YANGON—The Central Bank of Myanmar (CBM) has cut its key interest rates by a further 1.5 percentage points as the global COVID-19 pandemic continues to take a toll on the country’s economy.
This is the third time the CBM has reduced rates since it announced a 0.5 percentage point cut on March 12, followed by a further 1 percentage point reduction on March 24. In total, the bank has cut the rates by 3 percentage points in less than two months.
CBM Governor U Soe Min told The Irrawaddy that the reduction is aimed at encouraging low-interest loans to businesses in order to facilitate an economic recovery.
According to the bank’s directive, the minimum bank deposit rate will be lowered from 6.5 percent to 5 percent, while the maximum lending rate will be lowered from 11.5 to 10 percent for collateralized loans and from 14.5 to 13 percent for non-collateralized loans.
“I’m afraid the country’s economy won’t pick up. The interest rate is part of the cost [of doing business]. If the interest rate is high, the cost will be high, and vice versa. So, the reduction in interest rates is good. We have long called for it. It is already overdue,” said U Than Lwin, a senior adviser at Kanbawza Bank who formerly served as the vice governor of the central bank.
Myanmar’s economy has slowed dramatically due to the impacts of COVID-19, with hotels and tourism, and manufacturing industries being hit particularly hard.
In the third week of March, the Myanmar government unveiled an initial stimulus package to cushion the impact of COVID-19 on the country’s economy, including 100 billion kyats (nearly US$70 million) worth of loans, eased deadlines for tax payments, and tax exemptions for Myanmar-owned businesses that have been hit by the pandemic.
The government invited applications from affected businesses as well as small and medium-sized enterprises for loans with a 1-percent interest rate. It has so far provided loans to 88 companies in the first round of applications, and is preparing to loan to over 100 businesses in the second round.
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