7/29/2019 IMF_Statement at the Conclusion of an IMF Staff Mission to Myanmar_Nov2012

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Statement at the Conclusion of an IMF Staff Mission to MyanmarPress Release No. 12/453

November 21, 2012An IMF mission visited Myanmar November 522, 2012, to hold discussions on macroeconomic policies

that could support the authorities ambitious reform program over the next year. It reached anunderstanding that could form the basis of a possible Staff-Monitored Program1during January-

December 2013.

The mission met with U Win Shein, Union Minister of Finance and Revenue; Central Bank of MyanmarGovernor U Than Nyein; and other senior officials. The mission also briefed parliamentarians and haddiscussions with representatives of the private sector and donors.

IMF Mission Chief Meral Karasulu issued the following statement at the conclusion of the mission:

Myanmar has embarked on a historic set of reforms to modernize and open up its economy. Managedwell, these reforms will facilitate strong and inclusive growth that reduces poverty.

The government has made rapid strides over the last two years. The exchange rate regime has been

changed from a peg to a managed float. The financial sector is being gradually modernized, startingwith partial deposit rate liberalization and the relaxing of some restrictions on private banks. Thisyears fiscal budget was debated in Parliament for the first time, yielding increased spending in critical

areas such as health, education, and infrastructure. Laws to support the development goals of thegovernment have been passed, including on land reforms, microfinance, and foreign investment.Discussions on clearing Myanmars external arrears are also progressing.

These reforms are already bearing fruit. Growth is expected to accelerate to around 6 percent inFY2012/13, bolstered by foreign investment in natural resources and exports of commodities. Inflationhas declined rapidly and should remain moderate at around 6 percent next year. Meanwhile, theexchange rate has been stable in recent months, with international reserves increasing to US$4 billion.

Nevertheless, the government recognizes there is still a long way to go. Myanmar remains one of the

poorest countries in Asia, with economic development stymied by many distortions. On themacroeconomic front, the governments overarching priorities are two-fold: to maintain stabilityduring the transition process, and to build the modern tools and institutions necessary to manage a

rapidly changing economy. Meeting these challenges will hinge on implementing a core set of policies,as emphasized by the governments own economic plans. Commitment to such reforms and soundeconomic management would also facilitate a successful resolution of arrears, which is crucial forMyanmar to re-engage with the global community and ensure debt sustainability.

Over the coming year, the authorities explained that macroeconomic reforms would focus on threekey areas. First, consolidating exchange rate unification, which will be an important foundational stepfor securing macroeconomic stability, while at the same time boosting competitiveness and trade.Achieving it requires bringing more flows from the informal to the formal market, including byremoving remaining exchange restrictions and ensuring a level playing field for private banks.

Second, the recent move to a managed float will be accompanied by a consistent monetary policyframework, focused on achieving low and stable inflation. In this context, the immediate tasks includeenabling the Central Bank of Myanmar to build its core central banking functions and improving itscapacity for monetary management. Taking further measures to develop financial markets whilecontaining risks, and facilitating domestic financing of the budget deficit would also help. In the near-

term, steps to modernize regulations and strengthen supervisory capacity will be important.

Third, fiscal deficits will need to be contained and the stage set for higher and stable revenues to fundMyanmars considerable development needs. This will take some time, but steps are planned tostrengthen revenue administration, simplify tax rates, broaden the tax base, improve public financial

management, limit non-concessional external borrowing, and develop government securities markets.

In all of these areas, the IMF will continue to provide technical assistance to the Myanmargovernment. Other international financial institutions and bilateral donors are also supporting the

authorities broader reform efforts. With a commitment to strong reforms, Myanmar has the potentialto vastly improve the living standards of its people and emerge as Asias next rising star.

The mission would like to thank the authorities for their excellent cooperation, frank and constructivediscussions, and generous hospitality during the visit.

1A staff-monitored program is an informal and flexible instrument for dialogue between the IMF and a

member country on its economic policies. It is not accompanied by financial support from the Fund. InMyanmars case, it will involve joint monitoring of progress on the governments own reform plans.

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