What Governments Do in Crises

In major crises and wars, governments adjust their financial and economic strategies, taking into account the conditions of their populations, and also take maximum precautions regarding factories, companies, and service institutions to ease the pressure on them; otherwise, they may falter, leading to what can be considered an economic contraction, as is currently happening in some countries that have not taken local conditions into account, such as the United States and Germany, among others.

The region, since the “corona” pandemic and the ongoing war, has seen its shadow fall on general conditions, and the repercussions continue to mount. For this reason, some Gulf states have resorted to supporting institutions, factories, and even citizens, as Bahrain, the United Arab Emirates, and Saudi Arabia have done.

These countries have instructed banks not to pressure borrowers, granting them time until they recover from the war’s repercussions, especially since supply chains have faced a major crisis, leading to higher prices for all goods and increasing the inflation rate.

Addressing these conditions requires a forward-looking vision that turns the crisis into an opportunity for recovery, because any setback means more pressure on citizens and the economy. Therefore, avoiding further problems helps improve institutional performance and preserve national employment, as governments ultimately recognize that this workforce is the backbone of the national economy.

It is well known that the private sector is the state’s primary client, and projects begin from it. The relationship between the private sector and governments is reciprocal. Thus, when the second party (the government) delays paying dues to the first party while insisting on fulfilling its own payments, it becomes part of the problem, as it closes off avenues of assistance to the sector most capable of serving the national economy.

Since the money cycle is an integrated loop, any disruption causes a “blockage” that paralyzes multiple facilities simultaneously. Therefore, governments study viable alternatives to ensure continuous operation across all facilities without difficulties. In some cases, they even pay salaries to a portion of citizens, as Saudi Arabia recently did, particularly for low-income earners.

Reducing bureaucratic restrictions during crises, especially wars, helps business flexibility. Thus, countries seeking to develop their economies, even during war, resort to unconventional solutions. For example, when banks are instructed not to freeze funds owed to borrowers, they indirectly help stimulate the country’s financial cycle. On this basis, governments have ordered banks to accommodate their customers, releasing funds so that companies and business owners can pay their employees’ salaries.

It is well known that the region remains in a highly sensitive political and military situation, which no government can overlook. Therefore, governments work to facilitate the spending of money in local markets to maintain trade activity. For instance, during and after World War II, many European countries stimulated their national economies through financial aid and support for companies and factories, first to reduce unemployment, and second, to encourage citizens to work.