The government’s 15-page document, released April 27, listed more than 50 measures to support the economy, including in banking, manufacturing and e-commerce. No clear budget was revealed, except for up to K500 billion (US$360 million) in loans for small- and medium-sized businesses in selected sectors – an expansion of an existing K100 billion ($72 million) fund – and a K100 billion ($72 million) fund for trade financing. Most measures contained little information about how much money will be allocated and how they will be implemented.

While the relief plan goes some way to helping households, offering cash transfers, food rations and exemptions of electricity tariffs, economists and analysts say there should still be more focus on families struggling to put food on the table and keep small businesses afloat.

“The stimulus plan contains practical support for vulnerable households such as cash transfers and electricity tariff waivers. These have the potential to make a real difference to those struggling to make ends meet,” said Andrew Bauer, a public finance specialist formerly based in Yangon.

But it is unclear how much money is allocated to these programmes, leading to doubts over whether they can be implemented effectively in the near future. Mr Bauer urged the government to clarify how much cash it will allocate to vulnerable households and how it will implement the cash transfer scheme.

“Unlike many low- to middle-income countries, Myanmar has the fiscal space to be generous with its cash transfer programme,” he said.

The government has so far revealed its measures will be funded by a mixture of budget reallocation, by cutting the 2019-20 budget to all government entities by up to 10 percent, central bank financing and by taking loans from international financial institutions of between $50 million and $500 million.

Problem with informal economy

Myanmar’s large unbanked populations, its sizeable informal economy and lack of a social welfare system will make it more challenging for the country to deliver relief to the people and businesses affected.

“The government is trying its best but … we have a huge informal economy. The relief plan will only cater for businesses in the formal sector,” said Daw Thet Thet Khine, owner of a jewellery business and a Lower House lawmaker who used to be a member of the ruling National League for Democracy party.

To support businesses in the informal economy, she said the interest rates of microfinance institutions should be cut further to 18-20pc from the current 24pc.

The labour ministry has also extended healthcare benefits for unemployed members of the Social Security Board. Daw Thet Thet Khine highlighted that few Myanmar citizens are receiving these benefits today and hence the impact will be limited. In addition, tens of thousands of migrant workers who returned from Thailand and Malaysia are left out from the scheme, she said.

Referring to the high ratio of non-performing loans, Daw Thet Thet Khine added “the banks are also in trouble” along with the Myanmar conglomerates. Research from previous economic crises suggests that non-performing loans spike during the acute phase of the crisis.

The Central Bank of Myanmar has already delayed a deadline for local banks to comply with central bank directives involving non-performing loans and reporting requirements. The government also plan to establish an “asset management company” for non-performing loans over the next five to seven years.

While little data is available to date on the COVID-19 damage to the banks, the measures announced reflect the government is concerned about the likelihood of the banks failing.

Daw Thet Thet Khine urged the central bank to further cut the interest rate to 8pc for businesses and 4pc for depositors. This, she said, will help to stimulate the economy and have a leveraging effect.

Tax incentives lacking

Meanwhile, the government has deferred corporate income tax and commercial tax as well as waived taxes and duties on medical supplies, moves applauded by the private sector.

But other incentives appear controversial.

“While the commercial and income tax deferrals make sense in this context, other measures, such as waiving withholding taxes and some of the tax credits are likely to boost corporate profits at the margins without benefiting workers or small businesses,” commented Mr Bauer.

He has raised concerns that those measures, as well as the deferral of Social Security Board contributions, will benefit the biggest companies while “failing to protect jobs, workers and small businesses.”

Likewise, the government has not explained how its emergency loan for affected businesses, which it said could be scaled up to a maximum of K500 billion, would support employment. No conditions are attached to firms who apply for the loans, such as guaranteeing the loan will be used to retain workers or ruling out dividends or bonuses.

These policies may provide financial support to company shareholders without necessarily keeping businesses afloat or supporting employment, said Mr Bauer. “Providing direct support to firms is unlikely to be an effective way of delivering immediate support to vulnerable workers, since the majority of workers are operating in the informal sector.”

For the government to reach those experiencing the most severe socio-economic repercussions, there is an opportunity to work closely with civil society organisations on the ground, said Ma Yee Mon Oo, Oxfam advocacy and campaigns coordinator.

“Civil society organisations are well placed to help identify who needs help, what support they need and how to effectively reach them, ensuring that no one is left behind,” she said, adding that implementing the plan will be challenging given how many different sectors and communities the government needs to support.

Ma Yee Mon Oo stressed the importance of extending support to informal workers, many of whom are women, and those without documentation.

Source: https://www.mmtimes.com/news/myanmar-opts-limited-stimulus-counter-pandemic.html