In its efforts to support the national economy, the UAE Cabinet has approved an AED16 billion economic stimulus package as part of the Federal Government's pledge to mitigate the impact of Covid-19 and ensure businesses continuity.
According to WAM, this came during a virtual meeting held this week under the chairmanship of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, as a preventive measure to protect everyone from the Covid-19 coronavirus.
“The latest financial support complements those announced recently by the emirates of Abu Dhabi and Dubai, along with that of the Central Bank of the UAE, taking to AED126.5 billion the total value of stimulus packages introduced since the COVID-19 outbreak to survive the current challenging conditions,” says news agency WAM.
Over the next three months, the package is expected to develop the commercial, retail, external trade, tourism and the energy sector, while seeking to reduce the cost of doing business.
According to Dr Christopher Payne, chief economist at Peninsula Real Estate, the greatest challenge facing the UAE, and the globe at the moment, is the effect of temporary business closures on cashflows.
“Most businesses do not keep large stores of cash in reserve but rather use up most of their revenues to pay salaries and other costs. As sales plummet, many businesses may face the prospect of not being able to service their loans. Without sufficient support from Central Banks, a severe credit crunch may ensue leading to outcomes at least as bad as the Global Financial Crisis.
To address this, the Central Bank of the UAE has already announced a liquidity and funding programme. The scale of this support program, when compared to Abu Dhabi’s and Dubai’ fiscal response underscores that the major problem here is liquidity (cashflows) and that the key response has to be monetary,” he says.