Myanmar is expecting to be K7 billion short of state funds to support development in fiscal 2019-20, a projected fiscal deficit of 5.9 percent GDP compared to the 5.4pc budgeted for the current year. Meanwhile, financing sources for the fiscal deficit have also become more diversified. The share of Central Bank financing has declined from a high of 61pc of total domestic financing in 2015-16 to almost zero during the transition period between April and September last year and the first two months of 2018-19, data showed. During the period, sovereign T-bill and T-bond auctions almost fully met the domestic financing needs.

U Soe Thein, deputy governor of the Central Bank of Myanmar, said the fiscal deficit would mainly be financed by bonds in the coming years. For fiscal 2018-19, half of the K4.7 trillion deficit will be financed through bonds, he said. Although the government has increased bond and bill auctions to K3.8 trillion from October 2018 to February 2019 compared to K3.6 trillion October 2017 to February 2018, market participation has remained below potential due to negative interest rates.

To help spur participation in the bond market, the World Bank said that more attractive coupon rates reflective of market conditions are needed. Meanwhile, observers said that for Myanmar to better develop its debt markets, speedier reforms are needed. Daw Sandar Oo, chair of Myanmar Insurance Association, said a more mature local insurance industry can help by buying these bonds and bills. “Everybody benefits, the government because it gets to sell its bonds, the insurance firms as it gets to hedge its premiums with more stable government debt and the people as they get to have more choice in financial products,” she said.

Source: Myanmar Times 

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