The United Arab Emirates' centralbank announced new measures to guarantee liquidity in the banking system inthe face of the new coronavirus outbreak, boosting its stimulus to atotal of $70 billion from a previously announced $27 billion package.
As of Saturday, the UAE registered a total of 1,505 cases ofpeople infected. The outbreak has led the government to carry out incrementalsocial and business restrictions that are hitting hard vital economic sectorssuch as retail and tourism.
The central bank said on Sunday the aggregate value of allcapital 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 thefinancial impact of the coronavirus by introducing a new set ofliquidity-boosting and capital preservation measures," said Shabbir Malik,a banking analyst at EFG Hermes. "It will help ease liquidity pressureswhich had built up recently."
The Emirates Interbank Offered Rates (EIBOR), used inmany 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 theirlending to minimise potential losses from the coronavirus crisis and from anexpected squeeze in dollar liquidity due to lower oil prices.
A Dubai-based banking source said on Sunday that while the newUAE central bank measures encouraged banks to lend more, they did not compelthem to do so.
The measures will probably free up liquidity for potentialbail-outs of state-owned companies, rather than targeting smaller business, thesource said.
The central bank's governor, Abdulhamid Saeed – who wasappointed last week – said the additional measures "will effectivelyrelieve the pressure on financial institutions, allowing them to continue tocarry out their crucial role as the backbone of the economy while offering therequired relief and continued access to funding for businesses andhouseholds."