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Myanmar: Staff Report for the 2014 Article IV Consultation—Debt Sustainability Analysis

Author(s):
International Monetary Fund. Asia and Pacific Dept
Published Date:
October 2014
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Background

1. The update of the external and public debt sustainability analyses are based on the standard low-income countries DSA framework. The DSA framework presents the projected path of Myanmar’s external and public sector debt burden indicators, and draws conclusions on the sustainability of debt.

2. The macroeconomic assumptions remain broadly unchanged compared with the last DSA but updates have been made, with recent developments taken into account. The medium-term GDP growth rate has been revised upward to 8.1 percent, reflecting the better than anticipated GDP growth performance in 2013/14 (8¼ percent) which is expected to continue in the medium term, given robust investment in productive sectors including manufacturing in special export zones.4 However, growth has been revised slightly downward over the longer term, taking into account the new growth diagnostics conducted for Myanmar. Several windfall gains, such as revenues from telecommunication and bank licenses that are spread over a few years, have also caused a revision to the fiscal deficit. The fiscal deficit is expected to improve compared to last DSA both in the medium and long term.

Key Macroeconomic Assumptions Underlying the DSA for the Baseline Scenario (FY2014/15–34/35)
Current DSAPrevious DSA
Medium TermLong TermMedium TermLong Term
2014/15–2019/202020/21–2034/352013/14–2018/192019/20–2033/34
Real GDP Growth (in percent)8.16.67.87.4
Inflation (in percent)6.346.23.8
Overall fiscal balance (in percent of GDP)-4.6-3.8-4.8-4.2
Noninterest current account (in percent of GDP)-4.7-3.3-4.5-4.6
Revenue (nonfinancial public sector; in percent of GDP)24252324.3
Sources: IMF staff estimates
Sources: IMF staff estimates

3. The current DSA incorporates the resolution of Myanmar’s arrears with its multilateral and bilateral creditors completed in 2013/14. In late-January 2013, the Paris Club reached an agreement with the Myanmar authorities on a debt treatment to be completed in early 2014. Paris Club members agreed to write off 50 percent of all arrears and reschedule the remaining arrears over 15 years with a 7-year grace period. The treatment was phased, with 25 percent of the written-off occurring immediately and 75 percent on the successful completion of a staff-monitored program with the IMF.5 Furthermore, Myanmar resolved its arrears to the World Bank and the Asian Development Bank in January 2013, with the help of bridge financing from Japan.

4. As in the previous DSA, Myanmar is expected to gradually reduce its reliance on external nonconcessional financing. With the resolution of its arrears and the re-engagement with the international community, Myanmar is expected to gradually regain access to concessional resources. As donors re-engage with Myanmar, and gradually identify suitable projects, the share of nonconcessional financing is expected to decline.

Debt Sustainability Analysis

5. Successful completion of the resolution of the arrears in 2013/14 has ensured that all external debt indicators are below their indicative thresholds. Furthermore, standard stress tests indicate that no thresholds will be breached.6 To maintain external debt below the threshold, continued strong performance of the external sector is critical, including by maintaining high export growth, attracting foreign direct investment (FDI) to fund investment projects and obtaining more concessional financing.

6. Total public sector debt will also remain below the indicative benchmark under the baseline scenario but is vulnerable to shocks. The present value of total public debt as a percentage of GDP remains below the indicative benchmark in the medium term. This trajectory reflects the significant development needs of Myanmar and the associated overall fiscal deficits assumed in the baseline scenario. It also underscores the need to limit the share of nonconcessional financing as is assumed in the baseline scenario. However, this level of debt can give rise to vulnerabilities including a high debt service burden. Overall, public debt sustainability is vulnerable to lower real GDP growth, and fiscal slippages. Risks are somewhat mitigated as the authorities aim to use their borrowing to only finance economically viable projects in priority sectors.

7. Myanmar continues to face fiscal risks. Public finances are dependent on state-owned economic enterprises (SEEs) and natural resource revenues. Tax revenues are very low and the tax base remains narrow, in part due to widespread exemptions. Recent off-budget external non-concessional borrowing and guarantees for policy banks7 and microfinance pose risks to debt control and complicate fiscal management. Increases in transfers to subnational governments without effective budget constraints on subnational governments could be a drain on government resources as a whole. Moreover, reforms that separate SEEs from the budget could trigger contingent liabilities and would reduce a critical source of budget funding.

8. Several steps can be taken to mitigate against fiscal risks. Higher revenue is needed to provide a solid foundation for financing development. To this end, introducing a value added tax (VAT) is a key step. Fiscal decentralization and reform of SEE finances need to be carefully planned and implemented. Off-budget borrowing needs to be strictly limited and reported to the legislature alongside the budget. Strong capital inflows, such as one-off revenues from oil and gas exploration, can also ease budget constraints in the short-term.

Staff Assessment

9. Myanmar is assessed to be at low risk of debt distress, following the resolution of its external arrears in 2013/14. Under the baseline scenario, which incorporates the resolution of all arrears in 2013/14 as agreed with the Paris Club, all indicators for the external debt are below their indicative thresholds. Under the baseline scenario, the total public debt also remains below the benchmark although it is vulnerable to fiscal slippages and low real GDP growth. Preventing total public debt vulnerability from increasing will require continuation of the current prudent fiscal policy, improvements in tax policy and public financial management and increasing use of concessional finance.

10. The authorities broadly agreed with these conclusions and with the thrust of the analysis. They concurred with staff on the need to be cautious on nonconcessional borrowing and reconfirmed their intention to use nonconcessional external borrowing only to finance economically viable projects in priority sectors, at levels consistent with low risk of debt distress. The authorities reiterated their aim to keep the fiscal deficit below 5 percent of GDP over the medium term.

Figure 1.Myanmar: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2014/15–2034/35 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio on or before 2024/25. In figure b. it corresponds to a one-time depreciation shock; in c. to an export shock; in d. to a one-time depreciation shock; in e. to an export shock and in figure f. to a one-time depreciation shock.

Figure 2.Myanmar: Indicators of Public Debt Under Alternative Scenarios, 2014/15–2034/35 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio on or before 2024.

2/ Revenues are defined inclusive of grants.

Table 1a.Myanmar: External Debt Sustainability Framework, Baseline Scenario, 2011/12–2034/35 1/(In percent of GDP, unless otherwise indicated)
ActualHistorical 2/Standard 2/Projections
2014/15-2019/202020/21-2034/35
2011/122012/132013/142014/152015/162016/172017/182018/192019/20Average2024/252034/35Average
External debt (nominal) 1/27.324.619.218.218.218.218.218.118.218.623.3
of which: public and publicly guaranteed (PPG)27.324.619.218.218.218.218.218.118.218.623.3
Change in external debt-1.6-2.7-5.4-1.00.0-0.10.00.00.10.20.6
Identified net debt-creating flows-5.1-0.50.4-1.2-1.4-1.4-1.4-1.7-2.0-2.7-3.3
Non-interest current account deficit1.04.15.1-0.54.65.04.94.84.74.44.33.72.53.3
Deficit in balance of goods and services1.33.94.83.84.34.44.45.15.34.93.9
Exports19.620.724.325.525.325.526.126.827.931.543.0
Imports20.924.729.129.329.629.930.531.933.236.446.8
Net current transfers (negative = inflow)-0.9-1.0-1.6-1.00.3-1.7-1.7-1.9-2.1-2.3-2.3-2.2-2.2-2.2
of which: official-0.1-0.1-0.4-0.4-0.4-0.4-0.5-0.6-0.6-0.5-0.5
Other current account flows (negative = net inflow)0.61.21.92.92.42.32.41.61.31.10.8
Net FDI (negative = inflow)-3.7-5.0-4.6-3.31.1-5.1-5.2-5.2-5.1-5.2-5.3-5.5-5.0-5.3
Endogenous debt dynamics 3/-2.40.40.0-1.1-1.0-1.0-1.0-0.9-0.9-0.9-0.8
Contribution from nominal interest rate1.00.20.40.30.30.30.30.30.30.30.3
Contribution from real GDP growth-1.5-2.0-2.0-1.4-1.4-1.3-1.3-1.3-1.2-1.2-1.2
Contribution from price and exchange rate changes-1.92.21.6
Residual (3-4) 4/3.4-2.2-5.80.21.41.31.41.72.02.93.9
of which: exceptional financing0.0-10.9-8.40.00.00.00.00.00.00.00.0
PV of external debt 5/13.412.913.113.012.912.812.912.515.4
In percent of exports55.050.551.751.049.747.946.239.835.9
PV of PPG external debt13.412.913.113.012.912.812.912.515.4
In percent of exports55.050.551.751.049.747.946.239.835.9
In percent of government revenues54.454.155.555.855.454.554.051.460.5
Debt service-to-exports ratio (in percent)10.52.23.13.83.74.13.83.53.13.52.7
PPG debt service-to-exports ratio (in percent)10.52.23.13.83.74.13.83.53.13.52.7
PPG debt service-to-revenue ratio (in percent)17.22.03.04.13.94.54.24.03.74.54.5
Total gross financing need (Billions of U.S. dollars)-0.2-0.10.80.80.60.80.80.40.1-0.8-4.4
Non-interest current account deficit that stabilizes debt ratio2.66.810.56.14.94.94.74.54.23.51.9
Key macroeconomic assumptions
Real GDP growth (in percent)5.97.38.38.83.98.58.58.28.07.77.68.17.05.56.6
GDP deflator in US dollar terms (change in percent)6.9-7.5-6.08.517.16.03.93.13.03.02.53.62.22.22.2
Effective interest rate (percent) 6/3.90.61.61.80.92.02.02.02.01.91.92.01.71.51.6
Growth of exports of G&S (US dollar terms, in percent)16.95.119.316.912.120.811.812.613.514.214.814.612.011.312.1
Growth of imports of G&S (US dollar terms, in percent)28.717.320.221.723.015.813.812.913.316.314.814.511.011.011.4
Grant element of new public sector borrowing (in percent)33.133.936.938.239.540.737.041.639.140.8
Government revenues (excluding grants, in percent of GDP)12.023.324.623.823.623.323.423.623.924.425.524.7
Aid flows (in Billions of US dollars) 7/0.00.00.10.40.50.81.11.41.62.76.1
of which: Grants0.00.00.10.30.30.30.50.60.70.92.0
of which: Concessional loans0.00.00.00.10.20.50.60.80.91.84.1
Grant-equivalent financing (in percent of GDP) 8/1.11.21.31.31.41.41.51.61.5
Grant-equivalent financing (in percent of external financing) 8/46.142.346.349.652.854.051.848.151.1
Memorandum items:
Nominal GDP (Billions of US dollars)56.255.856.865.373.682.291.4101.5111.9176.7400.6
Nominal dollar GDP growth13.2-0.71.815.012.811.611.211.010.312.09.37.88.9
PV of PPG external debt (in Billions of US dollars)7.68.49.510.511.612.814.221.961.5
(PVt-PVt-1)/GDPt-1 (in percent)1.31.71.41.41.31.31.41.21.61.4
Gross workers’ remittances (Billions of US dollars)0.40.50.70.91.01.21.51.72.03.16.6
PV of PPG external debt (in percent of GDP + remittances)13.212.712.912.812.712.612.712.315.2
PV of PPG external debt (in percent of exports + remittances)52.448.049.048.146.845.143.537.734.6
Debt service of PPG external debt (in percent of exports + remittances)2.93.63.53.93.53.33.03.32.6
Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Derived as [r - g - ρ(1+g)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Derived as [r - g - ρ(1+g)]/(1+g + ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Table 1b.Myanmar: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2014/15–2034/35(In percent)
Projections
2014/152015/162016/172017/182018/192019/202024/252034/35
PV of debt-to GDP ratio
Baseline1313131313131315
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014–2034 1/13108642-12
A2. New public sector loans on less favorable terms in 2014–2034 2/1313141415151723
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015–20161313141414141316
B2. Export value growth at historical average minus one standard deviation in 2015–2016 3/1314161515151416
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015–20161315161616161620
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015–2016 4/1315181717171516
B5. Combination of B1–B4 using one-half standard deviation shocks1316201919191718
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/1318181818181722
PV of debt-to-exports ratio
Baseline5052515048464036
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014–2034 1/50413121149-34
A2. New public sector loans on less favorable terms in 2014–2034 2/5053545554545354
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015–20165051504947453936
B2. Export value growth at historical average minus one standard deviation in 2015–2016 3/5058706865625142
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015–20165051504947453936
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015–2016 4/5061706764614838
B5. Combination of B1–B4 using one-half standard deviation shocks5061716865624938
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/5051504947453936
PV of debt-to-revenue ratio
Baseline5455565554545160
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014–2034 1/544434241610-47
A2. New public sector loans on less favorable terms in 2014–2034 2/5457596162636891
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015–20165456595857575464
B2. Export value growth at historical average minus one standard deviation in 2015–2016 3/5459676665635862
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015–20165462707069686577
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015–2016 4/5466777573716263
B5. Combination of B1–B4 using one-half standard deviation shocks5468848280786970
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/5477777776757185
Debt service-to-exports ratio
Baseline44444343
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014–2034 1/43432210
A2. New public sector loans on less favorable terms in 2014–2034 2/44444444
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015–201644444343
B2. Export value growth at historical average minus one standard deviation in 2015–2016 3/44554453
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015–201644444343
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015–2016 4/44444343
B5. Combination of B1–B4 using one-half standard deviation shocks44444443
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/44444343
Debt service-to-revenue ratio
Baseline44544455
A. Alternative Scenarios
A1. Key variables at their historical averages in 2014–2034 1/44433210
A2. New public sector loans on less favorable terms in 2014–2034 2/44544467
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2015–201644544455
B2. Export value growth at historical average minus one standard deviation in 2015–2016 3/44544455
B3. US dollar GDP deflator at historical average minus one standard deviation in 2015–201644655566
B4. Net non-debt creating flows at historical average minus one standard deviation in 2015–2016 4/44554465
B5. Combination of B1–B4 using one-half standard deviation shocks44555465
B6. One-time 30 percent nominal depreciation relative to the baseline in 2015 5/46666566
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/3838383838383838
Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Table 2a.Myanmar: Public Sector Debt Sustainability Framework, Baseline Scenario, 2011/12–2034/35(In percent of GDP, unless otherwise indicated)
ActualAverage 1/Standard Deviation1/EstimateProjections
2011/122012/132013/142014/152015/162016/172017/182018/192019/202014/15–2019/20 Average2024/252034/352020/21–2034/35 Average
Public sector debt 2/49.448.039.839.539.840.340.540.640.641.241.9
of which: foreign-currency denominated26.725.219.218.318.518.518.418.418.518.823.4
Change in public sector debt-0.2-1.4-8.3-0.30.40.50.20.10.10.2-0.1
Identified debt-creating flows-1.62.9-2.3-0.7-0.10.10.10.00.10.2-0.2
Primary deficit2.52.20.02.01.12.93.03.23.22.92.73.02.41.42.1
Revenue and grants12.023.324.824.224.023.723.924.224.524.926.0
of which: grants0.00.10.20.40.40.40.50.60.60.50.5
Primary (noninterest) expenditure14.525.524.827.127.026.927.127.127.227.327.4
Automatic debt dynamics-3.10.6-2.3-3.6-3.1-3.1-3.0-2.9-2.7-2.2-1.6
Contribution from interest rate/growth differential-1.8-3.1-3.6-3.0-2.9-2.9-2.8-2.7-2.6-2.2-1.1
of which: contribution from average real interest rate0.90.20.00.10.20.10.10.20.30.51.1
of which: contribution from real GDP growth-2.8-3.4-3.7-3.1-3.1-3.0-3.0-2.9-2.9-2.7-2.2
Contribution from real exchange rate depreciation-1.33.71.3-0.6-0.2-0.2-0.2-0.20.0
Other identified debt-creating flows-1.00.00.00.00.00.00.00.00.00.00.0
Privatization receipts (negative)-1.00.00.00.00.00.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (HIPC and other)0.00.00.00.00.00.00.00.00.00.00.0
Other (specify, e.g. bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes1.4-4.2-6.00.40.50.40.00.00.00.00.1
Other Sustainability Indicators
PV of public sector debt33.934.034.434.835.035.035.034.933.9
of which: foreign-currency denominated13.412.913.113.012.912.812.912.515.4
of which: external13.412.913.113.012.912.812.912.515.4
PV of contingent liabilities (not included in public sector debt)
Gross financing need 3/6.73.13.26.26.56.87.06.96.86.45.3
PV of public sector debt-to-revenue and grants ratio (in percent)136.8140.3143.5147.0146.6144.9143.2140.4130.4
PV of public sector debt-to-revenue ratio (in percent)138.0142.9145.6149.5149.7148.6146.8143.2133.0
of which: external 4/54.454.155.555.855.454.554.051.460.5
Debt service-to-revenue and grants ratio (in percent) 5/32.310.411.812.313.514.014.815.616.015.314.3
Debt service-to-revenue ratio (in percent) 5/32.310.511.912.613.714.215.116.016.415.614.5
Primary deficit that stabilizes the debt-to-GDP ratio2.83.68.33.22.62.73.02.92.62.21.5
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)5.97.38.38.83.98.58.58.28.07.77.68.17.05.56.6
Average nominal interest rate on forex debt (in percent)4.00.61.61.80.92.02.02.02.02.01.92.01.71.61.6
Average real interest rate on domestic debt (in percent)2.82.30.4-4.57.20.30.60.40.61.01.20.72.74.23.2
Real exchange rate depreciation (in percent, + indicates depreciation)-4.715.25.7-4.214.1-3.2
Inflation rate (GDP deflator, in percent)2.82.85.710.68.26.66.36.66.36.15.86.34.63.04.0
Growth of real primary spending (deflated by GDP deflator, in percent)0.275.313.29.023.718.67.98.08.68.07.89.87.05.56.6
Grant element of new external borrowing (in percent)33.133.936.938.239.540.737.041.639.1
Sources: Country authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Sources: Country authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Indicate coverage of public sector, e.g., general government or nonfinancial public sector. Also whether net or gross debt is used.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Table 2b.Myanmar: Sensitivity Analysis for Key Indicators of Public Debt 2014/15–2034/35
Projections
2014/152015/162016/172017/182018/192019/202024/252034/35
PV of Debt-to-GDP Ratio
Baseline3434353535353534
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages3434333232312926
A2. Primary balance is unchanged from 20143434353535353640
A3. Permanently lower GDP growth 1/3435363737384463
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015–20163436394041424550
B2. Primary balance is at historical average minus one standard deviations in 2015–20163434353535353534
B3. Combination of B1–B2 using one half standard deviation shocks3435353636373940
B4. One-time 30 percent real depreciation in 20153440393938383633
B5. 10 percent of GDP increase in other debt-creating flows in 20153442424140403836
PV of Debt-to-Revenue Ratio 2/
Baseline140143147147145143140130
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages140140140136131127116100
A2. Primary balance is unchanged from 2014140143146145143142145155
A3. Permanently lower GDP growth 1/140145151153155156177240
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015–2016140151164168169171182191
B2. Primary balance is at historical average minus one standard deviations in 2015–2016140144147147145143140130
B3. Combination of B1–B2 using one half standard deviation shocks140144148150150150155155
B4. One-time 30 percent real depreciation in 2015140165165162158155145127
B5. 10 percent of GDP increase in other debt-creating flows in 2015140174175170166163154138
Debt Service-to-Revenue Ratio 2/
Baseline1214141516161514
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages1214141314141311
A2. Primary balance is unchanged from 20141214141515161617
A3. Permanently lower GDP growth 1/1214141517171926
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2015–20161214151719192020
B2. Primary balance is at historical average minus one standard deviations in 2015–20161214141516161514
B3. Combination of B1–B2 using one half standard deviation shocks1214141515171717
B4. One-time 30 percent real depreciation in 20151214161718181818
B5. 10 percent of GDP increase in other debt-creating flows in 20151214152517191615
Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

1External public and publicly guaranteed (PPG) debt and public domestic debt dynamics are assessed using the low-income countries debt sustainability framework, which recognizes that better policies and institutions allow countries to manage higher levels of debt, and thus the threshold levels are policy-dependent. The quality of a country’s policies and institutions are normally measured by the World Bank’s Country Policy and Institutional Assessment (CPIA). Since Myanmar does not currently have a CPIA rating, the most conservative thresholds are applied for the purposes of this debt sustainability assessment (DSA). The current DSA framework uses the 5 percent discount rate specified in the new guidance note.
2The DSA was jointly prepared by the IMF and the World Bank in consultation with the Asian Development Bank.
3This risk rating is unchanged from the previous DSA which had assumed that the resolution of the external arrears would be completed as planned.
4The staffs of the World Bank and the IMF, while strong supporters of the overall reform effort, note that there is significant uncertainty surrounding the growth projections, given that the reform program has only begun recently and data and capacity constraints are significant.
5Myanmar has signed bilateral agreements with all eleven Paris Club creditors. Japan, Norway, Denmark, Canada, and Italy have provided a more generous treatment than agreed in the Paris Club minutes.
6The typical historical scenario is not shown in this analysis. In the case of Myanmar, the historical scenario would imply an unlikely return to pre-reform policies: low noninterest current account deficits (consistent with binding international sanctions) and sustained real exchange rate pressures.
7Policy banks in Myanmar are financial institutions in which the government has an ownership stake and which carry out functions that are associated with policies of the government.

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