Wednesday, 9 April 2014

Economists warn of looming debt and inflation

Economists forecast that Myanmar will face possible long term debts along with high inflation in the next three years due to an annual budget deficit.

Soe Thein, a retired deputy director from the budget department, was speaking during a state budget seminar, where he warned economists of the rising inflation. 

“In coming years, about Ks 3 trillion will be shortfall. There wouldn’t be a problem if the deficit was not more than five percent of the GDP. Of course, the GDP could be up and down. However, the continuous deficit will cause more debts well as the inflation rate could be rising,” said Soe Thein.

He encouraged the government to implement better fiscal management when it came to issuing government bonds as a way to counter the deficit, as well as in taxation and interest rates. 

“Surplus is good. But deficit will be still ok under good management. Therefore, when making fiscal policy, the taxation becomes the key. Another is how to handle income and expenditure. Within these years, the rate of the country’s budget deficit is four to five per ]cent. It is not high when comparing to international rate. The real problem is our country budget’s plan is annually,” he added.

He continued that the budget should be planned ahead for three to five years. Even with a five year head start, a deficit can still be expected. The country is still in a transition period this will mean more expenditure.

On March 30, 2011, the Central Bank of Myanmar became independent and is now making policies to control price stability in the domestic market and to preserve the internal and external value of the Kyat. Although it has authority to print out more notes, it will take at least three to five years.

Likewise, experts argue that Myanmar spends too much of its budget on more than 30 ministries. This is the other reason of deficit. Some ministries are not necessary and there is too much that goes towards public spending. 

“Budget should be spent wisely and efficiently. Myanmar has many ministries and the budget is being wasted. So the expenditure is more than income. Germany doesn’t even have 20 ministries,” said Dr. Aung Ko Ko, an economist.

source: Eleven Myanmar
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