By Judith Ugwumadu | 7 October 2014
The government of Myanmar must strengthen its public financial management to improve the quality of social spending and public investment, the International Monetary Fund (IMF) said.
It also urged the Southeast Asian country to prioritise the cut back of exemptions, strengthening tax administration, and preparing for the introduction of VAT.
The county’s economic outlook is favourable, the IMF said, with growth in the next few years expected to reach 8.25%, led by rising gas production and investment.
But medium and long-term growth prospects need sustained policy and institution reforms.
Following its Article IV consultation with Myanmar, the IMF said: ‘Directors stressed that continued progress with structural reforms is necessary to ensure macroeconomic stability and spur inclusive growth. Reform efforts should focus on investments in infrastructure, expanding education and health services, boosting access to finance, improving the business climate, and diversifying exports. Improving economic statistics is also essential.
‘Additional efforts to mobilise revenues are also necessary to allow increases in social spending and public investment. Priority should be given to cutting back exemptions, strengthening tax administration, and preparing for the introduction of a VAT. Directors stressed the need to strengthen public financial management.’
Myanmar’s economy faces risks in the short run, as fiscal buffers are thin and the capacity to develop and implement policy remains constrained, said the IMF. It recommended further efforts to reinforce policy and institutional frameworks and pursue structural reforms.
The Fund also emphasised the importance of a prudent fiscal policy that addresses development needs while safeguarding debt and macroeconomic stability. The IMF supported the country’s government to keep fiscal deficit below 5% and indicated that off-budget borrowing needed to be carefully controlled.
Directors also agreed that continued technical assistance from the IMF and other international institutions ‘remained critical given Myanmar’s vast transformational needs and limited capacity’.
