Canada Announces Historic Fiscal Stimulus Package
On November 30, the Canadian government announced that will spend C$100 billion, about three to four percent of the country’s total gross domestic product, to help the nation recover from the COVID-19 pandemic. Finance Minister Chyrstia Freeland called the initiative “the largest economic relief package for our country since the Second World War.”
Broadly, Canada will make new investments to help industries that have been impacted by the pandemic, distribute the COVD-19 vaccine, and help long-term care homes fight the pandemic. (It is unclear right now when a vaccine might be approved in Canada. CBC News has provided an extensive review of the process, and a timeline for potential distribution. Global News looked at potential distribution. Still, Freeland has assured Canadians that the government “has secured the most diverse vaccine portfolio in the world,” including seven different vaccine purchase contracts that it says will be enough for each Canadian to receive 10 doses free of charge.)
For businesses, the Canada Emergency Rent Subsidy (CERS) will help some businesses pay their rent and mortgage interest while a Lockdown Support program will make sure that eligible businesses that have to significantly restrict their activities as a result of a public health order get extra support to cover their eligible expenses.
The government also is proposing to:
- Increase the maximum wage subsidy rate to 75 percent from December 20, 2020 to March 13, 2021.
- Extend the current subsidy rates of the CERS for an additional three periods. This means a base subsidy rate of up to 65 percent will be available on eligible expenses until March 13, 2021. With the 25 percent Lockdown Support also being extended, businesses may be eligible for a subsidy of up to 90 percent of their eligible expenses.
- Expand the Canada Emergency Business Account by allowing qualifying businesses to access an additional interest-free $20,000 loan in situations where there is need. Half of this additional amount, up to $10,000, would be forgivable if the loan is repaid by December 31, 2022. The deadline to apply for a CEBA loan has been extended to March 31, 2021.
The government also will work with financial institutions in the near term to create the Highly Affected Sectors Credit Availability Program, a new program for the hardest hit businesses, including those in sectors like tourism and hospitality, hotels, arts, and entertainment. This program would offer 100 percent government-guaranteed financing for heavily impacted businesses and provide low-interest loans of up to $1 million over extended terms, up to ten years.
Finally, the government will provide an additional C$500 million through the Regional Relief and Recovery Fund (RRRF), which is operated by regional development agencies, of which a minimum of 25 percent will support local tourism businesses.
The government’s full report is available here.
Two days after introducing the C$100 billion package, Freeland introduced a bill that would implement some of the programs she announced on November 30. These measures would:
- Provide temporary and immediate support for low- and middle-income families who are entitled to the Canada Child Benefit, totaling up to $1,200 in 2021 for each child under the age of six;
- Ease the financial burden of student debt for up to 1.4 million Canadians by eliminating the interest on repayment of the federal portion of the Canada Student Loans and Canada Apprentice Loans for one year (2021-22);
- Provide funding of up to $505.7 million as part of the new Safe Long-term Care Fund to support long-term care facilities, including funding to prevent the spread of COVID-19 infection, outbreaks, and deaths in supportive care facilities;
- Provide up to $133 million to support access to virtual care, mental health tools, and substance use programming and up to $262.6 million for a suite of COVID-19 initiatives, including testing, medical research, countermeasures, vaccine funding and developments, border and travel measures and isolation sites;
- Formally provide that an expense, such as rent, can qualify as an eligible expense under the new Canada Emergency Rent Subsidy when it becomes due so businesses can access the subsidy before the expense is actually paid; and
- Allow the government to continue making the necessary investments to weather the pandemic and support the recovery.
Stay tuned to Connecting the Dots as the Canadian government issues further details for these initiatives.