Businesses warned against possible risks from foreign loans
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Businesses in Myanmar are warned on foreign exchange risks associated with borrowing from World Bank and Asian Development Bank's loan facilities.
Though the interest rate imposed on the loans, at 6 per cent, is low compared to 13 per cent on kyat-denominated loans, the rate is high if forex risks are taken into account, said Maw Than, a member of the board of directors from Central Bank of Myanmar (CBM).
The issue was part of the discussion on Foreign Exchange Management laws and by-laws last month. It took place at the office of the auditor general in Yangon and was attended by members of the Myanmar Institute of Certified Public Accountants (MICPA).
Sett Aung, vice governor of the central bank, also warned that encouraged by the lower interest rates, some enterprises are positive about foreign-currency loans.
“They think it is good for them. It is not good considering the laws that apply. Foreign banks give loans depending on fluctuating exchange rates and inflation rates. If we take out kyat-denominated loans, the interest rate will depend on inflation only. For foreign loans, we will make a profit when kyat is stronger than US dollar. But there will be a big problem if the kyat weakens against the currency,” he said.
Daily Eleven’s inquiry showed that ADB keeps interest rates confidential. It only announced the interest rate of loans extended to the government.
Last month, Singapore-listed Yoma Strategic Holdings Ltd won a US$100 million loan from ADB. The loan will finance the construction and leasing of telecom towers, the development of cold storage logistics, and modernisation of vehicle fleet leasing.
A representative from Yoma Group said its intention to get the loan is to contribute to long-term development projects in Myanmar, to strengthen connectivity in Southeast Asia, to create job opportunities and to enhance urban development in Yangon. The representative could not reveal the interest rate applied with the loan.
