Safeguarding governments’ financial health during coronavirus

In the wake of the coronavirus outbreak, governments have taken unprecedented steps to protect the health of their citizens and support their economies. They now need to take extraordinary steps to safeguard their own financial health through what could be a protracted period of economic disruption necessary to contain and eradicate the virus. This paper explores what policymakers today can learn from how governments coped with the economic and fiscal stresses associated with previous viral outbreaks over the past century.

While coronavirus is the first global pandemic of the 21st century, it is not the first viral outbreak which governments around the world have had to contend with. In just over a century, the world has seen another global pandemic in the 1918-19 Spanish flu and more localised viral outbreaks in the 2003 SARS outbreak in East Asia and the 2014-16 Ebola epidemic in West Africa. During all of these past outbreaks and even more during the current coronavirus pandemic, governments played a central role in not only treating the sick and containing the spread of the virus, but also in mitigating its impact on people, businesses, and the economy as a whole. To do so, however, governments have to keep their own finances in good health in the midst of unprecedented pressures on their expenditure, revenues, and traditional sources of financing.

The experience from these past viral outbreaks points to the following ten lessons for finance ministries to consider in calibrating their policy response to coronavirus: