Japan to provide US $ 46 million emergency loan to Myanmar small businesses
Burma and COVID-19
A small tailor’s shop in Naypyitaw. / The Irrawaddy
Through Nan Lwin June 1, 2020
YANGON — The Japan International Cooperation Agency (JICA) announced emergency loans worth 5 billion yen (US $ 46.5 million) to help Myanmar businesses affected by the coronavirus pandemic in as part of its plan to help the country mitigate the impacts of COVID-19.
On Monday, JICA said the loans will be at low interest rates and will help small and medium-sized enterprises (SMEs) continue to operate despite the severe economic situation caused by COVID-19.
JICA announced that it was funding the emergency program by restructuring an ongoing SME finance project known as “JICA SME Two-Step-Loan Phase 2”, which started in 2018, to quickly respond to the serious situation of SMEs.
Since the end of February, Myanmar has been facing a significant economic slowdown. The government of Myanmar is currently developing an economic impact assessment to identify the sectors most affected by the pandemic. The government plans to publish the impact assessment at the end of June.
Last week, a new survey of the impacts of COVID-19 on Myanmar’s tourism sector showed that more than 80% of micro, small and medium-sized tourism enterprises (MSMEs) are “extremely seriously” affected by the pandemic. The survey indicated that nearly 90 percent of tourism-related MSMEs saw their income decline. Almost 80 percent had very few activities and 60 percent had to downsize, either by laying off staff or putting staff on leave or unpaid leave.
“SMEs, which represent 99% of businesses, are a crucial part of the whole economy and important sources of income for many people in the country,” said Sakakura Noriji, chief representative of the office of JICA in Myanmar.
According to JICA, the emergency program is managed by Myanma Economic Bank and other commercial banks participating in the PME project, which aims to support Myanmar’s COVID-19 Economic Relief Plan (CERP).
Launched at the end of April, the CERP aims to mitigate the economic impact of the pandemic by implementing new measures and response plans ranging from monetary reforms and increased public spending to strengthening the country’s health 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 aim to flatten the curve without flattening Myanmar’s economy.
According to JICA, the new loans can be used for both working capital and capital investment without any limitation on the ratio between the two, with the base interest rate set at 5.5% in May 2020. .
JICA said loans can mature from one to five years, including appropriate grace periods that will be set to facilitate repayment by SMEs. The majority of funds are available for loans with relaxed collateral conditions to allow 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 works.
He said that the entire Myanmar support program includes both ongoing and upcoming projects and will cover assistance from emergency responses to the recovery phase, with the aim of paving the way for a resilient society and sustainably protect hard-earned development gains.
Last week, the Myanmar Union Parliament approved a proposal to seek $ 700 million in loans from the International Monetary Fund (IMF) to fill budget deficits resulting from increased spending for economic recovery, social security and improvement of the health sector.
It also approved a $ 50 million loan from the World Bank to modernize hospitals and train health workers across the country to fight COVID-19. It also approved 30 billion yen ($ 280 million) from JICA for economic policy development to mitigate the impacts of COVID-19 and $ 60 million from the Asian Development Bank (ADB) to help SMEs.
In early May, MOPFI deputy chief U Set Aung said Myanmar would receive around $ 2 billion from international development organizations to implement CERP.
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