Search
  • pawanchugh

Economic Relief Packages: What are nations offering?

This article reveals some examples of major relief tools being used to fight an economic downturn by countries around the world. Countries are putting emphasis on different industries which are economy drivers for their regions, like agriculture, travel, hospitality, and export-oriented industries to name a few. The drop in the optimism levels amid heightened uncertainty due to COVID-19 pandemic and resulting disruption of the global economy, has led the governments around the world to use wide range of monetary and fiscal policy tools to stimulate their economies. While monetary policy addresses interest rates and the supply of money in circulation, fiscal policy addresses taxation and government spending. Together, they both influence the economy of the country, businesses and people. The key monetary and fiscal tools used include:

  • Business loans and liquidity injections

  • Interest rate cuts

  • Stimulus packages including wage and cash subsidies and employees’ benefits

  • New tax provisions and cuts


Business Loans

Among others, a diverse approach from the Reserve Bank of India may ease bad-loan classification norms and allow banks to raise their lending ceiling to help companies[1]. Similarly, Bangladesh Bank has undertaken a business-friendly initiative, announcing that no one will be considered a loan defaulter till June 2020[2].


In terms of loans to businesses, among others United States (US) is providing trillions in loans, Germany passed a 550 billion-euro loan program, Hong Kong and France announced government-guaranteed loans for businesses, Japan passed a package of small business loans, while Italy announced adding money to a fund guaranteeing loans to small and medium businesses.


The Canadian government also has put billions towards loans to help businesses.


Liquidity injections

Central banks around the world used capital injections to support liquidity in stressed financial markets. The European Central Bank, People's Bank of China, and Saudi Central Bank have all pumped additional liquidity into their financial systems in recent weeks through repurchase agreement (repo) operations and asset purchases[3]. In Germany, companies suffering from a liquidity crunch can receive preferential loans through the state-run Kreditanstalt fuer Wiederaufbau. US added $1.5 trillion of liquidity to the banking system[4].

Interest rate cuts

The International Monetary Fund (IMF) announcement on March 4, included $10 billion of zero-interest loans to the poorest IMF member countries. In many countries, the interest rate sits near zero for the first time since 2008. Saudi Arabia, United Kingdom (UK), Canada, South Korea, South Africa, and Australia are among countries, who have also slashed their interest rates to new lows. Japan announced a new program of 0% interest loans to increase lending to businesses. Australia lowered interest rates twice by 0.25% to bring it to 0.25%. In March, Canada announced, an additional unscheduled interest-rate cut of 0.50% to bring it down to 0.25%.

Stimulus packages

Canada, Russia, and Australia are among many countries who have enacted stimulus plans aimed at providing relief for ailing sectors and citizens. The packages of financial support for small businesses range from assisting targeted industries like airline and hospitality businesses, to payments for the heath sector industry, to assist in hiring or investing in equipment.


The UK brought forward a package of measures to protect renters[5]. Bangladesh and Pakistan announced bailout/stimulus packages specifically targeting agriculture and export-oriented industries. Japan included appx. $4 billion (430 billion yens) for several programs including boosting mask production and stopping the virus from spreading into nursing homes[6].


Payroll, wage and cash subsidies

Canada’s wage subsidy offers 75 percent of eligible remuneration on the first C$58,700 per employee, maxing out at C$847 per week. The program would be in place for a 12-week period, from March 15 to June 6, 2020[7].


On March 22, Australia put forward a second stimulus package worth billions of dollars including, among other things cash payments equal to payroll withholding for small businesses. This is in addition to payments to small businesses to encourage hiring[8]. On March 30, the Australian government announced a third stimulus package which includes a plan to offer businesses payments of $913 every two weeks to cover payrolls[9]. UK has a program to issue grants to companies covering up to 80% of worker's salaries if companies keep them on payrolls rather than lay them off. It will be up to $3,046 a month per person[10].


The US put $500 billion in direct payments, including more than a $1000 payment to all US adults, excluding millionaires and billionaires[11]. The UK and Germany announced cash grants to small businesses. Germany announced $55 billion to help small businesses and the self-employed avoid bankruptcies with cash payments up to $16,225[12]. Japan announced up to $2,800 per household that suffered income declines from the pandemic[13]. Hong Kong announced $1200 cash subsidy to all adult permanent residents, paying one month's rent for people living in public housing and extra month's worth of payments to people collecting old-age or disability benefits.


India’s economic relief package provides immediate income and consumption support to the poor, women, and workers affected by the three-week nationwide lockdown[14]. India is giving free grain and other staples for poor families for three months, One-time cash payment to 30 million senior citizens, front-loading cash payments to 87 million farmers as part of an existing program, free cooking gas to women in rural areas for three months, and creating new programs to establish a fund to help construction workers effected by the quarantine and a $22.6 billion economic stimulus plan that provides direct cash transfers and food security measures, offering relief to millions of poor people hit by a nationwide lockdown triggered by the coronavirus pandemic[15]. China have been giving out prepaid spending vouchers to boost consumer spending, but the amounts are relatively small.

New tax provisions and cuts

Many countries have turned to business-specific tax cuts to keep firms above water as many are forced to shut their doors. Canada, India and UK are among the countries announcing tax and other relief measures to businesses in millions and billions of dollars. The UK Chancellor revealed 20 billion pounds worth of tax cuts and grants for the leisure, hospitality, and tourism industries that have faced a sudden stop in consumer demand amid the outbreak[16]. Canada and India have extended the deadlines for filing tax returns and remittances of payments declaring that penalties and interest will not be charged for extended terms as announced. Turkey and China have also issued tax cuts for struggling businesses. The UK is deferring the next quarter of Value Added tax estimated to be about $36.6 billion[17].


Without any reservations, funding for the health care system is the top priority, to protect the physical safety of citizens, but as governments observe the fiscal livelihood in industries which are key economic drivers more announcements are imminent. Though governments are undertaking initiatives to support the economy with monetary and fiscal measures, sooner or later the limits with funds and debt ceilings will curb the support. In Canada, a close look at the economic functioning of the provinces and territories, will determine the big picture based on the factors driving the economy of each region ranging from, but not limited to, forestry, fishing, tourism, resource and mining. However, many sectors and businesses will suffer neglect. Businesses need to look positively and creatively to face these challenges. Over time, new and different modes of operations will develop as concentration will change from sector to sector. If history is any evidence, Microsoft, Apple, Amazon and Netflix are just a few of the iconic companies that leaped out of terrible economic times. Among many other successful stories, Uber, Airbnb, and Groupon were founded in the midst or immediate aftermath of the Global Financial Crisis of 2007-2009. Given past experiences, businesses need to think constructively to make significant breakthroughs.

Note: Dollars amounts are mostly in US dollars unless stated otherwise e.g. Canadian dollars are presented as C$. There are frequent changes by governments to their announcements. This document has been prepared for general informational purposes only. This document is not intended to be relied upon as accounting, tax, or other professional advice.

[1] https://www.reuters.com/article/us-health-coronavirus-india-stimulus/india-outlines-22-6-billion-economic-stimulus-to-help-poor-hit-by-lockdown-idUSKBN21D0YK [2] https://www.thedailystar.net/coronavirus-deadly-new-threat/news/pm-announces-tk-5000cr-stimulus-package-export-oriented-industries-1885813 [3] https://business.financialpost.com/pmn/business-pmn/cash-and-low-rates-how-g-20-policy-makers-are-stepping-up [4] https://thehill.com/policy/finance/487279-fed-to-spend-15t-to-pump-liquidity-into-financial-markets-amid-coronavirus [5] https://www.gov.uk/guidance/government-support-available-for-landlords-and-renters-reflecting-the-current-coronavirus-covid-19-outbreak [6] https://www.richmond-news.com/news/asia-pacific-business/japan-unveils-fresh-economic-package-to-offset-virus-damage-1.24094192 [7] https://www.canada.ca/en/department-finance/news/2020/04/government-announces-details-of-the-canada-emergency-wage-subsidy-to-help-businesses-keep-canadians-in-their-jobs.html [8] https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723 [9] https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723 [10]https://www.theguardian.com/uk-news/2020/mar/20/government-pay-wages-jobs-coronavirus-rishi-sunak [11] https://www.bloomberg.com/news/articles/2020-03-17/mnuchin-says-trump-wants-money-sent-to-americans-in-two-weeks [12] https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723 [13] https://www.reuters.com/article/us-health-coronavirus-japan-ldp/japan-pm-abe-agreed-to-2800-cash-payouts-to-households-ruling-party-official-idUSKBN21L0M2 [14] https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723 [15] https://www.reuters.com/article/us-health-coronavirus-india-stimulus/india-outlines-22-6-billion-economic-stimulus-to-help-poor-hit-by-lockdown-idUSKBN21D0YK [16] https://www.telegraph.co.uk/business/2020/03/17/markets-live-news-coronavirus-pound-euro-ftse-shares-flights/ [17] https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723

55 views
  • Facebook
  • Twitter
  • LinkedIn

©2020 by Chugh Consulting Limited.