IMF Article IV Consultation on Burma and ramifications of PRGF

According to the media information of IMF (International Monetary Fund) released today, the next article IV consultation of IMF with Burma would take place tentatively on 28th of November 2007. Earlier IMF article IV consultation with Burma took place in October, 6, 2006, 25 March 2005, and 17 March 2004. Most importantly, as of October 2007, Burma is also eligible for Poverty Reduction and Growth Facility (PRGF) programme help of the IMF with other Seventy-Seven countries of the developing and under-developed nations, which includes –Angola, Albania, Afghanistan, Nigeria, Pakistan, Vietnam, Lao PDR, Cambodia, India etc.

IMF established the PRGF programme in September 1999 to make the objectives of poverty reduction and growth themes more central to lending operations in its poorest member countries. But here, IMF should also take care of the contemporary situation in Burma under military dictatorship, which lacks any public account mechanism without any elected institutions to direct funds towards poverty reduction. And there have been serious concern raised by many observers of Burma events, that, it might go to the other areas of spending serving little to the core objectives of PRGF of serving poor and needy people of the Burma in its forthcoming article IV consultation.      

It is important to note that, recently in an article published in the military’s official newspaper – “The New Light of Myanmar” of 24th of November entitled, “Duty of All Who Love Motherland Myanmar” by Kyaw Min Aye (page no. 5) wrote about the IMF data on Burmese economy that, “Well, let me point out some facts regarding the present economic situation of Myanmar. A report of IMF says that at the end of 2006-2007 fiscal, it is estimated that Myanmar’s economy would grow by seven percent (7)”. However, according to the latest 2007 World Economic Outlook report of IMF about Burma’s economy released on 17th of October 2007, says that the real GDP figures of Burma in the year 2007 is of 5.5 percent growth rate, and projected growth rate of real GDP for the year 2008 falling to 4 (four) percent.      

Moreover, the announced PRGF programme of IMF has three core objectives. First in principle as a central theme is of “broad public participation and greater country ownership”, which totally lacks in the present circumstances in Burma under military rule. The second priority is that, “each country’s poverty reduction and growth priorities” policies should be taken care of and it is well known that, the present military leadership in Burma is more focused on selling petroleum resources and gems and jewelries to business houses rather then following IMF’s core objectives. Most crucial is the third priority of PRGF programme, which is focused on “strengthening governance”, in order to assist countries’ efforts to design targeted and well-prioritized spending. In which, special emphasis has been given to improve public resource management, transparency, and accountability. And, all the three things – “public resource management, transparency and accountability in governance” are missing in Burma and it couldn’t develop without the freedom of expression and elected institutions in Burma, which present ruling military regime wants to control through proposed drafting of constitution by bringing unelected element of military in Burma’s forthcoming Parliament. The military regime, which has recently faced the human rights resolution in the third committee of UN General Assembly regarding the freedom of Daw Aung San Suu Kyi and other political prisoners in Burma has not even obeyed the wishes of international institution like UN, and earlier ASEAN ministerial meetings joint communiqués. It is true that, the concerned human rights resolution of GA third committee is non-binding; but it doesn’t imply that, the concerned nations should avoid the moral accountability of obligations of international institutions like – third committee of UN General Assembly to perpetuate authoritarian rule and suppressing independent observation including economic verification of governance by visiting remote areas of the country.      

The PRGF eligibility is based principally on the IMF’s assessment of a country’s per capita income, drawing on the cutoff point for eligibility to World Bank concessional lending (currently 2005 per capita gross national income of $1,025). And, loans under the PRGF carry an annual interest rate of 0.5 percent, with repayments made semiannually, beginning 5½ years and ending 10 years after the disbursement. An eligible country may normally borrow up to a maximum of 140 percent of its IMF quota under a three-year arrangement, although this may be increased to 185 percent of quota in exceptional circumstances. In each case, the amount will depend on the country’s balance of payments need, the strength of its adjustment program, and its previous and outstanding use of IMF credit.    

And, as per the recent IMF data released on 31st of October 2007, Burma’s financial position in the IMF in General Resources Account of Quota and Fund holding of Currency is – 258.40 million SDR to each segment.  And Net Cumulative allocation in SDR department is – 43.47 million SDR. It is important to note that, Burma joined the International Monetary Fund (IMF) on 3rd of January 1952 during the democratic era of Prime Minister- U Nu.

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ENDNOTES:     

IMF Article IV Consultation: Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year and a staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities.     

SDR: Special Drawing Right (SDR) as an International reserve asset created by the IMF in 1969 to supplement to existing reserve assets. Under SDR’s allocation, distribution of SDRs to members is taken by the decision of the IMF. A “general” allocation requires a finding by the IMF that there is a global need for additional liquidity. And the currency valuation of SDR is determined daily by the IMF by summing the values in U.S. dollars, based on market exchange rates, of a basket of four major currencies—the euro, Japanese yen, pound sterling, and the U.S. dollar. The SDR valuation basket is normally reviewed every five years. The last review, which took place in 2000, resulted in a revision of the weights assigned to each currency in order to take into account the introduction of the euro on January 1, 1999 and the growing role of international financial markets. The revisions in the valuation basket became effective on January 1, 2001.      

(Note: Based on the reports of International Monetary Fund (IMF) entitled, “A Factsheet October 2007 – The Poverty Reduction and Growth Facility (PRGF) programme, 2007 World Economic Outlook Reports of IMF released in October 2007 and the official – The New Light of Myanmar, 24th of November 2007 of Burma.)    

(THE END)    

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