"Narrative Summit" Releases 2025 Recommendations to Cement Egypt's Position as a Global Tourism Destination    Egypt, S.Arabia step up trade ties through coordination council talks    Egypt reviews progress on $200m World Bank-funded waste management hub    Egypt urges Israel to accept Gaza deal amid intensifying fighting    Egypt, ADIB explore strategic partnership in digital healthcare, investment    SCZONE, Tokyo Metropolitan Government sign MoU on green hydrogen cooperation    Egypt welcomes international efforts for peace in Ukraine    Al-Sisi, Macron reaffirm strategic partnership, coordinate on Gaza crisis    Contact Reports Strong 1H-2025 on Financing, Insurance Gains    Egypt, India's BDR Group in talks to establish biologics, cancer drug facility    AUC graduates first cohort of film industry business certificate    Egyptian pound down vs. US dollar at Monday's close – CBE    Egypt's FM, Palestinian PM visit Rafah crossing to review Gaza aid    Egypt prepares unified stance ahead of COP30 in Brazil    Egypt recovers collection of ancient artefacts from Netherlands    Egypt harvests 315,000 cubic metres of rainwater in Sinai as part of flash flood protection measures    Egypt, Namibia explore closer pharmaceutical cooperation    Fitch Ratings: ASEAN Islamic finance set to surpass $1t by 2026-end    Renowned Egyptian novelist Sonallah Ibrahim dies at 88    Egyptian, Ugandan Presidents open business forum to boost trade    Al-Sisi says any party thinking Egypt will neglect water rights is 'completely mistaken'    Egypt's Sisi warns against unilateral Nile measures, reaffirms Egypt's water security stance    Egypt's Sisi, Uganda's Museveni discuss boosting ties    Egypt, Huawei explore healthcare digital transformation cooperation    Egypt's Sisi, Sudan's Idris discuss strategic ties, stability    Egypt to inaugurate Grand Egyptian Museum on 1 November    Greco-Roman rock-cut tombs unearthed in Egypt's Aswan    Egypt reveals heritage e-training portal    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Fiscal policy key to saving lives during COVID-19 pandemic: IMF's Mauro to DNE
Policymakers should offer emergency protection lifelines through temporary, timely, and targeted fiscal measures, says IMF's Deputy Director of Fiscal Affairs
Published in Daily News Egypt on 15 - 04 - 2020

Governments, particularly in developing countries such as Egypt, can take steps to protect their citizens from the impact of the ongoing coronavirus (COVID-19) pandemic, says Paolo Mauro, Deputy Director of the Fiscal Affairs Department at the International Monetary Fund (IMF).
In an interview with Daily News Egypt, Mauro outlines those steps and how governments can use systems currently in place to minimise the economic damage.
What are the fiscal policies that have been put in place to mitigate the impact of the coronavirus, especially in countries like Egypt?
Fiscal policy is the key to saving lives and protecting people from the damage inflicted by the COVID-19 pandemic.
Governments should finance additional health/medical resources, as much as needed. Policymakers should offer emergency lifelines through timely, temporary, and targeted fiscal measures to protect people from losing jobs and incomes, and viable companies from bankruptcies.
These actions would limit permanent scarring of economies. Relief is especially needed for the most vulnerable and liquidity constrained individuals and businesses, such as daily workers and SMEs, particularly in the worst affected sectors. Authorities in developing countries could use measures such as expanded unemployment benefits, cash transfers for low income households or irregular workers, and tax relief for small firms. The challenge is often greater in emerging markets and developing economies that have more difficulty in accessing finance and, in some cases, face sharp drops in revenues from commodity market or tourism.
Global coordination can help achieve a universally low-cost vaccine and medicine, and support developing countries – especially those with limited health capacity – through aid, medical resources, and concessional emergency financing.
Which is more effective as an economic policy, business subsidies and tax relief for companies to preserve employment or direct cash transfers to households?
Right now, the objective is to save lives and livelihoods, not to stimulate demand.
As in other developing economies with less developed social safety nets, the effectiveness of fiscal support can be enhanced by linking additional transfers to existing programmes. For example, additional transfers through the Takaful and Karama benefit programmes in Egypt seem appropriate to protect people's livelihoods.
On the revenue side, deferrals of taxes and social security contributions are common tools among countries, to help maintain the cash flow for people and firms in difficult times. Profit-based tax advantages such as tax holidays should be avoided because they are not linked to the expenditure effort and would disproportionately reward businesses with the greatest profits.
All fiscal measures should be properly assessed and disclosed. Fiscal risks should be monitored to ensure transparency, good governance, and accountability.
Another objective is to promote a swift recovery once the pandemic is under control. Support should be timely, targeted, temporary, and transparent. The choice of policies and tools will depend on the country circumstances as they should use what is readily available given the urgency. Most countries will use a mix of support to households and firms.
Support to households should be targeted to ensure access to basic goods and services. Actions include tax deferrals, cash transfers, extended unemployment benefits, and social assistance. These measures truly are emergency lifelines aimed at families that have lost jobs or sources of income.
In countries with large informal sectors, support to individuals through the social protection system should play a prominent role. If a social cash transfer system already exists, one option is to increase transfer amounts and ease eligibility criteria. If no cash transfer system exists and administrative capacity is weak, an alternative is to subsidise utility (or other basic spending items) bills. In some cases, fintech might also help. If mobile payments are well-developed, the government might use this existing infrastructure for cash transfers.
For firms, the objective is to avoid permanent scarring. Fiscal policies can help preserve employment and wages while maintaining capacity that will be crucial for recovery. That includes avoiding unnecessary bankruptcies leading to job losses and liquidation of assets. Assistance to firms can help preserve — indeed can be made conditional on preserving —jobs.
It is important for all these policy tools to embed clear phasing-out mechanisms at the outset, to ensure that they facilitate rather than impede the eventual recovery.
How can central banks balance enormous fiscal efforts with preventing interest on government debt to soar and getting debt-to-GDP ratio unchecked?
In emerging markets and developing countries, ensuring that inflation expectations are anchored is particularly important, not only because higher prices reduce purchasing power, but also because higher inflation puts pressure on the exchange rate. The increase in public debt is likely to be one-off due to the temporary nature of the pandemic shock. Even so, the large cost of these fiscal measures should be embedded in a medium-term fiscal framework, and measures such as public guarantees should be transparently managed and recorded.
Monetary authorities will face a balancing act in that context. Reducing interest rates would support the economy and the fiscal effort, but this would have implications for the exchange rate, with associated effects on the burden of foreign currency debt. Selling foreign exchange to maintain orderly market conditions can on occasion help navigate that trade-off, but central banks will need to use caution to preserve scarce foreign exchange reserves.
What should developing countries, Egypt in particular, do to help their economies recover in the post-pandemic period?
The actions governments take now will determine the speed and strength of their recovery in the post-pandemic period. Policies that support households and firms in order to preserve the complex web of relationships in the economy (for example, between firms and workers, firms and banks), and the incomes of families during the pandemic, will facilitate the subsequent recovery as the pandemic recedes. As such, during this emergency, policymakers should do whatever it takes, although they should also keep the receipts. This means fully accommodating spending on health and emergency services and providing lifelines to hard-hit households and businesses. It also means deploying any measures in a temporary, transparent, and efficient way to minimise fiscal risks.
In Egypt, the government has announced a fiscal package amounting to 2% of GDP. This includes additional allocations to the health sector, an expansion of cash transfers for vulnerable households, and targeted support for workers and firms in the most severely hit sectors, such as tourism. To provide liquidity support, the authorities have also extended deadlines for income tax payments and announced a temporary real estate tax exemption. These are steps in the right direction.
Turning to developing economies more generally, where possible, the temporary deterioration of the fiscal deficits should be financed from concessional sources. In this regard, international support will be key to raise much needed health and budget financing.
Once the health crisis has waned, there will be a need for developing economies to put their fiscal position back on a sustainable path. The composition of fiscal consolidation should rely primarily on improving the tax capacity and efficiency of current spending to minimise the effects on growth, while safeguarding and expanding much needed investments in people and infrastructure to meet the Sustainable Development Goals.


Clic here to read the story from its source.