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IMF Country Report No. 20/215

MYANMAR

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR MYANMAR

July 2020

In the context of the Requests for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument, the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 26, 2020, following discussions that ended on June 1, 2020, with the officials of Myanmar on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility and the Rapid Financing Instrument. Based on information available at the time of these discussions, the staff report was completed on June 16, 2020.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).

  • A Statement by the Executive Director for Myanmar.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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PO Box 92780 • Washington, D.C. 20090

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© 2020 International Monetary Fund

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MYANMAR

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT

June 16, 2020

Executive Summary

Context: The COVID-19 pandemic is expected to hit hard Myanmar’s economy via weaker exports, tourism, remittances and domestic demand. The economic and social costs of a widespread outbreak could be large, against the backdrop of a frail healthcare system and inadequate social safety nets, as well as already low international reserves and a fragile banking system. The measures to contain and alleviate the effects of the pandemic open up sizeable BOP and fiscal financing gaps in the near term.

Policy Response: The authorities aim to bolster healthcare spending and mitigate the economic impact of the pandemic, while laying the groundwork for the recovery. Under the COVID-19 Economic Relief Plan (CERP), the authorities have enacted important emergency fiscal, financial and monetary measures and are planning several others. The Central Bank of Myanmar (CBM) has cut the policy interest rate by a cumulative 300 bps since mid-March and temporarily reduced the reserve and liquidity requirements for banks. The authorities have provided banks further forbearance from prudential requirements to encourage credit provision. The monetary stance is appropriate; however, the forbearance period should be shortened. The kyat has been allowed to adjust flexibly, with limited rules-based intervention to manage excessive volatility.

Request for Fund Resources: The authorities have requested Fund assistance, to be used as budget support, to mitigate the economic impact of COVID-19. Staff assesses that Myanmar meets the eligibility requirements for the blend Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) and supports a purchase and outright disbursement of SDR 258.4 million (50 percent of quota) on account of present and urgent balance of payments needs from a sudden and exogenous shock and the infeasibility of an Upper Credit Tranche (UCT) program at this time. Myanmar is a presumed blender based on the income criteria and access under the RCF and RFI will blend RCF/RFI resources in the ratio of 1:2. The access level would cover 21 percent of external financing gap and is expected to catalyze multilateral and bilateral support. The authorities have requested debt service suspension under the Debt Service Suspension Initiative (DSSI), supported by the G-20 and Paris Club. Public debt (about 40 percent of GDP) is assessed as sustainable with low risk of debt distress, and there is adequate capacity to repay the Fund.

Approved By

Kenneth H. Kang and Bjoern Rother

An IMF team consisting of S. Peiris (head), J. De, P. Deb, S. Nadeem (all APD), Y. Xiao (FAD), Y. Hul and R. Zandvakil (both ICD), S. Iorgova (MCM) and N. Saker (IMF Resident Representative) and K. Tun (Resident Representative Office) held discussions with the Myanmar authorities by teleconferences led by Union Minister of Planning, Finance and Industry U Soe Win, and Central Bank of Myanmar Governor U Kyaw Kyaw Maung and other senior government officials during May 27-June 1, 2020. Advisors from the IMF Capacity Development Office in Thailand (CDOT) and resident FX operations advisors joined the technical discussions. A. Mahasandana (Executive Director) and A. Srisongkram (OED) participated in the discussions. Ms. Dao and Ms. Tanseco assisted in preparing this report.

Contents

  • CONTEXT

  • IMPACT OF THE PANDEMIC AND OUTLOOK

  • A. Initial Impact and Response

  • B. Outlook and Risks

  • POLICY ISSUES AND DISCUSSION

  • A. Fiscal Policy

  • B. Monetary and Exchange Rate Policy

  • C. Financial Sector Policies

  • MODALITIES OF IMF SUPPORT UNDER THE RCF/RFI

  • STAFF APPRAISAL

  • FIGURES

  • 1. Health Sector

  • 2. Macroeconomic Developments

  • 3. Macrofinancial Impact of COVID-19

  • 4. Macro-Fiscal and Monetary Developments

  • TABLES

  • 1. Selected Economic Indicators, 2016/17–2020/21

  • 2. Summary Operations of the Nonfinancial Public Sector, 2015/16–2020/21 (Consolidated account, in billions of kyats)

  • 3. Summary Operations of Nonfinancial Public Sector, 2015/16–2020/21 (Consolidated account, in percent of GDP)

  • 4. Balance of Payments, 2016/17–2023/24

  • 5. Monetary Survey, 2016/17–2023/24

  • 6. Medium-Term Projections, 2016/17–2024/25

  • 7. Indicators of Capacity to Repay the Fund

  • ANNEX

  • I. Risk Assessment Matrix

  • APPENDIX

  • I. Letter of Intent

Front Matter Page

MYANMAR

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—DEBT SUSTAINABILITY ANALYSIS1

June 16, 2020

Approved By

Kenneth H. Kang and Bjoern Rother (IMF) and Marcello Estevão (IDA)

Prepared by the staffs of the International Monetary Fund and the International Development Association