Pyi­daungsu Hlut­taw ap­proves debt management strat­egy

The Myanmar Times - - News - SWAN YE HTUT swanye­htut@mm­

MPs have approved a strat­egy for man­ag­ing the coun­try’s US$9 bil­lion in for­eign debt. The plan, which the Pyi­daungsu Hlut­taw approved on Au­gust 19 after a brief de­bate, is based on the Medium-term Debt Management Strat­egy pro­posed by the Pres­i­dent’s Of­fice.

The de­bate cov­ered the risks en­tailed by ex­change-rate fluc­tu­a­tions even in an in­ter­est-free loan.

Four MPs spoke: U Than Soe (NLD; Yan­gon 4) and U Soe Thein (Ind; Kayah 9) of the Amyotha Hlut­taw, and Daw Thet Thet Khaing (NLD; Dagon) and U Lin Lin Kyaw (NLD; Myit­tha) of the Pyithu Hlut­taw.

“The Medium-term Debt Management Strat­egy aims to ful­fil the gov­ern­ment’s fi­nan­cial needs at low­est cost and low­est risk,” said Daw Thet Thet Khaing. “There are three ways to re­solve bud­get deficit: bor­row­ing from abroad, sell­ing trea­sury bonds and bor­row­ing from the Cen­tral Bank.”

She said the term of trea­sury cer­tifi­cates could also be ex­tended from three months to six or 12 depend­ing on mar­ket con­di­tions.

She added, “I also sup­port the de­ci­sion to bor­row from the CBM only if de­mand for trea­sury bonds is not suf­fi­cient.”

U Lin Lin Kyaw warned against the dan­ger of cur­rency fluc­tu­a­tions. “If we bor­rowed last year at an ex­change rate of K1000 to the dol­lar and the rate is K1285 this year, we have to pay at the higher rate even if the loan is in­ter­est­free,” he said, urg­ing mem­bers to take this vari­able into ac­count.

For­mer cab­i­net mem­ber U Soe Thein said loan de­fault ne­go­ti­a­tions with cred­i­tors had al­ready been car­ried out. The In­ter­na­tional Mon­e­tary Fund, the Asia De­vel­op­ment Bank, the World Bank and the OECD were avail­able to of­fer tech­ni­cal as­sis­tance, he said, re­call­ing that the strat­egy now be­fore par­lia­ment had been drafted based on the Public Debt Management Law adopted by the pre­vi­ous gov­ern­ment in Jan­uary. It pro­vided for the ac­cep­tance of for­eign and do­mes­tic loans to fund gov­ern­ment projects and is­sue trea­sury bonds to re­dress bud­get deficits.

“As you all know, bor­row­ing from the Cen­tral Bank could lead to in­creased in­fla­tion. By sell­ing gov­ern­ment bonds and trea­sury bills in­stead, in­fla­tion can be reined in,” he said, ex­press­ing sup­port for the strat­egy.

“I’d like to sug­gest that the Min­istry of Fi­nance should ob­serve mar­ket con­di­tions and de­velop a do­mes­tic money mar­ket,” he said, adding that chap­ter 32 of the strat­egy said priority should go to the cheap­est loans. “The gov­ern­ment needs to use the loans to fund projects that re­ally ben­e­fit the coun­try and the peo­ple, and should re­port reg­u­larly to par­lia­ment on the progress of the projects.”

U Soe Thein sug­gested that the gov­ern­ment should consider ways of ac­cess­ing for­eign cur­rency to re­pay its lo­cal and for­eign loans while tak­ing out cheap loans for in­fra­struc­ture de­vel­op­ment projects in un­der­de­vel­oped re­gions such as Chin, Rakhine and Kayah states.

“Ac­cord­ing to the law en­acted in Jan­uary, the min­istry will have to draw up a strat­egy for medium-term debt management every year for the next three fi­nan­cial years,” he said, en­dors­ing the pro­posed debt management strat­egy.

After the dis­cus­sion, Deputy Fi­nance and Plan­ning Min­is­ter U Maung Maung Win in­vited the Pyi­daungsu Hlut­taw to ap­prove the strat­egy, con­firm­ing that in­ter­na­tional fi­nan­cial in­sti­tu­tions had pledged all the nec­es­sary aid and ad­vice. The strat­egy was approved with­out ob­jec­tion.

In May, Fi­nance and Plan­ning Min­is­ter U Kyaw Win as­sured par­lia­ment that Myan­mar’s debt-to-GDP ra­tio was a sus­tain­able 16.1 per­cent. He said ex­ter­nal public debt had to­talled $11.11 bil­lion at the end of 2015, but that $1.95 bil­lion had been re­paid since then.

The IMF re­ported last year that Myan­mar was “at low risk of debt dis­tress”. It said the coun­try had started re­ceiv­ing con­ces­sional fi­nanc­ing from the World Bank and the Asian De­vel­op­ment Bank fol­low­ing debt reschedul­ing agree­ments in 2013 that had re­solved ar­rears with cred­i­tors and the two fi­nan­cial in­sti­tu­tions. – Trans­la­tion by Zar Zar Soe

and Thiri Min Htun

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