IMF: Fiscal Policies to Contain the Damage from COVID-19

Vitor Gaspar, W. Raphael Lam, and Mehdi Raissi

In times of pandemic, fiscal policy is key to save lives and protect people. Governments have to do whatever it takes. But they must make sure to keep the receipts.

The Fiscal Monitor shows how policymakers can offer emergency lifelines to: save lives; protect people from losing jobs and incomes, and companies from bankruptcies; and enable a recovery.

So far, countries have taken fiscal actions amounting to about $8 trillion to contain the pandemic and its damage to the economy.

Emergency lifelines provided globally include higher spending and foregone revenues ($3.3 trillion), public sector loans and equity injections ($1.8 trillion), and guarantees ($2.7 trillion). The Group of Twenty advanced and emerging economies are at the forefront with actions totaling $7 trillion. Fiscal support is also provided by automatic stabilizers—features of the tax and benefit system that stabilize incomes and consumption, such as progressive taxation and unemployment benefits.

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