Print options

January 28, 2013

Lending Agencies Restart Burma Loan Programs

by Michael Lipin

International lending agencies have agreed to restart loan programs for Burma after a 25-year break, rewarding that nation for reforms introduced since the end of a military dictatorship in 2011.
 
The Asian Development Bank and the World Bank said Monday that Burma's existing $900 million debt to the two agencies will be restructured, allowing them to offer additional loans in the future. 
 
Burma became ineligible for new development loans in 1987, when its then-military rulers stopped paying down existing debts. 
 
But, the reformist government that took office in 2011 received a $900 million loan from a Japanese development bank this month, enabling Burma to clear its debts to the two lending agencies. 
 
The two lenders said that move enabled them to offer $900 million in loans to Burma, so that it can repay its debt to the Japan Bank for International Cooperation. 
 
Asian Development Bank economist Kelly Bird said the restructured loan also will facilitate a resumption of work on developing the impoverished Burmese economy. 
 
"Over the next several months, we will be doing two things. ADB will be looking at what resources can be allocated to Myanmar. Secondly, we will develop our assistance program to build the capacity of authorities in economic policy. It also may include some projects focussing on infrastructure and agriculture," he said. 
 
Bird said the renewal of the lending program is a recognition of "wide-ranging" Burmese economic reforms in the past year. 
 
"They have introduced a new foreign investment law which has helped to open up opportunities for foreign investors. They are in the process of drafting amendments to the central bank law which would provide it with autonomy and lead to better macroeconomic stability. So they have got a number of these reforms that have been implemented," he said.
 
In a related move, an informal group of creditor nations agreed last Friday to cancel about $6 billion of Burmese debt in appreciation of what it called Burma's "strong commitment" to economic reforms. 
 
The canceled amount is half of the total debt owed by Burma to the 19 industrialized nations known as the Paris Club. The group said the remaining half of Burma's debt will be rescheduled over 15 years. 
 
Macquarie University analyst Sean Turnell said the renewal of the ADB and World Bank lending programs is a more significant step because it involves future loans to rebuild dilapidated Burmese infrastructure. 
 
"The cancelation of debts is not such an issue in that the old government of Burma just ignored them anyway, they were not repaying them. So, in a direct sense, it is not going to make too much of a difference. But of course symbolically and in terms of being embraced by the international community again, this is very significant," he said. 
 
A Burmese envoy to the Paris Club praised the debt cancellation as marking the start of a "new era" of cooperation with the industrialized nations. U Zaw Oo said Burma will devote resources made available by the move toward "development projects and poverty reduction programs."
 
Paris Club member Japan agreed to cancel $3 billion in Burmese debt, half of the group's total. 
 
Turnell said Japan has several motives for its generosity toward Burma, including commercial interests, with Japanese construction companies vying for infrastructure projects. 
 
"Also, Japan has an interesting relationship with Burma -- a sentimentality that goes back to the Second World War. There are many people in Japan who see their role as a bit of a mid-wife of Burma's independence. The final aspect though is strategic. Japan is involved in a big long-term struggle with China for influence throughout Southeast Asia. So this is also part of [Japan] sending that signal that they are close to Burma, and in that way, checking China, just a little bit," he said. 
 
The Paris Club said the cancellation of the $6 billion in Burmese debt will happen in two phases over several years. Turnell said Burma will be under pressure to make progress with economic reforms in order to qualify for the final phase of that debt relief.

VOA's Victor Beattie contributed to this report.