IMF Executive Board Concludes 2016 Article IV Consultation with Myanmar

February 2, 2017

On January 25, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Myanmar.

Myanmar’s economy grew broadly as expected in FY 2015/16 (ending March 31), at a healthy pace of 7.3 percent, despite massive floods during July–September 2015. Activity softened during the first half of FY 2016/17, but is expected to recover in the second half on account of the resumption of construction in Yangon after a temporary halt for regulatory compliance purposes. The growth of agricultural production was softer than expected. The external environment has been weak due to slowing demand from major trading partners and significant natural gas and other commodity price declines in 2015 and 2016. Macroeconomic imbalances persist, with continuing inflation pressure, an increased fiscal deficit, and a widening external current account deficit.

Taking into account sluggish activity in the first half of the year, growth for FY 2016/17 is projected at slower rate of 6.3 percent. Inflation is projected to be around 7 percent on average for FY 2016/17, and the external current account deficit to increase to about 6.5 percent of GDP. Risks to the growth outlook are tilted toward downside and relate to: (i) concerns over policy clarity; (ii) financial sector vulnerability on the back of rapid credit growth in recent years; (iii) weak commodity prices and slow export demand; (iv) global financial market volatility; and (v) natural disasters.


Executive Board Assessment 2

Executive Directors welcomed Myanmar’s continuing progress on economic and political transition, and noted the robust growth performance in 2015/16. As Myanmar continues with its transition, Directors saw good opportunities to expand inclusive growth, which will require a strengthening of macroeconomic and financial stability and a deepening of structural reforms, as well as effective communication of economic policies and development plans to support confidence.

Directors highlighted the critical role of exchange rate flexibility in strengthening Myanmar’s external position and protecting foreign exchange reserves. They observed that the official reference exchange rate should reflect market conditions consistent with the managed float exchange rate regime, and welcomed the authorities’ interest in exploring options for a transparent mechanism for setting the reference rate. Directors stressed that continued structural reform to improve the business environment is critical to strengthening Myanmar’s external position over the longer run.

Directors agreed that monetary conditions should be tightened to contain inflation and reduce pressure on the exchange rate. In this regard, they welcomed the authorities’ commitment to phasing out financing by the Central Bank of Myanmar. A number of Directors encouraged a faster phase out of central bank financing, but a few others suggested caution in view of its potential impact on financing costs and credit flow to the private sector, given the underdeveloped bond market. In light of past monetary expansion and continued strong credit growth, Directors also supported a more active liquidity management in line with reserve money targets that are consistent with the medium term inflation objective.

While recognizing Myanmar’s significant development needs, Directors emphasized the importance of fiscal restraint and improved spending efficiency to maintain debt sustainability. Directors welcomed improvements in tax administration, and encouraged continued efforts to increase fiscal revenues, including by swiftly moving to the next phase of revenue reform and streamlining tax exemptions and incentives. They also recommended prioritizing key infrastructure and social expenditure, and welcomed preparations for revised Financial Rules and Regulations and a public financial management law. Directors also underscored the importance of containing fiscal risks from state enterprises and public private partnerships.

Directors commended progress on financial sector reform, and called for further steps to reduce financial system risks. They urged the expeditious completion of full scope examinations of all banks, as well as the timely issuance of regulations to implement the Financial Institutions Law. Directors encouraged the authorities to accelerate the reform of systemically important state owned banks and to further increase financial sector supervision capacity. In order to improve access to credit for the agricultural sector and SMEs, Directors saw scope for a carefully sequenced loosening of controls on lending interest rates, supported by appropriate supervision. Directors also emphasized that ongoing work on anti-money laundering/combating the financing of terrorism (AML/CFT) should remain a priority.

Directors welcomed the progress in capacity development in Myanmar and encouraged the authorities’ further use of Fund technical assistance and training. They emphasized the importance of improved macroeconomic statistics for surveillance and macroeconomic management.


1. Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

Myanmar: Selected Economic Indicators, 2012/13–2018/19 1/

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

2018/19

Est.

Proj.

Proj.

Proj.

Output and prices

Real GDP 2/

7.3

8.4

8.0

7.3

6.3

7.5

7.6

CPI (end-period; base year=2006 )

4.7

6.3

7.4

10.7

10.4

8.9

7.7

CPI (end-period; base year=2012 )

6.1

8.5

8.3

7.1

6.5

CPI (period average; base year=2006)

2.8

5.7

5.9

11.4

9.0

8.7

7.9

CPI (period average; base year=2012)

5.1

10.0

7.0

6.9

6.7

Consolidated public sector 3/

(In percent of GDP)

Total revenue

19.0

20.1

21.9

18.8

17.2

16.5

16.8

Union government

8.7

10.0

12.1

10.8

10.0

9.6

9.9

Of which : Tax revenue

6.3

7.3

7.8

7.5

7.7

8.0

8.2

SEE receipts

10.3

9.7

9.5

7.2

6.6

6.2

6.2

Grants

0.1

0.3

0.3

0.6

0.6

0.7

0.7

Total expenditure

18.1

21.4

22.9

22.9

21.8

21.1

21.3

Expense

10.5

13.8

16.1

16.9

16.5

15.7

15.8

Net acquisition of nonfinancial assets

7.6

7.6

6.8

6.0

5.3

5.4

5.5

Gross operating balance

8.5

6.3

5.9

1.9

0.8

0.8

1.0

Net lending (+)/borrowing (-)

0.9

-1.3

-0.9

-4.1

-4.6

-4.5

-4.5

Underlying net lending (+)/borrowing (-) 4/

0.9

-1.7

-3.1

-5.3

-5.6

-4.5

-4.5

Domestic public debt

16.6

15.4

15.3

18.1

19.7

20.2

20.6

Money and credit

(Percent change)

Reserve money

38.5

16.3

4.6

19.6

14.5

13.5

12.5

Broad money

46.6

31.7

17.6

26.3

24.2

21.8

21.0

Domestic credit

5.1

24.6

22.9

32.3

27.7

23.6

22.1

Private sector

50.5

52.5

36.5

34.3

28.5

28.4

26.1

Balance of payments

(In percent of GDP)

Current account balance

-4.0

-4.9

-3.3

-5.2

-6.5

-6.6

-6.7

Trade balance

-3.6

-5.1

-6.3

-9.1

-10.1

-10.4

-10.4

Financial account

9.8

7.6

7.1

7.0

6.4

7.9

8.1

Foreign direct investment, net

4.7

4.4

7.1

7.1

5.9

6.5

6.7

Overall balance

4.4

2.1

1.8

-0.7

-0.1

1.3

1.4

CBM reserves (gross)

In millions of U.S. dollars

3,156

4,419

4,803

4,511

4,436

5,360

6,476

In months of total imports

2.4

2.8

3.0

2.6

2.3

2.4

2.5

Total external debt (billions of U.S. dollars)

13.7

10.2

8.8

9.6

9.9

10.9

12.0

Total external debt (percent of GDP)

23.0

17.0

13.9

15.9

15.4

15.5

15.4

Exchange rates (kyat/$, end of period)

Official exchange rate

879.5

965.0

1,027.0

1,216.0

…

…

…

Parallel rate

878.0

964.7

1,085.5

1,200.5

…

…

…

Memorandum items:

GDP (billions of kyats)

51,259

58,012

65,262

72,780

83,479

96,479

111,395

Sources: Data provided by the Myanmar authorities; and IMF staff estimates and projections.

1/ Fiscal year from April 1 to March 31.

2/ Real GDP series is rebased to 2010/11 prices by the authorities.

3/ Union and state/region governments and state economic enterprises.

4/ Excludes one-off receipts from telecoms licenses and signature bonus from gas contracts.


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