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Khatija Haque - Head of MENA Research
Published Date: 15 March 2020
Saudi Arabia and the UAE both announced targeted stimulus packages over the weekend to boost liquidity and provide some support for private sector businesses and households over the next few months.
The UAE saw two separate announcements: a fiscal package worth an estimated AED 1.5bn from the government of Dubai and a AED 100bn package to boost liquidity announced by the UAE central bank.
The measures announced by the government of Dubai focus on removing and reducing fees for private sector businesses, and particularly SMEs. They also provide a 10% reduction in utility costs for both businesses and households for the next three months.
The central bank’s Targeted Economic Support Scheme allows banks to access AED 50bn of interest free loans (with collateral) from the central bank, as well as freeing up AED 50bn from banks’ own existing capital buffers. This is to allow banks to offer temporary relief (of up to six months) for businesses and individuals who may be struggling to make principal and/ or interest payments on their loans. Banks’ should also be able to boost lending to SMEs, with lower capital buffers required by the central bank for these loans.
The maximum loan-to-value of mortgages for first time buyers has been increased to 80% from 75% previously, and banks have a higher ceiling on their maximum exposure to real-estate (30% from 20% previously), albeit with higher capital requirements for the additional 10% exposure.
The measures announced over the weekend amount to around 6.5% of the UAE’s GDP, and should ensure there is sufficient liquidity in the UAE’s banking system. They will go some way to providing support for private sector businesses and individuals who have been affected by the economic consequences of the coronavirus, allowing for better cash flow management.
The Saudi Arabian Monetary Authority (SAMA) announced a series of measures aimed at supporting
SMEs and other private sector businesses to continue to operate in challenging economic conditions. These include:
UAE budget posted a surplus in 2019