On March 14, 2020, the UAE Central Bank announced an AED 100 billion stimulus package to support businesses, borrowers and banks in the country. This development comes amidst the Coronavirus outbreak that is spreading at an unprecedented pace around the world.

With the number of Covid-19 cases jumping to over a hundred* in the UAE, the business community and residents have started to feel the heat. The outbreak has already started affecting businesses, especially those operating in deeply affected sectors like travel and recreation. With unforeseen pressure on cash flows, it is imperative that businesses receive the financial wiggle room they need to ensure business continuity.

Now if you’re working in the UAE – employed or running your own business – What does this financial stimulus mean for you? The Souqalmal team breaks down everything you need to know about it.

What’s included in the stimulus package?

Temporary relief from debt repayments

The UAE Central Bank has directed private banks to offer borrowers up to six months of relief from their scheduled debt installments. On the consumer front, an economic slowdown amplifies the threat of lay-offs and salary cuts. In this scenario, the option of postponing loan repayments can help make sure that residents are able to meet their living expenses and crucial financial commitments first.

Easing the burden on first-time homebuyers

Banks have been asked to increase the loan-to-value (LTV) on mortgages for first-time property buyers by 5 percent. So if you’re an expat resident looking to make your first property purchase in the UAE (worth up to AED 5 million), you can now get a home loan of up to 80 percent of the property value.

Lowering minimum balance requirements and other fees for SMEs

Private banks have been instructed to cap the minimum balance requirement for SME customer’s business accounts at AED 10,000. This is going to give small businesses increased access to their cash reserves. Further details are yet to emerge on how the UAE Central Bank plans to lower banking fees for SMEs.

What’s next?

Governments and central banks of countries that have been affected by the COVID-19 pandemic have already announced fiscal and monetary stimulus programs to support bank lending and offer financial relief to the worst-hit small and medium-sized businesses and retail customers.

We expect to see more detailed criteria around who qualifies for the break in repayments being revealed soon. Given the current announcement, it looks like banks may have the discretion to decide who’s eligible for the temporary relief from repayments, and which debts are covered (home loans, personal loans, business loans, credit cards etc.).

* As of March 18, 2020