Govt releases economic stimulus plan to fight COVID-19

This story has been updated on April 29 to include comments from the business community.

The Ministry of Planning, Finance and Industry (MoPFI) on April 27 issued a comprehensive economic stimulus plan (CERP) consisting of seven goals, 10 strategies, 36 action plans and 76 actions that cover a range of emergency fiscal and monetary measures.

The CERP “seeks to mitigate the inevitable economic impact posed by COVID-19 while establishing foundations that will facilitate Myanmar’s rapid economic recovery,” State Counsellor Daw Aung San Suu Kyi said in the report.

She added that “the significance of COVID-19 induced tax revenue shortfalls cannot be downplayed, with anticipated revenue underperformance requiring reallocations of government spending to create space for COVID-19-related outlays, and policies.”

Daw Aung San Suu Kyi said the reallocations “shall not come at the expense of 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 labour and investment.”

Among the ten goals is one which aims to ease the impact on the private sector through improvements to investment, trade and banking.

More government spending

Under this goal, the MoPFI will increase the recently launched K100 billion fund to small businesses in tourism and garment manufacturing to K200 billion- K500 billion before the end of the year.

The ministry will guarantee half of any new loans made by banks to Myanmar enterprises generating a turnover of up to K1 billion that are not beneficiaries of other government spending schemes.

Government guarantees will also be extended to firms in high-growth sectors which have been negatively impacted by COVID-19.

In addition to deferrals of corporate income tax and commercial tax and waivers to withholding tax, waivers on Specific Goods Tax, customs duties and commercial tax for critical medical supplies related to the prevention, control and treatment of COVID-19 will also be granted.

Further fiscal stimulus measures will be announced “as soon as practicable.” These involve tax credits on wages, including deductions equal to 125pc of wages paid, and investments on capital equipment.

Support will be provided to the banks, which have already been allowed to restructure existing loans extended to small businesses that regularly service their loans. To ease the impact of potential non-performing loans (NPLs) on the banks, an asset management company through which potential NPLs will be held for 5-7 years will be established “as soon as practicable.”

The MoPFI will cooperate with other ministries to promote investments in renewable energy projects and strategic infrastructure projects before the end of the year.

Within the same period, the ministry will also simplify the procedures for investments involving the manufacturing of COVID-19-related products using vacant state-owned factories.

Among other measures taken to encourage trade, a separate K100 billion fund will be set up for designated commercial banks to provide trade financing for any product before the end of the year.

Cash or lending support will provided to smallholder farmers who have lost sales revenue or remittance income to support input purchases in time for monsoon planting. Following the lifting of movement restrictions later this year, rural cash-for- work programs will also be established.

Mobile innovation

Another CERP goal is to promote the use of mobile platforms such as mobile payment services like KBZ Pay, CB Pay, Wave Money, M Pitesan and OK Dollar.

Conducting retail trade online is encouraged. Before year-end, the authorities will launch a central e-commerce website where retail businesses can sell their products online. It will also ensure e-commerce platforms only accept funds through bank transfers, mobile payments or card payments.

A so-called Challenge Grant competition will be initiated among Myanmar tech firms to encourage innovative ideas to combat COVID-19.

U Zaw Lin Htut, CEO of Myanmar Payments Union, commended the inclusion of the mobile services sector in the CERP. “Mobile payment platforms will reduce the hygiene risks involved in handling physical cash during COVID-19. It is also better security wise,” he said.

He added that with banking hours shortened the use of mobile payments and cash transfers will make transactions more convenient for the people. “It is a good time to cultivate the habit of using digital payments now,” he said.

Other goals under the CERP include improving the macroeconomic environment through monetary stimulus, such as lowering banks’ deposit and lending rate ceilings by 3 percent. After reducing rates by 0.5pc and 1pc in March, the Central Bank of Myanmar on April 27 announced a further 1.5pc cut to rates. Starting from May 1, bank deposit rates in Myanmar will be reduced to a minimum of 5pc and lending rates will not exceed 10pc for collateralised loans, according to the CBM.

The goals also include easing the impact of COVID-19 on labourers, households, strengthening the healthcare system and increasing access COVID-19 response financing.

U Aye Win, the Secretary of the Union of Myanmar Federation Chamber of Commerce and Industry, said: “The CERP is a good plan because it covers the economy, society and healthcare. We would suggest that the government prioritises sectors with growth potential such as agribusiness, as this could make the economy stronger.”

U Aung Thein, the Chair of Myanmar Industrial Association, added that the initiatives listed under the CERP should be implemented as quickly as possible, “as businesses are all in need of cash flow to remain open now.

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Source : Myanmar Times

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