The State as Financier of Last Resort

Author: Bryn Battersby, Mr. Raphael A Espinoza, Jason Harris, Mr. Gee Hee Hong, Mrs. Sandra V Lizarazo Ruiz, Mr. Paolo Mauro, and Amanda Sayegh

The note presents recommendations for managing the legacies of the COVID-19 programs and preparing for future crises.

Volume/Issue: Volume 2022 Issue 003

Publication date:

ISBN: 9798400220692

$20.00

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Finance , Economics- Macroeconomics , Money and Monetary Policy , Public Finance , Economics / General , Fiscal policy , Below the line , Equity injections , Government guarantees , Government loans , Bailout , Fiscal risks , Public sector balance sheet , equity injection , credit guarantees program , pre-existing FSM framework , government loan , equity purchase , Loans , COVID-19 , Solvency , Credit , Global

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Summary

During the COVID-19 pandemic and global financial crisis, governments swiftly served as financiers of last resort through large financial support measures (FSMs) such as loan and guarantee programs and equity injections in firms. This Staff Discussion Note argues that such FSMs prevented bankruptcies and attenuated the recession by increasing firms’ liquidity, reducing risk premiums, and boosting confidence. But FSMs also carry large and long-lasting fiscal costs and risks. The note presents recommendations for managing the legacies of the COVID-19 programs and preparing for future crises. Ideally, FSMs should be assessed and included in budget plans, though a balance needs to be struck between speed and scrutiny.