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.