Posted by: mulrickillion | February 1, 2012

Press Release: Statement at the Conclusion of the 2011 Article IV Mission to Myanmar

Press Release No. 12/25
January 25, 2012

An International Monetary Fund (IMF) mission led by Ms. Meral Karasulu visited Nay Pyi Taw and Yangon during January 9–25, 2012 for the 2011 Article IV Consultation. The team met with the authorities and other key counterparts to discuss recent economic developments and the outlook for Myanmar. At the conclusion of the mission, Ms. Karasulu issued the following statement today in Nay Pyi Taw:

“We would like to thank the authorities and other counterparts for their close cooperation, open engagement and warm hospitality.

“The new government is facing a historic opportunity to jump-start the development process and lift living standards. Myanmar has a high growth potential and could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world, into its advantage.

“Delivering on these expectations with inclusive and sustainable growth should start with establishing macroeconomic stability. This process has already begun with plans underway to unify the exchange rate and lift exchange restrictions on current international payments and transfers. As this essential process continues, channeling the reform momentum to improving monetary and fiscal management and to structural reforms would allow taking full advantage of the positive effects of exchange rate unification.

“Modernizing Myanmar’s economy will be a process of removing impediments to growth by enhancing business and investment climate, modernizing the financial sector, and further liberalizing trade and foreign direct investment. The government’s recent efforts go in the right direction and would benefit from broader consultation with stakeholders and using the best international practices distilled from other countries’ experiences.

“Myanmar’s real GDP growth is expected to increase to 5½ percent in FY2011/12 and 6 percent in FY2012/13, driven by commodity exports and higher investment supported by robust credit growth and improved business confidence. Inflation, projected at 4.2 percent for FY2011/12, is expected to pick up to 5.8 percent in FY2012/13 as the recent decline in food prices phases out. The parallel market exchange rate of the kyat has appreciated by about 32 percent in nominal effective terms since end-FY2009/10. The appreciation pressures are primarily due to large foreign inflows into the economy, which cannot find an outlet due to exchange restrictions on current international payments and transfers.

“Risks to this outlook are broadly balanced. On the downside, a drop in regional demand could negatively affect exports, although Myanmar, as in 2008, remains largely insulated from the developments in advance markets. If sustained, exchange rate appreciation could undermine Myanmar’s already limited external competitiveness. On the upside, the recent easing of foreign direct investment restrictions, increase in private sector credit, and continued progress toward lifting exchange restrictions and unifying the exchange rate could bolster growth.

“Reforming the complex exchange rate system is a priority to eliminate constraints on economic growth. The technical work by the Central Bank of Myanmar (CBM) is already under way to establish the necessary market structure for this important process. Ultimately, the unification of the exchange rate would require moving away from the ‘export first’ policy. . . .

Press Release: Statement at the Conclusion of the 2011 Article IV Mission to Myanmar

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