For much of its modern history, an unstable macro-economy has been Myanmar's constant companion. Excessive extractions from the State, mostly as a consequence of the resource demands of the country's security organs, fuelled persistent and growing budget deficits, rising debt, price inflation and monetary instability, a dysfunctional (and crisis-prone) financial system, and an insatiable dependence on the money-printing of Myanmar's central bank. Of course, many other economic maladies plagued Myanmar under its five decades of military rule, but foundational to all of them was this inherent macro-financial instability.
Given this, and understanding its consequences, the civilian government that took office in Myanmar in March 2016 assigned to the task of achieving macro-financial stability a priority that transcended other economic policy objectives. Accordingly, from its first year in office public spending across just about all sectors of the economy was trimmed, revenue enhancement policies introduced, restrictions imposed on borrowing from the central bank, the exchange rate fully liberalised, and the foundations laid for the full funding of budget deficits via a functioning bond market. Meanwhile, in an effort to bring stability to the banking sector – and to finally transform it into a mechanism for the proper aggregation and allocation of capital – various prudential banking regulations were introduced, along with other measures designed to stimulate competition and expand product offerings.
Of course, policy intentions and successful policy implementation are very separate things, and not all of the reforms outlined above have brought about the results hoped for or, indeed, been free of opposition (explicit or otherwise). Accordingly, in this chapter we not only outline the policies introduced under the National League for Democracy (NLD) government since 2016, but explore the extent that they have achieved the ends sought. Finding that stability in macro-financial terms has been largely achieved, at least in the short term, the paper concludes both with an account of a reassessment on the need for a mild fiscal stimulus in Myanmar, and some thoughts on the longer term macro-financial challenges.
PLANNING FOR STABILITY
Stabilising Myanmar's chronically unstable macro-economy was foundational in the economic policy planning of the NLD-led government that took office in March 2016.