The World Bank’s Board of Executive Directors has approved a first set of emergency support operations for developing countries around the world, using a dedicated, fast-track facility for COVID-19 (coronavirus) response. The first group of projects, amounting to 1.9 billion USD, will assist 25 countries and it is expected that by the end of April 2020, the World Bank will approve the support packages for the next 38 countries with a total capital of 1.4 billion USD.
WB support helps countries to overcome pandemic
Due to the increasing economic damage caused by the COVID-19 pandemic, many Governments have announced new policy packages to reduce the negative impacts of the disease. With its rich experience in supporting countries to cope with the avian influenza in 2004 and the global financial crisis in 2008, the World Bank has quickly collaborated with various Governments and international organizations, and provided emergency packages, policy analysis and other essential support in the health sector.
On March 3, 2020, the World Bank's Board of Directors announced the first emergency assistance package of 14 billion USD to assist developing countries to cope with the health and economic impacts of the epidemic; upon the announcement of the World Bank President at the G20 Leaders Meeting on March 26, 2020, the second support package worth 160 billion USD will be used to support countries in the next 15 months, and the third support package will be launched at the latest by June 2023 with the total value of up to 350 billion USD. The third package is expected to shorten the time of the countries’ economic recovery, support growth and development. And also in a recent press release on April 2, 2020, the World Bank Group President David Malpass said that the World Bank Group is taking broad, fast actions to reduce the spread of COVID-19. The World Bank offices in different countries have promptly discussed and agreed on how to deploy the resources from the existing programs to support countries to cope with the COVID-19 pandemic through restructuring, reallocating, activating emergency assistance provisions to help countries quickly recover their economies.
World Bank's assistance aims to focus on the following solution packages:
Support to meet essential medical needs: With the urgent needs of countries for medical equipment and gears, the World Bank is supporting the negotiations of medical expenses and transporting these equipment and gears to countries in the earliest time possible.
Support to cope with economic and social impacts: The World Bank has been coming up with scenarios to cope with the economic and social impacts for different countries. Accordingly, the policy recommendations made for countries have focused on supporting the following three groups of subjects: (i) The poor and vulnerable groups through living support allowances during periods of quarantine / wage reduction / job loss; (ii) The group of enterprises through short-term solutions such as tax reduction and credit access. The IFC and MIGA are the two organizations of the World Bank working quite effectively with announced support packages of up to 8 billion USD to support the business sector to meet short-term capital needs for production; (iii) Increasing the resilience to the economic shocks and shortening the recovery time.
Proposals for Vietnam
In order to support the Government in its efforts to minimize the economic damage brought by COVID-19, the proposed policy measures support both the supply and demand sides of the economy, but the initial focus should be on the supply side (the most affected industries) as demand stimulus measures may not be effective when travel and trade between different areas are limited. For this reason, the World Bank believes that solutions should be designed for each small phase. In the short term, although the fiscal policy is not too much influenced by the initial successes of the Government achieved after the fiscal policy reform in the recent period, increasing budget spending or reducing taxes without clear goals will create false signals for the private sector, thus the region may respond with more cautious behaviors, leading to less consumption and less investment.
The sequential approach can be divided into three steps. The first is to support the hardest-hit industries by combining tax breaks or extending the tax payment period, credit support and social security measures. The second step is to implement a number of stimulus measures, especially through accelerating the implementation of the public investment program. Finally, the third step will focus on structural reforms to reduce the vulnerability to similar shocks and helping Vietnam accelerate the transition to a middle-income and high-income economy over the next few decades. An economic support package with relatively favorable terms has also been proposed by the World Bank to the Government of Vietnam and is currently being considered in accordance with the domestic policy mechanism.
VA