Myanmar: Staff Report for the 2014 Article IV Consultation
IMF Staff Country Reports, October 6, 2014
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Bibliographic details
- Published: October 6, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498309202.002
Key issues and context
- Authorities continue to make progress on a far-reaching political and economic reform program; key economic reform priorities are being realized.
- Macroeconomic and financial risks are building, and capacity constraints are slowing institutional reform.
- Constitutional amendments are being considered ahead of the 2015 elections, and peace negotiations are continuing despite religious and ethnic tensions.
Macroeconomic situation and outlook
- Growth is accelerating, with average growth projected around 8¼ percent in the next few years.
- Inflation should remain broadly stable.
- After depreciating in 2013, the exchange rate has stabilized.
- The external current account has widened despite improved export performance.
- Rising capital account inflows should enable Central Bank of Myanmar (CBM)’s international reserves to grow rapidly from their current low levels.
- Monetary aggregates are growing at double-digit rates.
- The underlying fiscal deficit in 2013/14 is estimated at 3 percent of GDP.
- The underlying fiscal deficit is forecast to widen to around 5½ percent of GDP in 2014/15, but should decline below 5 percent of GDP in the medium term.
- Off budget operations could increase the deficit.
- Risks arise from capacity constraints and thin fiscal and external buffers.
Medium- and long-term prospects
- Economic prospects remain strong.
- Myanmar’s long-run growth potential is estimated at around 7 percent, in line with peer countries’ experience.
- Realizing this potential requires building sound institutional and policy frameworks.
Key policy recommendations
- Monetary policy tools need to be more aggressively deployed.
- Establish mechanisms to transfer public sector foreign exchange earnings automatically to the CBM.
- Urgently upgrade the regulatory framework for the banking sector and strengthen supervision, particularly as foreign banks will soon enter.
- Tax policy and administration should aim at simplifying the system and preparing for the introduction of a value-added tax (VAT).
Technical assistance and capacity building
- Capacity building will be crucial to achieve policy objectives.
- The IMF continues to provide intensive technical assistance in key areas, including a wide range of CBM operations, tax policy and administration, public financial management and statistics.
International Monetary Fund. Myanmar: Staff Report for the 2014 Article IV Consultation (October 6, 2014).