Coronavirus: Governments send citizens cash to ease economic stress

Governments across the world are trying to adapt to the coronavirus pandemic by creating new protection programs and transferring cash to their citizens, but low-income countries are still unprepared, according to a new report from the International Labour Organization (ILO).

Coronavirus has ravaged the global economy, shutting businesses and borders and leading to a dramatic rise in unemployment. In response, 84 countries have taken steps to protect their own, especially poorer citizens, in response to the global pandemic by introducing or adapting social protection and jobs programs. Of these, 50 are newly introduced cash transfer programs, reported the ILO.

The US recently made headlines for announcing its $2 trillion stimulus package in which it would send $1,200 to American adults and $500 for children.

COVID-19, has not only affected the most vulnerable, it has hit all sectors of society, making protection programs important to help ease the economic impact of the crisis.

“Social protection at this stage isn’t just to protect the poor, but it’s also to sustain living standards across the income distribution brackets and realizing that this crisis affects everybody in society,” Luca Pellerano, senior social protection specialist at the International Labour Organization Regional Office for Arab States told Al Arabiya English.

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The 238 programs in place globally are “a fitting testament to the dynamism of pandemic-related responses in the sector,” read the March 27 report titled Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measure.

Governments transferring money to citizens

These new programs involve some form of direct money transfer from governments to citizens, a shift away from traditional ideas of fiscal discipline.

The ILO found that 50 out of 97 cash transfer schemes in 58 countries were introduced as a response to COVID-19, including in countries as diverse as Ecuador, Peru, Iran, Jordan, and Italy. In 35 of these countries, the programs, like the one in the US, were ushered in as a response to coronavirus.

Cash transfer programs are typically used to provide victims of humanitarian crises or natural disasters with money to help them get through difficult times where many have lost jobs and means of livelihood.

Though their effect is debated in policy circles, cash transfer programs are designed to allow those impacted by crisis to purchase essentials that in turn help keep the economy going. Informal workers left out of these programs, may still indirectly benefit as people continue to spend money, Pellerano said.

The report also identified two one-off universal basic income schemes in Hong Kong and Singapore, where governments are giving citizens a basic amount of money each month to sustain themselves without work. In Honk Kong, permanent residents over the age of 18 will receive $1,280. The program which will cost around $71 billion is expected to benefit about 7 million people.

The rapid shift to cash transfer programs is a result of the economic damage caused by coronavirus, where many have now found themselves out of work and buying necessities has become harder, especially for those without any safety net.

“This is why countries around the world putting strict fiscal discipline aside at this stage and are finding all possible means to pump money into the economy, and particularly into the pockets of workers and families,” Pellerano said.

Other countries take different approaches

Cash transfer programs are one way countries are trying to bludgeon the economic impact of coronavirus, but such measures rely on governments being able to give money directly to citizens and are too expensive for some countries.

Instead, some countries have introduced less universal measures, but have put in place programs such as childcare vouchers, assistance for homeless populations, and utility subsidies that help cover essential services like electricity. In Bahrain, the Electricity and Water Authority announced that will pay individual and businesses’ utility bills for three months beginning in April.

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Others have dramatically ramped up existing assistance programs by increasing coverage, upping benefit levels, issuing payments in advance, cutting administrative red tape, and adapting existing support schemes for COVID-19 response, the report found. Some countries, like Ireland, Portugal, and New Zealand, have even extended coverage to self-employed workers. India has begun to offer support to workers in the informal sector, according to the report.

Low-income countries lag behind

Despite new programs in over 80 countries, no low-income country has yet put any coronavirus-related protection programs in place for vulnerable populations.

High-income countries are responsible for 33 percent of social assistance programs, with the remainder in middle-income countries – and none in low-income countries. In 2019, 31 countries were considered low-income by the World Bank and include countries such as Afghanistan, Syria, and Yemen.

For example, there are currently no protection programs in place in any of those three countries due to ongoing conflicts that have led to weak or non-functioning institutions, dilapidated health care systems, and a systemic inability to test for the coronavirus.

“Many countries around the world, including middle and upper income countries, are taking ambitious steps to finance these measures without regard to deficit or to the government balance sheet, but this is not an option for many countries in the [Middle East] region,” said Pellarano.

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