The Central Bank of Myanmar (CBM) today announced that it will reduce interest rates by 0.5 percent, effective April 1.

According to the directive, the minimum bank deposit rate will be lowered to 7.5pc from 8pc, while the maximum lending rate will be lowered to 12.5pc for collateralised loans and 15.5pc for non-collateralised loans, from 13pc and 16pc, respectively.

The move comes shortly after the World Health Organization defined the COVID-19 outbreak as a pandemic on March 12, triggering a collapse in global markets.

Central banks around the world have also eased rates to stimulate their economies. On March 11, the Bank of England announced an emergency rate cut by half a percentage point to 0.25pc.

The week before, the US Federal Reserve lowered the federal funds rate by half a percentage point to a range between 1pc to 1.25pc, its deepest cut since 2008.

In Myanmar, the tourism, manufacturing, and agriculture sectors have been hardest hit as a result of the pandemic.

There have been no reported cases of COVID-19 in the country so far, but U Zaw Oo, an economist from the Centre of Economic and Social Development, warned that a weaker Chinese economy could slow foreign direct investments into Myanmar and delay China’s spending on key projects under its Belt and Road Initiative. These include the Muse cross border trade zone, China-Myanmar Economic Corridor, Kyaukphyu Special Economic Zone and New Yangon City.

U Than Lwin senior consultant from Kanbawza Bank, said: “This is the right time to decrease the bank interest rate and drive the economy. The process of easing interest rates is very quick overseas and central banks are quick to respond to the needs of their economies. We need to reduce the bank’s interest rates in order to revitalise businesses in Myanmar.”

The CBM has long been under pressure to cut rates to more attractive levels to stimulate growth, but its officials have been hesitant to do so to keep the minimum deposit rate at a higher level than inflation, as this encourages savings.

According to the CBM, the annual rate of inflation is now 8.8pc.