Questions and Answers on Myanmar
Last Updated: February 25, 2021
- What is the IMF’s reaction to recent developments in Myanmar?
- What does the IMF see as the economic and fiscal implications of the coup?
- Has the recent RFI/RCF disbursed its funds?
- Does the IMF have any further loan disbursements planned?
- What is the safeguard assessment under the RCF/RFI for Myanmar?
What is the IMF’s reaction to recent developments in Myanmar?
We are very concerned about the escalating tensions in Myanmar and their impact on the people of the country. Combatting COVID-19 and supporting the most vulnerable are key immediate priorities. The country had already been facing large economic and social costs from the pandemic, and recent events could weigh further on the economy by delaying critical reforms. The IMF has supported the progress Myanmar made in recent years, and remain committed to a peaceful and more inclusive society for the people of Myanmar.What does the IMF see as the economic and fiscal implications of the coup?
We are watching events carefully. A key immediate concern is ensuring that efforts continue to combat COVID-19 and support the most vulnerable. In addition, preserving macroeconomic and financial stability during this period of uncertainty will be critical for building on recent gains in living standards.Has the recent RFI/RCF disbursed its funds?
Yes. Following the approval of the emergency RCF/RFI arrangement by the IMF Board on January 13, the IMF disbursed USD 372.39 million to the Central Bank of Myanmar on January 28, as scheduled. The emergency lending was in response to the urgent budgetary financing needs Myanmar faced due to the COVID-19 shock. This facility was aimed to quickly support the most vulnerable people during a humanitarian crisis.
What is the safeguard assessment under the RCF/RFI for Myanmar?
Myanmar faced large economic and social costs as a result of COVID-19. The IMF lending was disbursed to meet these urgent humanitarian needs. As part of the RCF/RFI, the authorities made a series of governance commitments including a safeguards assessment of the central bank, reporting on COVID-19 spending/procurement, and spending audit.
The safeguards assessment that the authorities committed to would be similar to that done elsewhere. It is a diagnostic review of the central bank’s governance, institutional and control framework. (See Staff Report No. 21/23)
It is in the best interest of the Myanmar people that these commitments will be maintained to help support the people, especially vulnerable groups.
On June 26, 2020 and January 13, 2021, the IMF’s Executive Board approved disbursements amounting to about US$ 356.5 million and US$ 372.4 million respectively to Myanmar under the Rapid Financing Instrument / Rapid Credit Facility (RFI/RCF). These disbursements aim to help Myanmar address the challenges posted by COVID-19.
How will these IMF emergency financings be used to help Myanmar?
The IMF emergency financial assistance under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) will support the government’s COVID-19 Economic Relief Plan (CERP) that aims at minimizing the pandemic’s impact by stimulating the economy and boosting expenditures especially on health and social safety nets. Measures include providing soft loans for businesses, credit guarantees schemes to support employment retention among SMEs and high-growth sectors, and direct cash transfers to vulnerable and at-risk groups and those affected by COVID-19.Why does Myanmar need both RCF and RFI?
Because Myanmar meets both the income and market access criteria, it qualifies for resources from two IMF facilities (1) the Rapid Credit Facility (RCF) created under the Poverty Reduction and Growth Trust (PRGT), and (2) the Rapid Financing Instrument (RFI) created under the General Resource Account (GRA). This ensures that low cost PRGT resources are preserved for countries most in need. Myanmar accesses these two facilities on blended terms, that is a 1:2 mix of PRGT and GRA resources. Under the approved access level of 50 percent of quota, this implies 16.7 percent of quota (approximately USD 118.8 million) would be provided under the RCF and 33.3 percent of quota (approximately USD 237.7 million) under the RFI. The authorities have also expressed interest in using the full 100 percent of quota annual access limit under the RCF/RFI (about US$ 700 million).What are the interest rates and repayment terms?
For the RCF component, the borrowing terms are zero interest with 5.5 years grace and 10 years maturity. For the RFI component, the rate of interest is the basic rate of charge (which comprises of the market determined SDR interest rate and a margin) with 3.25 years grace and 5 years maturity, plus a service charge of 0.5 basis points at disbursement.What are the conditions of these financial assistance?
The RCF/RFI comes with no ex-post conditionality. Countries would receive the full amount for which they are eligible under the RCF/RFI at the time of the Board approval, provided they meet all other applicable IMF policies. Myanmar is also availing of the Debt Service Suspension Initiative (DSSI), supported by the G-20 and Paris Club, and the authorities have committed to several of its transparency and reporting requirements.How will the IMF ensure the transparency on how the money are spent?
The authorities have committed to ensuring that crisis resources are used transparently and effectively to alleviate the effect of COVID-19. These include several governance, transparency, and accountability measures, including publishing online:
The authorities have also worked closely with IMF Capacity Development experts and other development partners to further enhance their capacity and improve fiscal reporting, accounting, cash management, and targeting of cash transfers across all regions of the country.