MPs discuss reforms to loss-making Myanmar Economic Bank
THE country’s largest state-owned bank has been loss-making since 1988 and reforms are necessary to help it become profitable again, parliament heard on August 23.
Myanmar Economic Bank (MEB), which began operations in 1976, has a mandate to lend at subsidised rates to other state banks, cooperatives and state-owned enterprises.
It makes a loss because it lends money at a lower rate than it pays on deposits, U Maung Maung Win, deputy minister for planning and finance told the Pyidaungsu Hluttaw.
“The main reason the bank’s losses are increasing is because it has to lend at a discounted rate. Its deposits are growing annually because it is a credible bank, but it cannot extend more loans to balance this out,” he said, adding that the bank has too much liquidity.
“If the bank lends more whenever its deposits grow, the quality of its loan book would decrease and we would also have to pay serious attention to defaulted loans.”
The deputy minister was speaking during a parliamentary discussion of the Public Account Joint Committee report on the Union Budget Law for 2016-17.
U Khin Cho (NLD; Hlaingbwe) said MEB depends on remittance fees and interest paid on agricultural loans disbursed to Myanmar Agricultural Development Bank.
In fiscal year 2015-16 MEB lent K800 billion to MADB at 4 percent interest, while paying 8pc on deposits.
There are limits on the amount of money MEB can lend to the private sector [at the commercial rate of 13pc], so it does not receive much interest from that,” said U Khin Cho.
“Liberalising the rules to allow MEB to disburse private sector loans could help it to earn more income. Moreover, if it can provide more remittance services, more people will depend on the bank, leading to higher earnings.”
Amyotha Hluttaw MP U Ye Htut (NLD; Sagaing 5) said the MEB had been loss-making since 1988 and its loss this fiscal year so far was K10.643 billion.
“In the meantime, local commercial banks are getting international awards for making large profits,” he said, adding that the government needs to work out where the bank is making a loss and try to remedy the situation as quickly as possible.
The deputy planning and finance minister pointed out that Myanmar Economic Bank is a 100pc stateowned financial institution and “the oldest and strongest bank in Myanmar”. If it was run like a commercial bank, it would be competitive, he said.
“But it also has to offer services as the representative bank of the government. While providing a banking service to the people, it also must take responsibility for all government departments and the salaries of retired civil servants and military members.
“It also has to disburse loans at a subsidised rate for development andto provide foreign currency services for government departments. Private banks do not have to do these tasks.”
The government will come up with a “proper approach” to restructure the bank to stem its losses, he added.
– Translation by Thiri Min Htun
‘It must take responsibility for all government departments.’
U Maung Maung Win Ministry of Planning and Finance