An updated draft of the Public Debt Management Law has recently been submitted to the parliament's bill committee

30 พฤศจิกายน 2558

An updated draft of the Public Debt Management Law has recently been submitted to parliament’s bill committee. The new law is aimed at managing the country’s domestic and external debts more effectively, according to the Ministry of Finance.

The draft, written with assistance from the Asian Development Bank, was first published in local newspapers in mid-July along with a request for feedback.

U Maung Maung Win, permanent secretary at the Ministry of Finance, said he had received comments and in response had adjusted the wording of the law, to make it clearer. He submitted the new draft to parliament’s bill committee before the November 8 election, he said, and hopes it will be enacted during the next fiscal year.

Under the new law, the Ministry of Finance alone will be authorised to approve and manage government debt, while ministries, state-owned enterprises, and state and regional governments will borrow money only with approval from the Union government, or from the government directly.

“We manage their debt under the State Budget Law at present, but we plan to co-operate with them for more effective debt management after the new law has been passed,” said U Maung Maung Win.

When the new government led by the National League for Democracy takes power in March, it plans to reduce centralised financial control, with the authority for financial matters to be divided “appropriately” between the Union and the state and regional governments, according to the party’s election manifesto.

Under the new law, all debt and cash management activities will be under the finance ministry’s treasury department, including oversight of the debt-to-GDP-ratio, an indicator of a government’s ability to pay back its liabilities, said U Maung Maung Win.

The new draft law will also promote the development of domestic securities and bond markets.

The government has held Treasury bill auctions since January, initially just for domestic financial institutions, under the Government Securities Act of 1920. The interest rate has risen from 7pc initially to 8.15pc at the most recent auction – roughly in line with the interest rate paid on bank deposits.

In state newspaper Kyay Hmone on November 28, U Maung Maung Win said Myanmar has around K10.2 trillion (US$7.8 billion) in external debt, though said this figure is constantly changing. Parliament’s figures, compiled from submissions by various ministries, can differ from Ministry of Finance figures, he said.

Myanmar’s projected GDP for this financial year is K76.47 trillion, said the International Monetary Fund in September, or $65.8 billion. However, based on the current weaker exchange rate of K1300, in US dollar terms the projected value of the economy has fallen.

The IMF said in September that Myanmar would likely have $9.7 billion in external debt by the end of this fiscal year, and that its debt-to-GDP-ratio would be 14.7 percent.

As the kyat weakens against the US dollar, Myanmar’s US dollar debts in kyat terms will increase. It has fallen by over 25pc this year.

Yet the ratio remains relatively low compared with other countries in the region. “The situation is acceptable at the moment, but we don’t want to raise the ratio much more,” said U Maung Maung Win.

Any ministry seeking an international loan needs to present its case to the Ministry of National Planning and Economic Development, and also requires approvals from the central committee for the management of foreign aid under the President’s Office. They must then take the case to the Pyidaungsu Hluttaw.

“Our public debt burden is growing as we issue more Treasury bills and bonds, which is why we have to be very careful about taking out overseas loans,” said U Maung Maung Win. “On the other hand, if we take on too much external debt we can reduce the supply [of securities] from the Central Bank.”

Myanmar will need to raise more debt to meet its burgeoning deficits – by the end of the year the IMF predicts the government will be faced with a fiscal deficit of almost 5pc and a current account deficit of around 9pc of GDP, with foreign currency reserves falling to 2.5 months of imports.

Reference: http://www.mmtimes.com/index.php/business/17873-debt-management-law-draft-submitted-to-parliament.html