Press Release No. 12/453

Press Release No. 12/453
November 21, 2012

An IMF mission visited Myanmar November 5–22, 2012, to hold discussions on macroeconomic policies that could support the authorities’ ambitious reform program over the next year. It reached an understanding that could form the basis of a possible Staff-Monitored Program¹ during January-December 2013.

The mission met with U Win Shein, Union Minister of Finance and Revenue; Central Bank of Myanmar Governor U Than Nyein; and other senior officials. The mission also briefed parliamentarians and had discussions 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. Managed well, 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, starting with partial deposit rate liberalization and the relaxing of some restrictions on private banks. This year’s 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 the government have been passed, including on land reforms, microfinance, and foreign investment. Discussions on clearing Myanmar’s external arrears are also progressing.

“These reforms are already bearing fruit. Growth is expected to accelerate to around 6¼ percent in FY2012/13, bolstered by foreign investment in natural resources and exports of commodities. Inflation has declined rapidly and should remain moderate at around 6 percent next year. Meanwhile, the exchange 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 the macroeconomic front, the government’s overarching priorities are two-fold: to maintain stability during 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 government’s own economic plans. Commitment to such reforms and sound economic management would also facilitate a successful resolution of arrears, which is crucial for Myanmar to re-engage with the global community and ensure debt sustainability.

“Over the coming year, the authorities explained that macroeconomic reforms would focus on three key areas. First, consolidating exchange rate unification, which will be an important foundational step for 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 by removing 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 policy framework, focused on achieving low and stable inflation. In this context, the immediate tasks include enabling the Central Bank of Myanmar to build its core central banking functions and improving its capacity for monetary management. Taking further measures to develop financial markets while containing 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 fund Myanmar’s considerable development needs. This will take some time, but steps are planned to strengthen 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 Myanmar government. Other international financial institutions and bilateral donors are also supporting the authorities’ broader reform efforts. With a commitment to strong reforms, Myanmar has the potential to vastly improve the living standards of its people and emerge as Asia’s next rising star.

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

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¹ A 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. In Myanmar’s case, it will involve joint monitoring of progress on the government’s own reform plans.