Question

Fiscal Policy in Response to the Coronavirus Crisis:

Many governments’ economic policy responses to Covid -19 have been rapid and extensive. The fiscal packages so far have aimed at cushioning the immediate impact of the sudden drop in economic activity on firms and households, and to preserve countries’ productive capacity. Among the measures introduced thus far by most countries are:

1. Maintaining business cash-flow,
2. implementing wide-ranging measures to help businesses retain their workers,
3. Providing income support to households, and
4. Easing access and expanding eligibility to sick-leave benefits and broadening the coverage of unemployment benefits to self-employed workers are amongst these.

(A) Your first task is to provide in some details on the government of Canada fiscal measures regarding the above four policy categories, since the outbreak of Covid-19 in March. (400 words limit)

Answer 1

Canada has dealt with the Corona virus crisis head-on since the onset of the pandemic, making it one of the best performing countries over this period.

The country has adopted a dovish monetary policy including over CA$214 billion in direct support to its citizens, and CA$85 billion in tax deferrals, subsidies and other liquidity injections, as of August 2020. The country also announced 10% wage subsidy to help organizations retain their workers, thereby reducing unemployment during these tumultuous times.

To sustain its small scale business structure, Canada announced upto 25% incentives under Canada Emergency Business Structure. Direct transfers under the Canada Emergency response benefit included CA$2000 transfer for a four week period. In addition to this, several businesses benefitted from tax deferrals and debt relief packages, allowing them to remain operational during the economic slump.