Six European Union states have deferred debt payments from Myanmar worth nearly US$100 million for the rest of this year to help the country’s efforts to focus on economic recovery from the COVID-19 pandemic.
On Wednesday, the ambassadors of the European Union, France, Germany, the Netherlands, Finland, Austria and Poland announced that the EU has agreed to Myanmar’s request to its bilateral creditors to defer payments totaling US$98 million (134.5 billion kyats), constituting 20 percent of Myanmar’s debt payments due during the May-December 2020 period.
The ambassadors said in their letter to U Soe Win, Union minister of planning, finance and industry, on Wednesday that “Myanmar is fully eligible for support under the debt moratorium (Debt Service Suspension Initiative).” The letter highlights the suspension is “in order to focus efforts on economic recovery from COVID-19.”
Myanmar’s economy has faced a significant slowdown due to COVID-19 since late January. The latest report from the World Bank said that country’s economic growth could drop from 6.8 percent to 0.5 percent this fiscal year due to COVID-19.
In late March, the government set up a 100-billion-kyat (US$71.3 million) COVID-19 fund for local businesses, particularly small and medium-sized enterprises and the garment, manufacturing and hotel-and-tourism sectors. The fund offers one-year loans at a 1 percent interest rate. The government’s COVID-19 Economic Relief Plan (CERP) also committed to increasing the size of the fund to 200-500 billion kyats, depending on the market response, by the end of 2020.
EU Ambassador Kristian Schmidt, who signed the letter together with the ambassadors from the six EU member states, said in a statement on Thursday that the move is part of “Team Europe’s” latest “coordinated global response to the COVID-19 crisis.”
The EU announcement is the first confirmed debt suspension for Myanmar under the G20 and Paris Club Debt Service Suspension Initiative agreement from in April. Myanmar is among the countries that has seen the most intense socioeconomic impacts from COVID-19. The G20 debt moratorium covers all countries receiving international development assistance and least-developed countries. Myanmar is one of 47 nations considered “least-developed countries” by the UN.
The ambassadors also called on all of Myanmar’s other sovereign creditors to show similar support.
Myanmar has a total foreign debt of nearly US$10 billion, almost half of which is owed to China, according to data from the auditor general from June.
In April, the EU also announced it would provide 5 million euros (US$5.6 million) as an emergency fund to support female workers in Myanmar’s garment sector who are impacted by COVID-19.
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