COVID-19, Fiscal Stimulus, And Credit Ratings
Author(s) Anuragh Balajee, Shekhar Tomar and Gautham Udupa


COVID-19 pandemic has rattled the global economy and has required governments to undertake massive ?scal stimulus to prevent the economic fallout of social distancing policies. In this paper, we compare the ?scal response of governments from around the world and its main determinants. We ?nd sovereign credit ratings as one of the most critical factors determining their choice. First, the countries with one level worse rating announced 0.3 percentage points lower ?scal stimulus (as a percentage of their GDP). Second, these countries also delayed their ?scal stimulus by an average of 1.7 days. We identify 22 most vulnerable countries, based on their rating and stringency, and ?nd that a stimulus equal to 1 percent of their GDP adds up to USD 87 billion. In order to ?ght the pandemic, long term loans from multilateral institutions can help these stimulus starved economies.

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