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The State as Financier of Last Resort

Author

Listed:
  • Bryn Battersby
  • Mr. Raphael A Espinoza
  • Jason Harris
  • Mr. Gee Hee Hong
  • Mrs. Sandra V Lizarazo Ruiz
  • Mr. Paolo Mauro
  • Amanda Sayegh

Abstract

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.

Suggested Citation

  • Bryn Battersby & Mr. Raphael A Espinoza & Jason Harris & Mr. Gee Hee Hong & Mrs. Sandra V Lizarazo Ruiz & Mr. Paolo Mauro & Amanda Sayegh, 2022. "The State as Financier of Last Resort," IMF Staff Discussion Notes 2022/003, International Monetary Fund.
    • Handle: RePEc:imf:imfsdn:2022/003
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