Monday, July 24, 2017

Myanmar should renegotiate expensive loans from China

Myanmar must renegotiate the terms to its existing loans from China, as these loans have saddled the country with the burden of repaying the loans at high interest rates, economists say.

Of the US$600 million in foreign debt repayments due from Myanmar this year, interest payments, mostly to China, make up about a third, data from the government’s 2017 mid-term debt management strategy revealed.

Myanmar has a budget deficit of K4.128 trillion for 2017-18, or 4.52pc of GDP.

Some 44pc of Myanmar’s total foreign debt of US$8.98 billion is owed to China, its largest creditor.

This is because when the country was under military rule, US sanctions made it difficult for it to obtain loans, forcing it to seek expensive funds from China. “At that time, no country except for China extended loans to Myanmar … So, Myanmar had to rely on Chinese loans,” economist Dr Aung Ko Ko said. As such, loans to Myanmar from the Chinese had the highest interest rates.

In comparison, loans from international organisations like the Asian Development Bank and World Bank have no interest, while interest rates from other sources amount to an average of 1.85pc. The interest rate for Chinese loans is around 4.5pc.

Now that its relationship with the US has improved, Myanmar should negotiate for lower interest rates on loans from the Chinese. ‘‘Because we had no alternative [before], we had to get loans from China with high interest rates. [But] now conditions have improved. They [China] can reduce interest rates, Dr Thaung Han, chief operating officer at Max Myanmar Group of Companies, said.

Daw Khin San Hlaing, an MP from Pale constituency, agreed that Chinese loans are a burden for Myanmar and that contracts with China need to be reviewed and renegotiated for any possible reduction in interest rate.

‘‘We don’t want to blame the leaders for high interest rates [at that time]. They had to rely on available creditors during their term. Now, we have low-interest creditors. In the future, we can have no-interest creditors … We should renegotiate – if there’s no interest, it is better,” Permanent Secretary from the Ministry of Planning and Finance U Tun Tun Naing said.