EXECUTIVE SUMMARY Context: The authorities are pursuing a wide-ranging economic reform program against a background of political liberalization. Challenges are formidable, however, as the authorities’ capacity to design and implement far-reaching reforms and absorb international assistance is being stretched. Macroeconomic situation and outlook: Growth has strengthened, led by services. However, international reserves remain low, and inflation pressures are significant. Notwithstanding these risks, the overall economic outlook is favorable. In 2013/14 and 2014/15, growth is projected to accelerate slightly, and inflation to remain elevated. The current account deficit is set to widen, but, from 2014/15 onward, be comfortably financed by FDI-related inflows and aid. Staff-monitored program: The SMP has been successful, with macroeconomic stability preserved and all quantitative and structural benchmarks met. Progress in building the institutions for economic management has also been made, though much remains to be done. IMF relations: The IMF’s engagement after the expiration of the SMP will remain intensive. Staff will continue to provide close support in updating the macroeconomic framework and formulating policy goals, and stand ready to discuss options for a more formalized cooperation. IMF capacity building will further intensify. Macroeconomic policies and further reforms: The Central Bank of Myanmar needs to focus on building international reserves and monetary policy tools, which will likely be needed in 2014/15 to sterilize significant foreign exchange inflows. Fiscal policy needs to continue balancing stability with development, while administrative reforms to boost revenue and public financial management need to be driven forward. Financial sector liberalization should proceed cautiously and in line with the development of supervisory capacity. Recently established policy banks should be supervised closely and managed transparently to minimize risks.