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Myanmar: Staff Report for the 2016 Article IV Consultation—Debt Sustainability Analysis

Author(s):
International Monetary Fund. Asia and Pacific Dept
Published Date:
February 2017
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Background

1. The external and public debt sustainability analyses are based on the standard LIC 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 underlying macroeconomic assumptions remain broadly unchanged from the last DSA but updates have been made taking into account several changes in both the external and domestic environment since the last Article IV consultation. Myanmar is undergoing a major economic transition, and its long-term economic prospects are favorable on account of continued reform and external support. Main macroeconomic assumptions:

  • Growth remained robust in 2015/16 at about 7.3 percent, but is expected to soften in 2016/2017 as a result of a number of transitory factors since the new government took office in April 2016. Over the medium term, growth is expected to converge to its estimated potential rate of 7-8 percent, as private investments begin to accelerate and production in the special economic zones gradually rises. Over the longer term, growth will slow down to somewhat below 7 percent (see Table 1), as Myanmar’s income levels rise.
  • Inflation (GDP deflator, percent change y/y) is projected to fall slowly and average around 7.2 percent over the medium term (2021/22). Long-term inflation is expected to settle at around 5 percent in line with staff’s recommended inflation objective.
  • The fiscal deficit widened in 2015/2016 to 4.1 percent of GDP, and is expected to remain above 4 percent in 2016/2017, reflecting slowdown in revenue growth and in part an expected increase in expenditure on key infrastructure and social services. The staff advises the authorities to keep the fiscal deficit at no more than 4.5 percent of GDP in the medium term and gradually reducing the deficit below that level over the longer term in line with slower GDP growth.
  • The current account deficit is expected to remain relatively high over the medium term at between 6-7 percent, reflecting Myanmar’s strong investment and development needs, but is expected to fall over time as export capacity strengthens.
Table 1.Myanmar: Key Macroeconomic Assumptions Underlying the DSA for the Baseline Scenario (FY2016/17-36/37)
Current DSAPrevious DSA
2016/17-2021/222022/23 - 2036/372015/16-2020/212021/22 - 2035/36
Real GDP Growth (in percent)7.36.68.16.8
Inflation (GDP deflator percent change, y/y)7.25.19.14.7
Overall fiscal balance (in percent of GDP)−4.5−4.1−4.5−4.2
Noninterest current account (in percent of GDP)−6.3−5.5−7.3−4.4
Revenue (nonfinancial public sector; in percent of GDP)17.118.821.323.8
Memo:
PV of public debt32.634.429.132.1
PV of external public debt11.811.411.914.2
PV of domestic public debt20.823.017.217.9
Source: IMF staff estimates.
Source: IMF staff estimates.

3. Reliance on external concessional financing is expected to rise over the medium term, similar to the previous DSA. While bilateral creditors (Japan and China) remain the biggest lenders to Myanmar (see Table 2), the Asian Development Bank and the World Bank are gradually stepping up concessional financing to Myanmar. In the medium term, external debt commitments from multilaterals and other concessional lenders (i.e., JICA) are expected to rise,4 although lags in disbursements may occur given weak project implementation capacity. Reliance on nonconcessional borrowing is expected to decline over the medium term, as concessional financing from multilateral and bilateral lenders becomes more readily available. However, we assume that the share of nonconcessional borrowing in the total external borrowing will gradually increase over the long term as Myanmar becomes more developed and able to access financial markets.

Table 2.Myanmar: External Public Debt FY2015/16
In millions US$In % of total public debtIn % of GDP
Total debt9,528.838.415.9
Multilateral1,386.15.62.3
Asian Development Bank524.12.10.9
World Bank/IDA836.83.41.4
Other25.20.10.0
Offical Bilateral4,006.816.26.7
Paris Club2,133.08.63.6
of which, Japan1,983.98.03.3
Non Paris Club1,873.77.63.1
of which, China1,524.76.12.5
Financial Institutions4,060.616.46.8
Paris Club1,273.05.12.1
Non Paris Club2,787.611.24.7
of which, China2,787.611.24.7
Other85.90.30.1
Sources: Myanmar authorities; and IMF staff estimates.
Sources: Myanmar authorities; and IMF staff estimates.

Debt Sustainability Analysis

4. Total external public and publicly guaranteed debt increased in 2015 for the first time in 10 years, to 15.9 percent of GDP from 13.9 percent a year earlier. Total public debt also increased in 2015 to 34.1 percent of GDP from 29.2 percent in 2014, largely as a result of a large increase in the central bank financing of the widened fiscal deficit, which has raised concerns about the inflationary impact of budget financing and underscores the importance of increasing market financing.

5. The new government has taken steps to ensure continued debt sustainability by passing a new Public Debt Management Law (PDML) and starting preparation of a comprehensive Medium-Term Fiscal Framework. The government continued its efforts in shifting from short-term towards medium-term financing through issuance of Treasury Bonds. Additionally, for 2016/17 the authorities set a cap of 40 percent for CBM financing of the total public deficit, with gradual declines thereafter. These are steps in the right direction and should help to keep public debt on a sustainable path in the future. Nevertheless, a more ambitious pace of phase out of CBM financing, replaced by domestic debt issuance, would help more forcefully address inflationary pressures.

6. Public and publically guaranteed external debt is projected to remain below the indicative thresholds throughout the projection period. Debt indicators also remain below the various thresholds under the baseline assumptions and the standard and alternative stress tests.5 Nevertheless, some indicators, such as the PV of debt-to-GDP and PV of debt-to-export ratios, are relatively sensitive to the exports shock, the depreciation shock, and the combination of shocks. For example, the exports shock (due to further drop in gas prices) causes a significant rise in the debt-to-exports ratio, as shown in Figure 1a, chart c. Given Myanmar’s large current account deficit and vulnerabilities to exogenous shocks, such as commodity price volatility and natural disasters, the authorities need to pursue prudent macroeconomic policies and build up policy buffers, particularly foreign reserves. Over the long run, economic diversification will be important, with improvements in productivity and export competitiveness in manufacturing and agriculture. Building on the new Investment Law, further efforts will be needed to attract FDI to fund investment projects.

7. Total public sector debt will also remain below the indicative benchmark under the baseline scenario, but it is vulnerable to shocks. In the baseline, the PV of total public debt as a percentage of GDP stays below the indicative benchmark throughout the projection period. However, the standard stress tests show that the PV of debt-to-GDP ratio could breach the benchmark toward the end of the projection period if shocks result in a significant decline in GDP growth and if fiscal slippages result in a failure in gradual fiscal consolidation.6

8. Myanmar is prone to large scale weather related natural disasters and is one of the most vulnerable countries among developing Asian countries (see selected issues paper on “Macro-Fiscal Risks: The Challenge of Climate Related Disasters”). In light of this risk, an alternative stress test is conducted, a scenario whereby a severe natural disaster of a magnitude similar to the impact of Cyclone Nargis in 2008 is assumed to happen in fiscal year 2017/2018 (almost ten years after). 7 This stress test leads the PV of debt-to-GDP ratio to breach the benchmark threshold in the long run after 2029/2030. To manage these risks, Myanmar needs to continue with structural reforms to improve its growth potential and resilience. A continued commitment to prudent fiscal policy is essential.

Staff Assessment

9. Myanmar is assessed to remain at low risk of debt distress. Public and publicly guaranteed (PPG) external debt is generally resilient to shocks under standard and alternative stress tests, although it is sensitive to export and exchange rate depreciation shocks. Continuation of export-market and exchange rate risks should be monitored carefully, given high uncertainty over growth in China and commodity price outlook. Downside realization of these risks, especially if combined with other risks, could shift risk ratings higher in a relatively short period of time. Total public debt is projected to stay below the benchmark, but it is vulnerable to growth shocks and fiscal slippages. These findings suggest that Myanmar needs to strengthen its economic resilience, including through broadening its production and export base and building up policy buffers such as higher foreign reserves. Moreover, given the sharp rise in the fiscal deficit in 2015/16 and potential shocks including natural disasters, gradual fiscal consolidation and a long-term commitment to fiscal prudence are critical to preserving debt sustainability.

Authorities’ Views

10. The authorities broadly agreed with these conclusions and the analysis. They planned to take a conservative approach to external borrowing that balances development needs with long-term fiscal sustainability. They shared staff’s view that nonconcessional external borrowing should be used only to finance high-return projects in priority sectors, at levels that are in line with the new PDML and consistent with low risk of debt distress. The authorities were committed to improving the medium-term fiscal framework, including by developing a medium-term debt management strategy.

Figure 1a.Myanmar: Indicators of Public and Publicly Guaranteed External Debt Under Alternatives Scenarios, 2016/17–2036/37 1/

Sources: Country authorities; and staff estimates and projections.

1/ In Panel bcd, the most extreme shock is the combination shock; in panel e, the most extreme shock is the export shock; and, in panel f, the most extreme shock is one-time depreciation shock.

2/ The combination shock assumes real GDP, exports, US dollar deflator of GDP, and non-debt creating flows all at their historical averages over 2005-2015 minus one standard deviation.

Figure 1b.Myanmar: Indicators of Public Debt Under Alternative Scenarios, 2016/17–2036/37 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the growth shock.

2/ Revenues are defined inclusive of grants.

Table 3a.Myanmar: External Debt Sustainability Framework, Baseline Scenario, 2013/14-2036/37 1/(In percent of GDP, unless otherwise indicated)
ActualHistorical 6/ AverageStandard 6/ DeviationProjections
2013201420152016201720182019202020212016-2021

Average
202620362022-2036

Average
External debt (nominal) 1/17.013.915.915.415.515.415.415.415.516.821.4
of which: public and publicly guaranteed (PPG)17.013.915.915.415.515.415.415.415.516.821.4
Change in external debt−6.6−3.12.0−0.50.00.00.00.00.10.40 3
Identified net debt-creating flows0.4−5.2−0.5−0.3−0.9−1.0−1.3−1.6−2.0−2.8−2.8
Non-interest current account deficit4.52.74.51.33.66.26.36.36.36.36.26.35.84.75.5
Deficit in balance of goods and services4.84.47.58.48.68.68.58.48.17.25.3
Exports21.824.625.023.023.424.826.227.728.933.141 0
Imports26.629.032.531.432.133.434.736.137.040.346.3
Net current transfers (negative = inflow)−2.3−3.7−4.2−1.61.3−4.0−4.1−4.1−4.1−4.1−4.0−3.8−3 3−3 6
of which: official−0.3−0.5−0.6−0.6−0.7−0.7−0.7−0.7−0.7−0.7−0.7
Other current account flows (negative = net inflow)2.11.91.31.81.81.91.92.02.02.32 7
Net FDI (negative = inflow)−4.4−7.1−7.1−4.21.7−5.9−6.5−6.7−6.9−7.1−7.3−7.7−6.7−7.4
Endogenous debt dynamics 2/0.2−0.82.0−0.5−0.7−0.7−0.7−0.8−0.8−0.8−0.8
Contribution from nominal interest rate0.40.60.60.40.40.30.30.30.20.20.3
Contribution from real GDP growth−2.0−1.2−1.1−0.9−1.1−1.1−1.0−1.0−1.0−1.1−1 1
Contribution from price and exchange rate changes1.8−0.22.5
Residual (3-4) 3/−7.02.12.5−0.21.01.01.31.62.03.23.1
of which: exceptional financing−8.00.00.00.00.00.00.00.00.00.00.0
PV of external debt 4/14.413.612.912.211.410.810.210.113 7
In percent of exports57.559.255.149.043.638.935.430.633.5
PV of PPG external debt14.413.612.912.211.410.810.210.113.7
In percent of exports57.559.255.149.043.638.935.430.633.5
In percent of government revenues79.181.981.675.469.764.861.157.571.9
Debt service-to-exports ratio (in percent)4.95.04.74.74.33.73.63.32.91.92.1
PPG debt service-to-exports ratio (in percent)3.23.84.74.74.33.73.63.32.91.92.1
PPG debt service-to-revenue ratio (in percent)3.64.36.56.56.35.75.75.55.13.64.4
Total gross financing need (Billions of U.S. dollars)0.9−2.0−0.70.90.60.50.30.1−0.3−2.3−4.9
Non-interest current account deficit that stabilizes debt ratio11.15.72.56.76.36.46.36.36.15.44 4
Key macroeconomic assumptions
Real GDP growth (in percent)8.48.07.37.63.06.37.57.67.57.57.57.37.05.56 6
GDP deflator in US dollar terms (change in percent)−7.21.0−15.48.917.84.81.52.83.13.23.03.12.52 32.4
Effective interest rate (percent) 5/1.63.84.12.31.22.62.62.42.11.91.72.21.41.51 4
Growth of exports of G&S (US dollar terms, in percent)13.522.9−7.715.414.12.411.317.017.117.315.613.412.79 711.7
Growth of imports of G&S (US dollar terms, in percent)15.819.01.624.120.87.811.315.215.115.313.713.111.59.010 8
Grant element of new public sector borrowing (in percent)51.054.758.059.759.159.957.145.339 343.3
Government revenues (excluding grants, in percent of GDP)19.821.618.216.615.816.116.416.616.717.619.118 1
Aid flows (in Billions of US dollars) 7/0.40.40.61.01.82.12.52.73.03.67 5
of which: Grants0.20.20.40.40.50.60.60.70.81.22.7
of which: Concessional loans0.30.20.30.61.31.51.82.02.22.34 8
Grant-equivalent financing (in percent of GDP) 8/1.21.81.92.02.02.01.71.61.7
Grant-equivalent financing (in percent of external financing) 8/67.566.168.669.769.369.758.252 756 4
Memorandum items:
Nominal GDP (Billions of US dollars)60.165.659.566.372.480.088.798.4109.0175.7403.7
Nominal dollar GDP growth0.79.0−9.211.49.110.610.810.910.810.69.77.99.1
PV of PPG external debt (in Billions of US dollars)8.68.79.19.510.010.410.917 554 9
(PVt-PVt-1)/GDPt-1 (in percent)0.20.60.60.50.50.50.51.21.31 3
Gross workers’ remittances (Billions of US dollars)1.22.12.12.32.52.73.03.33.65 410 5
PV of PPG external debt (in percent of GDP + remittances)13.913.212.511.811.010.49.99.813.4
PV of PPG external debt (in percent of exports + remittances)50.351.648.043.038.634.731.728 031 5
Debt service of PPG external debt (in percent of exports + remittances)4.24.13.73.33.12.92.61.81.9
Sources: Country authorities; and staff estimates and projections.

Includes both public and private sector external debt.

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.

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

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.

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.

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

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 3b.Myanmar: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2016/17-2036/37(In percent)
Projections
20162017201820192020202120262036
PV of debt-to GDP ratio
Baseline1413121111101014
A. Alternative Scenarios
A1. Key variables at their historical averages in 2016-2036 1/1411864324
A2. New public sector loans on less favorable terms in 2016-2036 21413131313131522
A3. Alternative Scenario: Cyclone in 20171313141313121214
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2017-20181413131211111114
B2. Export value growth at historical average minus one standard deviation in 2017-2018 3/1414161514131214
B3. US dollar GDP deflator at historical average minus one standard deviation in 2017-20181414151413131317
B4. Net non-debt creating flows at historical average minus one standard deviation in 2017-2018 4/1417201918171515
B5. Combination of B1-B4 using one-half standard deviation shocks1417222120181616
B6. One-time 30 percent nominal depreciation relative to the baseline in 2017 5/1418171615141419
PV of debt-to-exports ratio
Baseline5955494439353134
A. Alternative Scenarios
A1. Key variables at their historical averages in 2016-2036 1/59453223151159
A2. New public sector loans on less favorable terms in 2016-2036 25956534946444553
A3. Alternative Scenario: Cyclone in 20175768695145423533
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2017-20185954484338353033
B2. Export value growth at historical average minus one standard deviation in 2017-2018 3/5964817264584845
B3. US dollar GDP deflator at historical average minus one standard deviation in 2017-20185954484338353033
B4. Net non-debt creating flows at historical average minus one standard deviation in 2017-2018 4/5972827365594637
B5. Combination of B1-B4 using one-half standard deviation shocks5972928273665142
B6. One-time 30 percent nominal depreciation relative to the baseline in 2017 5/5954484338353033
PV of debt-to-revenue ratio
Baseline8282757065615772
A. Alternative Scenarios
A1. Key variables at their historical averages in 2016-2036 1/8267503626181019
A2. New public sector loans on less favorable terms in 2016-2036 282838179777684114
A3. Alternative Scenario: Cyclone in 20177985908176726671
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2017-20188282787267636075
B2. Export value growth at historical average minus one standard deviation in 2017-2018 3/8287989185807075
B3. US dollar GDP deflator at historical average minus one standard deviation in 2017-20188289938680757189
B4. Net non-debt creating flows at historical average minus one standard deviation in 2017-2018 4/821071261171081028680
B5. Combination of B1-B4 using one-half standard deviation shocks821071371271181119386
B6. One-time 30 percent nominal depreciation relative to the baseline in 2017 5/8211310597908580101
Debt service-to-exports ratio
Baseline54443322
A. Alternative Scenarios
A1. Key variables at their historical averages in 2016-2036 1/54332210
A2. New public sector loans on less favorable terms in 2016-2036 254444333
A3. Alternative Scenario: Cyclone in 201754433322
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2017-201854443322
B2. Export value growth at historical average minus one standard deviation in 2017-2018 3/55555433
B3. US dollar GDP deflator at historical average minus one standard deviation in 2017-201854443322
B4. Net non-debt creating flows at historical average minus one standard deviation in 2017-2018 4/54444332
B5. Combination of B1-B4 using one-half standard deviation shocks54454433
B6. One-time 30 percent nominal depreciation relative to the baseline in 2017 5/54443322
Debt service-to-revenue ratio
Baseline76666544
A. Alternative Scenarios
A1. Key variables at their historical averages in 2016-2036 1/76544311
A2. New public sector loans on less favorable terms in 2016-2036 276666657
A3. Alternative Scenario: Cyclone in 201776555434
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2017-201876666545
B2. Export value growth at historical average minus one standard deviation in 2017-2018 3/76666545
B3. US dollar GDP deflator at historical average minus one standard deviation in 2017-201877777656
B4. Net non-debt creating flows at historical average minus one standard deviation in 2017-2018 4/76676655
B5. Combination of B1-B4 using one-half standard deviation shocks76777656
B6. One-time 30 percent nominal depreciation relative to the baseline in 2017 5/79888756
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/4545454545454545
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 3c.Myanmar: Public Sector Debt Sustainability Framework, Baseline Scenario, 2013/14-2036/37(In percent of GDP, unless otherwise indicated)
ActualEstimateProjections
201320142015Average 5/Standard 5/ Deviation2016201720182019202020212016-21

Average
202620362022-36

Average
Public sector debt 1/32.329.234.135.135.736.036.436.837.139.543.7
of which: foreign-currency denominated17.013.915.915.415.515.415.415.415.516.821.4
Change in public sector debt−7.8−3.14.91.10.50.30.40.40.30.60.0
Identified debt-creating flows−1.6−1.83.11.20.50.20.30.30.20.3−0.1
Primary deficit−0.3−0.92.41.21.92.92.62.42.42.42.32.52.21.21.9
Revenue and grants20.121.918.817.216.516.817.117.317.417.118.319.818.8
of which: grants0.30.30.60.60.70.70.70.70.70.70.7
Primary (noninterest) expenditure19.821.021.220.219.219.219.519.719.720.521.0
Automatic debt dynamics−1.0−0.71.0−1.7−2.2−2.1−2.1−2.1−2.1−1.8−1.3
Contribution from interest rate/growth differential−2.8−1.6−1.2−1.9−2.1−1.9−1.9−2.0−2.0−1.7−1.3
of which: contribution from average real interest rate0.30.80.80.20.40.60.60.60.60.81.0
of which: contribution from real GDP growth−3.1−2.4−2.0−2.0−2.5−2.5−2.5−2.5−2.6−2.6−2.3
Contribution from real exchange rate depreciation1.80.92.20.1−0.1−0.2−0.2−0.2−0.2
Other identified debt-creating flows−0.3−0.1−0.30.00.00.00.00.00.00.00.0
Privatization receipts (negative)−0.3−0.1−0.30.00.00.00.00.00.00.00.0
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 changes−6.2−1.31.8−0.10.10.10.10.10.10.20.1
Other Sustainability Indicators
PV of public sector debt32.533.333.132.732.432.131.832.632.836.134.4
of which: foreign-currency denominated14.413.612.912.211.410.810.210.113.7
of which: external14.413.612.912.211.410.810.211.810.113.711.4
PV of contingent liabilities (not included in public sector debt)
Gross financing need 2/2.01.45.15.55.75.86.16.26.06.05.6
PV of public sector debt-to-revenue and grants ratio (in percent)172.9193.3200.4194.6189.5185.7182.7179.0182.4
PV of public sector debt-to-revenue ratio (in percent)178.9200.4209.2203.1197.5193.5190.4186.2188.9
of which: external 3/79.181.981.675.469.764.861.157.571.9
Debt service-to-revenue and grants ratio (in percent) 4/9.910.114.114.918.620.621.621.821.120.922.2
Debt service-to-revenue ratio (in percent) 4/10.010.314.515.419.421.422.522.822.021.722.9
Primary deficit that stabilizes the debt-to-GDP ratio7.52.2−2.51.92.12.02.02.02.01.61.2
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)8.48.07.37.63.06.37.57.67.57.57.57.37.05.56.6
Average nominal interest rate on forex debt (in percent)1.63.94.12.41.22.62.62.42.11.91.72.21.41.51.4
Average real interest rate on domestic debt (in percent)4.25.14.0−2.57.50.01.62.82.93.03.12.24.35.24.6
Real exchange rate depreciation (in percent, + indicates depreciation)8.55.416.8−4.315.80.8
Inflation rate (GDP deflator, in percent)4.44.23.99.87.57.97.57.37.06.96.77.25.44.55.1
Growth of real primary spending (deflated by GDP deflator, in percent)27.914.68.35.29.41.22.17.79.28.77.66.17.35.77.0
Grant element of new external borrowing (in percent)51.054.758.059.759.159.957.145.339.3
Sources: Country authorities; and staff estimates and projections.

[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.

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

Sources: Country authorities; and staff estimates and projections.

[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.

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

Table 3d.Myanmar: Sensitivity Analysis for Key Indicators of Public Debt 2016/17-2036/37
Projections
20162017201820192020202120262036
PV of Debt-to-GDP Ratio
Baseline3333333232323336
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages3332313029282727
A2. Primary balance is unchanged from 20163333333333333644
A3. Permanently lower GDP growth 1/3333333334343852
A4. Alternative Scenario: Cyclone in 20173335353535353642
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2017-20183334363636363946
B2. Primary balance is at historical average minus one standard deviations in 2017-20183333333333323336
B3. Combination of B1-B2 using one half standard deviation shocks3333333333333541
B4. One-time 30 percent real depreciation in 20173339373635343335
B5. 10 percent of GDP increase in other debt-creating flows in 20173340393837363638
PV of Debt-to-Revenue Ratio 2/
Baseline193200195189186183179182
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages193194184175168163149137
A2. Primary balance is unchanged from 2016193202198195192191195221
A3. Permanently lower GDP growth 1/193202198195194193207263
A4. Alternative Scenario: Cyclone in 2017193216210206202199198210
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2017-2018193208211209207207213231
B2. Primary balance is at historical average minus one standard deviations in 2017-2018193202199193189186181183
B3. Combination of B1-B2 using one half standard deviation shocks193201196193192190193205
B4. One-time 30 percent real depreciation in 2017193233221211202195180179
B5. 10 percent of GDP increase in other debt-creating flows in 2017193242232219213207196191
Debt Service-to-Revenue Ratio 2/
Baseline1519212222212122
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages1519201920181817
A2. Primary balance is unchanged from 20161519212223222326
A3. Permanently lower GDP growth 1/1519212223222431
A4. Alternative Scenario: Cyclone in 20171519202122222324
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2017-20181519222425242527
B2. Primary balance is at historical average minus one standard deviations in 2017-20181519212223212122
B3. Combination of B1-B2 using one half standard deviation shocks1519212122222324
B4. One-time 30 percent real depreciation in 20171520232525242325
B5. 10 percent of GDP increase in other debt-creating flows in 20171519223624252123
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 LIC DSA 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). The most conservative thresholds are applied for the purposes of this DSA based on the average CPIA index of the last two years which indicate a weak rating for Myanmar.
2The DSA was jointly prepared by the IMF and the World Bank staffs.
3This risk rating is unchanged from the previous DSA, published in September 2015, as a part of the staff report for the 2015 Article IV consultation with Myanmar (SR/15/267) http://www.imf.org/external/pubs/cat/longres.aspx?sk=43293.0
4The Asian Development Bank is expected to approve a total of US$3 billion in sovereign and non-sovereign loans over 2013–2018. The World Bank is expected to commit about US$1 billion in 2016–2018. In November 2015, the Prime Minister of Japan announced that Japan will commit an ¥800 billion (US$7.7 billion) package, which will comprise funding from both the public (through Japan International Cooperation Agency (JICA)) and private sectors to be spread over five years.
5The 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.
6For the PV of total public debt to GDP ratio, the most extreme shock is the growth shock which causes a breach in the indicative benchmark in 2025/26, while fixing the primary balance leads to a breach in 2029/30.
7The alternative cyclone scenario is based on the following assumptions: projected GDP growth is reduced by two-thirds in 2017 and 2018; the nominal exchange rate depreciates by 35 percent in 2017-2019; inflation is expected to double in 2017 and 2018; following historical experience both government revenue and expenditures are adjusted downward; financial aid and concessional finance is expected to increase.

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