The International Monetary Fund has found that Myanmar’s growth in the coming year will be bolstered by the continuation of the nation’s rapid reforms.
In
a statement issued on Wednesday, November 21, the IMF said that it
expects growth to reach to 6.25 percent for the 2012-13 fiscal year.
“These reforms are already bearing fruit,” said IMF mission chief Meral Karasulu in a statement.
“Growth
is expected to accelerate to around 6.25pc in FY2012-13, bolstered by
foreign investment in natural resources and exports of commodities,” the
statement said.
“Inflation has declined rapidly and should
remain moderate at around 6pc next year. Meanwhile, the exchange rate
has been stable in recent months, with international reserves increasing
to US$4 billion,” the statement added.
The findings come after a
November 5-22 visit by an IMF delegation. Over the course of the trip
IMF officials met U Win Shein, the Minister for Finance and Revenue, U
Than Nyein, Central Bank of Myanmar Governor and other senior Myanmar
officials. They also met representatives from the private sector.
The
IMF cited a number of steps undertaken by the Myanmar government as the
reasons for its confidence in the country’s economic potential.
“The
exchange rate regime has been changed from a peg to a managed float.
The financial sector is being gradually modernised, starting with
partial deposit rate liberalisation 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,” the
statement said.
New laws focused on microfinance and the
long-awaited foreign investment law, which was passed by the hluttaw on
November 1 and signed into law by President U Thein Sein the following
day, were also noted as key positive changes.
Despite the
positive forecast and improvements, the IMF warned that Myanmar still
has obstacles to overcome after decades of economic mismanagement that
plunged the country into poverty.
“Nevertheless, the government
recognises 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,” the statement cautioned.
To
achieve these two goals, the IMF laid out three priority areas for
Myanmar’s macroeconomic reforms to continue moving forward.
Two
of the areas focus on the transition to the managed float of the
national currency – the kyat – that the government undertook in April,
ending 35 years of a fixed exchange rate.
“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,” the statement said.
“Second, the
recent move to a managed float will be accompanied by a consistent
monetary policy framework, focused on achieving low and stable
inflation.”
The IMF’s third recommendation was the lowering of
debts and an increase in stable revenues in order to address the
country’s substantial development needs that span multiple sectors.
The IMF said this could be achieved through a multifaceted approach but will not happen quickly.
“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,” the statement said.
The
IMF is hopeful that the trip will lead to the formation of a
Staff-Monitored Program in 2013. Staff-Monitored Programs are described
as “informal and flexible instrument for dialogue between the IMF and a
member country on its economic policies”.
No financial support is provided by the IMF under these programs.
source: The Myanmar Times
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