News Highlights

Dubai banks to offer relief packages to companies, individuals

HH Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and Ruler of Dubai has asked local banks to offer companies relief measures including refinancing and repayment referrals as part of measures to mitigate the impact of COVID-19 on the economy.

The relief measures will prioritise key industries contributing to the UAE’s economy and sectors most impacted by the coronavirus such as health care, aviation, hospitality and retail.

According to the Dubai Media Office, the measures announced by the banks seek to support the UAE Government and the Central Bank of the UAE’s six-month economic stimulus package as well as the Dubai Government’s three-month economic stimulus package to support businesses.

The measures include offering refinancing, repayment deferrals or lower repayments where required. From 1 April until 30 June 2020, Dubai-based banks will waive loan repayments for three months for individuals on unpaid leave and small businesses.

Dubai-based banks implementing these initiatives are Emirates NBD, Emirates Islamic, Dubai Islamic Bank, Mashreq Bank and Commercial Bank of Dubai. The banks will also reduce the minimum monthly balance for business accounts to AED 10,000 ($2,700).

Oman plans to trim budget, draft public debt law in response to COVID-19

Oman plans to reduce spending by five per cent in response to COVID-19 and the plunge in oil prices, a day after the Sultanate unveiled a $20 billion incentive package for financial institutions to combat the impact of the new coronavirus on the local economy, reported Bloomberg.

The Sultanate is preparing a public debt law and is conducting a comprehensive review of public spending. Oman TVsaid that the government will conduct a budget review every three months to monitor adherence to spending limits.

Oman has additionally approved funds to augment food reserves and to underwrite measures it’s taking to shore up the economy. The government did not say where the money is coming from, but Oman is planning on drawing on reserves and selling assets this year.

The Central Bank of Oman said that it’s prepared to add OMR 8 billion ($20.8 billion) in liquidity as a buffer against the economic fallout from the virus, largely skirting a budget that is been battered by the crash in oil prices.

UAE, Indian lenders face exposure to beleaguering Finablr

Banks from the UAE and India risk losing millions of dollars due to their exposure to London Stock Exchange-listed Finablr, the foreign-exchange operator that is preparing for potential insolvency, reported Bloomberg.

The firm has been hurt by a liquidity squeeze at both group and operational business level as well as the fallout from NMC Health, coronavirus-related travel restrictions and a downgrade of Travelex’s bonds.

UAE-based National Bank of Fujairah and Commercial Bank International and India’s Bank of Baroda are still owed about $300 million by Finablr’s parent BRS Ventures, which is owned by Bavaguthu Raghuram Shetty.

The loan was used to refinance a bridge loan for the acquisition of Travelex Holdings. BR Shetty pledged around 56 per cent of his shares in the firm as collateral for the loan when he was unable to repay it after Finablr’s initial public offering (IPO) last May 2019.

Since listing in London, the shares have plummeted about 93 per cent, giving Finablr a market value of GBP 77 million ($89 million) when it was halted from trading last week that is down from a peak of GBP 1.5 billion in December 2019.

Oman plans to raise $1 billion to plug its budget deficit

Oman, the most vulnerable Gulf country in the oil-price war, plans to raise more than $1 billion in loans in the first half to bridge its budget deficit.

The Sultanate, which is rated junk by the three major rating companies, is in talks with local and international banks about the borrowing. If oil prices remain low the government will focus on asset sales and reserves to fill a widening gap.

According to the International Monetary Fund, Oman is still addressing the impact of the last oil price crash in 2014 and is set to post its seventh straight budget deficit.

The largest Arab crude producer outside OPEC calculated its 2020 budget with a deficit of OMR 2.5 billion ($6.5 billion) based on an average oil price of $58 per barrel, way above oil’s current level of about $35 a barrel.

Oman’s debt is projected to continue increasing in the next two years, despite Moody’s expectation that the government will begin implementing a significant medium-term fiscal adjustment programme to slow in the next few months and curb the increase in the debt burden.

Saudi Arabia unveils measures to mitigate COVID-19 impact

Saudi Arabia has unveiled a series of measures that would enable companies to redirect SAR 120 billion ($32 billion) as they struggle to combat the impact of the coronavirus pandemic.

The ministry of finance said that it would exempt the private sector from some government fees and delay other payments, for now saving firms SAR 70 billion. The steps will also allow businesses to delay value-added tax payments for three months.

In a statement, the ministry of finance said that the government ‘has the ability’ to diversify its sources of financing between public debt and reserves, enabling it to face the current challenges. The Kingdom plans to switch spending to sectors that are most affected by the epidemic and boost money for health services.

The Saudi Arabian Monetary Authority recently launched a SAR 50 billion package to support business, including SAR 30 billion for banks and financing companies that are deferring loans for SMEs.

BlackRock, Italy’s Snam bid for stake in $15 billion ADNOC unit

BlackRock, KKR & Co. and Italian infrastructure operator Snam are among firms that made initial bids for a stake in Abu Dhabi National Oil Company’s (ADNOC) natural gas pipelines, which could be valued at about $15 billion.

The firms are competing with other bidders including Australian fund manager IFM Investors and Ontario Teachers Pension Plan that submitted first-round offers in recently days. Global Infrastructure Partners and Singapore sovereign fund GIC Pte have also expressed initial interest in acquiring a stake in the business.

ADNOC is deciding when to set a timeline for the next round of offers. Travel restrictions have made in-person meetings and due diligence visits more difficult, and other sale processes have been held up as tightening credit markets hampered bidders’ access to funding.

The Abu Dhabi state energy giant seeks to sell as much as 49 per cent of the business through a lease structure.

Abu Dhabi has been opening up the operations of its state-owned oil producer to foreign partners, part of a push to diversify the UAE’s economy and generate additional sources of funding. ADNOC listed its fuel retail unit and sold a stake in its $11 billion drilling business to Baker Hughes Co.

KKR and BlackRock agreed last year to invest $4 billion in ADNOC’s oil pipeline network, securing two decades of guaranteed returns. GIC also bought a stake in the business later.

Saudi government agrees to slash five per cent of 2020 budget

Saudi Arabia finance minister said that the government has approved a SAR 50 billion partial reduction in 2020 budget, representing less than five per cent, in areas that have the least social and economic impact, according to local newswire, Saudi News Agency.

Mohammad Al-Jadaan, Saudi Arabia’s Minister of Finance and Acting Minister of Economy and Planning said that due to the global economic conditions, the Kingdom has taken measures to reduce the impact of low oil prices and additional measures will be taken to deal with the expected drop in prices.

Saudi Arabia is working on limiting the spread of COVID-19 to protect government installations and agencies and the continuity of their work.

Al-Jadaan said that the government is working on preliminary measures to ensure the provision of the financial requirements necessary to implement the preventive and direct measures to deal with the consequences of the epidemic.

“The government will provide all the additional appropriation required and the necessary health services for prevention, treatment and spreading and Saudi Arabia is keen on prioritising social spending and reorienting its spending with the social and economic requirements of the phase,” said Al-Jadaan.

Given the potential continuation or exacerbation of COVID-19 effects and its consequences on the global economy, Al-Jadaan said that government developments will be re-evaluated, items of expenditures will be reviewed and appropriate decisions will be taken in a timely manner.

Turkey unveils $15.4 billion aid package to counter COVID-19 outbreak

The Turkish President Recep Tayyip Erdogan unveiled a TRL 100 billion ($15.4 billion) plan to help businesses ride out the economic storm caused by the coronavirus pandemic.

The government will introduce a set of new measures such as tax cuts and payment deferrals for businesses, and an increase in minimum pension payouts.

Turkey is following countries around the world in pledging stimulus packages in coordination with central banks as the global economy grinds to a halt. Infections in Turkey are increasing, a growing threat to tourism and manufacturing industries just as growth was beginning to take off after a downturn.

The government said that sectors including retail and transportation will receive a sixmonth deferral on some tax and insurance premium payments.

Turkey’s steps come on the heels of an emergency response by the central bank which introduced a slew of measures aimed at easing lenders’ access to liquidity.

The Turkish central also lowered its benchmark interest rate by a full percentage point, pushing official borrowing costs adjusted for inflation near the world’s lowest.

Middle East countries join global stimulus with $47 billion to fight crisis

Three of the biggest Arab economies have pledged almost $47 billion in stimulus to limit the economic damage of the COVID19 outbreak, joining a global effort meant to soothe markets and salvage growth.

Saudi Arabia unveiled a SAR 50 billion ($13.3 billion) package to support private businesses, soon after its counterpart, the UAE announced an AED 100 billion ($27.2 billion) programme to assist its lenders. Egypt also said that it will allocate EGP 100 billion ($6.4 billion) to combat the coronavirus.

The UAE’s Targeted Economic Support Scheme includes an AED 50 billion aid package for banks in the country through collateralised, zero-interest loans. Banks will also be allowed to free up capital buffers, which will make another AED 50 billion in liquidity available to lenders.

Saudi Arabian Monetary Authority said that it’s preparing funding to support private businesses, which includes SAR 30 billion available to banks and financing companies in return for deferring SMEs’ loans.

The UAE central bank reiterated the longstanding peg of the country’s currency to the US dollar, saying that the oil-rich nation’s ample reserves of AED 405 billion as of 10 March 2020 are adequate to safeguard the stability of the national currency.

Days earlier, Iran asked the International Monetary Fund for $5 billion to help it manage the outbreak.

DIFC shrugs-off global trend, adds 2,000 jobs as registered firms increase

Dubai International Financial Centre (DIFC) added more than 2,000 new jobs in 2019, a nine per cent year-on-year increase as the number of active companies at the Middle East’s major financial hub increased to 2,347.

The financial hub is home to 737 active financial firms, representing an 18 per cent increase since 2018 and 64 per cent growth in five years.

DIFC stated that it attracted 493 new businesses in 2019 and now counts 17 of the world’s top 20 banks, eight of the 10 leading global law firms, three of the top five insurance companies and six of the top 10 asset managers among its clients.

Notable registrations in 2019 include AntFinancial’s global payments pioneer WorldFirst, Malaysia’s Maybank Islamic, the US’ Cantor Fitzgerald and Mauritius Commercial Bank.

HE Essa Kazim, the Chairman of DIFC Authority Board of Directors and Governor of DIFC, said, “The centre’s success is being powered by our focus on sector diversification, investment in innovation and our unwavering commitment to attracting the best global and local talent.”

The Governor of the DIFC said that Dubai’s financial district will be expanded gradually and only when there is demand for new space.

GCC central banks cut rates following the Fed’s decision

The Saudi Arabia Monetary Authority (SAMA), the Central Bank of the UAE (CBUAE), the Central Bank of Bahrain (CBB) and the Central Bank of Kuwait (CBK) have slashed key interest rates following an emergency move taken by the US Federal Reserve in response to the impact of the coronavirus outbreak.

The UAE’s central bank reduced the interest rate applicable to the one-week certificates of deposit by 75 basis points (bps) and maintained other rates at 50 bps.

Kuwait’s central bank cut its deposit rate by 100 bps to 1.5 per cent, its lowest ever. The regulator also slashed its overnight, one-week and one-month repo rates by 100 bps to one per cent, 1.25 per cent and 1.75 per cent respectively.

The Saudi central bank also reduced its repo rate by 75 basis points from 1.75 per cent to one per cent and the reverse repo rate by 75 basis points from 1.25 per cent to 0.50 per cent in a bid to preserve the Kingdom’s monetary stability given evolving global developments.

Additionally, CBB also reduced key interest rate applicable to one-week deposit facility from 1.75 per cent to one per cent. The central bank also slashed the overnight, the one-month and the CBB lending rate from 1.50 per cent to 0.75 per cent, 2.20 per cent to 1.45 per cent and 2.45 per cent to 1.70 per cent respectively.

SAMA instructs banks to support businesses to avoid job cuts

The Saudi Arabian Monetary Authority (SAMA) has ordered lenders to provide concessional loans to businesses grappling with the fallout of the coronavirus so that companies will not have to cut jobs, according to local newswire, Saudi Press Agency.

The regulator asked banks to immediately put in place a lending programme for at least six months to assist in maintaining employment levels and ensure business continuity as part of a series of the Kingdom’s measures to stem the impact of the COVID19 outbreak on the private sector.

Furthermore, the central bank said that banks should also provide relief on debt repayments for any customers that have already been dismissed.

SAMA stated that the measures taken include supervisory measures and precautionary policies to counter the impacts of the coronavirus epidemic in order to support banks to help them focus on providing the best banking services to their customers and meet their financing needs in the current circumstances.

Bloomberg reported that the measures will come at a cost to shareholders as banks’ revenue will be put under more pressure by the waivers on fees and some interest charges.

The central bank said that Saudi lenders should support and finance the country’s private sector by taking precautionary measures that are in the interest of the customer, the bank and the economy, whether by adjusting or restructuring the current funds without any additional costs.

Central Bank of Bahrain bans freezing of accounts after job loss

The Central Bank of Bahrain (CBB) has banned retail banks from blocking accounts of customers who have either lost their employment or has retired if that customer has a financing arrangement with the bank, according to local newswire, Bahrain News Agency.

The central bank said that the move is aimed at ensuring sound and fair banking practices, taking into consideration the interests of customers.

The regulator prohibited the freezing of accounts by retail banks, regardless of whether or not contractually the bank has the right to take such action.

The instruction by the central bank to keep accounts accessible following job losses or retirement even if the customer has a credit facility with the lender comes at a time when central banks around the world are weighing measures to mitigate the economic impact of the coronavirus.

Across the Gulf region, the Central Bank of the UAE (CBUAE) also urged financial institutions to re-schedule loan contracts, grant temporary deferrals on monthly loan payments and reduce fees and commissions to customers as part of measures to mitigate the effects of coronavirus.

The World Health Organisation advised countries to be prepared for a scenario in which the coronavirus turns into a pandemic where economic impact in affected countries can be relatively large.

Dubai rolls out AED 1.5 billion stimulus package for next three months

The Crown Prince of Dubai, HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, has announced an AED 1.5 billion economic stimulus package for the next three months to mitigate the impact of the coronavirus on companies and the business sector in the emirate, according to local newswire, WAM.

The package seeks to enhance liquidity and reduce the impact of the current global economic situation.

Sheikh Hamdan, who is also the Chairman of the Executive Council of Dubai said that the stimulus package will provide the highest support for citizens, residents and investors in these exceptional circumstances.

Dubai’s stimulus package seeks to reduce the cost of doing business and simplify business procedures, especially in the sectors of tourism, retail, external trade and logistics services.

The package includes the cancellation of the AED 50,000 bank guarantee or cash required to undertake customs clearance activity. A bank guarantee or cash paid by existing customs clearance companies will be refunded.

Dubai’s stimulus package also features two initiatives that seek to reduce the cost of living and doing business for citizens, expatriate residents and the business community through 10 per cent reduction in water and electricity bills and a 50 per cent decrease in deposit paid for water and electricity connections.

Sovereign Ratings as of 1 April 2020

Issuer

1 Bahrain 2 Central Bank of Bahrain 3 Egypt 4 Iraq 5 Jordan 6 Kuwait 7 Lebanon 8 Morocco 9 Oman 10 Qatar 11 Saudi Arabia 12 Abu Dhabi 13 Ras Al Khaimah 14 Sharjah

Foreign Currency Rating

B+/Stable/B B+/Positive/B B/Stable/B B-/Stable/B B+/Stable/B AA-/Stable/A-1+ CCC/Negative/C BBB-/Stable/A-3 BB-/Stable/B AA-/Stable/A-1+ A-/Stable/A-2 AA/Stable/A-1+ A/Stable/A-1 BBB/Stable/A-2

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