YANGON—The Myanmar government has announced 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 global pandemic.
In the announcement on Wednesday the government said it had created the COVID-19 fund with 100 billion kyats to assist CMP (garment and manufacturing) and hotel and tourism businesses, as well as small and medium-sized enterprises owned by local businesspeople.
The government has recognized those sectors as priorities for state assistance, based on their vulnerability to COVID-19, it said.
The interest rate on loans provided by the fund will be only 1 percent with a loan period of one year.
The rate and period would be reviewed later after the economic impact of the virus outbreak can be assessed, the government said.
The fund draws 50 billion kyats from the country’s revolving fund and another 50 billion kyats from the social welfare fund, according to the government.
Myanmar still has the highest interest rates among ASEAN countries. Recently, the Central Bank of Myanmar announced a 0.5 percentage point reduction in interest rates, saying it was needed to support the development of the country’s economy. Its latest directive sets the minimum bank deposit rate at 7.5 percent, while the maximum lending rate is 12.5 percent for collateralized loans and 15.5 percent for non-collateralized loans.
Moreover, the government said qualifying businesses now have until the end of September to make their quarterly income tax and monthly commercial tax payments. Income tax was supposed to be paid by March 31 for the second quarter and by June 30 for the third quarter. Those payments can now be made through the end of fiscal 2019-20, which ends on Sept. 30. The monthly commercial tax, which is supposed to be paid by March 31, is now also payable until Sept. 30.
The government has also announced that businesses will be exempted from paying the 2 percent advance income tax on exports until the end of current fiscal year on Sept. 30.
Myanmar’s overall economy has slowed due to the COVID-19 outbreak. Experts warn the effects of the outbreak could lead to a full-blown economic crisis for the country if it is not contained soon.
Since late January, the outbreak has hit Myanmar’s tourism, border trade and export sectors, causing massive losses for producers, exporters and workers. Airlines and hotels in the country have already suffered losses due to travel restrictions.
The Tourism Ministry said tourist arrivals in 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.
The Confederation of Trade Unions of Myanmar (CTUM) said last week nearly 20 factories have closed in Myanmar while other factories have reduced their working hours due to a lack of raw materials from China. CTUM said closures of garment factories have led to mass layoffs, affecting more than 10,000 workers across the country.
Meanwhile, in Ayeyarwaddy Region, over 200 crab production businesses have closed down temporarily, leaving more than 20,000 workers unemployed due to a lack of demand in China, according to the Labutta Crab Producers Association.
The announcement of economic support for local businesses followed the second meeting of a committee set up to tackle the impacts of the global coronavirus outbreak on the country’s economy. Myanmar formed the committee a day after the World Health Organization (WHO) declared the coronavirus outbreak to be a global pandemic.
The committee’s steps to tackle the main economic impacts of the coronavirus include drawing up both short- and long-term emergency plans to respond to the decline of the tourism sector; creating vocational training programs and new job opportunities for workers affected by factory closures; and advising the President’s Office on tax exemption schemes for small and medium-sized enterprises and reduced interest rates for local businesses.
Meanwhile, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) is also surveying the risks to the business community posed by the virus outbreak.
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