2017 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MYANMAR
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2017 Article IV consultation with Myanmar, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its March 12, 2018 consideration of the staff report that concluded the Article IV consultation with Myanmar.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on March 12, 2018, following discussions that ended on November 17, 2017, with the officials of Myanmar on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on February 9, 2018.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staff of the IMF and the International Development Association (IDA).
A Staff Statement updating information on recent developments.
A Statement by the Executive Director for Myanmar.
The documents listed below have been or will be separately released.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
Context: The economy is rebounding and macroeconomic imbalances have stabilized. The global recovery has supported a rebound in exports and continued strong FDI inflows. However, the recovery has been moderately weaker than anticipated and downside risks have increased. Latent banking sector risks are surfacing, following a period of strong credit growth and as banks adjust to updated prudential financial regulations. The humanitarian crisis in northern Rakhine state has created uncertainty over development partner finance and foreign investor sentiment. While direct economic impacts have been largely localized, the social costs and full impacts of the crisis are yet unfolding.
Medium term prospects: Strong fundamentals continue to support a favorable medium-term economic outlook. Myanmar’s initial phase of economic liberalization led to an impressive growth takeoff and poverty reduction; now a second wave of reforms is needed to continue the strong momentum.
An overarching medium-term growth strategy and a second wave of reforms is needed to set economic direction, and support investment and job creation. Structural reforms should focus on priority areas with strong payoffs, and further opening up of the economy to foreign trade and investment.
Fiscal policy should target achieving the Sustainable Development Goals (SDGs) by raising social and infrastructure spending, while remaining anchored on debt sustainability and lowering central bank financing of the deficit.
Fiscal resources for achieving the SDGs and greater infrastructure should be increased through continued domestic revenue mobilization, expenditure rebalancing, and improvements in Public Financial Management (PFM).
Concessionary external financing can expand fiscal resources, while reducing the historical reliance on monetary financing and bolstering FX reserves.
New prudential regulations should be implemented with a view to ensuring financial stability and deepening, while forming contingency plans to address systemic banking risks and strengthening the resolution framework.
The central bank should formally adopt a new market-determined mechanism for setting the exchange rate, and continue to allow exchange rate flexibility to help cushion against exogenous shocks.
Markus Rodlauer and Johannes Wiegand
Discussions took place in Nay Pyi Taw and Yangon during November 7–17, 2017. The staff team comprised Mr. Rodlauer (Reviewer), Mr. Peiris (head), Ms. Hunter, Mr. Wu (all APD), Ms. Moyo (MCM) and Mr. Queyranne (FAD). Staff from TAOLAM participated in some discussions and Mr. Ojima (Resident Representative) and his staff assisted the mission. Mr. Agung (Executive Director) and Mr. Alias (OED) also participated in discussions. To-Nhu Dao and Francis Landicho assisted in preparing this report.
OUTLOOK AND RISKS
A SECOND WAVE OF REFORMS TO SUSTAIN THE GROWTH MOMENTUM
FISCAL POLICY AND THE SUSTAINABLE DEVELOPMENT GOALS
MACROFINANCIAL STABILITY AND DEVELOPMENT
A. Exchange Rate and Monetary Policy
B. Financial Stability
CAPACITY DEVELOPMENT AND OTHER ISSUES
1. External Sector Assessment
1. Macroeconomic Developments
2. Macro-Structural Developments
3. Macrofinancial Developments
4. Progress Towards Sustainable Development Goals
1. Selected Economic Indicators, 2013/14–2019/20
2. Summary Operations of the Nonfinancial Public Sector, 2013/14–2019/20
3. Balance of Payments, 2013/14–2019/20
4. Monetary Survey, 2013/14–2020/21
5. Medium-Term Projections 2013/14–2022/23
6. Financial Soundness Indicators, 2016
I. Key Policy Recommendations from the 2016 Article IV Consultation
II. Risk Assessment Matrix
III. Surveillance Priorities and Integrated Capacity Development
IV. Takeaways from Fund-Wide Pilot Work
Front Matter Page
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
February 9, 2018
Asia and Pacific Department
(In consultations with other departments)
WORLD BANK-IMF COLLABORATION
RELATIONS WITH THE WORLD BANK GROUP
RELATIONS WITH THE ASIAN DEVELOPMENT BANK
Front Matter Page
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS
February 9, 2018
Approved By Markus Rodlauer and Johannes Wiegand (IMF), and John Panzer (IDA)
Prepared by Staffs of the International Monetary Fund and International Development Association
Myanmar is assessed to remain at low risk of external debt distress.1/2Under the baseline scenario, public and publicly guaranteed (PPG) external debt burden indicators are projected to remain below their indicative thresholds. Similarly, total public debt is also projected to remain below benchmark in the baseline, though stress tests lead to breaches in the event of an extreme shock and fiscal slippage. Keeping Myanmar at low risk of debt distress will require prudent fiscal policy and sound public financial and debt management. Use of nonconcessional borrowing should be limited to projects with high economic and social returns.