Myanmar: Staff Report for the 2013 Article IV Consultation and First Review Under the Staff-Monitored Program—Informational Annex

This 2013 Article IV Consultation highlights that recent economic developments in Myanmar have been positive. Growth is estimated to have risen to 6½ percent in FY2012/13 (April–May), driven by gas production, construction and services while inflation climbed to 4.7 percent in March 2013. The external current account deficit is estimated to have widened to about 4½ percent of GDP in FY2012/13, but to have been largely financed by foreign direct investment. The economic outlook remains favorable. Growth is expected to accelerate slightly in FY2013/14, led by rising gas production and investment, including in the transport and telecommunications sectors, and a recovery in agriculture.


This 2013 Article IV Consultation highlights that recent economic developments in Myanmar have been positive. Growth is estimated to have risen to 6½ percent in FY2012/13 (April–May), driven by gas production, construction and services while inflation climbed to 4.7 percent in March 2013. The external current account deficit is estimated to have widened to about 4½ percent of GDP in FY2012/13, but to have been largely financed by foreign direct investment. The economic outlook remains favorable. Growth is expected to accelerate slightly in FY2013/14, led by rising gas production and investment, including in the transport and telecommunications sectors, and a recovery in agriculture.

Fund Relations

(As of April 30, 2013)

Membership Status: Joined on January 3, 1952; Article XIV.

General Resources Account:

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SDR Department:

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Outstanding Purchases and Loans: None

Latest Financial Arrangements: None

Projected Payments to the Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiative: Not Applicable

Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable

Exchange Rate Arrangement

The kyat had been pegged to the SDR at K 8.5057 per SDR since May 2, 1977. Myanmar applied margins of 2 percent in respect of spot exchange transactions. In February 1993, the Central Bank of Myanmar (CBM) started issuing foreign exchange certificates (FEC) at a rate of 1 FEC=US$1. FECs were largely used as a proxy for U.S. dollars for limited transactions. In December 1995, the authorities established FEC exchange centers where the FEC could be traded at K 450 per FEC, but also allowed the FEC to be traded in parallel markets. The FEC counters were closed in April 2010. Effective October 1, 2011, the Thein Phyu (TP) market was introduced as a retail foreign exchange market. There are 17 private banks with money changer licenses to operate in TP counters. On April 1, 2012, the authorities replaced the official peg to the SDR with a managed float. The Central Bank of Myanmar (CBM) started daily two-way multiple-price foreign currency auctions with MCM technical assistance (TA). The auctions provide a mechanism for the market to determine an exchange rate that the CBM can use to set its new reference rate. However, the CBM reserves the right to periodically intervene to mitigate undue exchange rate volatility and support the liquidity of the kyat in the foreign exchange market. The CBM has no predetermined target for the level of the kyat exchange rate or its trading range, and expects the value to fluctuate with supply and demand in the market. The de jure exchange rate arrangement has been reclassified to a managed float. Due to the multiple exchange rates and divergence of these rates from the official rate, the de facto exchange rate regime is classified as other managed arrangement.

Myanmar continues to avail itself of transitional arrangements under Article XIV, although it has eliminated all Article XIV restrictions. Myanmar has made significant progress towards satisfying Article VIII obligations. Almost all current account restrictions have been removed through the implementation of the new Foreign Exchange Management Law. However, Myanmar still maintains exchange restrictions and a multiple currency practice subject to Fund approval under Article VIII.1 Exchange restrictions subject to Fund jurisdiction arise from (i) requirement of tax certification for authorizing transfers of net investment income abroad, (ii) limitations on the remittance abroad of net salaries and (iii) a multiple currency practice arising from the formal FEC rate. The authorities are committed to removing these in 2013. FECs, which represent a multiple currency practice, are being phased out and will cease to be legal tender at end-June 2013. The authorities have sought extension of IMF approval for the multiple currency practice arising from the two-way multi-priced foreign currency auction.

Article IV Consultation

Myanmar is on the standard 12-month Article IV consultation cycle. The last Article IV consultation discussions were conducted on January 10–25, 2012 in Yangon and Nay Pyi Taw. The Executive Board concluded the 2011 Article IV consultation on March 19, 2012.

Technical Assistance

Previously the Fund’s TA to Myanmar was limited partly due to lack of ownership and poor implementation of past advice. Starting in FY 2011/12, TA began to intensify and was prioritized to focus on the authorities’ plans to unify the exchange rate and accept Article VIII Sections 2(a), 3, and 4 obligations.

In FY 2012/13, the Fund further intensified its TA activities with multiple missions from FAD, LEG, MCM and STA (Table 1). An MCM resident advisor was also placed in the central bank, and a TA Office for Lao and Myanmar (TAOLAM) was established.

Table 1.

Technical Assistance Delivered: March 2012–May 2013

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Monetary and Capital Markets Department (MCM) also participated in the TAs.

In FY 2013/14, TA is expected to continue to be intensive and will be closely coordinated with activities of other providers. Key areas of focus will be monetary policy and operations, financial sector development, economic statistics, tax administration and policy, and public financial management. There will be two resident advisors in the central bank, one focusing on foreign exchange market development and the other on bank supervision. In addition, three resident advisors based in TAOLAM will mainly focus on Myanmar. The Singapore Technical Institute plans to offer financial programming courses and macroeconomic training program beginning in August 2013 in coordination with the TAOLAM macroeconomic advisor.

Resident Representative

Ms. Yu Ching Wong took up the first Resident Representative post of the country in Yangon, starting May 2013.

A TA Office

IMF opened TAOLAM in Bangkok in October 2012. The new office, headed by Ms. Susan Creane, will provide IMF technical assistance and training, in collaboration with the Bank of Thailand and the Japanese Government.

World Bank-IMF Collaboration

(May 2013)

The Fund and the Bank country teams for Myanmar, led by Mr. Davies (IMF) and by Ms. Dixon (World Bank), maintain excellent working relations and dialogue on macroeconomic and structural issues.

The level of cooperation and coordination is excellent, and is becoming more regular as both institutions have been scaling up their engagement in Myanmar. Myanmar was in arrears to the WB, which previously limited the WB’s level of engagement in the country. Following the clearance of arrears to IDA in January 2013, the Bank has resumed normal lending relations to Myanmar. There are currently four IDA lending projects in the pipeline scheduled for delivery within the next 12 months. The WB has also significantly scaled up its analytical and advisory services, and there is already collaboration with the IMF. For example, in the financial sector, the Bank and Fund teams have jointly prepared a note on collaborative IMF-WB Financial Sector Technical Assistance Plan for Myanmar. The note specifies the areas where the two institutions will collaborate and the specific areas in which each institution will take the lead. In this regard, the Bank’s Financial and Private Sector Development (FPSD) team has already had joint missions with the IMF’s Monetary and Capital Markets (MCM) Department team on the development of a financial sector strategy, bank supervision, the Central Bank Law, and Financial Institutions Law. Similarly, there have been joint missions in public financial management, including more recently, in delivering a PFM Foundational Course and conducting a Debt Sustainability Analysis. The teams have also agreed to collaborate in preparing the macro-fiscal analysis chapter of the Public Expenditure Review (PER) which is currently underway. The two institutions have further agreed to collaborate in all other mutually relevant areas. Staffs routinely share country documents prepared by both institutions for their respective Executive Boards.

Recent key areas of cooperation and coordination include:

  • Macroeconomic policy advice to the authorities. Representatives from the WB participate in IMF Article IV and SMP missions to Myanmar. In this context, staffs from both institutions discuss macroeconomic policies and the main messages to the authorities.

  • Structural reforms. Fund and WB teams have worked together and have shared views on a range of other issues, including structural reforms for a better investment climate and private sector development, and social development. Representatives from the World Bank participate in IMF Article IV and SMP missions, and provide their comments and inputs on important structural issues that are incorporated in the IMF staff reports.

Based on the above partnership, the WB and the Fund share a common view about Myanmar’s macroeconomic and structural reform priorities. Important reform priorities include:

  • Promoting long-term growth and diversification. Modernizing Myanmar’s economy will require removing impediments to growth by enhancing the business and investment climate, encouraging financial sector development, and further liberalizing trade and foreign direct investment (FDI). The new government’s recent efforts, supported by the IMF SMP, go in the right direction and would benefit from coordination across government agencies, broader consultation with stakeholders, and using best international practices distilled from other countries’ experiences through substantial capacity building efforts.

  • Foreign exchange policy. The authorities have come a long way in liberalizing the foreign exchange regime. Finalizing the unification of the exchange rate and removing any remaining current account restrictions should continue to be given high priority. Important actions include: developing an interbank foreign exchange market; removing the remaining restrictions arising from provisions in the foreign investment law and issuing comprehensive regulations for the foreign exchange management law, which will replace the instructions issued over the last year by the CBM.

  • Monetary policy. Strengthening the CBM’s capacity to conduct monetary policy is a critical prerequisite for macroeconomic management. To this end, the authorities need to give greater autonomy to the CBM with enactment of the CBM law. Prior to that, continued attention is required to building tools and capacity for monetary policy. Priorities include regularly conducting basic open market operations, reforming reserve requirements, and developing a reserve money forecasting and targeting framework.

  • Further liberalization of financial intermediation and strengthening regulatory and supervisory framework. To promote the expansion of financial services, the authorities have eased capital requirements for opening new bank branches, and abolished the capital-to-deposit ratio. Setting definitions of bank capital and nonperforming loans closer to international standards is critical. To contain risks to financial stability during the financial-sector modernization process, the authorities need to strengthen the enforcement of connected lending limits. Improving banks’ risk management is a necessary precursor to liberalization of lending rates and maturities. In all, changes must be implemented step by step, in line with the development of needed supervisory capacity. Liberalization of the financial sector should be complemented with a stronger regulatory and supervisory framework to maintain financial stability. Developing a plan to reform the state-owned banks is also required.

  • Fiscal discipline and transparency. Prudent fiscal policy is essential to maintain macroeconomic stability. Staffs emphasize an urgent need to improve the quality, timeliness, and transparency of government financial statistics, including those of the state economic enterprises (SEEs). Strengthening public financial management, including by establishing a treasury function, and defining institutional arrangements to delineate fiscal responsibilities under the planned decentralization, are essential to safeguard financial discipline. The government is commended for its strong commitment to adopting the Extractive Industry Transparency Initiative (EITI).

  • Prioritizing fiscal policies toward social and infrastructure spending. Continued increases in budgetary allocations towards health and education are welcome, but there is still room for reallocating further resources to social sectors where spending levels remain relatively low. Further room remains for reallocating resources from other sectors towards infrastructure which is currently in a poor state and negatively affecting the business climate.

  • Avoiding accumulation of a quasi-fiscal deficit in the energy sector. Staff welcomes recent adjustments of electricity tariffs which will help reduce the quasi-fiscal deficit (QFD) in the power sector resulting from tariffs below cost recovery. Elimination of QFD, which leads to decapitalization of the asset base in the power sector, is essential for financial viability and mobilization of necessary investments to reduce electricity shortages and promote inclusive development.

The teams are committed to continue their close cooperation going forward. The table below details the specific activities planned by the two country teams over the period June 2013–May 2014.

Myanmar: Joint Managerial Action Plan June 2013–May 2014

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Relations With the World Bank Group2

(May 2013)

Myanmar became a member of the World Bank in 1952, IFC in 1956, and IDA in 1962. By 1987, the Bank’s total portfolio amounted to US$804 million equivalent, of which US$752.8 million equivalent had been disbursed. New lending ceased after 1987 due to a lack of dialogue on policy reform. The last formal Consultative Group meeting was held in January 1986 in Tokyo, chaired by the Bank. Since then, occasional contacts between the government and the Bank continued on the sidelines of the Annual Meetings.

Myanmar went into arrears with the Bank in January 1998 and subsequently into nonaccrual status in September 1998. All credits that had been approved but which had not fully disbursed were cancelled and Myanmar was not eligible for new loans. The Bank’s engagement with Myanmar became limited to monitoring economic and social developments in the country based on available information and reports, liaising with other international donors and agencies, continued participation in IMF Article IV missions, and providing support to the work of other donors in selected areas.

Relations between Myanmar and the Bank have however been recently normalized. As part of its efforts to restore normal relations with the international community, the Government of Myanmar cleared the full amount of its arrears to the Bank in January 2013, in the amount of US$420 million through a bridge loan from the Japan Bank for International Cooperation. The Bank resumed normal lending to Myanmar, with the first loan being a concessional IDA credit extended to help Myanmar repay in full the bridge loan contracted to clear the arrears.

The Bank opened its first ever country office in Myanmar on August 1, 2012. Its engagement with Myanmar is currently being guided by an Interim Strategy Note (ISN) pending the preparation of a full Country Partnership Strategy. The ISN was discussed by the Bank’s Executive Board of Directors on November 1, 2012, on which date the Board also approved an US$80 million pre-arrears clearance grant to fund a Community Driven Development Project. The Bank is currently in the process of preparing four possible lending projects over the next 12 months in energy, telecommunications, public finance management, and education.

Apart from lending programs, the Bank has significantly scaled up its analytical and advisory services, some of which are financed by development partners. For example, it has just completed its first ever Public Expenditure and Financial Accountability assessment with funding from DFID while a PER is underway.

Relations With the Asian Development Bank3

(May 2013)

Myanmar joined the Asian Development Bank (AsDB) in 1973 and operations started the same year. In 2012, as the international community resumed engagement with Myanmar as a result of significant economic and political reforms, the AsDB developed a road map toward resumption of normal operations. The activities included initial assessments of the economy and of key sectors, provision of technical assistance, and development of an interim country partnership strategy for 2012–2014.

AsDB’s interim country partnership strategy for 2012–2014 seeks to support the government in achieving sustainable and inclusive growth. It focuses on (i) building human resources and capacities (capacity building in ministries in core areas of AsDB involvement, and education); (ii) promoting an enabling economic environment (macroeconomic and fiscal management; and trade, investment, financial sector reform); and (iii) creating access and connectivity (rural livelihoods and infrastructure development, especially energy and transport). AsDB will mainstream the thematic areas of good governance, environmental sustainability, private sector development, and regional cooperation and integration into its operations. AsDB will focus on the crosscutting areas of knowledge and partnerships.

Myanmar cleared its arrears to AsDB in January 2013. The AsDB has so far provided 33 loans totaling US$1,107 million for 28 projects and one policy-based operation. Of these, two loans amounting to US$6.6 million were from the AsDB’s ordinary capital resources (OCR) which have already been prepaid, and 31 loans were from the concessional Asian Development Fund resources. The AsDB has so far provided technical assistance (TA) totaling US$21.8 million for 54 projects. Of these 54 TA projects, 16 were approved since AsDB reengaged with Myanmar in 2012.

With resumption of its engagement with the international community, Myanmar is an increasingly active participant in the Greater Mekong Subregion Economic Cooperation Program and the Association of Southeast Asian Nations (ASEAN). AsDB coordinates closely with the IMF, the World Bank, the UNDP, and other development partners and is actively engaged in various sector and thematic working groups that are being formed by the government for aid coordination purposes.

The majority of AsDB assistance has been provided to support public sector management, followed by development of the agricultural sector. The sector composition of AsDB lending to Myanmar is shown below:

Myanmar: Asian Development Bank Lending

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Source: Asian Development Bank

Statistical Issues

Assessment of Data Adequacy for Surveillance

General. Data provision continues to have serious shortcomings that hamper effective surveillance. Data are not provided in a timely manner, while official and independent estimates of key macroeconomic variables differ widely.

National accounts. National accounts statistics are available only on an annual basis with considerable delay. Coverage of the private sector is incomplete as a proper business directory for sampling is not available yet. Resource constraints, primarily at the Planning Department and the Central Statistical Organization (CSO), limit the conduct of surveys and other data collection. GDP estimates do not completely account for informal sector activity. Agricultural work-in-progress is not included; construction is recorded on the basis of construction permits; and taxes and subsidies on products are excluded. Estimates of goods for processing and many services (including construction, financial services and insurance), as well as the deflators for financial and insurance services need improvement. Taxes and subsidies on products are not recorded.

Price statistics. The current CPI weights are based on the 2006 Household Income and Expenditure Survey (HIES). There are a number of weaknesses in the CPI: weights only represent urban households even though rural areas were also surveyed; some construction inputs are included; rentals of owner-occupied housing are excluded; missing prices are not imputed; and the classification of items is outdated. The CSO plans to address these issues when it introduces a new CPI in early 2014 with weights based on the results of the HIES that was conducted in November 2012. Other improvements to methods and practices will be introduced at the same time.

Government finance statistics. There is no comprehensive monthly or quarterly compilation of fiscal data. Monthly cash-based budget execution data are available in local language, but are not published. Annual comprehensive data are compiled with delays of up to 12 months after the end of the reference year. In addition, some transactions of state economic enterprises are recorded partly on an accrual and partly on a cash basis. Fiscal and monetary data are not consistent. Budget estimates and actual expenditures tend to differ by wide margins. In addition, recording of debt statistics is not comprehensive.

Monetary and financial statistics. The monetary survey compiled by the CBM covers the central bank and all commercial banks (public and private). Reporting of monetary data in the Standardized Report Forms, which accord with the MFSM classification principles, was established in January 2012. The quality of monetary statistics could be improved by: (i) monitoring the consistency of the reciprocal/interbank accounts that show positions between the CBM and the commercial banks; and initiating data review and resolution of large inconsistencies; (ii) using electronic means to capture and share data to minimize mistakes; (iii) in due course, adopting market or fair value-based valuation of financial instruments; and (iv) reviewing the accuracy of recording of the IMF Accounts in the CBM’s balance sheet.

External sector statistics. The coverage and reliability of the balance of payments could be improved. Merchandise imports are underestimated as military imports and other official imports, including imports linked to FDI under joint venture agreements with exemptions from custom duties, are generally excluded. Trade data are recorded at the time of entries by customs, causing serious volatility in values and incorrect time records. Many of the recommendations of the STA TA missions conducted in 1999 and 2000 have not been implemented. Items recorded in the current account, such as goods, services, and income (both primary and secondary accounts), rely on a mix of compilation methods with limited coverage. Detailed data on services transactions and financial flows are generally not available and transactions that are not undertaken through the official banking system are usually not estimated. A detailed recording of transactions in goods, services, income, and financial items between residents and nonresidents is necessary. Evaluation of external debts that are not denominated in U.S. dollars is conducted irregularly. Elaboration of external debt and arrears is needed. FDI flows are not properly measured. Identification and proper classification of official reserves and other external assets is necessary. The current compilation of IIP data relies on the accumulation of BOP flows, which makes position data extremely unreliable. It does not allow to bridge data to external debt tables. Compilation of IIP data also needs to be revamped.

Myanmar is participating in a three-year program that was designed for the improvement of External Sector Statistics in the Asia and Pacific Region. In May 2013, the first TA mission took place in which a work plan phased in two semesters was designed. The first two specific and attainable objectives agreed with the authorities by November 2013 are: (a) timely quarterly dissemination of BOP data and; (b) elaboration of external debt tables. In addition, the mission is of the view that the CBM is in a position to improve, as a priority, data collection and dissemination on direct investment, other investment, and official reserves during 2013.

Data Standards and Quality

Myanmar does not participate in the IMF’s General Data Dissemination System. No data ROSC is available.

Reporting to STA (optional)

Myanmar submits data reports to STA with a lag of two to six months. However, balance of payments statistics have not been reported to STA for publication since 2007. No fiscal data are reported to STA for publication in the IFS. Annual data on the operations of the consolidated central government were last reported for 2005 to STA for publication in the Government Finance Statistics Yearbook, but do not include an economic classification of expenditure.

Myanmar: Table of Common Indicators Required for Surveillance

(As of May 2013)

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Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extrabudgetary funds, and social security funds), state and local governments, and State economic enterprises (SEEs).

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.


Staff continues to assess the situation on the general restrictions on the making of payments and transfer for invisibles.


Prepared by the World Bank Group’s staff.


Prepared by the Asian Development Bank’s staff.