Ottawa announces $10 billion business credit line, plans to roll out stimulus package as COVID-19 spreads
Finance Minister Bill Morneau announced Friday that the government will establish a $10 billion credit facility to lend money to businesses under stress as a result of the spreading COVID-19 pandemic.
Morneau said the money will flow to the Business Development Bank of Canada and Export Development Canada, both Crown-owned entities, to help companies access cash and keep exporting to markets abroad at a time when COVID-19 is dramatically affecting the functioning of the economy.
Morneau said this sort of credit facility was an effective tool during the 2008 financial crisis and will be again now. Most of the money will be directed to small- and medium-sized enterprises, Morneau said.
Morneau made the announcement alongside the governor of the Bank of Canada, Stephen Poloz, who simultaneously announced yet another cut to the bank rate — which will lower the cost of borrowing for individuals and businesses alike. The Bank of Canada is cutting its overnight rate target by half a percentage point to 0.75 per cent.
"It is already clear that the spread of the coronavirus is having serious consequences for Canadian families and for Canada's economy," Poloz said.
"In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions."
Prime Minister Justin Trudeau said Friday the government will flow money directly to Canadians to help stimulate an economy that is sputtering due to the spreading COVID-19 pandemic.
Morneau said that a "significant fiscal package" will be announced sometime next week. He said that Ottawa will also consider extending the deadline to file taxes beyond April 30.
"The government of Canada is putting in place fiscal stimulus measures, major measures, which will be announced next week to stabilize our economy, to support our businesses and to protect Canadians during this difficult period," Morneau said.
An increasing number of Canadians are being forced to work from home as more people test positive for the coronavirus. Trudeau said the government will help people financially to ensure they can pay their rents or mortgages and put food on the table.
"We are looking at ways to help Canadians directly, yes," Trudeau said.
"Our focus right now is on ensuring Canadians have the resources and the money to not have to stress about rent and groceries and child care and elder care when they're worried about their health," Trudeau said.
The Toronto Stock Exchange has tanked in recent days as investors panic over the state of the economy, with disrupted supply chains and workers facing unprecedented restrictions on where and when they can work.
To reassure shaky markets, the Office of the Superintendent of Financial Institutions (OSFI), Canada's regulator of financial institutions, also announced an additional $300 billion in lending capacity for big banks to ensure liquidity in the economy.
The money is meant to encourage banks to keep lending to businesses to avoid a spike in bankruptcies or insolvencies.
"We are encouraging these institutions to use this capital as well as their liquidity buffers as required," said Jeremy Rudin, the federal banking regulator.
"This action will reinforce the ability to supply credit to the economy during the expected period of disruption," Rudin said.