Over 8,800 loans under moratorium due to COVID-19 pandemic

Over 8,800 loans were subject to a moratorium on repayments by the end of May when the COVID-19 pandemic faced businesses and households with liquidity challenges.

The total value of loans subject to a moratorium stood at €1.6 billion, or 13.9% of total outstanding loans to Maltese residents.

This was a relatively small increase when compared with April, when 11.3% of total loans were subject to a moratorium, indicating that liquidity needs may have started to stabilise in May.

The largest number of loans covered by moratoria was held by households, with this sector accounting for around three-fourths of the total volume of loans subject to a moratorium.

Maltese households held €610 million, or 39.3% of the total value of loans subject to a moratorium, though covered amounts represented only 10.0% of outstanding household loans.

This was followed by the real estate sector, which held €258.9 million in loans subject to a moratorium, or around 16.7% of all loans subject to a moratorium and equivalent to almost a third of this sector’s outstanding loans.

Another sector that benefited extensively from the moratorium is the sector comprising accommodation and food services activities which held €193.9 million in loans subject to a moratorium. The latter was the first and most affected sector by the containment measures, and indeed, 45.1% of the loans held by this sector were subject to a moratorium by the end of May.

In order to alleviate liquidity challenges, the government launched the MDB COVID-19 Guarantee Scheme (CGS) to guarantee new loans granted by commercial banks to businesses facing liquidity shortfalls as a result of the pandemic. The scheme enabled credit institutions to leverage government guarantees up to a total portfolio volume of €777.8 million.

By end-May 2020, 143 facilities had been approved under the CGS, covering total sanctioned lending of €68.5 million. Since the scheme provides loans for working capital and is relatively recent, only €7.4 million had been disbursed by the end of May.

However, Business Today has reported that by end-June, the total number of facilities had been taken up by 251 business for a total value of some €200 million odd.

The annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) eased to 0.9% in May, from 1.1% in April, while inflation based on the Retail Price Index (RPI) eased to 0.7%, from 0.8% in the previous month.

Meanwhile, Maltese residents’ deposits grew by an annual rate of 6.4% over the year to May, while annual growth in credit to Maltese residents reached 9.0%. In May, the deficit on the cash-based Consolidated Fund widened significantly compared with a year earlier, reflecting a significant increase in government expenditure and a large drop in revenue as a result of the impact of COVID-19.