YANGON—The Japan International Cooperation Agency (JICA) has announced emergency loans worth 5 billion yen (US$46.5 million) to assist businesses in Myanmar hit by the coronavirus pandemic as part of its plan to help the country mitigate the impacts of COVID-19.
On Monday, JICA said the loans will be low-interest and will support small and medium-sized enterprises (SMEs) to continue operations despite the severe economic situation caused by COVID-19.
JICA said it is financing the emergency program by restructuring an ongoing SME financing project known as “JICA SME Two-Step-Loan Phase 2”, which started in 2018, to respond quickly to the serious situation of SMEs.
Since late February, Myanmar has faced a significant economic slowdown. The Myanmar government is currently drawing up an economic impact assessment to identify the sectors hit the hardest by the pandemic. The government expects to publish the impact assessment at the end of June.
Last week, a new survey on the impacts of COVID-19 on the Myanmar tourism sector showed that over 80 percent of micro, small and medium-sized tourism businesses (MSMEs) are ‘extremely badly’ affected by the pandemic. The survey said almost 90 percent of tourism-related MSMEs have seen decreased revenues. Almost 80 percent had very little business and 60 percent had to reduce their workforce, either by laying off staff or putting staff on furlough or unpaid leave.
“SMEs, accounting for 99 percent of businesses, are a crucial part of the entire economy and important sources of livelihoods for many people in the country,” said Sakakura Noriji, chief representative of the JICA Myanmar office.
According to JICA, the emergency program is operated through Myanma Economic Bank and other commercial banks participating in the SMEs project, which aims to support Myanmar’s COVID-19 Economic Relief Plan (CERP).
Launched in late April, CERP aims to ease the economic impact of the pandemic by implementing new measures and response plans ranging from monetary reforms and increasing government spending to strengthening the country’s health care system.
According to the Ministry of Planning, Finance and Industry (MOPFI), the plan includes seven goals, 10 strategies, 36 action plans and 76 actions that seek to flatten the curve without flattening Myanmar’s economy.
According to JICA, the new loans can be used for both working capital and fixed asset investments without any limitations on the ratio between the two, with the baseline interest rate set at 5.5 percent as of May 2020.
JICA said the loans can mature in one to five years, including appropriate grace periods that will be set to facilitate repayment by SMEs. The majority of the funds are available for loans with relaxed collateral conditions to enable more SMEs to access the funds, according to JICA.
JICA said the new loan program is the first in a series of upcoming COVID-19 response projects it has in the pipeline.
It said the entire support package for Myanmar includes both ongoing and upcoming projects and will cover assistance from emergency responses to the recovery stage, with the goal of paving the way for a resilient society and protecting hard-won development gains in a sustainable manner.
Last week, Myanmar’s Union Parliament approved a proposal to seek US$700 million in loans from the International Monetary Fund (IMF) to plug budget deficits resulting from increased spending on economic recovery, social security and health sector improvements.
It also approved US$50 million in loans from the World Bank to upgrade hospitals and train health workers across the country to battle COVID-19. It has also approved 30 billion yen (US$280 million) from JICA for economic policy development to ease the impacts of COVID-19 and US$60 million from the Asian Development Bank (ADB) to assist SMEs.
In early May, deputy head of MOPFI U Set Aung said Myanmar would receive around US$2 billion from international development organizations to implement the CERP.
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