On January 25, the Paris Club announced the cancellation of nearly $6 billion of Myanmar’s debt,[i],[ii] which amounts to over 60% of the total debt Myanmar owes to this group of western countries.[iii] Of the total amount, more than $3 billion will be cancelled by Japan alone. Officials from the Japanese government met in October with officials from the Asian Development Bank (ADB), International Monetary Fund and World Bank in Tokyo, Japan to discuss these debt relief efforts.[iv] Besides Japan, another notable country is Norway, whose government has agreed to cancel all of Myanmar’s $534 million debt owed to them.[v] Stephen Groff, vice president of ADB, hailed this as a “tipping point”[vi] for the country economically, and Myanmar Finance Minister Win Shein promised that the “resources freed up by the debt relief would be used for development projects and poverty reduction.”[vii]
This debt relief has also allowed the Myanmar government to borrow more money, which it had not been able to do since it stopped payments on old loans around 1987.[viii] Now, since Myanmar agreed to IMF economic conditions earlier in January, both the World Bank and ADB have agreed to start lending again.[ix] The ADB has granted a $512 million loan and the World Bank has approved a $440 million credit.[x]
$11 billion of Myanmar’s debt incurred under the socialist regime of the late General Ne Win and another $2.61 billion under a military junta.[xi] Myanmar has experienced civil war and military regimes for decades and while Myanmar has shown signs of change in the last year, there continue to be cases of human rights abuses.[xii] Ethnic civil wars, political prisoners, forced labor and extrajudicial killings remain serious issues under the new government, which consists heavily of former generals and military personnel.[xiii]
While this debt relief will hopefully have positive impacts on development and infrastructure building in Myanmar, there must be caution with regards to new loans to ensure that the debt cycle does not continue, that the country can democratize and that the voices of ethnic minorities are heard. There is also a need to audit previous debts and current loans so that future generations are not saddled with odious debts that did not benefit the citizens of Myanmar.
[i] Myanmar is also known as Burma
[ii] Giannoulis, Karafillis, “Paris club of creditors forgives Burma’s €4.46 billion debt”, New Europe, January 28, 2013. http://www.neurope.eu/article/paris-club-creditors-forgives-burma-s-446-billion-debt
[iii] “Burma gets Asian Development Bank and World Bank loans”, BBC, January 27, 2013.
http://www.bbc.co.uk/news/business-21226344
[iv] Giannoulis, Karafillis, “Paris club of creditors forgives Burma’s €4.46 billion debt”, New Europe, January 28, 2013. http://www.neurope.eu/article/paris-club-creditors-forgives-burma-s-446-billion-debt
Wallace, Rick, “Burma to lose debt hurdle”, The Australian, October 12, 2012.
http://www.theaustralian.com.au/news/world/burma-to-lose-debt-hurdle/story-e6frg6so-1226493936360
[v] “Myanmar gets total debt relief of $6 billion; aid flows set to rise”, Reuters UK, January 28, 2013. http://uk.reuters.com/article/2013/01/28/uk-myanmar-economy-debt-idUKBRE90R02A20130128
[vi] “Burma gets Asian Development Bank and World Bank loans”, BBC, January 27, 2013.
http://www.bbc.co.uk/news/business-21226344
[vii] “Myanmar gets total debt relief of $6 billion; aid flows set to rise”, Reuters UK, January 28, 2013. http://uk.reuters.com/article/2013/01/28/uk-myanmar-economy-debt-idUKBRE90R02A20130128
[viii] Associated Press, “World Bank announces plan to clear Myanmar debt, clearing way for new loans”, Washington Post, January 27, 2013.
[ix] Giannoulis, Karafillis, “Paris club of creditors forgives Burma’s €4.46 billion debt”, New Europe, January 28, 2013. http://www.neurope.eu/article/paris-club-creditors-forgives-burma-s-446-billion-debt
[x] “Burma gets Asian Development Bank and World Bank loans”, BBC, January 27, 2013.
http://www.bbc.co.uk/news/business-21226344
[xi] Associated Press, “World Bank announces plan to clear Myanmar debt, clearing way for new loans”, Washington Post, January 27, 2013.
[xii] Human Rights Watch, http://www.hrw.org/asia/burma
[xiii] Human Rights Watch, http://www.hrw.org/asia/burma
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