The IMF Executive Board approves the 72th request for emergency financial assistance to help its member countries address the challenges posed by COVID-19.
Myanmar’s economy has been severely impacted by the COVID-19 pandemic. The global shock has led to a sharp decline in exports, remittances and tourist arrivals. Domestic activity has been constrained by the required lockdown measures.
To address the urgent balance-of-payments and fiscal needs, the IMF has approved US$ 356.5 million emergency assistance for Myanmar under the Rapid Credit Facility and the Rapid Financing Instrument.
This will support the government’s COVID-19 Economic Relief Plan that aims at minimizing the pandemic’s impact by stimulating the economy and boosting expenditures especially on health and social safety nets.
Washington, DC – The Executive Board of the International Monetary Fund (IMF) approved a disbursement of SDR 86.1 million (about US$118.8 million or 16.67 percent of quota) under the Rapid Credit Facility (RCF), and a purchase of SDR 172.3 million (about US$ 237.7 million or 33.33 percent of quota) under the Rapid Financing Instrument (RFI). This will help meet the urgent balance-of-payments and fiscal needs arising from the COVID-19 pandemic, support the government’s plans to boost spending especially on health and social safety nets. The IMF emergency financing will also catalyze additional support from the international community, including under the Debt Service Suspension Initiative (DSSI) supported by the G-20 and the Paris Club.
The COVID-19 pandemic is severely impacting the Myanmar economy despite the limited domestic outbreak so far. Disruptions have hit hard households and businesses, including in the agriculture sector, which comprises a fifth of the economy and over half of employment. The external position is deteriorating due to the collapse in global demand for garments and gas, weak tourism and remittance inflows and lower foreign direct investment. Domestic demand has weakened as the necessary measures to control a domestic outbreak have affected economic activities. As revenues fall and expenditures rise, the fiscal deficit is increasing, putting pressure on funding and public debt.
The authorities have put in place their Covid-19 Economic Relief Plan that aims at preserving macroeconomic stability and mitigating the impact of the pandemic on the population. In addition to increasing health expenditures, the government is expanding food distribution and cash transfer programs to the most vulnerable and supporting businesses and farmers across all regions of the country. The authorities remain committed to promoting strong and inclusive growth while bolstering macroeconomic and financial sector stability and improving governance.
The IMF continues to monitor Myanmar’s situation closely and stands ready to provide further advice and support if needed. The authorities have expressed interest in exhausting the 100 percent of quota annual access limit under the RCF/RFI (about US$ 700 million) and have committed to put in place targeted governance, transparency and accountability measures to ensure the appropriate use of emergency financing. Myanmar has accepted the obligations of Article VIII of the IMF’s Articles of Agreement, reinforcing its commitment to maintaining an exchange system free of restrictions on payments for current international transactions.
Following the Executive Board discussion of Myanmar’s request, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
The Myanmar economy is being impacted by the outbreak of COVID-19 through a sharp decline in tourism and remittances and supply chain disruptions. Support under the Rapid Credit Facility and Rapid Financing Instrument will help address Myanmar's urgent financing needs related to COVID-19 shock, and catalyze support from development partners, including with the DSSI. The authorities remain committed to protecting the most vulnerable and have enacted the COVID-19 Economic Relief Plan (CERP) featuring important emergency fiscal, financial, and monetary measures.
In the near term, fiscal spending should focus on containing the spread of the virus, boosting healthcare, and supporting the most vulnerable. It is important that the authorities give priority to external concessional financing to limit the risks associated with excessive monetary financing. When conditions permit, the focus should shift to enhancing revenue mobilization and PFM reforms.
The current accommodative monetary stance is appropriate. However, monetary policy should actively manage inflation expectations and a liquidity squeeze. Greater exchange rate flexibility will help cushion against external shocks. When feasible, it will also be important to strengthen external buffers in line with the FX intervention rule.
The authorities have announced policies to support bank lending. It is recommended that forbearance should be shortened in line with the duration of the COVID-related economic slowdown. The authorities should also monitor the NPLs and consider a comprehensive NPL resolution strategy. Addressing gaps in the AML/CFT framework will be important going forward.
The authorities are committed to implementing good governance, transparency, and accountability measures to ensure the appropriate use of this emergency financing. They continue to engage on capacity development and technical assistance with the IMF and other development partners to further their reforms.
For information on the emergency financing requests approved by the IMF Executive Board, please see a link to the IMF Lending Tracker: https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19.
For upcoming discussions on the emergency financing requests, please see a link to the calendar of the IMF Executive Board meetings: https://www.imf.org/external/NP/SEC/bc/eng/index.aspx
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