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15 March 2020
ECONOMY

UAE unveils AED 100 billion stimulus package to ease coronavirus impact

The UAE’s central bank said that it will continue to monitor the situation and is prepared to take further steps if necessary

Central banks around the world have unveiled emergency stimulus packages as the pandemic forces authorities to act/Bloomberg

by Kudakwashe Muzoriwa

The Central Bank of the UAE (CBUAE) has affirmed the dirham’s peg to the dollar and rolled out an AED 100-billion ($27 billion) stimulus package to support the financial sector as the second biggest economy in the Arabian Gulf seeks to mitigate the economic impact of COVID-19.

CBUAE stated that the Targeted Economic Support Scheme consists of an AED 50 billion aid package for banks in the country through collateralized, zero-interest loans. Banks will also be allowed to free up capital buffers, which will make another AED 50 billion in liquidity available to lenders.

The central bank said that the UAE banking system is adequately capitalised and banks maintain significant voluntary capital buffers in addition to the minimum prudential requirements. The draw-down of those voluntary buffers is not considered for calculating the overall size of the targeted economic support scheme, added CBUAE.

The regulator reiterated the long-standing peg of the country’s currency to the US dollar, adding that its ample reserve of AED 405 billion as of 10 March 2020 are adequate to safeguard the stability of the national currency.

The central bank said the measures, effective immediately, are aimed at protecting corporate and retail customers affected by the coronavirus.

The purpose of the Targeted Economic Support Scheme is to facilitate the provision of temporary relief from the payments of principal and interest on outstanding loans for all affected private sector companies and retail customers in the UAE.

Furthermore, the central bank will also revise the existing limit which sets maximum exposure that banks can have to the real estate sector. CBUAE stated that when the exposure reaches 20 per cent of the banks’ loan portfolio banks will be allowed to increase it to 30 per cent.

In a separate statement, the Saudi Arabian Monetary Authority also said that it had prepared a SAR 50 billion ($13.32 billion) package to help SMEs cope with the economic impacts of coronavirus. The central bank said that the funding aims to grant SMEs six-month deferrals on bank payments, concessional financing and exemptions from the costs of a loan guarantee program.

Bloomberg reported that central banks around the world have unveiled emergency stimulus packages as the pandemic forces authorities to restrict international travel, shut schools and even go into full lockdown in a bid to slow the spread and prevent it from overwhelming health services.

Egypt announced a $6 billion economic support package days after Iran asked the International Monetary Fund for $5 billion to help it manage the outbreak.


RELATED STORIES: SMEs Saudi Arabian Monetary Authority CBUAE Iran IMF

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