Where are countries finding money to mitigate economic disaster

Globally, the COVID-19 pandemic management has led to tough public policies, including lockdowns that aim to reduce human interaction. These measures have had devastating effects, forcing businesses to lay off millions of employees around the world.

In order to mitigate the economic and social impacts, the government had to dip deep into its finances, which were, in some cases, already stretched. This is in addition to the resources governments must pump into their healthcare systems as they fight the pandemic. The additional costs come at a time of reduced tax collections due to the economic shutdown, which puts further pressure on the public. Conversation’s network of experts has analyzed these issues. This roundup includes some of the most important articles that were published during the past week. The papers cover the national budgets during COVID-19. They also discuss how remote work is increasing inequality.

Here is our weekly roundup of expert information on the coronavirus.

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What various countries are doing

The government has two options for financing additional expenditures – either by raising taxes or borrowing more money.

Indonesia decided to issue bonds as part of a stimulus package in order to combat the effects of COVID-19. Nurhastuty Wardhani says that the US dollar denomination and its long-term nature will likely be a burden for future generations.

Argentina seeks ways to Tax its way out of the current Economic Crisis caused by COVID-19. Matt Barlow and Alejandro Milciades Pena explain why it is risky to tax a country with high taxes.

Ilan Noy says New Zealand needs to unleash aggressive but targeted spending. It will burden future generations more than any debt that governments may take on to keep businesses afloat or people on payrolls. Norman Gemmell describes the budget that the country should have in the future as it prepares to exit its COVID-19 quarantine.

A few African countries are struggling with their public finances. Some of them have already been unable to pay back their debt. Has been calling for more debt relief. Rodrigo Olivares Caminal, however, argues that any moratorium proposal must include lenders and investors in order to avoid unintended consequences, which could be costly for Africa.

Canada forecasts an increase of 12 times in its budgetary deficit in this financial year. This is due to the dramatic drop in tax revenues and the government’s extraordinary expenditure measures in order to support the economic recovery and manage the pandemic. Patrick Lebland explains that this could not lead to higher taxes.

This graph shows the average rate of return on Government of Canada Marketable Bonds for three to five years. Since the beginning of the coronavirus epidemic, borrowing costs have decreased for the federal government. (Bank of Canada).

US Unemployment shot up from 4,4% in March to 14,7% in April. But Jay L. Zagorsky believes that unemployment will not reach the 25% level, which was born during the Great Depression of 1933. In his opinion, this crisis will last only a short time. The US economy will recover when people resume economic activities.

Peter Martin, a senior economist at the Reserve Bank of Australia, has predicted an overly optimistic growth in economic activity and employment for Australia’s next two years. Peter Martin compares the recovery to a flat-bottomed boat, drawing on what happened in 2008 after the global financial crash.

Alan Shipman warns against the dangers of further falls in consumer prices. If consumers believe that prices will continue to fall, they delay purchases of non-essential items in the hope that they can be purchased later at a lower price. This behavior leads to a decrease in consumer spending, which is one of the main drivers of economic activity.

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