Staff Discussion Notes Volume 2022 Issue 003: The State as Financier of Last Resort (2022)

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The State as Financier of Last Resort

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Bryn Battersby

Bryn Battersby
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Mr. Raphael A Espinoza

Mr. Raphael A Espinoza
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Jason Harris

Jason Harrisnull

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Mr. Gee Hee Hong

Mr. Gee Hee Hongnull

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Mrs. Sandra V Lizarazo Ruiz

Mrs. Sandra V Lizarazo Ruiz
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https://orcid.org/0000-0003-1124-8039

Mr. Paolo Mauro

Mr. Paolo Mauro
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, and

Amanda Sayegh

Amanda Sayegh
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Series:: Staff Discussion Notes

Volume/Issue:: Volume 2022: Issue 003

Publication Date:: 13 Oct 2022

DOI:: https://doi.org/10.5089/9798400220692.006

ISBN:: 9798400220692

ISSN:: 2617-6750

Pages:: 36

Keywords:: Fiscal policy; Below the line; Equity injections; Government guarantees; Government loans; Bailout; Fiscal risks; Public sector balance sheet; equity injection; credit guarantees program; pre-existing FSM framework; government loan; equity purchase; Loans; COVID-19; Solvency; Credit; Global

Legal-disclaimer:: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate.The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

Series:: Staff Discussion Notes

Volume/Issue:: Volume 2022: Issue 003

Language:: English

Publication Date:: 13 Oct 2022

DOI:: https://doi.org/10.5089/9798400220692.006

ISBN:: 9798400220692

ISSN:: 2617-6750

Pages:: 36

Keywords:: Fiscal policy; Below the line; Equity injections; Government guarantees; Government loans; Bailout; Fiscal risks; Public sector balance sheet; equity injection; credit guarantees program; pre-existing FSM framework; government loan; equity purchase; Loans; COVID-19; Solvency; Credit; Global

Legal-disclaimer:: Staff Discussion Notes (SDNs) showcase policy-related analysis and research being developed by IMF staff members and are published to elicit comments and to encourage debate.The views expressed in this Policy Discussion Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

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During the COVID-19 pandemic and global financial crisis, governments swiftly served as financiers of last resort through large financial support measures (FSMs) such as loan and guarantee programs and equity injections in firms. This Staff Discussion Note argues that such FSMs prevented bankruptcies and attenuated the recession by increasing firms’ liquidity, reducing risk premiums, and boosting confidence. But FSMs also carry large and long-lasting fiscal costs and risks. The note presents recommendations for managing the legacies of the COVID-19 programs and preparing for future crises. Ideally, FSMs should be assessed and included in budget plans, though a balance needs to be struck between speed and scrutiny.

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Staff Discussion Notes

ISSN:: 2617-6750

Publisher:: International Monetary Fund

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