MPs question finance ministry over foreign loan
MPS are demanding an explanation from the finance ministry as to how they will spend – and repay – a US$100 million World Bank loan after is emerged that $60 million of the proposed funding will be spent within the finance ministry itself.
Pyithu Hluttaw lawmaker U Aung Hlaing Win (NLD; Mingaladon) said the ministry will need to give a clear reason for the loan.
“Ministries are approaching parliamentary committees to seek permission to take out further enormous foreign loans,” he told the Pyidaungsu Hluttaw on August 12.
“No country in the world has developed its economy by borrowing from abroad. We must repair our economy and try to develop it by ourselves. The budget faces deficits and we have to find a way to repay existing debts. Why are we looking to borrow more?”
Parliamentarians were discussing a proposal from President U Htin Kyaw to accept the loan for the development of the country’s monetary sector.
Deputy Finance Minister U Maung Maung Win told the Pyidaungsu Hluttaw on August 9 that the ministry planned to spend $60 million of the $100 million loan in budget support on the ministry’s regular expenditure, expanding ministry-run enterprises and paying staff salaries, allowances and pensions.
U Aung Hlaing Win said, “The ministry has to provide a clear explanation. It said $60 million would be spent on raising staff salaries, but parliament has heard no ministry plans for raising salaries. So what is the money for? It seems to be just going to the Ministry of Planning and Finance alone.” He added, “It’s not appropriate to make our children pay off our debts.”
He said the ministry’s presentation had included plans to use the loan to reform state-owned banks. “I think it’s time to change the habit of seeking international loans and to start considering reforming a sector which is going downhill,” he said.
“Myanma Economic Bank loses money every year. It lost K60 billion last year and is expected to lose another K75 billion this year. That’s the sum expected to be raised from the 5 percent tax on mobile phones. Tax revenue collected from the public is being spent by a single loss-making bank,” he said.
“Even if we provided financial and technical support to this bank, it can’t make a profit. It doesn’t make sense to inject more investment into an enterprise that’s already losing money,” he said.
Amyotha Hluttaw MP U Than Soe (NLD; Yangon 4) said Myanmar had yet to form a central or working committee to manage foreign financial aid. “If large numbers of such plans are allowed to proceed, the state will be burdened with debt,” he said, adding that the state owed $9 billion in foreign loans taken out to fund 882 plans.
He said he feared the country would become overly dependent on foreign aid rather than developing its own market economy. “The country needs multinational investment, not grants and loans. Though there may be some increase in performance due to grants and loans, we have to be careful not to waste the money,” he said.
Deputy Minister U Maung Maung Win said if the government agreed to the terms, the ministry would receive $75 million and the Central Bank would receive $25 million of the 38year interest-free World Bank loan.
Of the ministry’s share, $60 million would go toward normal budgeted expenditures including projects, staff salaries and pensions. The other $15 million would be spent on financial sector development.
Of this, $7 million would go toward restructuring and reforming the country’s four uncompetitive state-owned banks, $5 million would be used to develop legal frameworks and invest in IT for the microfinance and insurance sectors, and $3 million would be spent on capacity building for ministry staff.
The Central Bank would use its $25 million share for four projects, deputy governor Daw Khin Saw Oo told parliament. Of this, $6 million would be used to open an accounting and finance training school, $2 million would be spent on IT and capacity building, $2 million on building staff capacity, and $15 million on upgrading payment systems and financial infrastructure.
Before the ministry can draw down on the $60 million earmarked for operational support, it would need to meet several disbursement-linked indicators, U Maung Maung Win said.
While the loan is interest-free, he added, the government would pay an annual service charge of 0.75 percent after a six-year grace period.
The Pyidaungsu Hluttaw Speaker announced that the government could present its explanation in a future session.