DUBAI/RIYADH (Reuters) – The central banks of the United Arab Emirates (UAE) and Saudi Arabia, the 2 largest Arab economies, on Saturday introduced stimulus plans value a mixed $40 billion to ease the influence of the coronavirus outbreak of their respective international locations.
The UAE regulator plans to assist banks and companies within the nation, the place the outbreak is affecting main financial sectors equivalent to tourism and transport, with a 100 billion dirham ($27 billion) financial plan, it stated on Saturday.
In a separate assertion, the Saudi Arabian Financial Authority stated it had ready a 50 billion riyal ($13.32 billion) package deal to assist small and medium-sized enterprises (SMEs) address the financial impacts of coronavirus.
The illness has up to now contaminated 85 individuals within the UAE and 105 in Saudi Arabia.
The Saudi funding goals to grant SMEs six-month deferrals on financial institution funds, concessional financing and exemptions from the prices of a mortgage assure program, SAMA stated.
Concert events, sporting occasions and trade conferences have been canceled or postponed prior to now few weeks within the UAE to comprise the spreading of the brand new coronavirus.
In Dubai, the Center East’s commerce, finance, tourism and transportation hub, some companies have began to really feel the ache from the worldwide journey slowdown attributable to the outbreak.
Saudi Arabia, which has already suspended the Umrah pilgrimage and locked down its jap Qatif area the place many infections are positioned, plans to halt all worldwide flights for 2 weeks from Sunday.
The UAE central financial institution stated it’ll present 50 billion dirhams by collateralized loans at zero value to all banks working within the UAE whereas a further 50 billion dirhams can be freed up from lenders’ capital buffers.
“The CBUAE is permitting banks to free-up their regulatory capital buffers to spice up lending capability and assist the UAE financial system,” it stated in an announcement.
It stated the scheme presents banks reduction for as much as six months from the funds of principal and curiosity on excellent loans for affected personal sector firms and retail prospects.
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Including to a possible financial slowdown attributable to the virus, Saudi Arabia and the UAE are additionally anticipated to face wider fiscal deficits this yr due to decrease oil costs, on account of an oil worth warfare between Riyadh and Moscow.
The Gulf states’ currencies, that are pegged to the U.S. greenback, weakened within the forwards market final week.
The UAE regulator stated on Saturday it maintained its dedication to the peg for the dirham, and stated international foreign money reserves amounting to 405 billion dirhams as of March 10 have been “enough” to safeguard the steadiness of the foreign money.
Different measures launched by the UAE central financial institution on Saturday embrace decreasing by 15-25% the quantity of capital banks have to carry for loans to SMEs, and higher phrases for first-time residence consumers.
Importantly for the native actual property sector – which has been struggling in Dubai for the previous decade – banks can be allowed to extend their publicity to actual property loans.
“When the publicity reaches 20% of the banks’ mortgage portfolio (measured by risk-weighted property), banks can be allowed to extend it to 30%, however can be required to carry extra capital,” it stated.
The central financial institution additionally launched laws which cut back banking charges for small firms.
The Dubai and Abu Dhabi inventory change indices dropped final week amid coronavirus considerations and due to tumbling oil costs.
To comprise volatility within the markets, the central financial institution stated it plans to problem tips on margin calls, asking banks to request extra collateral earlier than liquidating shares within the occasion of a market downfall.
Extra reporting by Hesham Abdul Khalek; Modifying by Edmund Blair, William Maclean, Mike Harrison and James Drummond
