- Central Bank of the UAE stimulus package
- New stimulus package in Dubai
- Abu Dhabi government stimulus package
- New stimulus package announced in Sharjah
- Other relief packages by major UAE companies
As the global fight against the novel coronavirus pandemic continues with more confirmed cases emerging worldwide, the UAE has been at the forefront in taking the necessary precautions to prevent and limit the spread of Covid-19 and its impact. Along with implementing temporary travel restrictions to high-risk countries and temporary closure of entertainment venues, the UAE has also unveiled several stimulus packages to ease the economic impact of the coronavirus on citizens, residents and businesses. Find out more about how the country is taking steps to reduce the long-term consequences of the pandemic through the new stimulus packages in the UAE.
New stimulus packages in the UAE in 2020
In response to the coronavirus pandemic in the UAE and across the globe, there have been several stimulus packages and financial measures announced by the Dubai and Abu Dhabi governments, the Central Bank of the UAE and major companies in the UAE.
Central Bank of the UAE
The Central Bank of the UAE has launched its Targeted Economic Support Scheme, which is an AED 100 billion ($27 billion) stimulus package in the UAE to support banks, as well as retail and corporate customers.
HOW WILL THE AED 100 BILLION STIMULUS PACKAGE HELP?
The AED 100B stimulus package consists of many financial measures that will support the UAE’s economy and business environment.
- AED 50 billion from the Central Bank’s own funds will be offered as collateralised loans to banks in the UAE at zero cost. Another AED 50 billion will also be made available tas capital buffers for banks operating in the UAE, which will allow them to increase their lending capacity.
- Banks in the UAE will be allowed to use up to 60% of their regulatory capital conservation buffer, which is a mandatory fund that financial institutions are required to hold. Banks that have been recognised as systemically important by the Central Bank will be permitted to tap into 100% of their additional capital buffer.
Banks who receive these funds have been directed to use them to provide temporary relief for up to six months for retail and corporate customers in the UAE’s private sector, on the payment of outstanding loans.
Moreover, the Central Bank has also reduced the amount of capital that must be held by banks to offer a loan to small-to-medium businesses (SMEs), by 15% – 25%. This will make it easier for SMEs to access financing, and thereby boost the business environment in the UAE.
OTHER MEASURES ISSUED BY THE CENTRAL BANK IN THE UAE
On 16 March 2020, the Central Bank of the UAE cut interest rates applicable to the 1-week Certificates of Deposit (CDs) by 75 basis points, following the US Federal Reserve Board’s decision to cut rates, in a move to lower borrowing costs.
Some of the other directives outlined by the Central Bank of the UAE to mitigate the coronavirus economic impact in the UAE, which will also benefit the country’s real estate sector, include:
- The Central Bank is increasing the loan-to-value ratios (LTVs) for mortgage loans by 5 percentage points for first-time buyers. This will keep the UAE real estate market affordable by requiring first-time buyers to put up less of their own funds when making a real estate purchase.
- Banks will be allowed to increase their exposure to the real estate sector, with the existing limit rising from 20% of their loan portfolio to 30%, provided certain conditions are met.
- According to the Central Bank’s new stimulus package in the UAE, there will be new regulations to reduce the fees that are charged to merchants when customers pay by credit or debit cards.
The Central Bank will also issue new regulations to support SMEs in the UAE:
- There will be new regulations to limit banking fees for SMEs and to instruct banks not to require more than AED 10,000 as a minimum account balance.
- Banks must open accounts for SMEs within two days, provided the necessary documentation is in place and that the risk is acceptable, as per the anti-money laundering and combating financial terrorism policies.
Aside from this, the Central Bank of the UAE will also be issuing guidelines on margin calls, as well as waiving the fees for banks in the UAE for payment services provided through its payment and settlement systems. The fee waiver will be effective from 15 March 2020 for six months.
ADDITIONAL AED 16 BILLION STIMULUS PACKAGE IN THE UAE
On 22 March 2020, the UAE Cabinet approved another stimulus package, worth AED 16 billion, to support the economy and businesses during the Covid-19 outbreak. This brings the total size of the UAE’s stimulus packages to AED 126 billion, along with packages announced by Dubai and Abu Dhabi.
With the new UAE stimulus package, work permit fees will be suspended for a renewable period of six months and will also include a reduction of labour and other charges. These measures are focussed on reducing the cost of doing business and supporting SMEs, while also ensuring the acceleration of infrastructure projects in the country.
Dubai Stimulus Package
In light of the coronavirus pandemic around the globe, HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, launched an AED 1.5 billion ($400 million) stimulus package in Dubai on 12 March 2020, to reduce the cost of living and support businesses in the emirate. These 15 initiatives will be valid for the next three months and will be reviewed after this period.
Take a look below at the different measures introduced as part of the new stimulus package in Dubai:
FOR CITIZENS AND RESIDENTS IN DUBAI
As part of the Dubai stimulus plan, DEWA bills for residential, commercial and industrial sectors will be reduced by 10%. Additionally, the required deposits for water and electricity connections will also be reduced by 50%. These proactive steps by the government will help make the cost of living in Dubai more affordable for residents.
FOR BUSINESSES OPERATING IN DUBAI
As part of the Dubai stimulus package, several initiatives have been announced to support Dubai’s commercial sector:
- There will be a freeze on the 2.5% market fees charged to all facilities operating in Dubai.
- 20% of custom fees levied on imported products sold locally in the emirate will be refunded.
- The AED 50,000 bank guarantee or cash needed to conduct customs clearance activity will not be required. There will also be a refund of the bank guarantee or cash paid by existing custom clearance companies.
- The fees for submitting the customs documents for companies will be reduced by 90%.
- The 25% down payment required to avail instalment-based payments for obtaining and renewing licences will be removed, which will ease the financial burden for SMEs.
- The renewal of commercial licences will be permitted without the mandatory requirement of renewing lease contracts.
- Companies will not require permits for new sales and offers.
- There will be no need for a banking instrument when submitting custom-related grievances.
- Traditional wooden commercial vessels are not required to pay mooring services fees as well as loading fees at Dubai Harbour and Hamriyah Port.
FOR THE TOURISM SECTOR
The tourism and travel industries worldwide have been impacted by the travel restrictions imposed due to the coronavirus pandemic. The new stimulus package announced by HH Sheikh Hamdan will support Dubai’s tourism sector with the following measures:
- Municipality fees levied on sales at hotels will be reduced from 7% to 3.5%.
- There will be no fees charged for the postponement or cancellation of tourism and sports events scheduled for 2020.
- There will be a freeze on fees charged for the rating of hotels, along with the fees for the sale of tickets and acquiring permits and other government charges for business and entertainment events.
Abu Dhabi economic stimulus package
Along with the Central Bank and Dubai, the Abu Dhabi Executive Council has unveiled its own stimulus package, which fast-tracks the emirate’s Ghadan 21 initiative, to offset the impact of the coronavirus.
Take a closer look at the 16 initiatives that have been launched as part of the Abu Dhabi stimulus plan that will take immediate effect to preserve the emirate’s economy.
EXEMPTIONS ON FEES
As per the directives from the Abu Dhabi Executive Council, motorists will not be charged at the Abu Dhabi Toll Gates until the end of 2020. This will significantly contribute to reducing the cost of living for residents crossing the toll gates in Abu Dhabi.
Other fee exemptions for 2020 that were announced as part of the Abu Dhabi government stimulus package include the following:
- There will also be no annual registration fees for commercial vehicles
- There will be no fees charged for real estate registrations.
- There will also be no Tawtheeq fees for industrial and commercial activities.
INITIATIVES TO REDUCE THE COST OF LIVING AND DOING BUSINESS
The Abu Dhabi Executive Council has several measures to reduce the cost of living, as well as support SMEs and startups in the emirate. For instance, AED 5 billion will be allocated to subsidise water and electricity for citizens as well as commercial and industrial activities. Moreover, AED 3 billion will also be channelled towards the Abu Dhabi Investment Office’s SME Credit Guarantee Scheme, which will make it easier for SMEs to access financing.
Take a look at some of the other initiatives outlined in the new Abu Dhabi stimulus package:
- Electricity connection fees will also be subsidised for startups until the end of 2020.
- Bid bonds will be suspended and performance guarantees up to AED 50 million will be waived for startups.
- A new committee has been established to review lending options in support of businesses in Abu Dhabi, which will include members from the Department of Economic Development and locally-based banks.
- Fees for leasing industrial land will be reduced by 25% on new contracts, while all of the current industrial and commercial penalties will be waived.
- All approved government payables and invoices must be settled within 15 working days
- AED 1 billion has been allocated towards a market maker fund, to ensure that there is a balance between supply and demand for stocks.
To support the local tourism sector, there will be rebates offered on the rentals for the restaurant, tourism and entertainment sectors of up to 20%, while tourism and municipality fees for these sectors have been suspended for 2020.
Sharjah Stimulus Package Announced in 2020
On 31 March 2020, the Sharjah Executive Council announced a massive stimulus package to support businesses and individuals over the next three months. This new stimulus package consists of 47 directives to support the emirate’s economy. The highlights of this stimulus package include the following:
- Exempting economic establishments from paying fees for three months, who need to renew licenses between 1 January and 31 December 2020.
- Introducing 50% discount for traffic fines for violations and cancellation of black points for violations committed before 31 March 2020, for three months, from 1 April 2020.
- Issuing certificates (damage or loss) by the Sharjah Police General Command for free-of-charge for three months, from 1 April 2020.
- Exempting tenants of building 1 and 2 of the Sharjah Chamber of Commerce and Industry from rent for the next three months, from 1 April 2020.
- Exempting tenants of Expo Centre Sharjah from rent for the next three months, from 1 April 2020.
- 50% discount for shops, commercial centres and central markets participating in marketing campaigns organised by the SCCI for the year of 2020.
- Exempting employees of SMEs in 101 Trade Centre from rent fees until the end of 2020.
- Providing free sanitation services for houses for three months.
- Exempting the private sector from renewal fees for municipal-related permits for three months from 1 April 2020.
- Suspension of all rental property eviction cases for a period of two months, including procedures such as imprisonment, blocking of bank accounts and seizing vehicles and other assets.
- Exempting the public from paying parking fees for the next three months, from 1 April 2020.
Aside from the above, the new stimulus package in Sharjah also includes exemptions or reductions on certain fees for taxis and operators of public transport and exemptions for docking and loading fees for commercial vessels in Sharjah Creek, Khorfakkan Creek and Hamriyah Free Zone. There are several exemptions of fees for hotel establishments and companies in aviation industry.
Other Relief funds announced by major companies
Along with these stimulus packages, some of the UAE’s most well-known companies are also stepping forward with relief packages to combat the impact of the coronavirus.
Dubai Holding and Meraas: The two groups have announced an AED 1 billion relief fund for their customers and businesses that have been impacted by the coronavirus outbreak. A task force has been established to review specific cases and ensure that necessary economic support is made available to them.
Aldar Properties: The Abu Dhabi-based developer has also announced that it will allocate AED 4 billion to ensure that payments are made on schedule to its supply chain, including contractors, suppliers and consultants. In addition, an AED 100 million relief package has also been announced to support tenants, customers and partners, who have been affected by the coronavirus. Other initiatives by the developer include supporting tenants through monthly payment plans and waiving administrative fees for transactions with Aldar.
As you can see, these stimulus packages in the UAE will go a long way in supporting and providing relief for residents and businesses in the country. You can follow MyBayut to stay updated on the new developments regarding the coronavirus outbreak in the UAE, as well as any new regulations or directives announced.
As the UAE combats the pandemic, individuals can also do their part by taking steps to be responsible during the coronavirus outbreak. Adopt healthy habits such as washing hands regularly and practice social distancing, especially in light of the closure of attractions in the UAE. You can also read more about how the UAE is fighting Covid-19 through its various precautionary measures.