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IMF warns of challenges in opening up Myanmar financial sector

The IMF remains bullish on Myanmar, projecting that the economy will grow 8.5 per cent this year. But the fund warned that opening up the financial sector, as the government is planning to do, will bring big challenges. 

YANGON: The IMF remains bullish on Myanmar, projecting that the economy will grow 8.5 per cent this year. This is much higher than the 7.7 per cent it forecast just six months ago. 

But the fund warned that opening up the financial sector, as the government is planning to do, will bring big challenges. 

IMF Myanmar Mission Chief Matt Davies said: “The government needs to get the borrowing under control and the central banks' international reserves remain low and so can still be vulnerable to shocks.

“But where Myanmar sits in the centre of Asia, with a large labour force, it's relatively cheap, with links to the rest of the world and ASEAN. I think the future can be very bright."

Myanmar's banking sector is still in its nascent stage.

Currently, foreign banks are only allowed to open representative offices, without authority to provide any banking services.

But Myanmar plans to give restricted licences to up to 10 foreign banks to operate by September.

The IMF also cautioned the government against issuing more licences to domestic bank operators at this time.

Davies said: “This time frame is quite ambitious but the central bank is on track to achieve that.

“International experience suggests that these can end up posing fiscal risks to the government. So we think that it's important that they are managed commercially and supervised well.

“What we're most concerned about is the great burden on the central bank, with the entry of foreign banks, many domestic banks and a large agenda and small staff.

“So in order to keep their supervision on track, we think limiting the number of licences until it all bears down will be the most appropriate strategy."

The IMF noted that Myanmar's efforts to reform its financial sector are making progress.

But it said the country will need to implement more relevant laws and much stronger supervision, particularly crucial this year, when more foreign banks are expected to come knocking.  

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