How much money should be spent to fight the coronavirus?

The Coronavirus pandemic, which is wreaking havoc on around the world, continues to damage the country at the national level and the global economy and integration at the international level. The fight against the virus, on the one hand, has a reducing effect on the formation of budget revenues, on the other hand, increases budget expenditures. The negative impact of both is creating serious financial difficulties in several countries. Therefore, the International Monetary Fund (IMF) has announced an increase in financial assistance to developing countries to $ 1 trillion.[1] The IMF estimates that developing countries need to spend $ 2.5 trillion to fight the coronavirus.[2] The existence of unique and special funds of developed countries allows them to fight without the help of international financial institutions. Many of them are already preparing for the impending economic crisis, strengthening the fight against the coronavirus, as well as announcing aid packages to the affected population and businesses. The main purpose of these programs is to maintain a balance between aggregate demand and aggregate supply in times of crisis, to form a system of protection against the effects of the crisis.

Following discussions in this direction in Azerbaijan, Order of the President of the Republic of Azerbaijan No. 1950 was signed on March 19, 2020, on a number of measures in connection with the reduction of the negative impact of the coronavirus (COVID-19) pandemic and, consequently, the sharp fluctuations in world energy and stock markets on the economy of the Republic of Azerbaijan, macroeconomic stability, employment issues, and business entities in the country.[3] According to the order, 1 billion AZN was allocated to the Cabinet of Ministers of the Republic of Azerbaijan from the 2020 state budget of the Republic of Azerbaijan to finance measures in this area. In addition, the Fund to Support Fight against Coronavirus[4] was established by the Decree[5] of the President of the Republic of Azerbaijan dated March 19, 2020, on measures to protect the health of the population and strengthen the fight against coronavirus infection in the Republic of Azerbaijan. As of April 5, 2020, the support fund received 108,898,312 AZN, of which 20 million AZN was allocated from the President's Reserve Fund[6], the remaining 82,469,504 AZN were donations from legal entities and 6,428,808 from natural persons[7]. The fund is intended to be used to reward and provide financial assistance to medical workers in the fight against coronavirus; to improve the infrastructure and strengthen the material and technical base of medical institutions; to form the special regime medical institutions; to organize and implement control and monitoring; to finance scientific research in the field of medicine; to train medical specialists; in campaign and enlightenment work.[8]

The funds allocated for the measures taken to combat the coronavirus in different countries can be found in Table 1.

Table 1. Funds allocated for measures to combat the coronavirus in different countries, their distribution per capita, and their share in GDP

CountriesAllocated funds($ 1 billion)Amount per capita($)Share in GDP(%)
USA2,2006,67712.0
Germany811.09,78221.0
China344.12402.4
Spain220.04,68715.8
Australia213.68,47562.1
Japan138.01,0912.77
Great Britain122.71,8354.34
Canada58.01,5433.38
France48.67251.79
Switzerland33.03,8504.69
Italy28.04625.63
Kazakhstan10.0555.55.88
Russia4.027.51.75
Azerbaijan0.6601.27

As can be seen from the table, although the United States is the leading country in terms of the amount of funds allocated among different countries, in terms of per capita and share in GDP, the largest amount of funds was spent in Germany. As for Azerbaijan, in terms of per capita funds, although we are ahead of Russia, we lag behind Kazakhstan and all other countries. Azerbaijan ranks last among 14 countries for comparison in terms of the share of funds allocated to measures to combat coronavirus in GDP.

The reason why Azerbaijan spends less money on the fight against coronavirus than other countries can be explained by a dual approach to business and the population. Such that in the Action Plan of the Cabinet of Ministers, even individual (micro) entrepreneurs who are significantly affected by the coronavirus are differentiated when allocating aid in connection with the implementation of paragraph 10.2 of the Order of the President of the Republic of Azerbaijan No. 1950 "On a number of measures to reduce the negative impact of the coronavirus (COVID-19) pandemic and, consequently, sharp fluctuations in world energy and stock markets on the economy of the Republic of Azerbaijan, macroeconomic stability, employment issues, and business entities in the country" dated March 19, 2020.[9] Such that this support applies only to those who will pay taxes, compulsory state social insurance, and unemployment insurance in 2019. Thus, a large group of individual (micro) entrepreneurs was excluded. In addition, a similar approach is applied to employees of medium and large businesses who are significantly affected by the coronavirus. Such that although a certain part of the salary of hired employees working in the areas affected by the pandemic is expected to be paid, there is no payment for illegal workers working in those areas. This ultimately serves to limit the scope of the Action Plan and reduce the funds to be allocated from the 2020 state budget.[10]

I think that the amount of funds allocated in this direction should be increased and its scope should include all business entities, regardless of previous tax and social insurance payments, as well as legal and illegal workers in the sector, affected by the negative effects of the coronavirus. Because both businesses and all their employees are affected by the crisis. On the other hand, we are talking about state aid, the allocated funds are not a loan, and it is not the bank that allocates it so that the decision is based on the customer's debt history. Such an approach is unacceptable, especially in the current crisis.

 


[1] https://www.imf.org/en/News/Articles/2020/03/23/pr2098-imf-managing-director-statement-following-a-g20-ministerial-call-on-the-coronavirus-emergency

[2] https://www.imf.org/en/News/Articles/2020/03/27/sp032720-opening-remarks-at-press-briefing-following-imfc-conference-call

[3] https://president.az/articles/36228

[4] http://covid19fund.gov.az/az/

[5] https://president.az/articles/36216

[6] https://president.az/articles/36215

[7] http://covid19fund.gov.az/az/donation

[8] https://president.az/articles/36217

[9] https://cabmin.gov.az/az/document/4341/

[10] http://e-qanun.az/framework/43943

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