Statement by Ms. Pornvipa Tangcharoenmonkong, Alternate Executive Director and Ms. Nwe Ni Tun, Advisor to the Executive Director, August 28, 2015

This 2015 Article IV Consultation highlights that Myanmar's economic growth remains strong, but macroeconomic imbalances have increased significantly over the past year. Real GDP growth for FY2014/15 (April-March) is estimated to have reached 8.5 percent. The fiscal deficit increased to 3 percent of GDP in FY2014/15, while credit to the private sector continued to grow strongly at 35 percent (year over year) in March, albeit lower than in FY2013/14. The current account deficit widened to more than 6 percent of GDP, largely reflecting a rapidly rising trade deficit. The Myanmar economy is set for strong growth in 2015 amid signs of overheating. The economy is expected to grow by 8.5 percent, reflecting strong growth momentum and expansionary macroeconomic policies.


This 2015 Article IV Consultation highlights that Myanmar's economic growth remains strong, but macroeconomic imbalances have increased significantly over the past year. Real GDP growth for FY2014/15 (April-March) is estimated to have reached 8.5 percent. The fiscal deficit increased to 3 percent of GDP in FY2014/15, while credit to the private sector continued to grow strongly at 35 percent (year over year) in March, albeit lower than in FY2013/14. The current account deficit widened to more than 6 percent of GDP, largely reflecting a rapidly rising trade deficit. The Myanmar economy is set for strong growth in 2015 amid signs of overheating. The economy is expected to grow by 8.5 percent, reflecting strong growth momentum and expansionary macroeconomic policies.


1. On behalf of the Myanmar authorities, we would like to express our deep appreciation to Mr. Yongzheng Yang and his team for the productive discussions during the 2015 Article IV Consultation and for their comprehensive set of reports.

2. The authorities highly value the Fund’s constructive policy advice and technical assistance which significantly complements and contributes to Myanmar’s ongoing economic reform agenda. While Myanmar has made substantial achievements in most areas of the economic reform program, the authorities recognize the need to further accelerate the ongoing reform process. The authorities broadly agree with staff’s recommendations and recognize the importance of sustaining economic and structural reforms through creating fiscal space to boost public investment, strengthening banking regulation and supervision to maintain financial stability, and improving the business environment to support inclusive growth. Our authorities broadly concur with the staff appraisal and remain fully committed to the economic reform process.

Recent Economic Developments and Outlook

3. In line with the objectives under the Framework for Economic and Social Reform (FESR)1, Myanmar has continued its growth momentum over the years. In fiscal year2 (FY) 2014/15 - the fourth year of the authorities’ Five-Year National Development Plan (Five-Year Plan) - real GDP growth is estimated to grow at 8.5 percent3, similar to 8.4 percent recorded in FY 2013/2014. The services and other sector is the largest contributor to GDP, with a share of 37.7 percent, followed by the industry sector (34.4 percent), and the agricultural, livestock, fishery and forestry sector (27.9 percent). The average CPI inflation, which increased slightly to 5.9 percent in FY 2014/15 (FY 2013/14: 5.7 percent), is expected to rise further as a result of strong domestic demand from expansionary fiscal policy and rapid growth in private sector credit. The severe flooding in several parts of Myanmar in July which has affected about 1.3 million people and destroyed large areas of rice fields could pose an upside risk to inflation in FY 2015/16.

4. The current account deficit is estimated to widen to around 6 percent of GDP in FY 2014/15 (FY 2013/14: 5 percent of GDP) due mainly to the higher trade deficit, reflecting strong import growth. Gross international reserves held by the Central Bank of Myanmar (CBM) increased to US$ 5.12 billion, which is sufficient to finance about three months of imports.

5. Credit to the private sector is estimated to expand by 35.5 percent in FY 2014/15 (FY 2013/14: 52.5 percent), in light of increased government expenditure and better access to credit by the private sector, increased business opportunities, and the development of credit facilities to Small and Medium Enterprises (SMEs).

6. The authorities are in broad agreement with staff’s assessment on the economic outlook. Medium-to long-term growth prospects remain favorable. However, the authorities’ real GDP growth estimate for FY 2014/15 and projection for FY 2015/16 are 9.1 percent and 9.3 percent respectively, slightly higher than staff’s projections. For FY 2015/16, the authorities expect to achieve a higher growth rate in the agriculture, livestock and fishery, energy, construction and transportation sectors, which are likely to receive a boost from reform measures that were implemented over the first four years of Myanmar’s Five-Year Plan. Notably, reform measures targeted improvements in electricity and water supply, job creation and development in agriculture, tourism, trade and investment, and the financial sector.

Fiscal Policy

7. In line with the policy priorities and objectives of the FESR – a credible, responsive and transparent planning and budget process – the medium term fiscal framework for FY 2015/16 to 2017/18 has been laid out in order to achieve higher budget credibility, enhance fiscal discipline and improve strategic resource allocation.

8. The authorities have gradually tightened fiscal policy and remain committed to reducing central bank deficit financing. The authorities will ensure fiscal sustainability through greater revenue mobilization and expenditure re-prioritization. In addition, the government continues to scrutinize wage and salary increases and reduce non-productive expenditure.

9. The authorities are committed to the Public Finance Management (PFM) reform to strengthen budget formulation and fiscal discipline, control expenditure, as well as improve fiscal accounting and reporting processes. The authorities continue to focus on maintaining fiscal discipline in order to ensure debt sustainability and create the fiscal space needed. With the assistance of the World Bank and other development partners, the Myanmar Modernization of Public Finance Management Project is being implemented to support efficient, accountable and responsive delivery of public services through Myanmar’s PFM systems as well as to strengthen institutional capacity.

10. In order to develop cash and debt management operations, the authorities have established the Treasury Department under the Ministry of Finance (MoF). The Treasury bill auction was introduced in January 2015 to reduce central bank deficit financing and to access financial resources of the private sector. To develop a more effective market with market-determined interest rates and sufficient volume of bids, the authorities plan to issue Treasury bills with different maturities, on top of the existing 3-month bill, lower the minimum face amount of bids, and switch from single to multiple pricing auctions for government securities.

11. Under the fiscal reform program, the authorities have underscored the importance of increasing tax revenue by broadening the tax base and improving tax administration. Continuous efforts have been made to introduce the value-added tax and property tax, simplify the tax system, develop the legal and administrative framework, and implement the Extractive Industries Transparency Initiative (EITI)4. Thus far, the establishment of the Large Taxpayer Office (LTO) in 2014 has been effective in improving tax compliance and tax administration while the ongoing Internal Revenue Department (IRD) reform program will continue to help to improve the efficiency and effectiveness of the IRD and move it closer to international standards of tax administration.

12. On the expenditure side, the authorities will prioritize infrastructure development, socio-economic development, rural development and poverty alleviation. The authorities are committed to ensure the efficiency of spending in these priority areas.

Monetary and Exchange Rate Policy

13. The authorities have made significant progress in the area of monetary and exchange rate policies, including moving towards a managed float exchange rate system, enacting the new Central Bank Law, and introducing the deposit auction and Treasury bill auction after the CBM was granted its autonomy in July, 2013.

14. The authorities concur with staff’s recommendations in various areas regarding the monetary sector. The authorities recognize the risk of increasing inflation as a result of rapid credit growth to the private sector and expansion of government expenditure. Accordingly, the authorities continue to maintain a tight monetary policy stance in line with the monetary target which is reviewed frequently. Substantial progress has also been made in improving the liquidity management framework. The deposit auction introduced in 2013 allows market driven interest rates and more terms of deposits with greater participation by commercial banks and greater flexibility for the CBM to target specific types of banks in the deposit auctions. In addition, the authorities have also introduced a new reserve requirement for banks and financial institutions in April 2015, with full compliance required by October 2, 2015.

15. In addition, the introduction of Treasury bill auctions in January 2015, in close cooperation with the MoF and with technical assistance from the Fund, has reduced central bank financing of the fiscal deficit, thereby decreasing inflationary pressures stemming from fiscal expansion.

16. To develop the government securities market, the Securities Steering Group and Working Group, which include senior officials from CBM and MoF, have been established to implement the development plans in this area. The authorities plan to introduce Treasury bond auctions in the near future to further promote the development of the Treasury bond market. This will further promote market-determined interest rate and attract investor participation in the Treasury bond market. Allowing the purchase of government securities by foreign banks would be the next step when all prerequisites are met.

17. The authorities have also taken note of staff’s recommendation to tighten the access to the CBM discount window to prevent the use of the discount window as a de facto revolving credit facility. In this regard, the authorities plan to abolish the CBM discount window facility and replace it with the overnight window when the CBM Net system5 can be fully implemented in 2016.

18. On the exchange rate regime, in line with staff’s recommendation, the authorities have taken steps to reduce the divergence between the official reference rate and market rate as well as to abolish multiple exchange rates starting from July 13, 2015. As a result, the divergence between the CBM reference rate and the market rate has narrowed and will be unified in the near future. This will help deepen the foreign exchange interbank market, paving the way for completion of the remaining obligations under Article VIII.

19. Due to the strengthening of the US dollar and strong demand in the domestic market, the volatility in the foreign exchange market has increased towards the end of 2014, resulting in a shortage of foreign currencies. This in turn led to the depreciation of the Kyat. In response, the CBM started sales of foreign currencies to major importers by using CBM’s foreign exchange reserves and was able to keep the Kyat broadly in line with medium-term fundamentals. Amidst the unfavorable external environment, potentially lower rice exports as a result of the recent flooding may put further pressure on the Kyat. Although the use of CBM’s reserves has helped to meet the demand for foreign exchange and to smooth exchange rate fluctuations at this juncture, the authorities see the need to accumulate more reserves and are cognizant that adjusting macroeconomic policies are of the utmost importance in the longer term.

20. The authorities underscore their commitment to become an Article VIII member country and have made significant progress towards eliminating most of the Article XIV restrictions. The authorities are also taking active steps to address gaps that are preventing them from fully eliminating the present multiple currency practice. In this regard, the authorities have phased out foreign exchange certificates and the Foreign Exchange Management Law and accompanying regulations were enacted in August 2012 and September 2014, respectively.

21. Nevertheless, due to the absence of a mechanism in the multiple price foreign currency auction that would prevent exchange rates of accepted bids from deviating by more than 2 percent, the authorities would like to request the Fund’s approval for Myanmar to retain the multiple currency practice under Article VIII, Section 3 until August 27, 2016 or the conclusion of the next Article IV consultation with Myanmar, whichever is earlier.

Financial Sector Developments

22. With the growing economy, Myanmar’s financial sector is rapidly expanding. In ensuring that the financial sector remains supportive of growth without undermining financial sector stability, the authorities are highly committed to strengthening the regulatory and supervisory framework. Private sector credit growth, although remains elevated, has started to moderate. Progress has been made in strengthening the supervisory framework, including upgrading prudential regulations, revising supervisory framework, developing supervisory techniques in line with international standards, and enhancing the capacity of the supervisors through training and seminars with the assistance of international institutions, regional organizations and other development partners. The CBM has allocated its most qualified staff to work closely with the Fund to further enhance the supervisory framework.

23. In order to achieve greater access to international markets, the CBM, on October 1, 2014, granted preliminary approval to nine foreign banks to begin preparations to commence banking operations in Myanmar. Thus far, the CBM has issued final licenses to eight of the nine foreign banks, enabling them to begin their operations. In this regard, the authorities are concurrently strengthening the capacity of supervisors to supervise and regulate foreign banks. The presence of foreign bank operations will also help to promote greater use of technology and encourage international standard practices in the banking industry.

24. The authorities have made significant progress in improving the financial infrastructure to strengthen the financial system and to modernize its financial framework. Several laws and related regulations have been enacted, namely, the new Foreign Exchange Management Law (August 2012), the new Central Bank of Myanmar Law (July 2013), the Securities Exchange Law (July 2013) and the regulations of Foreign Exchange Management Law (September 2014). The enacting of a new Financial Institutions of Myanmar Law (FIML) and CBM rules and regulations are in the final stages. In particular, the rules and regulations under the FIML are expected to further modernize financial institutions.

25. The Anti-money Laundering and Counter Terrorism (AML/CFT) Law was enacted in March 2014 and its accompanying regulations are currently being drafted with high priority. A number of supervisory tools were developed under the IMF TA project with the objective of assisting the CBM to strengthen its overall AML/CFT legal framework and bring it in line with the Financial Action Task Force (FATF) Recommendations. As a result, the CBM has issued a Risk Management Guidance Note for banks on January 27, 2015. Moreover, to address concerns of the FATF identified in the Public Statement, the updated risk based CDD Directive has been prepared with the assistance of IMF and will be issued soon.

26. The enactment of the Securities Exchange Law in July 2013 was a major milestone as it enabled the establishment of the Securities Exchange Commission (SEC) to supervise and manage the securities market and also paved the way for further capital market development. The authorities have also adopted a concrete plan to establish a stock exchange in late 2015.

27. To develop greater financial access and promote a more inclusive financial system, the authorities have taken steps to expand the branch network of the banking system, encourage microfinance, and enhance innovations in ATMs, point-of-sale systems and mobile banking. In addition, the payment and settlement systems will be further enhanced with the establishment of the CBM Net system.

28. In addition, the Interbank Market Steering Committee will undertake continued and extensive efforts towards the establishment of a functioning and active interbank FX market and money market.

29. The authorities also place great importance on strengthening institutional foundation and capacity. Some programs are still ongoing and include, among others, introducing the “Modernizing the Funds, Payment and Securities Settlement Systems” project, developing the interbank foreign exchange market and money market, implementing new accounting standards and preparing a financial sector development master plan with the technical assistance from the regional and international community.

Macroeconomic and Structural Reforms

30. Comprehensive macroeconomic reforms are critical to maintaining economic stability, promoting sustainable growth and reducing poverty. In addition to the ambitious reforms in fiscal, monetary and exchange rate as well as financial sector policies, key reforms in business and trade sectors remain on track.

31. Recognizing the importance of creating a conducive investment climate and positive business environment to attract foreign direct investment (FDI), some laws relating to investments have been enacted while existing laws are being revised. Notably, the enacting of the new Foreign Investment Law (2012) has helped to attract more FDI by providing foreign companies access to a wide range of new businesses, longer term leases, favorable tax incentives with various tax and customs duty exemptions, and improving transparency of the foreign investment regulations and implementations. The establishment of Special Economic Zones (SEZs), with a new SEZs law (January 2014), will also help to promote local and foreign investment. Further, to support export development and competitiveness, the authorities are developing the National Export Strategy (NES) in cooperation with the International Trade Centre (ITC) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

32. The restructuring and privatization of state enterprises are crucial for sustained growth. In this regard, some state economic enterprises (SEEs) have been privatized, especially in the industrial and manufacturing sectors. This has also helped to reduce the fiscal deficit. To strengthen SMEs, the authorities have placed a strong emphasis on improving the legal framework and funding for SMEs. Various laws relating to the industrial sectors have also been enacted with the aim to transform Myanmar into an industrialized economy.

33. To enhance overall socio-economic development, the authorities have affirmed the development of the telecommunication sector as part of its economic reforms. In this regard, progress has been made in issuing telecom licenses to foreign companies. The authorities also underscore their commitment to promote inclusive growth through improving health and education services. The authorities recognize the importance of timely macroeconomic statistics for macroeconomic surveillance and have committed to undertake further efforts in this area.

34. The authorities deeply appreciate the Fund’s constructive policy advice and technical assistance. However, given the vast challenges that Myanmar is facing and with TAs available only to some reform areas, the economy continues to face significant difficulties in expediting the comprehensive reforms.


35. Myanmar is undergoing a major economic transition towards a market oriented economy. Despite its positive economic growth performance over the years, Myanmar still faces significant challenges in implementing the economic reform agenda given the constraints in human capital, institutions and infrastructure. The authorities remain committed to continuing efforts in those needed areas under the ongoing reform agenda. In this regard, the authorities firmly believe that the technical assistance, capacity building and valuable advice from regional partners and the international community will enable Myanmar to overcome the remaining challenges and ultimately achieve its long-term economic development goals.

36. Finally, the authorities would like to express their gratitude to the Fund as well as to the World Bank and the ADB, for their unwavering support and valuable policy recommendations over the years. The authorities look forward to continuous support and cooperation as they press ahead with the ongoing economic reform agenda.


The Framework for Economic and Social Reform (FESR) was developed to set the government’s policy priorities for 2012- 2015 in order to achieve the long-term goals of the 20-year National Comprehensive Development Plan 2011-2031.


The fiscal year (FY) starts April 1 and ends March 31.


Staff’s estimation.


EITI is a global standard to promote open and accountable management of natural resources.


The CBM is implementing the project of “Modernizing the Funds, Payment and Securities Settlement Systems” by Japan International Cooperation Agency (JICA) since February 2014 which is a grant aid program. This project includes Real Time Gross Settlement System (RTGS), Securities Settlement System and Mechanized Clearing House System (MCH).