G20 Finance Ministers and Central Bank Governors

COVID-19 – G20 Finance Ministers and Central Bank Governors April 15, 2020 Communique and G20 Action Plan

With the COVID-19 pandemic continuing to expand globally, with confirmed cases roughly 2.2 million on April 17 and with deaths exceeding 150,000, the world’s major economies continue to meet to promote policies and take individual and collective actions to address the health, social and economic impacts from the pandemic.

The G20 finance ministers and central bank governors met virtually earlier this week in an effort to push forward the overall objectives of G20 leaders. The communique that was released at the end of the virtual meeting included an Annex containing a “G20 Action Plan – Supporting the Global Economy through the COVID-19 Pandemic”. Below is a lengthy excerpt from the opening remarks of Saudi Arabia’s Minister of Finance, H.E. Mr. Mohammed bin Abdullah Al-Jadaan. Saudi Arabia holds the presidency of the G20 in 2020.

“We have just concluded our second G20 Finance Ministers and Central Bank Governors meeting on the margin of the 2020 spring meetings.

“This pandemic has already taken a great toll on our people and on their economic wellbeing, and we are still faced with extraordinary uncertainty about the depth and duration of this global pandemic.

“G20 Leaders, during the G20 Extraordinary Leaders’ Summit on 26 March 2020, recognized the gravity of the intertwined public health and economic crises. They have therefore committed to a globally coordinated response encompassing all necessary measures to combat the COVID-19 pandemic.

“More recently, G20 Finance Ministers and Central Bank Governors convened two extraordinary meetings to reach a consensus on a roadmap that will implement our G20 Leaders’ commitments in responding to COVID-19.

“Ministers and Governors’ urgent collective priority is to overcome the COVID-19 pandemic and its intertwined health, social and economic impacts. We are determined to spare no effort, both individually and collectively, to protect lives, overcome the pandemic, safeguard people’s jobs and incomes, support the global economy during and after this phase and ensure the resilience of the financial system.

“These are unprecedented times that demand swift, strong and significant global action. G20 members have injected over $7 trillion into the global economy to protect jobs, businesses and economies, billions have been allocated to the hunt for vaccines, research and development, protection of front line health workers and addressing trade issues on vital goods. Our
efforts must continue and be amplified.

“Ministers and Governors are committed to use all available policy tools to support the global economy, boost confidence, maintain financial stability and prevent deep and prolonged economic effects. As mandated by the extraordinary G20 Leaders’ Summit, today Ministers and Governors endorsed a G20 Action Plan in response to the COVID-19 pandemic.

“The Plan sets out our commitments to specific actions to drive forward international economic cooperation as we navigate this crisis and look ahead to a robust and sustained global economic recovery.

“Our aim, with the action plan, is to support the necessary health response and measures to increase our collective health resilience for the future, preventing a liquidity crisis turning into a solvency crisis, and a global recession becoming a global depression.

“Ministers and Governors have worked as well to deliver international financial assistance to the developing countries.

“Our actions today include a G20 initiative to suspend debt service payments for the poorest countries. All bilateral official creditors will participate in this initiative, which is an important milestone for the G20. The multilateral development banks are also expected to further explore the options for their participation in this initiative. And through this platform, I also call on private creditors, working through the Institute of International Finance, to participate in this initiative on comparable terms.
In addition, our collective actions today resulted in a comprehensive IMF financial support package and implementing urgently the support proposed by the WBG and the Multilateral Development Banks, amounting to USD 200 billion. Ministers and Governors have also taken exceptional measures to develop bilateral swap lines and repo facilities by central banks.”

The Communique and its Annexes can be found here, http://www.g20.utoronto.ca/2020/2020-g20-finance-0415.html, and the document is embedded below.

Communiqué_-G20-Finance-Ministers-and-Central-Bank-Governors-April-15-2020

The action plan provides a number of useful agreed actions to address the three broad needs for governmental action to respond to the pandemic – the health response (saving lives), pages 3-4; the economic and financial response (supporting the vulnerable and maintaining conditions for a strong recovery), pages 4-6; and returning to strong, sustainable balanced and inclusive growth once containment measures are lifted, pages 6-7. The action plan also reviews what is being done to provide international support to countries in need, pages 7-8, and actions needed to learn from the current pandemic, pages 8-9. Actions through multilateral organizations like the World Bank and IMF and additional actions through regional development banks provide hope for many least developed countries and many developing countries that assistance is forthcoming for each area of primary need. How successful the assistance will be will depend in part on private sector participation in debt payment deferrals and whether G20 governments increase the level of funding made available to the World Bank and IMF.

Not surprisingly, few of the actions outlined in the G20 action plan are trade specific. Most deal with the types of actions needed to help countries and territories get through the pandemic without the collapse of their economies. The focus is on financial needs. However, there is one trade specific action listed in each of the three areas reviewed.

For health – “We agree that emergency trade measures designed to tackle COVID-19, if deemed necessary, must be targeted, proportionate, transparent and temporary, and that they do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules. We are actively working to ensure the continued flow of vital medical supplies and equipment.” Page 4.

For economic and financial response – “As agreed by Trade and Investment Ministers, we will continue to work together to deliver a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.” Page 5.

For returning to strong, sustainable, balanced and inclusive growth — “We look forward to work by the G20 Trade and Investment Working Group to identify, among other things, longer term actions that should be taken to support the multilateral trading system and expedite economic recovery.” Page 6.

As reviewed in prior posts, the lack of greater specificity on trade actions the G20 can agree on reflects in part the existing flexibilities within the WTO permitting governments to take trade restricting actions for certain purposes, including protecting human health. It is also the case that a number of the G20 countries (e.g., China, EU countries, India and the US) have used export restraints already as part of their response to COVID-19. In such a situation, language other than that calling for trade restrictive measures taken to be “targeted, proportionate, transparent and temporary” was unlikely to win agreement from the G20 countries as a whole.

The G20 action plan released by the finance ministers and central bank governors constitutes important ongoing steps by the G20 to provide some coordinated leadership to addressing at least certain global needs flowing from the pandemic.

IMF, OECD and FSB policy tracking tools for government actions to address COVID-19

Attachment I to the G20 Action Plan are links to policy tracking sites on the IMF and the OECD websites. The Attactment also reviews information that is available from the Financial Stability Board. Pages 11-12 describes the policy tracking sites as follows:

“The International Monetary Fund: This policy tracker summarizes the key economic responses governments are taking to limit the human and economic impact of the COVID-19 pandemic as of end-March 2020. The tracker includes 193 economies. Available here: https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19.

“The Organization for Economic Co-operation and Development: This series brings together policy responses spanning a large range of topics, from health to education and taxes. It is updated daily. Available here:
http://oecd.org/coronavirus/en/#country-policy-tracker.

“The Financial Stability Board: Compilation of regulatory, supervisory and other financial policy measures in response to COVID-19. Circulated to FSB members.” See, e.g., FSB, COVID-19 pandemic: Financial stability implications and policy measures taken, https://www.fsb.org/wp-content/uploads/P150420.pdf

Below is an excerpt from the IMF tracker for China:

“China, People’s Republic of

“China has been hit hard by the outbreak with over 81,865 confirmed COVID-19 cases and 3,335 deaths as of April 9, 2020 (mainland). The government imposed strict containment measures, including the extension of the national Lunar New Year holiday (ending on Feb 2 extended from Jan 30), the lockdown of Hubei province, large-scale mobility restrictions at the national level, social distancing, and a 14-day quarantine period for returning migrant workers. The domestic transmission of the virus has slowed significantly, and mobility restrictions have been largely removed. while policy has tightened to contain the virus transmission of asymptomatic cases.

“Key Policy Responses as of April 9, 2020

“FISCAL

“An estimated RMB 2.6 trillion (or 2.5 percent of GDP) of fiscal measures or
financing plans have been announced, of which 1.2 percent of GDP are
already being implemented. Key measures include: (i) Increased spending on epidemic prevention and control. (ii) Production of medical equipment. (iii) Accelerated disbursement of unemployment insurance. (iv) Tax relief and waived social security contributions. The overall fiscal expansion is expected to be significantly higher, reflecting the effect of already announced additional measures such as an increase in the ceiling for special local government bonds of 1.3 percent of GDP, improvements of the national public health emergency management system, and automatic stabilizers.

“MONETARY AND MACRO-FINANCIAL

“The PBC provided monetary policy support and acted to safeguard financial market stability. Key measures include: (i) liquidity injection into the banking system via open market operations, including RMB 3 trillion in the first half of February and 170 billion in late-March, (ii) expansion of re-lending and rediscounting facilities by RMB 1.8 trillion to support manufacturers of medical supplies and daily necessities micro-, small- and medium-sized firms and the agricultural sector at low interest rates, (iii) reduction of the 7-day and 14-day reverse repo rates by 30 and 10 bps, respectively, as well as the 1-year medium-term lending facility rate by 10 bps, (iv) targeted RRR cuts by 50-100 bps for large- and medium-sized banks that meet inclusive financing criteria which benefit smaller firms, an additional 100 bps for eligible joint-stock banks, and 100 bps for small- and medium-sized banks in April and May to support SMEs, (v) reduction of the interest on excess reserves from 72 to 35 bps, and (vi) policy banks’ credit extension to micro- and small enterprises (RMB 350 billion).

“The government has also taken multiple steps to limit tightening in financial conditions, including measured forbearance to provide financial relief to affected households, corporates, and regions facing repayment difficulties. Key measures include (i) delay of loan payments and other credit support measures for eligible SMEs and households, (ii) tolerance for higher NPLs for loans by epidemic-hit sectors and SMEs, (iii) support bond issuance by financial institutions to finance SME lending, (iv) additional financing support for corporates via increased bond issuance by corporates, (v) increased fiscal support for credit guarantees, (vi) flexibility in the implementation of the asset management reform, and (vii) easing of housing policies by local governments.

“EXCHANGE RATE AND BALANCE OF PAYMENTS

“The exchange rate has been allowed to adjust flexibly. A ceiling on crossborder financing under the macroprudential assessment framework was raised by 25 percent for banks, non-banks and enterprises.”

As noted, the IMF tracks the same type of information for 193 economies. The IMF data do not include trade-related actions by governments.

More surprising is that the OECD policy tracker doesn’t review trade-related actions since the OECD does review trade policy issues within its overall activities. In an earlier post, I had noted that the OECD indicates that it shares trade information with the WTO, but neither the WTO nor the OECD present information is as detailed and comprehensive a way as the tracking done by the IMF or done by the OECD on matters they do cover. Below is the OECD tracking information for Italy as an example of the depth of information provided for each country monitored:

“Italy Beta Updated on 17-Apr-2020

Containment measures/Quarantine/Confinement


“On April 10, the government extended the lockdown to 3 May. People can only leave the home for prescribed, essential purposes. Movement out of the municipality of residence remains prohibited.

“On March 23, movements restrictions reinforced, with fewer exceptions and a limited range of industrial and commercial activities permitted to continue operating.

“Industrial and commercial activity prohibited apart from those assessed as ‘essential’, with a list that includes about 30% of private employment and activity.

Travel bans/restrictions

“Strict travel restrictions nation-wide, reinforced from March 23 and, on April 10, were extended to May 2. These prohibit movements out of the municipality where individuals reside. Non-nationals or residents cannot enter Italy except for limited, prescribed reasons.

Closure of schools/universities

“Closure of schools and universities from March 4 until April 3, extended to at least April 14.

Cancellation of public events / Closure of public places

“- Bars and restaurants along with many other retail trade activities (e.g. shopping centres; indoor and outdoor markets) closed from March 10 until at least 14 April, and all sporting competitions suspended over the same period along with other public gatherings.

“- All but prescribed essential production activities suspended from March 23, with the list of permitted activities further limited from March 26.

“- On March 30, closures extended from April 3 to 30 April for sports, bars and similar activities.

Support measures – Health

“EUR 3.2 billion for the national health service and to support civil protection. Within this package:

“- EUR 1.4 bn to raise funding for the health care system for 2020, including EUR 845 m to recruit 20 000 more health workers.

“- Ease burden of hospitals: dedicate entire facilities to patients infected with Covid-19, while redirected non-infected patients for other facilities.

“- Increased cleaning of public transportation facilities, such as metro transit, buses, boats.

“- Measures to increase purchases and production of medical materials (masks, ventilation machines).

“- Repurposing of medical equipment and buildings (e.g. hotels) for the medical emergency.

“- The production of face masks is incentivised

“- Retired medical personnel are encouraged to come back to work

“- Smart working has been extensively favoured, both in the private and in the public sector.

Fiscal measures – overall

“EUR 25 billion of measures, including EUR 20 billion of net debt measures. 1) EUR 3.2 bn for health care and civil protection; 2) EUR 10.3 bn for employment and incomes; 3) EUR 5.1 bn support to raise liquidity for businesses and households; 4) EUR 1.6 bn tax payment support. EUR 540 m for 60% tax credit on commercial rents.

Fiscal measures – people specific

“Over EUR 10 bn allocated:

“- EUR 5.0 bn to strengthen the wage supplementation scheme for furloughed employees, and increase to a last-resort fund for workers not qualifying for these measures. This includes about EUR 1.3 bn for ordinary wage supplementation schemes, EUR 300 m for wage supplementation schemes to firms that already participate in the ‘cassa integrazione guadagni straordinaria’ supplementation scheme, and EUR 3.3 bn for firms already that already participate in of the ‘cassa integrazione in deroga’. A Last Resort scheme is established for workers not qualifying (EUR 300 m).

“- EUR 2.3 bn for one-off EUR 600 payment to various categories of self-employed and seasonal workers. A Last Resort scheme has been established for those not qualifying.

“- EUR 400 m for one-year suspension in the repayment of real estate mortgages by workers having lost their job.

“- Allowance of EUR 500 per month for up to 3 months for self-employed workers in the municipalities most affected.

“- EUR 1.3 bn to strengthen childcare support for children up to 12 years old (15 extra days at a 50% wage replacement rate, compared with 0% or 30% of the ordinary leave) or, alternatively, a EUR 600 transfer to pay childcare services.

“- EUR 30 m for EUR 1000 childcare payment to employees in the healthcare and law enforcement sectors.

“- EUR 0.5 bn to raise by 12 days the paid leave for disabled workers and workers caring for a disabled relative.

“- EUR 130 m to extend sick leave to cover days spent in quarantine.

“- EUR 900 m for a EUR 100 one-off bonus to workers who continued to work at their workplace.

“- Moratorium on debt payments, including mortgages.

“- EUR 400 m for one-year suspension in the repayment of real estate mortgages by workers having lost their job.

“- Moratorium on debt payments, including mortgages.

Fiscal measures – company specific

“- EUR 540 m for 60% tax credit on commercial rents.

“- EUR 50 m for incentives to firms to sanitise workplaces.

“- Suspension for 2 months of tax and social security payments in the municipalities most affected.

“- For firms with an annual turnover below EUR 2 m, suspension of all the tax and social security payments coming due in March (valued at EUR 10 bn in deferred payments).

“- Non-application of withholding tax for professionals without employees, with revenues below EUR 400 000 until 31 May 2020.

“- Suspension of collection of tax collection files (valued at EUR 0.6 bn).

“- EUR 50 m allocation for one-year suspension in repayment of loans to Invitalia to support SMEs in the most affected municipalities.

“- Suspension of 2 months (until end of April) in the payment of the electricity, gas, water and waste bills in the most affected municipalities.

“- Increase to EUR 1.7 bn for the Fund to provide fee-free guarantee for SMEs loans. Eligibility has been enlarged, admission fees and costs reduced. Private individuals can contribute to the SMEs Fund’s financing. Maximum guarantees raised from EUR 2.5 m to EUR 5 m.

“- Further guarantees for firms most affected by the virus. Facilitate guarantees for self-employed workers, freelancers and individual entrepreneurs.

“- Suspension of 6 months (until end of September) of loan repayment by SMEs.

“- State guarantee for up to EUR 10 bn in new loans for medium-large firms.

“- EUR 500 m to support exporting firms.

“- Incentive to sell impaired loans (NPLs) by converting deferred tax assets (DTA) into tax credits for financial and industrial companies.

“- Establishment of a Fund to support the cultural sector. Increase in advances from the 2014-2020 Development and Cohesion Fund.

“- Increase to EUR 1.7 bn for the Fund to provide fee-free guarantee for SMEs loans. Eligibility has been enlarged, admission fees and costs reduced. Private individuals can contribute to the SMEs Fund’s financing. Maximum guarantees raised from EUR 2.5 m to EUR 5 m.

“- Further guarantees for firms most affected by the virus. Facilitate guarantees for self-employed workers, freelancers and individual entrepreneurs.

– Suspension of 6 months (until end of September) of loan repayment by SMEs.

“- State guarantee for up to EUR 10 bn in new loans for medium-large firms.
Information not available.

“- Increase to EUR 1.7 bn for the Fund to provide fee-free guarantee for SMEs loans. Eligibility has been enlarged, admission fees and costs reduced. Private individuals can contribute to the SMEs Fund’s financing. Maximum guarantees raised from EUR 2.5 m to EUR 5 m.

“- Further guarantees for firms most affected by the virus. Facilitate guarantees for self-employed workers, freelancers and individual entrepreneurs.

“- Suspension of 6 months (until end of September) of loan repayment by SMEs.

“- State guarantee for up to EUR 10 bn in new loans for medium-large firms.
Information not available.

Monetary policy / Macro-prudential regulation

“Information not available

“Less significant banks and non-bank intermediaries are allowed to operate temporarily below the level of the Pillar 2 Guidance, the capital conservation buffer and the liquidity coverage ratio. Their deadline to submit their revised NPL reduction plans is postponed to 30 June. Other reporting and inspection deadlines are delayed.”

World Customs Organization Tracks Certain Trade-Related Actions Related to COVID-19

In an earlier post, I had reviewed transparency concerns in tracking trade actions related to COVID-19. As the above information shows, other international organizations (IMF and OECD) provide pretty detailed information on certain aspects of government actions related to COVID-19. While the WTO has a page dedicated to COVID-19 and has compiled a list of notifications from Members of trade actions taken (both trade restricting and trade liberalizing), the data on the WTO website are limited. The limitation flows in large part from the failure of Members to provide full notifications. As mentioned, the OECD should be able to supplement what it puts out to include information on trade actions it has access to from OECD member governments.

Similarly, the World Customs Organization compiles customs related actions taken by governments on its website. The information on India is linked to below and then embedded. http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/facilitation/activities-and-programmes/natural-disaster/covid_19/best-practices_india_en.pdf?la=en.

best-practices_india_en

The International Trade Centre in Geneva has a “dashboard” that is updated daily showing COVID-19 temporary trade actions taken by governments. https://www.macmap.org/en/covid19.

It would useful if there was a compilation of trade-related actions from either the WTO or a consortium of international organizations so that there is much greater transparency on efforts (both trade restricting and trade liberalizing).

Conclusion

The COVID-19 data on confirmed cases show that the vast majority of the cases to date have been in Europe, the U.S., China and a few other countries although nearly all countries have some cases. With an unprecedented (at least in the last 100 years) pandemic, the breadth and complexity of the needs of G20 countries and the rest of the world are breathtaking. While some have criticized the G20 for the lack of specific commitments in the trade area of COVID-19 responses, the G20 Action Plan released earlier this week is an important step by the world’s major economies to address not only the health needs of the global community but also the interrelated economic survival of economies both within the G20 and around the world. While more undoubtedly needs to be done, the Action Plan is a start and will hopefully be updated and expanded in the coming weeks and months.