SECO is supporting its partner countries in tackling the coronavirus crisis and its consequences, which could cost thousands of jobs. It has made around 50 million Swiss francs available for this purpose. This will help safeguard important services in communities and finance liquidity relief for companies. In addition, this support will enable countries to borrow money from capital markets and provide tax relief for their populations.
SECO relies on its core competencies in economic development cooperation to help its partner countries overcome the crisis. It dedicates its resources, expertise, instruments and partnerships to targeted and time-bound economic policy support measures. The aim is for partner countries to return to a resilient and sustainable economic policy in the long term.
SECO is currently providing approximately 50 million Swiss francs to adapt ongoing projects and initiate additional measures. This amount will be funded through the existing budget of the SECO framework credit 2017–2020. Measures will be adopted in the following areas in particular:
Prioritising public spending: The COVID-19 crisis has put SECO partner countries in a position where they have to finance additional spending, for instance for healthcare and social welfare. At the same time, lower tax revenues and lower commodity prices have caused drops in public revenues. This results in budgetary deficits, and the reallocation of funds from other areas . SECO is working with the World Bank to provide the governments of its partner countries with around 10 million Swiss francs in support of such measures. The objective is to ease the burden on companies and citizens through tax relief, as well as in prioritising spending and structuring their debt in a sustainable manner.
Budgetary assistance for public services: SECO has responded to a request by the Tunisian government for budgetary assistance. Together with the World Bank, it is helping Tunisian communities to face the crisis and safeguard public services. This measure also aims at supporting the local economy by investing in public infrastructure. SECO’s assistance amounts to about 8 million Swiss francs.
Supporting SMEs and saving jobs: SECO will provide 10 million additional Swiss francs to support the crisis capacities of the Swiss Investment Fund for Emerging Markets (SIFEM) and to alleviate the emerging liquidity problems faced by SMEs. Founded by SECO in 2011, SIFEM is the development finance institution of the Swiss Confederation. It invests in line with the highest international ecological, social and governance standards and provides commercially viable SMEs and fast-growing companies with expertise and long-term financial support in the form of shareholdings and loans.
Crisis hits developing countries hard
Switzerland does not want to leave its partner countries to fend for themselves in the current situation. The crisis has hit them hard. In many places, public healthcare systems are rudimentary and do not have sufficient capacity. Their economies are less resilient and under considerable pressure: production, consumption, investment and trade are falling dramatically. Thousands of jobs are being lost. Many people do not have any savings and rely on income from their daily work. Hunger is becoming a reality again in many places, and social and political unrest are looming.
Unlike the situation in Switzerland, the governments in developing countries do not have sufficient resources to support people and companies. Public finances are stretched, debt levels are high, and safety nets are inadequate, offering governments little room for manoeuvre when it comes to offering state support. States also face falling revenue from customs and taxation, a drop in tourism revenues, and sinking commodity prices along with massive tax shortfalls. Market uncertainty leads to the withdrawal of foreign investments. Remittances from migrants abroad are also expected to decline by as much as 20 percent in 2020 compared to the previous year.
Switzerland offers both bilateral and multilateral aid
Switzerland wants to act in solidarity in the Covid-19 crisis. At the same time, it has an interest in ensuring that developing countries overcome the crisis. Because the disease spreads so quickly, any success in combating the virus in Switzerland could be jeopardised by a strong spread elsewhere. In addition, when societies in developing countries are more resilient, this improves economic and social prospects in those countries and thus indirectly combats the causes of displacement and irregular migration. But Switzerland is limited in what it can accomplish alone. It relies on strong partnerships, for example with multilateral development banks and the private sector.
Multilateral organisations have an important role to play in tackling the pandemic and its consequences. They have the size, reach and flexibility to respond quickly and effectively. International organisations and multilateral development banks have already taken extensive measures. So far, banks have made around 200 billion US dollars available to emerging economies and low-income countries. Membership of the governing bodies of international organisations allows SECO to influence multilateral initiatives to ensure primary care and crisis management, and to help design these.
In line with Switzerland’s new international cooperation strategy
Overcoming the crisis will take time. Switzerland’s new strategy for international cooperation 2021–2024 will make it possible to respond flexibly to current global challenges. For instance, Switzerland will be able to support developing countries in containing the pandemic, managing its consequences, and reintegrating themselves into global value chains. Switzerland will also be able to help countries learn lessons from the crisis, become more resilient and better absorb future shocks. By the end of April, Switzerland had already provided 400 million Swiss francs to organisations including the ICRC, the IMF, the UN and the WHO.
In spite of the crisis, SECO maintains its focus on long-term structural challenges. It carefully examines where its expertise provides the most added value. SECO will adapt its projects in the short term, but will maintain its long-term priorities such as favorable economic framework conditions, jobs and climate protection . SECO continually evaluates its role in mitigating the crisis and draws lessons as to how it can better respond to similar challenges in the future – both from its own perspective and from that of Switzerland’s international cooperation.