Fighting coronavirus: $97bln stimulus packages erupt across GCC states

Here's a summary of the stimulus packages announced by the various GCC states to fight the economic impact of the coronavirus

  
The stands are seen empty after the decision of the Saudi Ministry of Sports, following an outbreak of the coronavirus disease (COVID-19), during the Saudi Professional League soccer match between AL-Hilal and Al-Ettifaq at King Saud University Stadium, in Riyadh, Saudi Arabia March 7, 2020.

The stands are seen empty after the decision of the Saudi Ministry of Sports, following an outbreak of the coronavirus disease (COVID-19), during the Saudi Professional League soccer match between AL-Hilal and Al-Ettifaq at King Saud University Stadium, in Riyadh, Saudi Arabia March 7, 2020.

Reuters/Ahmed Yosri

The fight against the rapidly spreading coronavirus is proving to be a battle for the economies as well, with leaders gearing up to do everything possible to shore them up. Nearly every GCC nation has announced relief and stimulus packages to help their economy cope with the situation.

From Bahrain’s announcement that it would foot electricity and water bills for both individuals and companies for three months, to the UAE’s and Saudi Arabia’s many stimulus packages, to Kuwait’s approval of additional funds for ministries and state agencies, the Gulf states are launching new economic packages and policies like never before. The total value of the announced stimulus packages across all the major Gulf states together is at $97.36 billion

Here’s a summary of the financial stimulus packages announced so far by the various GCC states to fight the economic impact of the coronavirus pandemic.

UAE

While the UAE central bank announced a $27.2 billion (100 billion dirhams) Targeted Economic Support Scheme and other measures to offset the economic effects of the coronavirus pandemic, Dubai unveiled a 1.5 billion dirham plan last week and the Abu Dhabi Executive Council announced a huge stimulus package aimed at supporting economic activity and businesses.

The Abu Dhabi Executive Council has allocated 5 billion dirhams for water and electricity subsidies for citizens and the commercial and industrial sectors and an additional 3 billion dirhams for the SME Credit Guarantee Scheme. Not to forget a one billion dirham market maker fund to enhance liquidity and sustain balance between supply and demand for stocks.

The measures, effective upon announcement, will limit UAE banks' likely material asset quality deterioration from the coronavirus outbreak. The support scheme provides funding for banks to grant relief from principal and interest payments for up to six months on loans to all private sector and retail borrowers economically affected by the coronavirus, Moody's Investor Service said. 

The central bank's targeted scheme includes $13.6 billion of funding from which banks can draw collateralized funds at a 0 percent interest rate. And, the scheme reduces domestic systematically important banks' (D-SIB) buffers as well as banks' capital conservation buffer (CCB), which will free up an additional $13.6 billion in banks' lending capacity. The overall scheme equates to 6.4 percent of UAE banks’ domestic credit as of January 2020.

"Although Moody’s still expects UAE banks’ asset quality to materially deteriorate amid the current difficult environment, the support scheme will mitigate the extent of the deterioration by keeping some borrowers' liquidity issues from becoming solvency issues," Mik Kabeya, AVP Analyst, Moody's Investor Service said. 

"The new $13.6 billion funding scheme will not mute significant asset quality challenges, particularly should the pandemic be persistent," he added.

Moody’s expects borrowers in the tourism, transportation, trade and real estate sectors to be the most affected, and small and medium enterprises (SMEs) to be particularly vulnerable to economic shocks.

SAUDI ARABIA

Saudi Arabia Monetary Authority (SAMA) unveiled a $13.3 billion economic stimulus package to offset coronavirus impacts and to support the private sector, especially the small and medium enterprises (SMEs).

As part of the stimulus package, up to 30 billion Saudi riyals is earmarked for banks and finance institutions for deferred payments by SMEs for six months with immediate effect. Small scale businesses across the kingdom will be given concessional loans of up to 13.2 billion Saudi riyals from banks and finance institutions to maintain their operations, contribute to economic growth and maintain employment rates at these facilities.

SAMA will cover the payment fees for all private sector stores for three months by providing a fund of over 800 million Saudi riyals and will pay those fees for service providers registered in the national system.

SAMA will also coordinate with banks and finance institutions to facilitate payment of loans secured by the facilities, which are impacted by the precautionary measures adopted in Makkah and Madinah.

OMAN

As coronavirus fears spread in the region, Oman's central bank is preparing to provide around $20.8 billion in extra liquidity to banks as one of the many measures aimed at supporting the economy.

According to Oman state news agency, the central bank has asked banks to slash banking fees, adjust their capital and credit ratios, and allow repayment postponements for up to six months, mainly for SMEs.

It asked to facilitate lending in sectors affected by the coronavirus, including healthcare, travel and tourism, Reuters reported.

Oman’s economy eroded by high levels of debt is vulnerable to regional and global economic slowdown due to the coronavirus outbreak.

Rating agencies Moody's and Fitch this month cut Oman's rating further into junk territory, citing continued erosion of the country's fiscal and external balance sheets.

BAHRAIN

Bahrain reported Gulf region's first coronavirus death.

The Bahraini government has announced a $11.38 billion economic stimulus package to support its citizens and the private sector amidst the rapidly spreading coronavirus pandemic.

The package which is equivalent to 29.6 percent of Bahrain’s annual GDP includes a draft law that concerns paying the salaries of all private sector employees for three months from April 2020 from the unemployment fund. However, this is not yet passed.

According to a tweet from the finance ministry, the kingdom will cover electricity and water payments for individuals and companies for three months starting April. It will double the size of the liquidity fund to reach 200 million dinars ($530 million). Its central bank will raise the lending capacity of banks by 3.7 billion dinars ($9.80 billion).

Businesses and individuals will be exempt from municipal, industrial land rental fees for three months. The government has also announced that tourism-related firms will be exempt from tourism taxes.

On Monday, the cabinet authorised the finance minister to directly withdraw funds with a 5 per cent cap from the public account to tackle emergency measures related to the virus spread.

QATAR

Qatar has announced that it would facilitate $20.5 billion in financial incentives to the private sector to tackle the economic setbacks arising from the coronavirus pandemic. It has also instructed state funds to increase their investment in the local bourse by 10 billion riyals.

KUWAIT

A cabinet meeting presided by Sheikh Sabah Khaled Al-Hamad Al-Sabah, the prime minister of the Kuwait, on Sunday, has approved a draft law authorising $1.6 billion additional funding to ministries and state agencies to fight the impact of the coronavirus.

Kuwait's central bank has already confirmed that it is ready to support the financial sector affected by the economic impacts amid coronavirus, by providing cash to commercial banks. Kuwait has suspended fees on point of sales devices and ATM withdrawals.

Separately, Kuwait has donated $40 million to the World Health Organisation (WHO) to help its worldwide efforts to stop the spread of coronavirus.

(Writing by Seban Scaria seban.scaria@refinitiv.com; editing by Daniel Luiz)

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