Myanmar defends lacklustre bond sale

YANGON — Myanmar’s Central Bank on Thursday defended its first sale of government debt under the reformist regime as “successful”, despite selling less than half of the US$50 million offering, as it looks to finance rising state spending.

In the latest of a string of economic reforms under the quasi-civilian government that replaced military rule four years ago, Myanmar reaped some 21.5 billion kyat ($20.8 million) from the auction of its treasury bonds.

“I think it was successful. This is the first time and I think we can do better next time,” Thuzar Win, a Central bank official involved in the auction process, told AFP.

The sale, which was completed late last week, “will help our country’s economy a lot,” she added.

Myanmar has initiated a series of political and economic reforms in recent years that have seen most international sanctions lifted and a surge of investor interest in the long-isolated nation.

The country, which is due to hold crucial elections this year, has scaled up government spending in an effort to begin rehabilitating public services that were chronically neglected by the previous junta.

Myanmar economics expert Sean Turnell said that while the incomplete bond sale was “not ideal”, it was a “good and necessary step forward”.

He added shortfalls were not uncommon even in developed markets and that the 8 percent yield was “not a bad rate to achieve for Myanmar government debt in the present environment”.

“Now we just need (the) government to get its fiscal policy right, and so reduce the pressure to sell such bonds to finance government spending,” he told AFP.

The International Monetary Fund has praised Myanmar’s economic reforms, including giving autonomy to the central bank and adopting a floating rate for its kyat currency.

The central bank last year granted limited approval for some foreign lenders to operate in the country, while Myanmar has announced plans to open its first stock exchange by October.

But many in the country remain deeply suspicious of the banking system after decades of economic mismanagement and isolation under the junta, and large swathes of the population deal only in cash.

Rajiv Biswas, Asia-Pacific chief economist at IHS, said the establishment of a government bond market “is an important long-term financial sector reform”.

“Myanmar is still a new frontier market economy that has only recently begun reforming its financial system, and is still largely a cash-based economy, with debit cards first issued in 2012, so it will take time for the financial system to deepen,” he told AFP.

Myanmar has issued government bonds before — in 1993 and 2010 — with both done through state-owned banks, he added.

Source: Bangkok Post

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