Mideast joins global stimulus with US$47 bil to fight crisis

ABU DHABI: Three of the biggest Arab economies pledged almost US$47 billion in stimulus to limit the economic damage of the coronavirus outbreak, joining a global effort meant to soothe markets and salvage growth.

Saudi Arabia’s central bank unveiled a 50-billion riyal (US$13.3 billion) package to support private businesses, soon after its counterpart in the United Arab Emirates announced a $100-billion dirham (US$27.2 billion) program to assist its lenders.

Egypt said it will allocate 100 billion pounds (US$6.4 billion) to combat the coronavirus.

Timed before the start of the workweek in much of the Middle East on Sunday, policymakers are acting as many of the economies in the region are at risk of paralysis, with most countries shutting tourist attractions, closing schools and universities, and limiting public events.

The UAE also stopped issuing visas and halted flights to Iraq, Lebanon, Syria and Turkey.

Compounding the disruptions to trade and tourism from the coronavirus, the crash in oil prices is also crippling the economies in the energy-rich Persian Gulf.

Central banks around the world have unveiled emergency stimulus packages as the pandemic forces authorities to restrict international travel and even go into full lockdown to slow the spread and prevent it from overwhelming health services.

Cases have risen to more than 140,000 worldwide, with deaths topping 5,200.

Unprecedented steps

Days of panic last week prompted unprecedented joined-up fiscal and monetary action by the UK, a package of targeted aid by the European Central Bank, stimulus from the People’s Bank of China, an easing pledge from the Bank of Japan, and more firefighting by the US Federal Reserve.

The UAE’s Targeted Economic Support Scheme includes a 50-billion dirham aid package for banks in the country through collateralised, zero-interest loans.

Banks will also be allowed to free up capital buffers, which will make another 50 billion dirhams in liquidity available to lenders.

UAE banks are “adequately capitalised and banks maintain significant voluntary capital buffers”, the regulator said in a statement.

“The purpose of the targeted scheme is to facilitate provision of temporary relief from the payments of principal and interest on outstanding loans for all affected private sector companies and retail customers in the UAE.”

Saudi Arabia’s central bank said it’s preparing funding to support private businesses, which includes 30 billion riyals available to banks and financing companies in return for deferring small and medium-size businesses’ loans.

The Saudi Arabian Monetary Authority, as the central bank is known, said the kingdom’s banking sector is still seeing “good performance indicators”.

UAE regulators reiterated the long-standing peg of the country’s currency to the US dollar, saying that the oil-rich nation’s “ample reserves” of 405 billion dirhams as of March 10 “are adequate to safeguard the stability of the national currency”.

The central bank said the measures, effective immediately, are aimed at protecting corporate and retail customers affected by the virus.

Days earlier, Iran asked the International Monetary Fund for US$5 billion to help it manage the outbreak. Iran is the third-worst hit country after China and Italy.