The UAE’s proactive roll out of relief measures, in line with the International Monetary Fund and World Bank’s recommendations for countries globally during the current pandemic, will help cushion the impact of the coronavirus.
A series of monetary and fiscal measures by the central bank and government provide support for people and businesses, while local lenders have also stepped up with payment holidays that should create a buffer in the coming three months.
Individual emirates in the UAE are extending special support packages to help smaller businesses and some of the more vulnerable sectors of the economy to brave the unprecedented crisis that has wreaked havoc on the global economy and put millions of jobs at stake as travel and tourism come to a grinding halt.
The National lists what state measures have been taken to support the people and economy of the UAE:
Central Bank of UAE
On March 14, the regulator introduced a Dh100 billion ($27bn) comprehensive economic monetary package – the Targeted Economic Support Scheme – which provides funding to banks and allows them to delay principal and interest payments for up to six months on loans to all private sector and retail borrowers affected by the pandemic.
The package includes Dh50bn from the Central Bank funds through collateralised loans at zero interest rate to all UAE lenders. The regulator has allowed reduction in capital buffers, which will free up Dh50bn of banks’ lending capacity. The overall package equates to 6.4 per cent of UAE lenders' domestic credit as of January.
The regulator ordered banks to use the funding “to grant temporary relief” to private sector corporate customers and retail clients for up to six months. The Central Bank has also reduced the amount of capital banks have to hold for their loans to SMEs by 15 to 25 per cent. This will increase available financing to small companies. It also raised the loan-to-value ratios applicable to mortgage loans for first-time homebuyers by 5 percentage points.
Abu Dhabi stimulus initiative
On March 16, Abu Dhabi detailed a plan to stimulate economic growth and support the private sector in the emirate.
The 16-point agenda unveiled by Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Supreme Commander of the Armed Forces, includes allocation of Dh5bn to subsidise water and electricity for citizens and commercial and industrial activities; reduces electricity connection fees for start-ups until the end of this year; and exempts all commercial and industrial activities from Tawtheeq fees in 2020.
The government has also allocated Dh3bn for the SME credit guarantee scheme, dedicated Dh1bn to establish a market maker fund to stabilise stock markets and issued directives to settle all approved government payables and invoices within 15 working days.
The state has exempted start-ups from performance guarantees for projects up to Dh50 million, reduced industrial land leasing fees by 25 per cent on new contracts, suspended real estate registration fees for the remainder of this year and waived current commercial and industrial penalties.
Waiving annual registration fees for commercial vehicles, exempting all vehicles from traffic tariffs and road tolls this year and suspending tourism and municipality fees in 2020, are among the other reprieves.
Dubai stimulus package
On March 13, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, unveiled an economic support package worth Dh1.5bn, which includes measures to protect businesses, especially in tourism, retail, external trade and logistics services.
The government has introduced nine initiatives over the next three months, including a freeze on the 2.5 per cent market fees for all facilities operating in Dubai, refund of 20 per cent on the customs fees imposed on imported products sold locally and a 10 per cent cut to water and electricity bills for three months.
Total government support package
The UAE government increased its stimulus to Dh126bn on March 22, when Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, announced an additional support package of Dh16bn. “We approved new measures to cut the cost of doing business, support small businesses and accelerate major infrastructure projects,” he wrote on Twitter.
Measures by UAE banks
Banks in Dubai are offering clients loan repayment holidays and reduced fees and charges to help ease financial distress. Emirates NBD, Dubai Islamic Bank, Emirates Islamic, Mashreq, and Commercial Bank of Dubai on Saturday announced a series of support measures that will remain in effect for three months starting April 1. The steps include repayment holiday of up to three months with zero interest and fees for retail loan customers, placed on unpaid leave by their employers.
Those who took out personal and car loans, or mortgages can apply for a one-month repayment holiday with no fees.
A 5 per cent increase in the loan-to-value ratio and full waiver of processing fees can be availed by first-time homebuyers.
Credit card customers will be allowed interest-free instalment plans for all school fee payments as well as grocery purchases with no processing fees for up to six months.
SME clients can avail a repayment holiday of three months with zero interest and fees. For wholesale banking, lenders are prioritising relief measures for key industry sectors including health care, aviation, hospitality, retail, event management, consumer goods and education, by offering refinancing, repayment deferrals or lower repayments where required.
Apart from the facilities offered by their conventional peers, Dubai Islamic Bank and Emirates Islamic are offering option to apply for debt consolidation solutions where appropriate. The lenders will also work with the customers facing margin calls on their shares portfolio.
Banks in the capital including First Abu Dhabi Bank, Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank, have launched their separate support measures for customers.