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IMF Country Report No. 21/23
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
January 2021
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 January 12, 2021, following discussions that ended on November 24, 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 December 21, 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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MYANMAR
REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT
December 21, 2020
Executive Summary
Context: With the economy already slowing due to the COVID-19 pandemic in FY2019/20, a more intense second wave has hit Myanmar hard, inflicting large economic and social costs and straining the frail healthcare system. The needed strict lockdown measures have hurt manufacturing and spending further, while weak external demand has weighed on exports and tourism, though the kyat continued to appreciate as remittances remained robust. In FY2020/21, growth will decelerate further to 0.5 percent and open up external and fiscal financing gaps of about US$1 billion. The IMF’s RCF/RFI disbursement of 50 percent of quota (SDR 258.4 million) in June helped support the authorities’ policy response for FY2019/20, particularly for social and health spending, kept monetary financing within target, and catalyzed financing from external partners, including through the Debt Service Suspension Initiative (DSSI).
Policy Response: The authorities reiterated their commitment to the policies discussed in IMF Country Report 20/215 following the outcome of the November elections. In response to the second wave, the new administration is drawing up the Myanmar Economic Resilience and Reform Plan (MERRP) that builds on the emergency fiscal, financial and monetary measures under April’s COVID-19 Economic Relief Plan (CERP). The MERRP extends relief measures while adding macroeconomic and financial stability measures to guide the recovery. Additional tax and utility deferrals, soft loans, and cash transfers are planned to support affected sectors and vulnerable groups, along with a continuation of measures to support credit and liquidity. Myanmar has made significant progress in implementing the spending transparency commitments made in the LOI for the first RCF/RFI request and efforts are ongoing to extend support equitably across the country, including to conflict regions and ethnic minorities.
Request for Fund Resources: The authorities have requested additional Fund assistance to be used as budget support in FY2020/21. 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. The access level would cover 38 percent of the external financing gap and is expected to catalyze external support. The authorities have requested debt service suspension under the DSSI. Public debt 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 Johannes Wiegand
An IMF team consisting of S. Peiris (head), J. De, P. Deb, D. Muir, S. Nadeem, and U. Rawat (all APD), Y. Xiao (FAD), 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 November 18–24, 2020. Advisors from the IMF Capacity Development Office in Thailand (CDOT) joined the technical discussions. A. Mahasandana (Executive Director) and M. Soe (OED) participated in the discussions. Ms. Dao and Ms. Tanseco assisted in preparing this report.
Contents
CONTEXT
IMPACT OF THE PANDEMIC AND OUTLOOK
A. Impact of the COVID-19 Outbreak and Response
B. Outlook and Risks
POLICY ISSUES AND DISCUSSIONS
A. Fiscal Policy
B. Monetary and Exchange Rate Policy
C. Financial Sector Policies
MODALITIES OF IMF SUPPORT UNDER THE RCF/RFI
STAFF APPRAISAL
BOX
1. Cash and In-Kind Transfers in Response to COVID-19 Crisis
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 accounts, in billions of kyats)
3. Summary Operations of the Nonfinancial Public Sector, 2015/16–2020/21 (Consolidated accounts, in percent of GDP)
4. Balance of Payments, 2016/17–2023/24
5. Monetary Survey, 2016/17–2023/24
6. Medium-Term Projections, 2016/17–2025/26
7. Gross External Financing Needs and Sources, 2018/2019–2023/2024
8. Indicators of Capacity to Repay the Fund
ANNEX
I. Risk Assessment Matrix
APPENDIX
I. Letter of Intent
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MYANMAR
REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—DEBT SUSTAINABILITY ANALYSIS1
December 21, 2020
Approved by
Kenneth H. Kang, Johannes Wiegand (IMF), and Marcello Estevão (IDA)
Prepared by Staff of the International Monetary Fund and the International Development Association
