January 18, 2013 / 2:24 AM / in 5 years

UPDATE 1-Myanmar seeks IMF program to aid reforms, clear debt

(Adds details, background)

By Lesley Wroughton

WASHINGTON, Jan 17 (Reuters) - Myanmar is seeking a one-year, IMF-monitored program to help it craft economic policies, pursue reforms and clear its debt arrears, according to International Monetary Fund documents published on Thursday.

The IMF said the country asked for the program in December to help “achieve sustainable and equitable growth, reintegrate Myanmar with the global economy and reduce poverty.”

Myanmar, also known as Burma, has implemented rapid economic and political reforms since President Thein Sein’s semi-civilian government took over from a long-ruling military junta in March 2011, allowing elections, easing rules on protests and freeing dissidents.

Still, the IMF cautioned that Myanmar’s transition to an open market economy will take time, with the short-term outlook appearing “favorable” and the medium-term “promising.”

The pace of economic growth is likely to hit 7 percent over the next couple of years from around 6.3 percent this year. Gas exports are set to peak in 2014-15, it added.

But the IMF said its analysis suggested Myanmar is in “debt distress” because of arrears. It said the Paris Club of creditor nations had invited the authorities for talks on the arrears in late January.

“The authorities recognize that a successful arrears resolution is essential for Myanmar to re-engage with the international community and ensure debt sustainability,” the IMF said. “They aim to normalize relations with all creditors, supported by the program.”

Japan has already said it intends to waive part of the 500 billion yen Myanmar owes it in debt. Myanmar also owes nearly $400 million to the World Bank and almost $500 million to the Asia Development Bank.

The IMF said the main domestic risk facing Myanmar came from the government’s limited capacity to implement economic and social reforms. It also warned that a possible escalation of ethnic conflict in border regions could undermine investor confidence.

Myanmar’s military has stepped up shelling and air attacks on rebels in its northern Kachin state, raising doubts over assurances by the Myanmar government that it wants a peace deal to end the fighting now on China’s doorstep.

The Kachin rebels are fighting for greater autonomy.

Reporting by Lesley Wroughton; Editing by Eric Beech and Xavier Briand

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