YANGON—The Myanmar government is putting the finishing touches on a comprehensive COVID-19 relief plan to be announced very soon. Among the new response measures being considered is a plan to inject US$2-3 billion (2.8-4.2 trillion kyats) into the economy to help the country recover from the economic and social impacts of the global pandemic.
Multiple sources familiar with the plan confirmed to The Irrawaddy that the package, currently known as the COVID-19 Economic Relief Plan (CERP), comprises new measures covering monetary policy, tax, trade, the financial sector, foreign direct investment, health, public finances and the household sector, including an increase in government spending.
The Irrawaddy has learned that the measures include a reallocation to the health sector of 10 percent of total government spending formerly earmarked for other ministries. Details of that aspect of the plan are not yet known, however.
The CERP also calls for the installation of more handwashing stations, and increased funding to cover medical personnel’s salary and support payments, and to conduct new recruitment, the sources said.
In terms of monetary measures and financial assistance, the COVID-19 Fund for on-lending to small and medium-sized enterprises (SMEs), which have been badly hit by the virus, will be expanded; interest rates and banks’ reserve ratios will be lowered; some prudential measures on banks (asset classification and provisioning) will be delayed; the Myanmar Economic Bank (MEB) and Myanmar Agricultural Development Bank (MADB) will be merged in order to accelerate and expand lending; and credit guarantees will be provided to private banks to encourage new lending to SMEs and expand capital inputs into the microfinance sector.
The Irrawaddy has learned that the government has already moved to implement these measures. In mid-March, the government announced an initial stimulus package including the establishment of the 100-billion-kyat COVID-19 Fund to support low-interest loans to the most vulnerable sectors—CMP (garment and manufacturing) and hotel and tourism businesses, as well as small and medium-sized enterprises owned by local businesspeople. The interest rate on loans provided by the fund will be only 1 percent with a loan period of one year.
However, the business community criticized the initial fund as being too small to cover all of the most vulnerable sectors, and called for more aggressive stimulus spending.
The Central Bank of Myanmar (CBM) has cut its key interest rate three times in less than two months in response to a slowing of the country’s overall economy due to COVID-19. The bank has cut its rate by 3 percentage points in total since March 12.
To the tax payment deferrals already implemented by the government, the CERP would add new deductions, allowances and credits aimed at employee retention, according to the sources.
Under an earlier stimulus package, the government eased deadlines for tax payments and introduced tax exemptions for Myanmar-owned businesses. The government 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.
Last week, the Ministry of Hotels and Tourism announced land lease payments would be deferred for six months for a total of 47 state-owned and private hotels in Myanmar that have been badly hit by COVID-19. Moreover, the ministry also exempted hotel and tour businesses from paying license fees for one year.
As part of the upcoming measures, the government will expedite import clearances and fast-track investment approval related to medical equipment, personal protective equipment (PPE) and medicines (including FDA or equivalent approval), the sources said.
The new plan will also include targeted cash and in-kind transfers to the most impacted groups, investment in community infrastructure and increased labor benefits.
Moreover, the government will encourage the use of new technologies including digital payment and mobile money systems. The plan also calls for an acceleration of the identification of critical infrastructure in the recently launched Myanmar Project Bank.
The sources said the concept behind the CERP is that “the government must spend what it can. What was prudent before may not be prudent now.”
Under the CERP, the CBM will seek to access innovative instruments to fund the measures, provided the funding is time-bounded and targeted. This will allow the country to access, in substantial volumes, highly concessional multilateral funding. Revenue-raising activities that could have a dampening effect on the economy will be suspended for the time being.
Last week, the World Bank announced a US$50-million emergency loan for Myanmar to support improvements in the country’s hospital system and public health emergency preparedness.
Also last week, the president of the CBM, U Kyaw Kyaw Maung, said the bank was in ongoing discussions with the Ministry of Planning, Finance and Industry to secure loans under the International Monetary Fund’s Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) to cushion the effect of COVID-19 on the country’s economy.
To approve a supplementary budget allocation and foreign loans to support the government’s COVID-19 response, the Union Parliament has announced that it will resume on May 18.
In an article published in government newspapers on Monday, U Thaung Tun, the Union minister of investment and foreign economic relations, wrote, “Despite the many varied challenges our nation faces, Myanmar is fully committed to taking every possible action to mitigate the social and economic impacts of COVID-19 on families and firms.”
To guide this effort, the minister said, Myanmar would soon be launching the plan, which he said would introduce a broad range of actions and policy reforms focused on facilitating a rapid, wide-ranging and inclusive recovery.
He said the plan offered Myanmar a roadmap to recovery.
“Importantly, policies enacted 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 cuts to social services or raising taxes on labor and investment,” he said.
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