World Bank to resume Myanmar lending
World Bank to resume Myanmar lending
The World Bank is set to resume lending to Myanmar for the first time in almost 25 years and has opened an office in Yangon in the latest sign of the international community’s embrace of the regime’s economic and political reforms.
The World Bank and its investment arm, the International Finance Corporation, as well as the Asian Development Bank all opened country offices in Yangon on Wednesday. The ADB also became the first international financial institution to open an office in Naypyidaw, the capital.
The return of leading international financial institutions to the country was facilitated in part by a Japanese plan to extend nearly $900m in bridging loans to Myanmar.
Tokyo’s move, following its April decision to forgive about $3.7bn in bilateral debt owed by Myanmar, underlines Japan’s concerted push to help the country’s emergence from decades of diplomatic and economic isolation.
Under the latest plan, a consortium of Japanese banks would provide a temporary loan to enable Myanmar to repay about $500m owed to the Asian Development Bank and $397m in interest and principal owed to the World Bank on outstanding debt of about $700m. The institutions would then provide low-interest loans to Myanmar to repay the bridging loans.
The ADB, World Bank and others ceased lending in the late 1980s after Myanmar suspended debt repayments.
Any new lending would require clearance of arrears and also a shift in the US position. As the World Bank’s biggest stakeholder, with 15 per cent of the vote, the US has cited Myanmar’s lowest ranking on the State department’s human trafficking index in its opposition to resuming World Bank assistance. The State department upgraded Myanmar’s status in its annual “trafficking in persons” rankings in June, citing government reforms.
Speaking at the World Bank’s new Myanmar office, Pamela Cox, the bank’s vice-president for East Asia and Pacific, announced $85m in development grants for community projects ahead of the arrears clearance. Japan’s proposed bridging loan was among possible solutions to facilitate that clearance, she said.
“We are not cancelling the debt. We are just clearing the back interest payments. Then they’ll start repaying it again,” she told the Financial Times.
In the first visits by senior World Bank and IFC executives since the reformist government of President Thein Sein came to power early last year, Ms Cox and Karin Finkelston, IFC vice-president for Asia Pacific, met the president and cabinet ministers, opposition leader Aung San Suu Kyi and other political leaders on Wednesday.
The two executives said the feedback from Ms Suu Kyi was “very positive” on the grant scheme and the prospect of fresh lending. Before winning a parliamentary seat in April 1 by-elections Ms Suu Kyi had strongly supported economic sanctions on Myanmar.
“We explained the World Bank programme and what we are intending to do, and we got some feedback on issues she feels are important, including agriculture, rural incomes and migrant workers,” Ms Cox said.
As for the government, she noted: “I think certainly the government is committed to reform, I said very clearly that for us to continue on the path of engagement, they need to continue on the reform path – that is the message we gave to the president and all the ministers.”
The IFC meanwhile, which has invested about $1bn in the Mekong region ex-Myanmar of its total $5bn budget for Asia in the past year, would focus initially on areas such as microfinance in Myanmar, Ms Finkelston noted. Myanmar owes no money to the IFC but as part of the World Bank group, the organisation would wait until arrears clearance before making investments, she said.
According to discussions between Japan, the ADB, World Bank and Myanmar’s government, arrears would be cleared by January and lending could resume shortly after. “There are many stages to clear arrears,” said Ms Cox. “We need to do a debt sustainability analysis, [Myanmar has] more than 200 bilateral loans. It takes a while to put all debt data together . . . a number of steps are needed.”
Separately, Kunio Senga, director-general of the ADB’s Southeast Asia department, expressed confidence that the resumption of ADB assistance was “just around the corner” following his discussions on the arrears issue with government leaders.
“If there is one theme we feel strongly about, it’s connectivity. Our priority area is to help Myanmar reconnect with the fastest growing region in the world, including India and China. Connectivity along the border area is also essential for reconciliation of the different ethnic groups in the country,” he told the Financial Times.
financial times
