How the DH 50 billion central bank stimulus extension will boost the UAE economy


The decision of the UAE Central Bank to extend the term of the zero-cost facility (ZCF) by MAD 50 billion is expected to boost the recovery of the UAE economy. Dubai skyline photo used for illustration purposes only.
Image Credit: Gulf News

Dubai: UAE Central Bank’s decision to extend the term of the zero-cost facility (ZCF) (funds granted to interest-free banks) of 50 billion dirhams is expected to boost the recovery of the UAE economy , according to companies, bankers and financial consultants.

The extension of the support scheme is expected to benefit retail clients, small and medium-sized enterprises (SMEs) and merchant banking clients in need of financing. It will also make liquidity management easier for banks with guaranteed zero-cost financing for an additional six months.

As part of the expanded program, a zero-cost financing facility is available to banks until June 30, 2021, allowing banks to offer loan deferral to individuals and businesses that are affected by COVID-19.

We believe that this initiative [the extension of Targeted Economic Support Scheme (TESS)] will protect the economy from the impact of the pandemic and put us in an ideal position to recover once the pandemic is over.

– Abdulhamid M. Saeed Alahmadi, Governor of the Central Bank of the United Arab Emirates

Recovery catalyst

The UAE Central Bank, International Monetary Fund and Institute of International Finance expect UAE economy to contract more than 5% this year and return to growth path in 2021 .

Who are eligible and how to apply

As of January 1, 2021, banks and financial companies participating in the Targeted Economic Support Program (TESS) will be able to provide new loans and facilities to customers negatively affected by the pandemic under the applicable conditions set by the TESS standards published by the Bank. Centrale on its website.
TESS facilities are available as temporary relief from principal and / or interest / profit payments on outstanding loans for all private sector companies, SMEs and individuals concerned. SMEs and private enterprises in UAE Free Zones are included in TESS, however, entities registered in UAE Free Zones providing financial and financial banking activities are not included. The TESS does not apply to loans outstanding to government, government-related entities (GRE), and non-residents.
Individuals and businesses affected by the COVID-related liquidity crisis should contact their banks directly or through their account managers to benefit from the deferral of their existing loans. Bankers said priority would be given to those who avail themselves of the facility for the first time, but those who apply for the second time will also be considered on the basis of merit.

Bankers and businessmen expect the sustained central bank stimulus to be a catalyst in the economy’s rapid recovery.

“We believe that this initiative [the extension of TESS] will protect the economy from the impact of the pandemic and put us in an ideal position to recover once the pandemic is over, ”said Abdulhamid M. Saeed Alahmadi, Governor of the Central Bank of the United Arab Emirates.

The reopening of the economy has seen some recovery in non-oil economic activity, reflected by the improvement in the UAE’s purchasing managers index in recent months. Bankers said the liquidity support would help maintain growth momentum.

“We believe this initiative will further protect our customers, small and medium-sized businesses and corporate banking customers, and give them a huge boost in confidence as they strive to bounce back from the COVID downturn. -19 earlier this year.

– Hesham Abdulla Al Qassim – Vice President and General Manager, Emirates NBD.

“Emirates NBD stands in solidarity with the Government of the United Arab Emirates and the Central Bank to help support and protect the well-being of all individuals and businesses. We applaud our country’s exceptional vision of wise leadership to contain the difficult circumstances of the pandemic, and the extension of the applicability period of the TESS is just another example of their proactive efforts to continue to accelerate the economic recovery. Said Hesham Abdulla Al Qassim – Vice President and General Manager, Emirates NBD.

“We believe this initiative will further protect our customers, small and medium-sized businesses and corporate banking customers, and give them a huge boost in confidence as they strive to bounce back from the COVID downturn. -19 earlier this year. As a leading bank in the UAE, Emirates NBD has been among the first in the industry to step up and introduce support measures for UAE businesses and we remain committed to doing everything possible to protect our customers, stakeholders, ”said Al Qassim.

Increasing liquidity in the banking sector has been key to supporting clients and businesses during this unprecedented time, providing loans to all UAE banks and freeing up capital reserves. This has helped us a lot and allowed us to take swift and decisive action to support our customers throughout the pandemic.

– André Sayegh, Managing Director of the FAB Group.

First Abu Dhabi Bank (FAB), the largest bank in the UAE since the onset of Covid-19, the UAE government has acted swiftly and effectively to mitigate risks and overcome challenges to support the economic prosperity of the country.

“Increasing liquidity in the banking sector has been essential in supporting customers and businesses during this unprecedented time, providing loans to all banks in the UAE and freeing up capital reserves. This put us in a good position and allowed us to take swift and decisive action to support our customers throughout the pandemic, ”said André Sayegh, Chairman and CEO of the FAB group.

“The decisive action of the CBUAE since March has enabled us to extend these relief measures to our consumer, SME and business customers in the form of payment deferrals under the targeted economic support program (TESS) exceeding 7 , 5 billion dirhams at the end of September 2020. In addition to the continued commitment of TESS and FAB to support the government of the United Arab Emirates, we have continued to bring relief to customers and the community at large through of our own programs.

A cautious gesture

Mashreq Bank praised the development and described the decision by the UAE Central Bank to extend TESS for another six months.

Ahmed Abdelaal, CEO of Mashreq Bank Group

“The actions taken by the Central Bank will help ease financial strains and ensure a smooth flow of credit, thereby helping UAE banks to better finance their businesses, SMEs and retail clients. At Mashreq, we continue to develop various initiatives to support our clients across all lines of business, including helping to restructure or defer their debts based on their cash flow, removing fees, extending repayment periods loans, reducing cash advance fees and avoiding account suspensions. ”Said Ahmed Abdelaal, CEO of Mashreq Bank group.

To date, the TESS loan deferral program has benefited more than 310,000 retail clients, nearly 10,000 small and medium-sized businesses and more than 1,500 private sector businesses.

Although we have learned to adapt to the situation, it takes longer for the economy to reach its full capacity. By extending the TESS program until June 2021, the CBUAE sends a strong message of continued support to the various components of the economy

– Varouj Nerguizian, CEO of Bank of Sharjah

“It is evident that the CBUAE is taking a very proactive and positive approach to supporting the economy in order to minimize the damage caused by the repercussions of the Covid19 pandemic. The second wave that hits us around the world has delayed the full extent of the expected recovery. Although we have learned to adapt to the situation, it takes longer for the economy to reach its full capacity. By extending the TESS program until June 2021, the CBUAE sends a strong message of continued support to the various components of the economy. This new window appears to be better aligned with the time needed for the various vaccine options – which are already showing promising results – to be widely available to the public. The latest positive response from the market highlights more than eloquently the positive expectations of the global recovery ”, Varouj Nerguizian, CEO of Bank of Sharjah.

Sustained commitment

The Commercial Bank of Abu Dhabi (ADCB) said the continued commitment to the UAE Central Bank’s TESS program to support the UAE economy is a welcome move.

“ADCB continues to support the decisive measures introduced by the UAE Central Bank to support the country’s economy through TESS. The bank has fully participated in TESS, offering a package that includes deferral of loan payments, reduced fees and charges, interest rate reductions and exemptions, and rescheduling of working capital facilities for SMEs and businesses, ”ADCB said in a statement.

Financial consultants believe that extending the loan deferral will be a great relief for businesses and individuals.

“Even though a vaccine may be available in the coming months, it will be some time before the world reaches pre-pandemic commercial levels. UAE businesses will need access to liquidity to survive during this critical time, ”said Bal Krishen, President of Century Financial.

Businessmen have said liquidity is essential for businesses to weather the harsh environment and the central bank’s latest move is reassuring.

Adeeb Ahamed, Managing Director of LuLu Financial Holdings.

“We fully appreciate the support provided by the Central Bank of the United Arab Emirates to institutions during this pandemic period, through its various initiatives. The deployment of TESS has helped bring adequate liquidity to many banks under the UAE banking system, which has further benefited almost all major business sectors and individuals in general, ”said. Adeeb Ahamed, Managing Director of LuLu Financial Holdings.

“The program has involved thousands of SMEs and retail clients and enabled them to access cash or fulfill their obligations amidst many socio-economic constraints. We welcome the CBUAE’s decision to expand the program, which we hope will boost the banking system’s confidence in lending and alleviate the current challenges of the industrial scenario, especially in sectors such as hospitality, real estate, food and beverage, oil and gas. , Manufacturing and retail, as well as individual consumer, ”said Ahamed.


Darcy J. Skinner

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