October 30, 2016

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IMF says Myanmar making economic progress

The IMF is upbeat on progress being made with Myanmar’s economy.
An International Monetary Fund (IMF) staff team led by Yongzheng Yang visited Myanmar October 14-28, to undertake the 2016 Article IV Consultation discussions. At the end of the visit, Mr. Yang made the following statement:
“Myanmar remains a fast-growing economy with real GDP increasing by 7.3 percent in FY2015/16 (ending March 31). Growth softened in the first half of FY2016/17, reflecting a correction in the real estate market, an adjustment in the construction sector, slowing demand from major trading partners, and weak commodity prices. However, with expected increases in FDI and aid inflows growth is expected to recover in the second half of the year and the full-year growth is projected at 6.5 percent. Inflation is projected to stay at around 9 percent on average for FY2016/17, and the external current account deficit to increase to about 7.6 percent of GDP.
“The authorities have made important progress since the last Article IV consultation, including the enactment of the Financial Institutions Law, the passage of the Investment Law, and continued improvements in revenue administration, including the successful introduction of income tax self-assessment at the large taxpayer office. That said, macroeconomic imbalances persist. Inflation remains high, the fiscal deficit has increased significantly, and the external current account deficit continues to widen.
“Therefore, safeguarding macroeconomic stability remains the top priority, which means bringing down inflation, strengthening Myanmar’s external position, and fortifying the banking system. In particular, the fiscal deficit needs to be kept in check, monetary conditions tightened, and the exchange rate allowed to move more flexibly in line with market conditions. Phasing out central bank financing of fiscal deficits is a priority. To safeguard financial stability and improve financial inclusion, prudential regulations should be issued soon, and state-owned banks reformed to reduce risks to public finance and the financial system.
“To build a resilient and inclusive economy, Myanmar needs to focus on domestic revenue mobilization, including by rationalizing tax exemptions and investment incentives, and passing the draft Tax Administration Procedure Law. It also should initiate sustained public education on the importance of taxation for economic and social development and accelerate reforms of state economic enterprises. Carefully phased liberalization of the financial sector will help improve financial inclusion, especially for agriculture and small and medium-sized enterprises. Continued efforts to streamline business regulation will help create an enabling environment for the private sector.
“We would like to thank the authorities for their openness and hospitality. It is expected that the IMF’s Executive Board will consider the 2016 Article IV consultation in January 2017.”
The team had constructive meetings with the Governor of the Central Bank of Myanmar (CBM) U Kyaw Kyaw Maung, Deputy Governors U Set Aung, Daw Khin Saw Oo, and U Soe Min, Deputy Planning and Finance Minister U Maung Maung Win, and other senior officials. The team also held discussions with parliamentarians, private sector representatives, and civil society. —IMF

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