,702 recoveries and 313 deaths.
A COVID-19 National Preparedness and Response Plan was launched on March 19, 2020 with President Mnangagwa declaring the pandemic a State of National Disaster. The authorities launched on April 2, 2020 a US $ 2.2 billion domestic and international humanitarian appeal covering the period April 2020 to April 2021. Of this, US $ 220 million, now revised to US $ 300 million is targeted to fighting COVID-19, US $ 37 million for other critical health spending, and US $ 34 million for water, sanitation and hygiene (WASH). Other critical needs include US $ 956 million for food insecurity, and US $ 20,8 million for social protection. As at September 2020, humanitarian support disbursements stood at US $ 448.4 million. Key donors include the European Union, the United Kingdom, Japan, Sweden, The Global Fund, the African Development Bank, and the World Bank.
Reopening of the economy and additional containment measures. The authorities have re-opened all sectors of the economy. International flights resumed on October 1, 2020. Schools reopened on a phased basis.
A national lockdown was reintroduced on January 2, 2020 for 30 days in response to an increase in infection rates. It prohibits most public gatherings of more than two people and closes most of the commercial and informal sectors except for supermarkets and pharmacies. The productive sectors of agriculture, mining and manufacturing are to remain open. Supermarkets and other outlets supplying essential goods and services to customers are allowed to remain open but must limit their opening hours to between 8am and 3pm. A curfew is imposed between 6pm and 6am.

Key Policy Responses as of January 7, 2021

Fiscal

The authorities have supported ministries' COVID -19 mitigation and control response with a ZWL$1.8 billion disbursement. Interventions were aimed primarily at the Ministry of Health for additional employment benefits, recruitment of additional staff, capacity building and PPE procurement; water and sanitation; local production of PPEs by institutions of higher learning; reopening of schools; e-learning; enforcement of lockdown restrictions; support transitory poor households; homeless shelters; and quarantine centers and a cash transfer program targeting 1 million vulnerable households in rural and urban areas.
On May 4, 2020, the authorities announced a ZWL$18.2 billion Stimulus Package for COVID-19 economic recovery aimed to: (i) provide liquidity support to several sectors, including agriculture, mining, tourism, SMEs, and arts; (ii) expand social safety nets and food grants; (iii) set up a health sector support fund; and (iv) scale up investments in social and economic infrastructure in Cyclone Idai affected communities. Of this ZWL$18.2 billion, about ZWL$6 billion supported food security related program which included wheat farming and maize procurement, a further ZWL$4 billion was directed towards the Pfumvudza Program which support vulnerable households with farming inputs.
To cushion the vulnerable members of society, the government allocated ZWL$2.4 billion for COVID-19 cash transfers. The identification of beneficiaries is ongoing, and currently over 202,077 beneficiaries are receiving allowances of ZWL$300 per household. As at end November 2020, the Treasury has disbursed ZWL$98 million through the Ministry of Public Service, Labor & Social Welfare to vulnerable households. The freeze on government hiring has been lifted for the health sector, targeting over 4,713 additional medical personnel (about 20 percent increase); companies have been allowed to extend the payment of corporate taxes (waiving interest and penalties); and duties and taxes on various goods and services related to COVID-19 have been suspended, including on testing, protection, sterilization, and other medical consumables and procurement regulations have been relaxed to facilitate speedy procurement of essential goods and services. The authorities are also offering corporate tax credits of up to 50 percent for COVID-19 donations.
Zimbabwe is experiencing hyperinflation, at 402 percent y-on-y in November 2020. In June the authorities started paying US $ 75 to civil servants and US $ 30 to pensioners to cushion them from the COVID-19 pandemic effects. The authorities have also been making periodic reviews of salaries and pensions to cushion employees and pensioners from the challenging economic situation. In June 2020, they awarded a 50 percent salary increment which was followed by a 40 percent increment in October 2020.

Monetary and macro-financial

On March 26, 2020, the authorities returned to the multicurrency system allowing both Zimbabwean dollar and US dollar to be legal tender. The statutory reserve ratio on bank deposits was lowered from 5 to 4.5 percent in March, and further from 4.5 percent to 2.5 percent in June 2020. The RBZ policy rate was lowered from 35 percent to 15 percent per annum but have since July 1, 2020 reverted back to 35 percent to stem speculative borrowing. The RBZ introduced a ZWL$5 billion medium-term bank accommodation lending facility at 10 percent per annum and also increased private sector lending facility by the central bank from ZW$1 billion to ZW$2.5 billion. ZWL$3 billion has been availed with beneficiaries in the mining, tourism, manufacturing, construction industries. ZWL$1 billion was set aside for supporting empowerment programs for SMEs, youths, artists and sports, through respective financial institutions such as Empowerment Bank, Zimbabwe Women Microfinance Bank, People’s Own Savings Bank and Small and Medium Enterprises Development Company.

Exchange rate and balance of payments

In March 2020, the RBZ moved from a fixed exchange rate regime to a managed floating exchange rate system. The RBZ also revised the FX allocation priority list to improve allocation efficiency in light of the prioritize COVID-19 pandemic. Faced with acute foreign currency shortages, in June 2020, the RBZ introduced a foreign currency auction system and reinstated the 30-day limit of liquidating surplus foreign exchange receipts from exports which was further revised to a 60-day limit for FX liquidation.