Pyidaungsu Hluttaw approves debt management strategy
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