Myanmar Launches Sweeping COVID-19 Economic Relief Plan
By Nan Lwin 29 April 2020
YANGON—Myanmar late on Tuesday launched its COVID-19 Economic Relief Plan, which seeks to mitigate the economic impact of the global pandemic by implementing new measures and response plans ranging from monetary reforms and increasing government spending to strengthening the health-care system in the country.
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.
The COVID-19 Economic Relief Plan (CERP) focuses on improving the microeconomic environment through monetary stimulus; easing the impact on the private sector through improvements to the investment, trade and banking sectors; assisting laborers, workers and households; promoting innovative products and platforms; strengthening the health-care system; and increasing access to COVID-19 response financing, including contingency funds.
Prior to the plan’s unveiling, The Irrawaddy on Tuesday reported on some of the CERP’s most significant measures, based on information provided by multiple sources familiar with the plan. The Irrawaddy has learned that some of the measures and response plans are already under way.
The MOPFI said, “Myanmar has not, and will not, escape the economic consequences of COVID-19. Already we have felt its impact: disrupted supply chain and trade flows, falls in retail and discretionary spending, a near cessation of tourism, and an understandable slump in consumer and investment sentiment broadly.”
It added, “The CERP contains measures to mitigate the range of COVID-19 effects on our economy while leaving us in a position to bounce back to strong economic growth as soon as possible.”
The CERP also contains measures to improve the macroeconomic environment through monetary stimulus to cushion COVID-19’s impact on the economy. These include lowering banks’ deposit and lending rate ceiling by 3 percent as well as their minimum reserve requirement, conducting credit auctions to inject more liquidity into the banking and financial sector, allowing the central bank to increase financing of the fiscal deficit, and temporarily reducing treasury bond and bill auction sales.
Among the steps aimed at easing the impact on private sector firms, the government has committed to increasing funding in support of local businesses. Last month, the government set up a 100-billion-kyat COVID-19 fund for local businesses, particularly small and medium-sized enterprises, and the CMP (garment and manufacturing), and hotel and tourism sectors, offering loans at a 1-percent interest rate. According to the latest plan, the fund size will increase to 200-500 billion kyats, depending on the market response, by the end of 2020.
As part of the CERP, the government has already eased deadlines for tax payments and introduced tax exemptions for Myanmar-owned businesses. It has also announced that businesses will be exempted from paying the 2 percent advance income tax on exports until the end of the current fiscal year on Sept. 30.
The plan also includes credit guarantee schemes under which the government guarantees 50 percent of any new loans made by banks to Myanmar enterprises with turnover of 1 billion kyats or less for use as working capital. (It does not specify a time period for the 1-billion-kyat turnover figure.) These are conditional upon maintenance or rehiring of staff as employed on Feb. 1, 2020.
Under the plan, the government will establish a 100-billion-kyat fund by the end of 2020 for designated commercial banks to promote financing of trade of any products.
The CERP also prioritizes the following immediate measures: expediting and facilitating the process of importing medical-related products for COVID-19 prevention, control and treatment; and waiving import licensing and FDA requirements, as long as the products are FDA approved in another country.
Under the CERP, related government departments will have to review all export applications, licenses and permits, and screen out those that are not required to maintain market access or to protect health, safety and security. Moreover, the government will immediately facilitate rice exports to maintain immediate incentives for farmers to plant this planting season.
Among steps to lower the burden on workers, labor-intensive community infrastructure projects will be implemented to ensure employment for those who have been laid off, and for returning migrants.
Since late March, thousands of Myanmar migrant workers have returned from Thailand and China.
Among the steps to ease the impact of COVID-19 on households, CERP includes cash transfers to the most vulnerable and the most badly affected, including IDPs in the most vulnerable areas, through mobile financial-services transfers.
In early April, the government announced it would waive electricity tariffs for all households (excluding embassies and international organizations) up to 150 units per month. Moreover, it has
provided in-kind food transfers to vulnerable households and at-risk populations.
Additionally, under the CERP, the Central Bank of Myanmar (CBM) will negotiate with private financial institutions to give more flexibility on interest and mortgage payments to those households that are most negatively affected by COVID-19.
Under the plan to strengthen the health-care system, steps will be taken to improve quarantine centers and facilities, and to import key medical products immediately for COVID-19 prevention, control and treatment—including but not limited to masks, Personal Protective Equipment (PPE), drugs, ventilators, intensive care unit (ICU) equipment and cardiovascular support tools—from well-known suppliers with positive track records, without going through a lengthy procurement process.
Among other measures to improve the health-care system, the Ministry of Health and Sports (MOHS) will upgrade existing laboratories, hospitals and health-care centers in order of priority as practically as possible, and recruit and enhance the skills of doctors, nurses, medical staff, health-care workers and volunteers—who will be engaged on an emergency, short-term basis—before the end of 2020.
MOPFI said the process of cutting the 2019-20 budget allocations to all government entities by up to 10 percent and reallocating that money to the COVID-19 Fund had already started.
Myanmar State Counselor Daw Aung San Suu Kyi said the significance of COVID-19-induced tax revenue shortfalls could not be downplayed, with anticipated revenue underperformance requiring reallocations of government spending to create space for COVID-19-related outlays and policies.
“However, such reallocations shall not come at the expense of hard-fought-for fundamental social and economic freedoms now enjoyed in Myanmar. Nor shall our nation’s economic response involve cutting down our social services or increasing taxes on labor and investment,” she said.
Daw Aung San Suu Kyi added, “Make no mistake, COVID-19 has cast its long shadow across our country, our economy and our people.”
The state counselor praised the plan, saying it will seek to mitigate the inevitable economic impacts of COVID-19. She said the plan balances the needs of all stakeholders while leaving no one behind.
Since early February, Myanmar’s economy has slowed significantly due to the effects of COVID-19. The World Bank warned that the country’s GDP growth is projected to slow to between 2 and 3 percent in the current fiscal year due to the pandemic, with the poor and vulnerable households across the country likely to be hit the hardest.
The Myanmar government has so far provided loans from the COVID-19 Fund to 88 companies in the first round of applications, and over 100 companies in the second. However, the business community has been critical of the initial loan plan, saying it has not done enough to cover all pandemic-hit businesses and accusing the government of moving too slowly in its initial response to the economic impact of COVID-19.
The chairman of the Hlaingtharyar Industrial Zone, U Myat Thinn Aung, welcomed the latest move but regretted that it was coming so late.
“Many businesses are already hurting badly. We need more aggressive economic stimulus activities from the government,” he said.
“We are facing a life-or-death situation. This is not a time to move slowly. The government should act quickly in whatever way it can—to save our economy and people,” U Myat Thinn Aung stressed.