Despite interest rate cut, Burma’s loan rate higher than neighbouring countries

Monday, 12 September 2011 16:22 Phanida

Chiang Mai (Mizzima) – Although the Burmese Central Bank reduced interest rates at all banks, including privately held banks, by two per cent on September 1, the interest rate on loans is still higher than in all other Southeast Asian countries.

The Burmese interest rate on loans was reduced in
September but it remains the highest among its
Asian neighbor countries. Photo: Mizzima

State-run newspapers said that “to promote economic development in the country, the interest rate is reduced” from 17 per cent to 15 per cent, but the new rate is still two per cent higher than the interest rate in Vietnam, which has the second highest rate in neighboring countries.

According to the article, the interest rate on deposits was reduced from 12 to 10 per cent.

Social activist Dr. Phone Win said that he welcomed the reductions, but the rate still needs to be reduced more.

“Fifteen per cent is still high for normal and traditional businesses. The worse thing is that people will not invest in social services that could help the public. Many people will invest in mining for gold, petroleum and jewels, which need large investments and can earn high profits. But investments relating to social services might not be attractive to many people,” Phone Win said.

Because interest rates in Burma are so much higher than other countries’ rates, some foreigners, especially from China, Thailand, Malaysia and Singapore, might not make investments in Burma, observers said.

Rangoon-based economist Khin Maung Myo said that despite the cut in interest rates, nothing has really been affected.

“Nothing strange seems to have happened. Presently, unusual things such as withdrawing money by large numbers of people haven’t happened. The new rates mean that it [government] prefers making investments to saving.” All banks in Burma will now set the same interest rates, said Khin Maung Nyo.

The interest rate in Vietnam is 13 per cent for interest rates on loans and 12 per cent for deposits. Thailand’s rate is seven per cent for loans and 2.5 per cent for deposits.

According to businessmen, ordinary businesses have difficulty getting loans from state-run banks. Businessmen who have a close relationship with the authorities or who are permitted to do government projects find access to loans from state banks easier to obtain.