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International Monetary Fund (IMF) chief Christine Lagarde has urged Burma to urgently prioritise tackling widespread poverty while pledging assistance to the country’s nascent banking sector.
“As Myanmar [Burma] opens up and expands, it needs the structural foundations of a modern economy. This is an urgent priority,” she said in a speech to students at the Yangon Institute of Economics.
Lagarde was in Rangoon on Saturday on her first official trip to the country where she met with a range of government officials and opposition leader Aung San Suu Kyi.
“Three-quarters of the population have no access to electricity… only 1 percent of the population uses the internet,” she said.
High annual growth rates and a large, untapped domestic market in Burma have triggered a surge of interest from foreign investors, but Lagarde pointed out that 26 percent of the country’s population still lives below the poverty line.
“The next step is to build on these gains and take the path of sustained, strong, and inclusive growth to lower poverty and lift the prospects of everyone in Myanmar,” she said.
“Clearly, too many people are not yet equipped for the economy of tomorrow,” she added.
She highlighted the importance of agriculture to the country’s economy, pointing out it accounted for over a third of GDP and more than half of all employment.
“More than that, over two-thirds of the population depends on the land for their livelihood. So it is important to raise the productivity of agriculture, to boost the income of farmers and all who depend on them,” she said.
She also urged the government to boost spending on health and education which account for, respectively, just 1.5 percent and 1.7 percent of GDP – the lowest in the ASEAN region.
Lagarde said the IMF was going to ramp up assistance to the country, adding more staff to its team in 2014, but warned there was “a lot of groundwork to do”.
She also warned Burma not to rush into opening up its banking sector to international competition.
‘It’s most suitable for Myanmar to use the ‘no haste, no waste’ way for opening up its banking sector,” said the IMF chief.
Lagarde pledged that the IMF will provide technical assistance to the Burmese Central Bank in monitoring the country’s nascent banking system.
“Myanmar must stabilize its banking system with strong monetary policy, directed by an independent central bank and a bank monitoring system with the help of IMF,” Lagarde said.
The IMF has forecast that Burma’s economy will grow 6.75 percent in the fiscal year 2013-14, ending in March.
Burma has one of the least developed banking systems in Asia, according to the Asian Development Bank.
Meanwhile, a 5 December report by Reuters said that Burma will allow some foreign banks to begin offering limited financial services next year, citing a senior central bank official. No less than 34 international banks have representative offices in the country, but none are allowed to open branches or conduct money transactions in the country until now.
The Burmese government is reportedly encouraging foreign banks to form joint ventures with domestic banks before allowing them to open independent branches. The senior official is quoted saying that the central bank is now formulating a plan to speed up the process by letting a select number of foreign banks begin operating in 2014 in “certain areas of banking services”, which he did not define.
Central Bank officials will reportedly meet soon with the heads of all local private banks to prepare them for the development.