IMF Staff Completes 2019 Article IV Visit to Myanmar
December 20, 2019
End-of-Mission press releases include statements of IMF staff teams that
convey preliminary findings after a visit to a country. The views expressed
in this statement are those of the IMF staff and do not necessarily
represent the views of the IMF’s Executive Board. Based on the preliminary
findings of this mission, staff will prepare a report that, subject to
management approval, will be presented to the IMF’s Executive Board for
discussion and decision.
- Economic growth has been stable in recent years but is below potential.
- Despite favorable long-term dynamics, the medium-term outlook remains subdued: risks are tilted to the downside.
- Upgrading the monetary and fiscal policy framework and comprehensive financial sector reforms are needed to bolster macro-financial stability.
- Building on recent successful reforms, full implementation of the Myanmar Sustainable Development Plan (MSDP) and the targeted scaling up of infrastructure and human capital spending can help achieve the SDGs and boost sustainable growth.
An International Monetary Fund (IMF) team led by Mr. Shanaka J. Peiris
visited Myanmar from December 4 to 19, 2019, to conduct discussions for the
2019 Article IV consultations. At the conclusion of this visit, Mr. Peiris
issued the following statement:
“Growth is estimated at 6.5 percent in 2018/19, up slightly from 6.4
percent in 2017/18 on account of continued good export performance,
particularly of garments and gas, despite global headwinds. A modest fiscal
stimulus supported growth although domestic demand was mostly weaker
reflecting slowing credit growth, a correction in real estate prices and
declining investment. FDI inflows as well as project approvals remain lower
than in recent years as large projects have been completed and foreign
investors remain cautious ahead of the 2020 elections. The fiscal deficit
widened slightly to 3.5 percent of GDP in 2018/19, compared to 3.0 percent
in 2017/18 with central bank financing of the deficit higher than last
year. The current account deficit halved in 2018/19 to 2.0 percent of GDP
largely reflecting a contraction in imports and was matched by FDI and
other inflows, keeping international reserves and the kyat stable. Headline
inflation stood at 8.6 percent as of end-September largely due to one-off
factors such as higher electricity tariffs, food, and fuel prices.
“Although long-term prospects remain favorable driven by positive
population dynamics and Myanmar’s strategic location, medium-term growth is
likely to remain below potential. For 2019/20, growth is expected to be
broadly stable with higher government spending largely offset by
pre-election uncertainty and weaker private demand. Inflation is expected
to fall to 6-7 percent in the medium term as the one-off impact from higher
electricity tariff ends and pressures from rising food prices abate.
“Risks to the outlook are tilted to the downside. On the domestic front, growth could underperform if fiscal spending does
not accelerate sufficiently. Delayed restructuring and recapitalization of
the banking system could increase systemic risks with large macro financial
spillovers. A deterioration of the security situation and continued
humanitarian issues in Rakhine could weigh on sentiment. Global risks include rising trade tensions and global market
volatility, higher crude oil prices and spillovers from a slowdown in
“Fiscal policy should aim to raise tax revenues that remain very low by
international standards and boost SDG-related spending. A modestly higher
fiscal deficit would still maintain debt sustainability but needs to be
fully financed through the issuance of market-based securities and
concessional external loans, while central bank financing is gradually
phased out. A public private partnership (PPP) framework should be
instituted to improve project selection and ensure value-for-money through
competitive bidding, building on the project bank regulation. Strengthening
profitability and the governance of state economic enterprises is macro
critical. A new bidding round for petroleum production sharing contracts
should rely on a revised model contract to help maximize revenues and
ensure transparency. The process for finalizing new power purchase
agreements should be expedited through enhanced inter-ministerial
coordination with due regard to cost competitiveness and fiscal risks.
“Continued exchange rate flexibility will help cushion the economy from
external shocks. The active control of monetary conditions and the fading
out of one-off supply side pressures should reduce inflation. Further
upgrading the monetary and FX operational framework, including by allowing
greater interest rate flexibility, will anchor inflationary expectations
and strengthen the monetary transmission mechanism. In the context of
upcoming reviews by the Asia-Pacific Group in 2020, the authorities should
continue to work on ensuring full compliance with international standards
on anti-money laundering and combating the financing of terrorism.
“Sustained growth will require that the banking sector is sufficiently
capitalized, regulated, and supervised in order to support lending to
productive sectors. Bank restructuring should follow the new prudential
regulations and a comprehensive financial sector reform strategy would
minimize the eventual clean-up costs and risks of negative spillovers to
the rest of the economy.
“We welcome recent reforms such as the increase in electricity tariffs, the
liberalization of the financial sector including opening to foreign
insurance companies and banks, and the move to greater exchange rate
flexibility. Continuing reforms to improve governance and reduce the cost
of doing business will help attract private investment. A consistent
implementation of structural reforms and a scaling up of needed
infrastructure plus a faster resolution of security and humanitarian issues
would support higher external financing and more sustainable development.
In turn, this would allow greater SDG-related spending and a steady
build-up of international reserves. Continued capacity development to
support reform implementation and institution building is critical to
achieving the goals set in the MSDP.”
The staff team met with the Governor and Deputy Governors of the Central
Bank of Myanmar, the Union Minister and the Deputy Ministers of Ministry of
Planning, Finance and Industry, senior government officials, members of
parliament, private sector business and financial representatives, and
We thank the authorities for their kind cooperation and hospitality.
IMF Communications Department
PRESS OFFICER: Keiko Utsunomiya
Phone: +1 202 623-7100Email: MEDIA@IMF.org