IMF Executive Board Approves a SDR 258.4 Million Disbursement under the Rapid Credit Facility and Purchase under the Rapid Financing Instrument to Myanmar to Address the COVID-19 Pandemic

IMF News, January 13, 2021

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Canonical URL: IMF Executive Board Approves a SDR 258.4 Million Disbursement under the Rapid Credit Facility and Purchase under the Rapid Financing Instrument to Myanmar to Address the COVID-19 Pandemic

The Executive Board approved:
- a disbursement of SDR 86.1 million (16.67 percent of quota) under the Rapid Credit Facility (RCF).
- a purchase of SDR 172.3 million (33.33 percent of quota) under the Rapid Financing Instrument (RFI).
The IMF described this as the second emergency financial assistance under the RFI/RCF for Myanmar since the outbreak of the pandemic.
The IMF stated the assistance is equivalent to about US$350 million for this round.
Earlier disbursement: on June 26, 2020, the IMF Executive Board approved a disbursement of US$ 356.5 million.
The combined IMF financial assistance provided to Myanmar to address the COVID-19 pandemic was reported as about US$ 700 million after this approval.

The financing aims to:
- meet urgent balance-of-payments needs arising from the COVID-19 pandemic.
- support the government’s recovery measures to ensure macroeconomic and financial stability while supporting affected sectors and vulnerable groups.
- catalyze additional support from the international community.
The IMF emergency assistance, together with additional external support and the Debt Service Suspension Initiative, would:
- cover higher social spending needs under continued strains on revenues.
- mitigate the risk of excessive monetary financing.

The IMF reported that Myanmar’s economy was hit hard by the second wave of the COVID-19 pandemic, inflicting large economic and social costs and straining the healthcare system.
Growth projections reported:
- Economic growth is projected at 3.2 percent for FY2019/20 (starting October 1), a sharp decline from 6.8 percent in FY2018/19.
- For FY2020/21, growth is expected to fall to 0.5 percent.
- Growth is expected to rebound to 7.9 percent in FY2021/22 reflecting the gradual recovery and strong base effects.
The IMF warned of:
- disproportionate effects on lower income groups, SMEs, and those in conflict regions.
- permanent losses in medium-term output, raising concerns of increased poverty.

The government is formulating the Myanmar Economic Resilience and Reform Plan (MERRP).
The MERRP:
- builds on last April’s emergency relief measures under the COVID-19 Economic Relief Plan (CERP).
- extends relief measures and adds macroeconomic and financial stability measures to guide the recovery.
- prioritizes increasing healthcare spending, tax relief measures, and transfers to vulnerable households.
- emphasizes equitable extension of programs across the country, including in conflict regions and ethnic minorities.
The IMF noted the authorities’ progress in enhancing spending transparency and their commitment to further enhance governance, transparency, and accountability to ensure appropriate use of this emergency financing.

Observations:
- Myanmar’s economy suffered from a second COVID-19 wave, resulting in extensive lockdowns, declines in tourism, and supply chain disruptions.
- The accommodative monetary policy stance is appropriate and the Kyat is adjusting flexibly, with limited rules-based interventions managing excessive short-term volatility.
Recommendations and suggested actions:
- Once conditions allow, focus on enhancing the effectiveness of the monetary policy framework and further building external buffers.
- Further strengthen banking sector stability to underpin the recovery:
- monitor non-performing loans (NPLs).
- accelerate preparation of contingency plans to better manage banking sector stresses, should they materialize.
- conduct targeted asset quality reviews of systemically important banks, followed by a comprehensive strategy for NPL resolution and bank recapitalization.
- Address remaining gaps in the AML/CFT framework.
- Continue leveraging capacity development and technical assistance from the Fund and other development partners to further reforms.

The press release noted links for more information:
- IMF Lending Tracker for emergency financing requests.
- Calendar of the IMF Executive Board meetings.

IMF Press Release No. 21/9, January 13, 2021 — IMF Communications Department