Step 1: Properly assess scope and scale of needed increase in expenditure
Step 2: Carry out an assessment of fiscal space available for increasing spending
Step 3: Analyse in depth policy priorities and available policy measures
By Shabiya Ali Ahlam
As the global economy enters a deep economic recession, with the possibility of a financial crisis, the United Nations (UN) asserted the governments across the world must adopt a three-step approach for the socio-economic response to the coronavirus (COVID-19) crisis.
“COVID-19 is wreaking havoc on already weak economies through containment measures put in place to control its spread. This unprecedented crisis requires unprecedented measures—a massive counter-cyclical fiscal and financial effort is urgently needed everywhere,” the UN said in its latest framework that was conceptualised to assist governments to steer through the crisis whilst placing people at the core of its efforts.
Outlining the three-step approach, the UN highlighted that the first step is to conduct a rapid assessment of the potential impact of the crisis so that the dependence necessary to contain the same can be quantified.
“To properly assess the scope and scale of the needed increase in expenditure, a clear understanding of the various channels of economic impact is essential,” the agency said.
The second is to carry out an assessment of the fiscal space available for increasing spending, as it will in large part determine the government’s capacity for action.
According to the UN, large-scale fiscal measures, supported by targeted monetary easing, will be needed to contain the spread of the disease, ease the shock to jobs, reduce layoffs and guarantee minimum living standards. It stressed this could be facilitated with a special focus on vulnerable population groups.
The third and final step nations should embark on is to carry out a comprehensive analysis of policy priorities and available policy measures, considering both financing and implementation constraints faced by governments.
The agency added that the key implications of the proposed policy measures will need to be analysed to ensure that the policymakers are aware of policy trade-offs and that the desired impacts of such measures are sustained over time, without causing economic and social instability and environmental degradation.
For this, the policymakers will need to consider the impact on fiscal and public debt positions, the UN said.
“Several developing countries and countries with economies in transition will need debt relief and/or deferral of debt payments or debt cancellations,” the UN said while opining that such measures could be coordinated with multilateral organisations such as the International Monetary Fund, World Bank Group and other multilateral development banks and groups of countries, such as G-20.
The agency assured that the United Nations Development System (UNDS) would continue to assist countries to conduct development finance assessments and to design and implement Integrated National Financing Frameworks (INFFs) in pioneer countries.