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World Bank advises urgent measures to avoid serious financial shock and recession

Sok Chan / Khmer Times Share:
A woman is tested for the virus as the World Bank urges urgent action. KT/Siv Channa

The World Bank has released several urgent recommendations to Cambodia and other countries in the East Asia Pacific, stating governments need to act quickly, cooperatively and at scale to avoid serious financial shock and recession due to the COVID-19 outbreak.

The recommendations advised adjusting both health and macroeconomic policies to prevent the spread of infection and also urged governments to take transmission control measures like lockdowns and travel bans to “flatten the pandemic curve”.

“Governments have to urgently boost healthcare capacity to meet what may be an overwhelming demand for a sustained period.

“Apart from expanding conventional healthcare facilities and medical equipment factories, innovative measures are likely to be needed such as converting ordinary hospital beds for ICU use and rapidly training people to work in basic healthcare,” the World Bank stated.

Referring to Cambodia specifically, the organisation believes the government has to adjust fiscal and monetary policy to meet the crisis.

“The expansion of macroeconomic policy cannot do much to increase production and employment during periods when workers are obliged to stay at home,”  the World Bank also stated.

It also recommended the financial sector ease access to credit for households to relieve hardship and smooth consumption while easing access to liquidity for firms to help them survive the current disruption. Further recommendations include ensuring regulators disclose risk and clearly communicate supervisory expectations to avoid financial instability.

Victoria Kwakwa, vice-president for East Asia and the Pacific at the World Bank said, “Countries in East Asia and the Pacific that were already coping with international trade tensions and the repercussions of the spread of COVID-19 in China are now faced with a global shock. The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined.”

To address the current issues faced by COVID-19, the Cambodian Government launched additional measures this week to help the private sector and workers affected by the pandemic. These include the introduction of a second round of measures aimed at helping the worst-hit private sector survive this difficult time, as well as assisting workers in related sectors. The new measures will target aviation, tourism and the private sector, plus help the ailing construction industry.

For the aviation sector, the government will give a minimum tax exemption for three months from March to May 2020 to Cambodia Airlines, while delaying debt payments of the civil aviation’s air fee for six months.

For the tourism sector, the government has also extended its scope for monthly tax exemptions for hotels, guesthouses, restaurants and travel agents registered with the General Department of Taxation that have business activities in Phnom Penh, Siem Reap, Sihanoukville, Kep, Kampot, Bavet and Poipet over the same three -month period. These businesses are still obliged to declare their taxes, using an  online system to manage VAT (E-VAT) every month during the exemption period.

In addition, the government has expanded the scope of the wage subsidy to 20 percent of the minimum wage (which is currently set at $190 a month) to workers affected by suspensions. The subsidy is in conjunction with the conditions for attending a one- to two-week training course organised by the Ministry of Tourism.

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