Asked to comment about the Government’s approach to assisting businesses through the COVID-19 pandemic, leading local economist and visiting assistant lecturer JP Fabri stressed that it is now all in the implementation.

“Literally nothing should stand in between the support being given out and the intended beneficiaries,” said Mr Fabri while commenting to WhosWho.mt

Over the past two weeks, Prime Minister Robert Abela announced three main aid packages aimed at assisting businesses stay afloat despite the massive COVID-19 disruptions.

The first two packet of measures amount to a €1.8 billion aid package providing for tax and VAT deferrals, soft loan provisions, funding allocation to banks so that they may provide business loan moratoriums, a €350 payment per employee who must self-quarantine and a subsidy to parents who are both unable to work due to COVID-19 disruptions.

On Wednesday of last week, Dr Abela announced that industries included in a list called Annex A, deemed to be the most critically impacted by the pandemic, will be receiving a monthly wage subsidy of €800 per worker. This has been done to help save the jobs of workers in industries which have ground to a halt, such as travel, tourism, hotels, restaurants and bars.

Just last night, the European Commission approved a €350 million aid package aimed at providing guarantees on loans, under the temporary state aid framework.

On whether he agrees on the way Dr Abela’s Government has targeted industries deemed to be worst hit, Mr Fabri said:

“The cash injection will alleviate some of the hardships that some employers are facing. The first priority must remain workers and securing their employment. Although ambitious, the package has targeted specific sectors.

“Though still early days, the ramifications of this economic crisis will go well-beyond these specific sectors.

“There are many other businesses feeling the brunt of the crisis and they too need reassurances from Government that, if and when needed, support will be available to them.

“Shoring up the confidence of economic operators is critical for the economy.”

Noting the challenges in attempting to draw hard boundaries between industries, he stressed the “complex web of interconnected parties: employees, firms, suppliers, consumers, banks and financial intermediaries” that makes up today’s globalized economy.

“Everyone is someone else’s employee, customer, lender, etc. If one of this buyer-seller links is broken by this crisis, the outcome will be a cascading chain of disruptions which if not halted can quickly turn a recession into a protracted depression,” remarked Mr Fabri.

To this end, he highlighted the importance of swiftness in the implementation of aid measures. He also added that, since the banking system “is going to be the main conduit of aid in the economy, processes and procedures need to be streamlined.”

“We cannot have a situation whereby approvals and onboarding take months as is current practice. These are extraordinary times and every day becomes crucial for a firm’s survival. Deployment of digital tools wherever possible is essential for the flow of funds to happen,” he stressed.

He pointed towards the Malta Development Bank, stating how Government could use the institution to ensure such financing permeates throughout the economy.

“A development bank has a key role in such circumstances by leveraging state guarantees and accessing low-interest funds from European institutions. Development banks have made a resurgence in the past few years following the financial crisis especially given their role in providing counter-cyclical financing,” he mused.

Mr Fabri noted that a development bank can provide direct finance or better-than-market terms, which he said “should be a main priority at this point in time, to ensure that affected firms, including start-ups, have access to much needed funds”.

He also noted the possibility for such banks to fill gaps in the supply of credit, especially if commercial banks will not take on the risk.

Lastly, he said a development bank could promote economic stability by playing a counter-cyclical role, to ensure that the economy does not seize up.

“Our economic survival depends very much on flattening the economic recession curve too. For this to happen, in parallel with a robust set of measures we need to ensure that their implementation is swift.

“Otherwise, it can be too late. Government and the Malta Development Bank need to take a leading role in ensuring that the financial services sector provide the lifeline the economy requires.”