Washington, DC (BBN) – The International Monetary Fund (IMF) sees that Myanmar made important progress in economic reforms, while safeguarding macroeconomic stability remains the top priority.
“Myanmar remains a fast-growing economy with real GDP increasing by 7.3 percent in FY2015/16 (ending March 31),” Yongzheng Yang, an IMF mission head that visited Myanmar from October 14-28, to undertake the 2016 Article IV Consultation discussions, said after their assessment.
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, according to the IMF.
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 per cent.
Inflation is projected to stay at around 9.0 per cent on average for FY2016/17, and the external current account deficit to increase to about 7.6 per cent 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,” Mr. Yang said in a statement.
In particular, the fiscal deficit needs to be kept in check, monetary conditions tightened, and the exchange rate allowed moving more flexibly in line with market conditions, it added.
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.”
The IMF also said: “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.”
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.
It is expected that the IMF’s Executive Board will consider the 2016 Article IV consultation in January 2017.