The opening of the World Bank Group and the Asian Development Bank (ADB) offices in Yangon has paved the way for Myanmar to regain access to financing from official development banks and foreign governments, Moody's Investors Service said.
“Engagement with the World Bank and ADB will enhance Myanmar’s nascent political and economic reform process, which followed 2010 elections. If all goes according to plan, an opening and growing economy will attract new foreign investment from the private sector as well,” the rating company said in a statement.
It added that the offices add credit positive to Myanmar, which has not been given any ratings yet.
Both multilateral development banks ceased approving new loans to Myanmar in the late 1980s after the country suspended its debt repayments. The last formal consultative group meeting between Myanmar and the World Bank was in 1986. The country owes approximately US$780 million (Bt24.5 billion) to the International Development Association (IDA), the World Bank’s fund for the world’s poorest countries, of which $397 million is in arrears. Overdue loan payments to ADB’s Asian Development Fund are close to $500 million.
Japan is facilitating the return of the World Bank and ADB to Myanmar. A consortium of Japanese banks may provide bridge funding worth $900 million to allow for the repayment of the overdue amounts to the multilateral banks. The World Bank and ADB would then provide low-interest loans to Myanmar so it can repay the bridge loans.
ASSISTANCE HAS BEGUN
Once it clears the arrears, Myanmar will have access to funding from the multilaterals’ concessional funds and the International Finance Corporation, the World Bank’s private-sector lending arm, which also has an established presence in Yangon.
“Although the process of clearing the multilateral development bank arrears will take until January 2013, technical and capacity building assistance has already begun,” Moody’s added.
The ADB’s focus is on helping Myanmar improve its transportation and trade infrastructure with neighbours in the Mekong Delta. The World Bank will advise the Myanmar government on modernising its financial system and improving its business environment.
In addition, the United States government formally eased its sanctions against Myanmar three weeks ago, officially unlocking the gate for American companies to invest in the former pariah state. These recent developments follow the Japan’s announcement in April that it will write off $3.7 billion of Myanmar’s bilateral debt and will resume full financial aid for the country, a development that can be considered credit positive for Myanmar.