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Opinion and Editorial

KT Edit: UAE stimulus hike will help people and businesses

Filed on April 6, 2020


It would take a lot of effort to reboot economies after we have dealt with this coronavirus, and measures like these will certainly help lay foundation for the future

It was towards mid-March that the UAE started implementing strict measures to contain the spread of coronavirus. In the last three weeks, we have seen how a health crisis can mutate into an economic and social one. As people are staying indoors, businesses are shrinking and demand is getting suppressed. Layoffs, salary cuts, unpaid leaves, shutting down of business, rental evictions, etc. have become universal features of this pandemic, and are realities in the UAE too. Amid all the uncertainty, one thing seems definitive, the economic consequences of the pandemic will have far graver consequences on people compared with the present impact on public health. Only government's support can help people weather this storm. The UAE has been proactive on this front. The leadership has assured time and again that help is at hand. On Sunday, the UAE Central Bank doubled the stimulus package to $70 billion that aims to extend much needed help to people and businesses. The package is generous and has taken into consideration the needs of all sections, from small and medium businesses, to big corporates and firms, and individuals. The central bank has given more leeway to commercial banks and freed up capital so that banks in turn are able to maintain liquidity in the system and extend credit to the ones in need. However, much depends on the banks now. Going by the uncertainty that looms large globally, a number of banks are understandably risk-averse, which means, much of the effort of the Central Bank could be nullified if the banks do not pass on the benefits to businesses and individuals. A lot of small and medium enterprises might just vanish by the end of the crisis, but many would need protection from bankruptcy, many more need loans to stay afloat. Banks should access risk carefully and extend help wherever it can.  

On the individual front, the Targeted Economic Support Scheme has been strengthened to allow individuals to defer their principal and interest until the end of this year. This would provide a huge buffer to families that are finding it hard to make the ends meet, and are unsure of their future plans. The current package is in addition to the $35 billion stimulus that was announced last month. All this goes to show that the government is constantly accessing the situation and would not shy away from providing more support, if needed. Hundreds would benefit from such measures. If the Great Recession of the last decade hit the financial system, what is essentially known as the heart of the economies, the ongoing pandemic is shutting down the entire economies. It would take a lot of effort to reboot these economies after we have dealt with this coronavirus, and measures like these will certainly help lay foundation for the future. 


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