Epidemics, of the size of Covid-19, have huge economic impacts – not just from the costs of managing the health of people, but stopping them, and keeping the economy working. The 10% fall in global stock markets since it became clear that Covid-19 would not be limited to China has boldly highlighted this.

Suppressing the epidemic, but allowing the economy to still function, requires key decisions, in which central banks and finance ministries play a part.

The role of fiscal and monetary authorities in managing an epidemic economy

The scope to use monetary policy to manage the economic impact of Covid-19 is limited. The fact that the underlying cause of the shock is an infectious disease outbreak (rather than a banking crisis, as in 2008-09) and nominal interest rates are currently close to zero in most major advanced economies reduces the effectiveness of monetary policy.

Since 2010, reductions in fiscal deficits mean there is more scope for supportive fiscal action. But even here, high public debt levels and the desire not to underwrite ‘zombie’ companies that may have been sustained by a decade of ultra-low interest rates remain constraints. 

However, outside broad based fiscal and monetary policies there are six ways in which finance ministries and central banks will play a critical role in responding to the crisis.

A first crucial role for finance ministries and central banks is in helping provide the best possible economic evaluation of strict containment measures (trying to isolate each potential case) versus managing the epidemic (delaying the spread of the virus, protecting the most vulnerable and treating the sick, while enabling the majority of people to get on with daily life). Given the economic consequences, they must play a full part, alongside health experts, in advising political leaders on this key decision.

Second, if large numbers of staff are required to work from home to manage the epidemic, they have the lead role in doing whatever is necessary to ensure that financial markets – and thus the wider economy – will continue to function smoothly.

Third, they need to ensure adequate funding for the public health response. Steps that can make an enormous difference to the success of containment strategies, such as strengthening surveillance, and guaranteeing the availability of testing kits and protective equipment for front line health workers, must not fail because of a lack of funding. 

Fourth, they have a lead role in designing targeted economic interventions for the wider economy. Some of these are needed immediately to re-enforce and incentivize strict containment strategies, such as ensuring that employees without full or adequate sick leave cover have the financial support to enable them to report and self-isolate when they get sick. 

Other interventions may help improve the resilience of the economy in accommodating moderate ‘social distancing’ measures; for example, by providing assistance to small firms to help them gear up for home working.

Yet others are needed, as a contingency, to safeguard the most vulnerable sectors (such as tourism, retail and transport) in circumstances where there is a prolonged downturn. The latter may include schemes to allow deferral of tax payments by SMEs, or steps to encourage loan extensions and other forms of liquidity support from the banking system, or by moves to underwrite continued provision of business insurance.

Fifth, national economic authorities will need to play their part in combatting ‘fake news’ through providing transparent and high-quality analysis. This includes providing forecasts on the likely economic impact of the virus under different scenarios, but also detailed information on the support and contingency measures they are considering, so they can be improved and refined through feedback. 

Sixth, they will need to ensure that there is generous international support for poor countries, by ensuring the available multilateral support facilities from the international financial institutions and multilateral development banks are adequately funded and fit for purpose. The World Bank has already announced an initial $12 billion financing package, but much more is likely to be needed.

They also need to support coordinated bilateral aid where this is more effective, as well as special measures to support particularly vulnerable groups, for example, in refugee camps and prisons. Given the importance of distributing sophisticated medical equipment and expertise quickly, it is also important that every effort is made to avoid delays due to customs and migration checks.

Managing the future

The response to the immediate crisis will rightly take priority now, but economic authorities must also play their part in ensuring the world finally takes decisive steps to prevent a repeat of Covid-19 in future.

The experience with SARS, H1N1 and Ebola shows that, while some progress is made after each outbreak, this is often not sustained. This epidemic shows that managing diseases is absolutely critical to the long-term health of global economy, and doubly so in circumstances where traditional central bank and finance ministry tools for dealing with major global economic shocks are limited.

Finance ministries and central banks therefore need to push hard within government to ensure sustained long-term funding of research on prevention and strengthening of public health systems. They also need to ensure that the right lessons are drawn by the private sector on making international supply chains more robust.

Critical to the overall success of the economic effort will be effective international coordination. The G20 was established as the premier economic forum for international economic cooperation in 2010, and global health issues have been a substantive part of the G20 agenda since the 2017 Hamburg Summit. At the same time, G7 finance ministers and deputies remain one of the most effective bodies for managing economic crises on a day-to-day basis and should continue this within the framework provided by the G20.

However, to be effective, the US, as current president of the G7, will need to put aside its reservations on multilateral economic cooperation and working with China to provide strong leadership.

Illicit finance not only threatens financial stability and inclusion but also provides support for terrorism and is a primary incentive for human trafficking, the illegal wildlife trade and narcotics smuggling. Frequently, actors capitalize on loopholes and inefficiencies resulting from the lack of a coordinated response to financial crime and an underpowered global system for tracking illicit financial flows. Enhanced public-private partnerships, in addition to investment in tackling financial crime from governments, international bodies and private industries, are necessary to develop regulatory frameworks, effective responses and valuable coordination between law enforcement, policymakers, regulators and financial institutions. But how should businesses structure their efforts so that their business interests are protected and the work they do is of use to others fighting financial crime?

This webinar will explore solutions to enable public-private partnerships to work together to combat financial crime. What do successful partnerships need from each side to ensure that the work being done is efficient and effective? How can the industry’s internal effectiveness impact the ‘real-world’ victims? And what barriers impede public-private partnerships operating as a force for good? 

This event is part of a fortnightly series of 'Business in Focus' webinars reflecting on the impact of COVID-19 on areas of particular professional interest for our corporate members and giving circles.

Not a corporate member? Find out more.

Ukrainians are accustomed to crisis. As COVID-19 spread, forest fires were raging in the Chernobyl exclusion zone, turning Kyiv into the most polluted city in the world. The fighting in Donbas continued, claiming the lives of more Ukrainian soldiers, bringing the total to more than 4,000 — and, on top of that, President Zelenskyy overhauled his government. So Ukraine is fighting three battles at the same time — war with Russia, the struggle against its own ineffective system, and now COVID-19.

Every crisis is a reality check — the coronavirus provoked and exposed the strategic vulnerabilities and deep-rooted features of Ukraine’s system of governance. Three trends have come to the fore. First, the inefficiency and paralysis of many state agencies, particularly the lack of coordination between them and the prevalence of vested interests. Second, the reliance of the country’s leaders on large financial-industrial groups (FIGs) to compensate for weak institutional capacity. Third, a strong societal and private sector mobilization to fill the gaps in the dilapidated public health system.

State agencies are rigid and ineffective. Despite the modern Prozorro digital public procurement system, and the government’s allocation of $2.5 million from the early days of the epidemic, the Ministry of Health blocked COVID-related purchases for over a month. This was a tactic by — now ex-minister — Yemets to pressure the state medical procurement agency into appointing a protégé of his as one of its deputy heads.

Lowest testing rate in Europe

Similarly, in some regions, notably Odesa, procurement stalled and orders went to politically connected businesses at higher-than-market prices. Lack of tests and laboratory equipment means Ukraine has administered only 72,000 tests within a population of 42 million to date — the lowest rate in Europe.

Doctors were given orders to ensure they only test patients in hospitals with COVID-19 symptoms and only those arriving from Asia, while ignoring the fact that millions of Ukrainian labour migrants were in Europe. Indeed, the first confirmed case was imported from Italy.

Ukrainian government and public health officials lack information to take informed decisions. There is no accurate electronic database of registered deaths and reporting is lagging behind events. Information on testing availability in the regions is missing.

Thirteen days after the first case of the virus was recorded, Zelenskyy exhorted business tycoons to come to the rescue. Taking a populist tone, Zelenskyy said ‘Ukraine has been feeding you for a long time and it is time that you helped the country’. The tycoons divided the regions among themselves to deliver relief efforts according to the location of their enterprises.

It is believed FIGs have donated around $25 million to procure testing kits, ventilators, personal protective equipment (PPE) and disinfectants. This may sound impressive, but many of those same tycoons actually owe millions to the state, some even billions, and cause serious problems by perpetuating the current rent-seeking system, where public resources benefit those groups resulting in serious social losses.

Reliance on these groups makes Zelenskyy a hostage to their favour in any potential reform efforts. It is a dangerous solution, as these tycoons often obstruct Ukraine’s economic development.

An alternative — and more transformative — trend of public-private partnerships is emerging in some regions. Across Ukraine, hundreds of small- and medium-sized enterprises (SMEs) have led efforts to deliver PPE, support the vulnerable with food supplies, and to procure ventilators for key hospitals.

They have mobilised hundreds of volunteers to deliver assistance and partnered with local non-profits. Fundraising initiatives have begun in Lviv, Odesa, Kyiv and Poltava with donations and expenditure has been posted online for transparency. Companies have repurposed to produce PPE kits and medical equipment. The efforts unfolded quickly and, in some cases, in smooth collaboration with municipal and regional authorities.

Ukraine cannot afford to ‘waste’ this crisis, which could help accelerate healthcare reform, decentralization, modernize governance, and boost citizen empowerment. But for this to happen, the country has to deploy a ‘smart response’.

Such ‘smart response’ means applying a resilience framework that nurtures the agility of the system of governance, ensures a diversity of actors in decision-making, supporting both self-regulation and better coordination. Rather than reaching out to tycoons, Zelenskyy should enter a coalition with true agents of change — SME leaders, volunteers, and mayors who have mobilized effective grassroots action. These actors demand a level playing field with accountable governance and effective state institutions.

Civic COVID-19 response hubs and local authorities should be joined in a network that spans the regions, and connected with the national agencies designing pandemic responses. For a national strategy to be effective, central headquarters should draw information from local communities and manage a ‘team of teams’ in a decentralised fashion.

Ensuring effective public service delivery without compromising integrity and keeping the risk of corruption low should also be a priority of political reform, with volunteers and the private sector ensuring civic oversight of both regional and national funding.

Civic engagement such as this can be transformative as it defies the Soviet legacy of paternalism and expands the belief among citizens that society can work for them. By assisting the relief effort, citizens are gaining valuable insights into quality of public services and participate in holding them to account.

Citizens are also developing a better understanding of the purpose of having effective armed forces, police, border guards and modern hospitals. They are coming to understand the value of taxpayer money and witnessing how corruption erodes institutions.

This survival mobilization — if properly harnessed by the state — could drive transformative change and make Ukraine more resilient, not just against present crises, but future ones too.

Ukrainians are accustomed to crisis. As COVID-19 spread, forest fires were raging in the Chernobyl exclusion zone, turning Kyiv into the most polluted city in the world. The fighting in Donbas continued, claiming the lives of more Ukrainian soldiers, bringing the total to more than 4,000 — and, on top of that, President Zelenskyy overhauled his government. So Ukraine is fighting three battles at the same time — war with Russia, the struggle against its own ineffective system, and now COVID-19.

Every crisis is a reality check — the coronavirus provoked and exposed the strategic vulnerabilities and deep-rooted features of Ukraine’s system of governance. Three trends have come to the fore. First, the inefficiency and paralysis of many state agencies, particularly the lack of coordination between them and the prevalence of vested interests. Second, the reliance of the country’s leaders on large financial-industrial groups (FIGs) to compensate for weak institutional capacity. Third, a strong societal and private sector mobilization to fill the gaps in the dilapidated public health system.

State agencies are rigid and ineffective. Despite the modern Prozorro digital public procurement system, and the government’s allocation of $2.5 million from the early days of the epidemic, the Ministry of Health blocked COVID-related purchases for over a month. This was a tactic by — now ex-minister — Yemets to pressure the state medical procurement agency into appointing a protégé of his as one of its deputy heads.

Lowest testing rate in Europe

Similarly, in some regions, notably Odesa, procurement stalled and orders went to politically connected businesses at higher-than-market prices. Lack of tests and laboratory equipment means Ukraine has administered only 72,000 tests within a population of 42 million to date — the lowest rate in Europe.

Doctors were given orders to ensure they only test patients in hospitals with COVID-19 symptoms and only those arriving from Asia, while ignoring the fact that millions of Ukrainian labour migrants were in Europe. Indeed, the first confirmed case was imported from Italy.

Ukrainian government and public health officials lack information to take informed decisions. There is no accurate electronic database of registered deaths and reporting is lagging behind events. Information on testing availability in the regions is missing.

Thirteen days after the first case of the virus was recorded, Zelenskyy exhorted business tycoons to come to the rescue. Taking a populist tone, Zelenskyy said ‘Ukraine has been feeding you for a long time and it is time that you helped the country’. The tycoons divided the regions among themselves to deliver relief efforts according to the location of their enterprises.

It is believed FIGs have donated around $25 million to procure testing kits, ventilators, personal protective equipment (PPE) and disinfectants. This may sound impressive, but many of those same tycoons actually owe millions to the state, some even billions, and cause serious problems by perpetuating the current rent-seeking system, where public resources benefit those groups resulting in serious social losses.

Reliance on these groups makes Zelenskyy a hostage to their favour in any potential reform efforts. It is a dangerous solution, as these tycoons often obstruct Ukraine’s economic development.

An alternative — and more transformative — trend of public-private partnerships is emerging in some regions. Across Ukraine, hundreds of small- and medium-sized enterprises (SMEs) have led efforts to deliver PPE, support the vulnerable with food supplies, and to procure ventilators for key hospitals.

They have mobilised hundreds of volunteers to deliver assistance and partnered with local non-profits. Fundraising initiatives have begun in Lviv, Odesa, Kyiv and Poltava with donations and expenditure has been posted online for transparency. Companies have repurposed to produce PPE kits and medical equipment. The efforts unfolded quickly and, in some cases, in smooth collaboration with municipal and regional authorities.

Ukraine cannot afford to ‘waste’ this crisis, which could help accelerate healthcare reform, decentralization, modernize governance, and boost citizen empowerment. But for this to happen, the country has to deploy a ‘smart response’.

Such ‘smart response’ means applying a resilience framework that nurtures the agility of the system of governance, ensures a diversity of actors in decision-making, supporting both self-regulation and better coordination. Rather than reaching out to tycoons, Zelenskyy should enter a coalition with true agents of change — SME leaders, volunteers, and mayors who have mobilized effective grassroots action. These actors demand a level playing field with accountable governance and effective state institutions.

Civic COVID-19 response hubs and local authorities should be joined in a network that spans the regions, and connected with the national agencies designing pandemic responses. For a national strategy to be effective, central headquarters should draw information from local communities and manage a ‘team of teams’ in a decentralised fashion.

Ensuring effective public service delivery without compromising integrity and keeping the risk of corruption low should also be a priority of political reform, with volunteers and the private sector ensuring civic oversight of both regional and national funding.

Civic engagement such as this can be transformative as it defies the Soviet legacy of paternalism and expands the belief among citizens that society can work for them. By assisting the relief effort, citizens are gaining valuable insights into quality of public services and participate in holding them to account.

Citizens are also developing a better understanding of the purpose of having effective armed forces, police, border guards and modern hospitals. They are coming to understand the value of taxpayer money and witnessing how corruption erodes institutions.

This survival mobilization — if properly harnessed by the state — could drive transformative change and make Ukraine more resilient, not just against present crises, but future ones too.

Ukrainians are accustomed to crisis. As COVID-19 spread, forest fires were raging in the Chernobyl exclusion zone, turning Kyiv into the most polluted city in the world. The fighting in Donbas continued, claiming the lives of more Ukrainian soldiers, bringing the total to more than 4,000 — and, on top of that, President Zelenskyy overhauled his government. So Ukraine is fighting three battles at the same time — war with Russia, the struggle against its own ineffective system, and now COVID-19.

Every crisis is a reality check — the coronavirus provoked and exposed the strategic vulnerabilities and deep-rooted features of Ukraine’s system of governance. Three trends have come to the fore. First, the inefficiency and paralysis of many state agencies, particularly the lack of coordination between them and the prevalence of vested interests. Second, the reliance of the country’s leaders on large financial-industrial groups (FIGs) to compensate for weak institutional capacity. Third, a strong societal and private sector mobilization to fill the gaps in the dilapidated public health system.

State agencies are rigid and ineffective. Despite the modern Prozorro digital public procurement system, and the government’s allocation of $2.5 million from the early days of the epidemic, the Ministry of Health blocked COVID-related purchases for over a month. This was a tactic by — now ex-minister — Yemets to pressure the state medical procurement agency into appointing a protégé of his as one of its deputy heads.

Lowest testing rate in Europe

Similarly, in some regions, notably Odesa, procurement stalled and orders went to politically connected businesses at higher-than-market prices. Lack of tests and laboratory equipment means Ukraine has administered only 72,000 tests within a population of 42 million to date — the lowest rate in Europe.

Doctors were given orders to ensure they only test patients in hospitals with COVID-19 symptoms and only those arriving from Asia, while ignoring the fact that millions of Ukrainian labour migrants were in Europe. Indeed, the first confirmed case was imported from Italy.

Ukrainian government and public health officials lack information to take informed decisions. There is no accurate electronic database of registered deaths and reporting is lagging behind events. Information on testing availability in the regions is missing.

Thirteen days after the first case of the virus was recorded, Zelenskyy exhorted business tycoons to come to the rescue. Taking a populist tone, Zelenskyy said ‘Ukraine has been feeding you for a long time and it is time that you helped the country’. The tycoons divided the regions among themselves to deliver relief efforts according to the location of their enterprises.

It is believed FIGs have donated around $25 million to procure testing kits, ventilators, personal protective equipment (PPE) and disinfectants. This may sound impressive, but many of those same tycoons actually owe millions to the state, some even billions, and cause serious problems by perpetuating the current rent-seeking system, where public resources benefit those groups resulting in serious social losses.

Reliance on these groups makes Zelenskyy a hostage to their favour in any potential reform efforts. It is a dangerous solution, as these tycoons often obstruct Ukraine’s economic development.

An alternative — and more transformative — trend of public-private partnerships is emerging in some regions. Across Ukraine, hundreds of small- and medium-sized enterprises (SMEs) have led efforts to deliver PPE, support the vulnerable with food supplies, and to procure ventilators for key hospitals.

They have mobilised hundreds of volunteers to deliver assistance and partnered with local non-profits. Fundraising initiatives have begun in Lviv, Odesa, Kyiv and Poltava with donations and expenditure has been posted online for transparency. Companies have repurposed to produce PPE kits and medical equipment. The efforts unfolded quickly and, in some cases, in smooth collaboration with municipal and regional authorities.

Ukraine cannot afford to ‘waste’ this crisis, which could help accelerate healthcare reform, decentralization, modernize governance, and boost citizen empowerment. But for this to happen, the country has to deploy a ‘smart response’.

Such ‘smart response’ means applying a resilience framework that nurtures the agility of the system of governance, ensures a diversity of actors in decision-making, supporting both self-regulation and better coordination. Rather than reaching out to tycoons, Zelenskyy should enter a coalition with true agents of change — SME leaders, volunteers, and mayors who have mobilized effective grassroots action. These actors demand a level playing field with accountable governance and effective state institutions.

Civic COVID-19 response hubs and local authorities should be joined in a network that spans the regions, and connected with the national agencies designing pandemic responses. For a national strategy to be effective, central headquarters should draw information from local communities and manage a ‘team of teams’ in a decentralised fashion.

Ensuring effective public service delivery without compromising integrity and keeping the risk of corruption low should also be a priority of political reform, with volunteers and the private sector ensuring civic oversight of both regional and national funding.

Civic engagement such as this can be transformative as it defies the Soviet legacy of paternalism and expands the belief among citizens that society can work for them. By assisting the relief effort, citizens are gaining valuable insights into quality of public services and participate in holding them to account.

Citizens are also developing a better understanding of the purpose of having effective armed forces, police, border guards and modern hospitals. They are coming to understand the value of taxpayer money and witnessing how corruption erodes institutions.

This survival mobilization — if properly harnessed by the state — could drive transformative change and make Ukraine more resilient, not just against present crises, but future ones too.

Drawing on his experience in government, Rory Stewart shares his observations into the impact corruption can have on society.

This event is organized in association with Transparency International UK as part of Transparency International UK’s Annual Lecture series.