The United Arab Emirates‘ central bank announced new measures to guarantee liquidity in the banking system in the face of the new coronavirus outbreak, boosting its stimulus to a total of $70 billion from a previously announced $27 billion package.
As of Saturday, the UAE registered a total of 1,505 cases of people infected. The outbreak has led the government to carry out incremental social and business restrictions that are hitting hard vital economic sectors such as retail and tourism.
The central bank said on Sunday the aggregate value of all capital and liquidity measures it adopted since March 14 is 256 billion dirhams ($69.70 billion). On March 14 it had launched 100 billion dirhams ($27 billion) worth of measures.
“The UAE central bank has upped the ante against the financial impact of the coronavirus by introducing a new set of liquidity-boosting and capital preservation measures,” said Shabbir Malik, a banking analyst at EFG Hermes. “It will help ease liquidity pressures which had built up recently.”
The Emirates Interbank Offered Rates (EIBOR), used in many UAE financial transactions, have shot up in the second half of March, Refinitiv data showed, suggesting tighter liquidity.
Bankers told Reuters last week that banks are limiting their lending to minimise potential losses from the coronavirus crisis and from an expected squeeze in dollar liquidity due to lower oil prices.
A Dubai-based banking source said on Sunday that while the new UAE central bank measures encouraged banks to lend more, they did not compel them to do so.
The measures will probably free up liquidity for potential bail-outs of state-owned companies, rather than targeting smaller business, the source said.
The central bank’s governor, Abdulhamid Saeed – who was appointed last week – said the additional measures “will effectively relieve the pressure on financial institutions, allowing them to continue to carry out their crucial role as the backbone of the economy while offering the required relief and continued access to funding for businesses and households.”