Bank of England Funds UK’s COVID-19 Expenses
No country in the world is safe from the impacts of the pandemic. Government’s biggest current concern is how to maintain the stability of their country. Impacts of the pandemic had affected every country’s economy and industries. Financial resources to support the ongoing fight against the pandemic are slowly draining.
This scenario of shortage of fund is happening even in highly developed countries. Countries of royalties like the United Kingdom is also in the middle of this problem. UK having a big population would definitely means more amount of expenses can be accumulated. This was the problem a few weeks ago. Until the Bank of England (BoE) announced that they will be supporting the countries COVID-19 expenses.
BoE directly funds UK’s pandemic expenses temporarily
Speculations that the BoE would be funding UK’s expenses are spreading in the country. Although earlier this week reports had revealed that the banks governor are opposing to this plan. Contradicting the governor’s stand the Treasury officials think that it’s better for the bank to finance it. As to their statement this direct financial financing would be short-term and temporary. They felt that it was the best to provide the insurance that the bank provide even in just a short period of time.
This is known as the Ways and Means Facility (W&MF) that is usually at just £370 million or €422 million. This extended accounts will allow ministers to spend more amounts within that short period of time.
This unexpected action from the Treasury according to economist is a directly big step. This move as to the former BoE official Tony Yates, this move is an indication of unusual pressures on the government. Richard Barwell, also a former BoE official has stated that this short term move like this one can became more permanent as time goes by. He also added that the central bank must know how to get into it and get out of it also.
UK utilizing W&MF
Ways and Means Facility had been used by the government to fund the daily spending. It’s used to fund it before the BoE sell the government bonds into markets. On 2006, it had changed into a fund for emergency funded by the government.
BoE had revealed a few months ago, that there is less chance that this would be needed. A journalist Mr Bailey last March 18, had said that this facility is just only a historical feature. Earlier this week, Financial Ties had reported that, according to the BoE governor that this will not lead into a permanent monetary financing funded by the government.
Fran Boait of Positive Money, said that the use of direct monetary financing shows that for once the government does not depend on market finance. He also added that now people could know how the collective resources be properly allocated.
BoE funding the country’s spending for COVID-19 pandemic is a great move that will help the citizens greatly during this event. Many may questions its long term effects to the economy of UK. But as of now for the government battling to end this pandemic is more important.