Wednesday 12 June 2013

Myanmar to further cut back interest rates

Myanmar's government is currently holding talks to further reduce the country’s interest rates to allow local businesses to compete with international rivals, according to sources from Parliament.

The current interest rates sit at 10 percent for loans and 8 percent for savings and will be reduced to 6 percent and 4 percent respectively, according to the Central Bank of Myanmar. This would be the third time for the government to cut interest rates since it's forming under President Thein Sein.

"Local businessmen will be able to compete with their international rivals only if the rates are low. It's for the long-term as international interest rates are mostly 2.5 percent and only a few at 3 percent. Commodity prices must be cut down along with the rates cut," said Kyi Myint, MP for Lathar Township in Yangon.

The higher interest rates have attracted foreign businessmen from the countries like Singapore and Thailand to take advantage of the situation by borrowing money with lower interest rates from banks in their own countries and depositing it in Myanmar's banks.

"They have been taking advantage of the situation for 10 or 15 years now," said Than Lwin, an advisor for the Ministry of Finance and Revenue. 

The cuts will also benefit local SME's (Small and Medium Enterprises) at the time when they are facing unprecedented competition with rival companies from other ASEAN countries. Myanmar had a high inflation rate of over 10% in 2009 and 2010. It went down to 8.2% in the first half of 2012 and further reduced to 2.6% in the middle of 2013.

The public savings in local banks will possibly be going down as a side-effect of the interest rates being cut, affecting the circulation of money in the country.

"The Parliament's Trade and Development Committee are now discussing the ways to deal with the possible side-effects of the cut," Kyi Myint added. 

source: Eleven Myanmar

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