The IMF ended, on 1 July, their Article IV consultation visit to Myanmar releasing information regarding Myanmar’s macroeconomic state, calling for tighter fiscal and monetary policies, and stricter tax collecting policies with less incentives.
The report said that in order to restrict inflation Myanmar must enforce tighter fiscal and monetary policies through, “vigorous enforcement of prudential standards in the banking sector to slow credit expansion and reduce financial sector risks.”
Tightening the monetary and fiscal policies will help anchor the exchange rate expectation.
Myanmar could increase its tax revenue by cutting back on incentives, strengthening compliance and implementing the commercial tax on telecom services.
The 5% telecom tax that was to be put in motion as of June 1 was pushed back another year due to the pathetic state of coverage in the new market. MPs were calling for a 1-2% that would then gradually grow to 5% over time.
Ministry of Finance officials pointed out that the estimated 84 billion MMK collected could help fund improvements to the sector.
In a press release it noted that real GDP growth is at an estimated 8.5 percent and inflation has grown to 8% as of March 2015 with credit in the private sector surging to 36 percent in the 2014/15 financial year.
Yongzheng Yang told reporters on 1 July that an increase to health, education, and infrastructure could happen if there were cuts to other sectors, also mentioning that the telecom tax is a ‘good source’ of revenue for that increase.
Fiscal deficit for the last financial year sits at 3 percent of the GDP; underlying deficit is estimated to be 5.5 percent when telecom and natural gas revenues are excluded. Account deficit has stretched to 6 percent due to strong import growth.
Military expenditure is reported to be growing every financial year until 2020 Myanmar’s military expenditure from 2011 to 2015 grew by 40 percent from 2 billion USD to 2.8 billion USD according to the report “Future of the Myanmarese Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2020.”
Depreciation of the Kyat was addressed though it was noted as unchanging.
Yongzheng Yang led an IMF team that held consultations with Vice President U Nyan Tun, Deputy Governors from the CBM and Deputy Minister of Finance, Dr. Maung Maung Thein.