Swedish Local Government on the Forefront of COVID-19 Emergency. Lessons to be Learnt?

  • April 14, 2020

  • Stockholm, Sweden


COVID-19 was confirmed to have reached Sweden on January 31, when a woman returning from Wuhan tested positive. On February 26, following outbreaks in Italy and in Iran, multiple travel-related clusters appeared in Sweden.

Unlike some other European countries, the government has not yet imposed a strict quarantine on its population. Most workplaces, restaurants, and bars have stayed opened and kids are still physically attending school. Authorities have limited social gatherings to a maximum of 50 people, a revision down from 500 people previously and further restrictions are being debated.

As of April 12, Sweden has reported 10,483 cases and 899 deaths.

Economically the government is moving toward compensating municipalities and regions that have been hit by COVID-19, proposing funding totaling SEK 20 billion (US$2 billion) in general government grants, rather than the previously announced SEK 5 billion (US$0.5 billion). This additional funding will be provided as both general government grants and an increased amount to cover emergency health care and social services costs. This increase of SEK 15 billion (US$1.5 billion) for 2020 is being provided to strengthen the ability of the local government sector to maintain essential services such as health care, education, social services and public transport.

Of the SEK 20 billion (US$2 billion), SEK 12.5 billion (US$1.2 billion) is a permanent increase in appropriations; in other words, this is money that municipalities and regions will also have at their disposal in the years ahead.

UNCDF is studying how to work with other governments to design similar approaches – financed by any additional fiscal space created by the international relief packages. UNCDF is also advocating that local government finance is a key element of national response packages. Monitoring the effect of the Swedish measures will be a key component of this.

Crisis package for jobs and transition

On March 30, the Government, the Centre Party and the Liberal Party, presented further measures to alleviate the impact of the virus outbreak on jobs and the economy in Sweden. The measures include a temporary reinforcement of the unemployment insurance. It is proposed that increased funding be paid to Arbetsförmedlingen (the Swedish public employment service) and labour market policy programmes.

Furthermore, more enrollment and more distance learning at higher education institutions are proposed, as well as more opportunities for vocational education and training throughout the country. It is proposed that the income ceiling for health and medical students receiving student aid be temporarily removed in order for those students to support the healthcare sector without their student aid being reduced.

Crisis package for small enterprises

To particularly alleviate the impact on small and medium-sized enterprises, a crisis package was presented by the Government on March 25.

The package includes a central government loan guarantee to make it easier for companies to access financing. The proposal means that the central government will guarantee 70 per cent of new loans banks provide to companies that are experiencing financial difficulty due to COVID-19 but that are otherwise robust.

Furthermore, temporary reduction of employers’ social security contributions is proposed from March 1 to June 30 so that only the old age pension contribution is paid. To reduce costs for companies with considerable difficulties as a result of COVID-19 – in sectors such as durable consumer goods, hotels, restaurants and certain other activities – the Government proposes providing support that aims to facilitate and speed up renegotiation of rents. The approach is that central government will cover 50 per cent of the rental reduction up to 50 per cent of the fixed rent.

Moreover, the rules for tax allocation reserves will be temporarily changed so that sole proprietors severely affected by the COVID-19 outbreak will receive tax cuts.

UNCDF is discussing with some governments how to repurpose sovereign funds and national development banks to serve a similar purpose in protecting the local economy.

Increased loan facilities and credit guarantees for Swedish businesses

On March 20, a range of measures were presented to alleviate pressure for Swedish businesses, particularly small- and medium-sized businesses, to access finance at this difficult time.

For example, Almi Företagspartner AB will receive a capital contribution of SEK 3 billion (US$302 million) to increase its lending to small- and medium-sized businesses throughout the country. The Swedish Export Credit Corporation’s credit framework will be increased from SEK 125 billion (US$12.5 billion) to SEK 200 billion (US$20.1 billion) and can be used to provide both state-supported and commercial credit to Swedish export companies. Furthermore, the Swedish Export Credit Agency will decide on credit guarantees that entail new and improved credit opportunities for businesses.