Uruguay: Central Bank intervenes to support credit and liquidity
April 14, 2020
In two subsequent decisions on 19 March and 1 April, the Central Bank of Uruguay adopted measures to stimulate credit extension and inject liquidity into the financial system, as part of efforts to cushion the economic impact of Covid-19 lockdown measures.
On 19 March, the Bank authorized financial institutions to relax deadlines on loan payments—both interest and principal—for households and businesses hit by the coronavirus crisis. Specifically, it deferred loan payments for up to six months, although the monetary authority underlined the measure was not to be read as a debt restructuring. Subsequently, on 1 April, in a bid to boost credit, the lender reduced the reserve requirements for commercial banks conditional on an expansion in credit portfolios.
The measures should provide some relief to businesses and households, although it remains to be seen how the Central Bank will balance the need to provide support to the economy while handling stubbornly high inflation.