YANGON—The Central Bank of Myanmar (CBM) has dropped interest rates by an additional 1 percent as the country’s economy has slowed due to the COVID-19 global pandemic.
CBM announced a 0.5 percent reduction in interest rates on March 12, saying it was needed to support the country’s economy. However, business people have criticized the move, saying it wouldn’t be enough to help the country’s declining economy.
In its latest move, the bank said on Tuesday that it will reduce its interest rate from 9.5 percent to 8.5 percent, effective on April 1, in the hope of spurring economic growth.
According to the latest directive, the minimum bank deposit rate will be lowered from 7.5 percent to 6.5 percent, while the maximum lending rate will be lowered from 12.5 to 11.5 percent for collateralized loans and from 15.5 percent to 14.5 for non-collateralized loans.
CBM announced in February that it was considering reducing interest rates but said it will proceed with caution due to inflation concerns.
Myanmar’s economy is declining significantly as the clothing, tourism and manufacturing industries are suffering from the coronavirus outbreak, according to the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).
The Tourism Ministry said tourist arrivals to Myanmar are likely to drop 50 percent this year due to the outbreak. The Union of Myanmar Travel Association told The Irrawaddy that a total of $800,000 worth of travel bookings have been canceled since late January due to the travel restrictions.
Last week, the Myanmar government announced an initial stimulus package to cushion the country’s economy against the impact of COVID-19. The package includes 100 billion kyats (nearly US$70 million) worth of loans, postponed deadlines for tax payments and tax exemptions for garment, manufacturing, hotel and tourism businesses as well as small and medium-sized enterprises owned by local business people.
The fund will provide loans at an interest rate of only 1 percent for with a period of one year. The rate and the period will be reviewed later after the economic impact of the virus outbreak can be assessed, the government said.
UMFCCI is also surveying the risks posed by the virus outbreak to the business community.
Central banks around the world have eased rates in order to limit the impact of the coronavirus outbreak on their economies. Last week, the Bank of England announced an emergency move to cut its rate to 0.1 percent—the lowest in its history.
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