BANGKOK: Myanmar has the potential to quickly boost economic growth if the government modernises the financial sector and makes it easier for companies to trade and invest, according to the International Monetary Fund.
“The new government is facing a historic opportunity to jumpstart the development process and lift living standards,” Meral Karasulu, who led an IMF mission to Myanmar that ended on Wednesday, said in a statement. “Myanmar has a high growth potential and could become the next economic frontier in Asia” if it takes advantage of rich natural resources, a young labor force and its proximity to China and India, she said.
The IMF is pushing for an overhaul of Myanmar’s finances as President Thein Sein releases political dissidents, lifts media restrictions and engages with opposition leader Aung San Suu Kyi. The moves have prompted the United States and Europe to reassess sanctions against the former military dictatorship that have been in place for more than two decades.
Myanmar’s economy may grow 5.5 per cent in the 2011-2012 fiscal year and six per cent in 2012-2013 on commodity exports and higher investment, the IMF said. Fixing the country’s multiple exchange rate system is key to removing constraints to growth, a process the Central Bank of Myanmar has started, it said.
“The exchange-rate unification is expected to improve fiscal revenues,” the IMF said in the statement. “The discussion of the 2012-13 budget in the new parliament provides a historic opportunity to redefine national spending priorities and bring fiscal transparency.”
Under Myanmar’s multiple exchange-rate system, the kyat is pegged to 8.5 per one IMF-issued special drawing right, equivalent to about 6.4 kyat per dollar. Unofficial rates are more than 100 times higher, trading at 770 kyat per dollar on Oct 28, according to the Irrawaddy, an online newspaper for exiles from the country formerly known as Burma.
The difference hinders trade and increases costs for foreign businesses, according to a 2008 IMF working paper.
The IMF projects a “moderate fiscal deficit” of 4.6 per cent of gross domestic product, about one per cent lower than last year’s deficit. It called on the government to establish treasury bond auctions to finance the deficit instead of printing money.
“This budget will be a test of how serious” Thein Sein is in promising reforms, Mark Farmaner, director of activist group Burma Campaign UK, said in a statement. “There needs to be substantial increases in spending on health, education and agriculture, and major cuts in military spending.”
Last year’s budget allocated 25 per cent of spending for the armed forces, compared with 1.3 per cent for health and four per cent for education, the group said.
Parliament opened on Thursday for its third session since Thein Sein took power following 2010 elections that ended more than five decades of direct military rule.
Myanmar’s government is confident that by-elections on April 1 will be “free and fair”, a demand made by Western countries that have imposed sanctions on the Southeast Asiannation, Foreign Minister Wunna Maung Lwin said on Wednesday in New Delhi during a four-day visit.
Suu Kyi’s party will contest the special vote for 48 seats in the 664-seat parliament, the first time it is participating in an election since winning 1990 polls that were ignored by the military.
The EU this week ended travel restrictions on Myanmar’s senior leaders and pledged to consider lifting other sanctions in April, a view shared by US policy makers. US sanctions ban imports, restrict money transfers, curb aid money, freeze assets and target jewelry with gemstones originating in Myanmar. The EU has lighter restrictions, including a ban onweapons sales and imports of minerals.
By arrangement with Washington Post-Bloomberg News Service