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RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
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RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001098 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS; PACOM FOR FPA; 
TREASURY FOR OASIA:S. SEARLS 
 
E.O. 12958: DECL: 12/08/2015 
TAGS: EFIN PGOV IMF BM
SUBJECT: IMF TEAM VISITS BURMA FOR ARTICLE IV CONSULTATIONS 
 
RANGOON 00001098  001.2 OF 002 
 
 
Classified By: CDA Villarosa for Reason 1.4 (b,d) 
 
¶1.  (C) Summary:  An International Monetary Fund (IMF) team 
visited Burma July 10-21 for annual Article IV consultations. 
 Charge met with them privately during their visit plus 
hosted a separate roundtable for the team with Burmese 
private sector business and economic observers.  The IMF team 
received higher-level meetings than in previous years, 
including with the Prime Minister in the new capital of 
Naypyitaw.  The IMF team generally found GOB officials 
concerned about the fiscal deficit and rising inflation, 
making progress on raising revenues, but failing to attract 
investment.  The team also found the GOB unwilling to tamper 
with the multiple exchange rate system and unable to 
reconcile national accounts to determine a realistic GDP 
figure.  GOB officials requested IMF assistance, but the IMF 
team leader committed to nothing beyond technical advice. 
The Burmese roundtable participants discussed the general 
deterioration experienced in every sector of the economy. 
The IMF team agreed that Burma had fallen behind its 
neighbors due to mismanagement and serious political issues. 
The IMF team did not provide detailed findings to us for 
confidentiality reasons, but they will be made available to 
 
SIPDIS 
the Board.  Embassy Rangoon requests a copy of the report 
after it is sent to the Board.  End Summary. 
 
¶2. (C) The IMF team was led by Leslie Teo, and included Hooi 
Eng Phang, the Executive Director for Southeast Asia, along 
with representatives of the World Bank and the Asian 
Development Bank.  They met Central Bank, Finance, Budget, 
Planning, Statistics, Customs, Mining, Energy, Oil and Gas, 
Electric Power, Construction, Labor, Industry, Education, 
Social Welfare and Health officials.  In addition, they met 
with directors of selected State-Owned Enterprises, official 
and private bankers, the Chamber of Commerce, and 
representatives of Embassies and UN agencies.  Teo said that 
every government office requested help from the team; he made 
no commitments beyond technical advice. The team's meeting 
with the Prime Minister received prominent coverage by the 
government-controlled print and television media.  Although 
pleased with the higher-level attention, Teo remained 
uncertain whether the team's recommendations would be relayed 
to the Senior General and to what extent the IMF advice would 
be taken. 
 
Poor Quality Statistics 
----------------------- 
¶3.  (C) The Roundtable began by discussing the quality of the 
statistics the GOB now collects since one of our Burmese 
participants had established the Central Statistics Office. 
He noted that the GOB no longer regularly publishes 
statistics.  When he headed the department, he had tried to 
gather complete statistics without analysis to avoid 
political problems.  But now he noted the statistics were 
incomplete and even less reliable without facts or analysis 
to back them.  None of the Burmese participants believed the 
statistics now cited by the GOB.  Teo said that officials had 
been very forthcoming with statistics, but noted that many of 
the categories of statistics they received from the GOB were 
marked N/A.  He said the IMF could provide technical advice 
to the GOB on the compilation of statistics. 
 
Inflation a Concern But Not Exchange Rates 
------------------------------------------ 
 
¶4.  (C) Although he could not discuss the statistics in 
detail for confidentiality reasons, Teo "roughly" estimated 
that the money supply had increased from 3 trillion kyat last 
year to somewhere between 4 and 5 trillion kyat this year. 
The IMF team estimated that year-on-year inflation was 12.6 
 
RANGOON 00001098  002.2 OF 002 
 
 
percent, which surprised the roundtable participants.  The 
IMF team explained that the fuel price increases and civil 
servant wage increases had occurred towards the end of the 
year.  With those increases factored in, the IMF estimated 
inflation this year could reach 30-50 percent.   Teo said the 
technical-level officials were very concerned about 
inflation.  The GOB had followed the IMF's advice made last 
year to reduce fuel subsidies and improve revenue collection, 
which had helped to reduce the deficit.  He also noted large 
increases in foreign exchange revenues from gas sales.  Teo 
dismissed GOB excuses that sanctions had caused inflation. 
The GOB also cited declining investment as a reason, and the 
team suggested ways to improve the investment climate. 
 
¶5.  (C) The Burmese roundtable participants complained about 
increased complications with customs, which they attributed 
to GOB attempts to increase revenues.  A pharmaceutical 
distributor said that importers and exporters now must spend 
10-14 days and make several trips to the new capital to get 
necessary approvals; this added to the costs of doing 
businesses.  Others chimed in with complaints about corrupt 
Customs officials.  They requested the IMF advise the GOB to 
simplify the process and make it more transparent.  Teo 
promised to do so saying the GOB needs to improve 
transparency.  He added that the Prime Minister seemed 
particularly interested in measures to combat corruption. 
 
¶6.  (C) The Civil Service pay hikes announced last April also 
troubled the Burmese roundtable participants.  One former 
state banker noted that he calculated that the increases 
would cost the GOB 45 billion kyat per month, or 540 billion 
kyat over the coming year.  As a result, the price of rice 
had increased 50 percent since April.  So now private sector 
workers seek wage hikes, which will further fuel inflation 
and harm businesses already losing money due to higher fuel 
prices and increased transactions costs.  The Burmese 
roundtable participants acknowledged that civil service wages 
had been kept too low for too long, but criticized the timing 
as bad psychologically. 
 
¶7.  (C) Teo commented that the market rate of the kyat did 
not appear to depreciating dramatically, signifying that 
inflation was not spiraling out of control.  The Burmese 
participants acknowledged that it had stabilized around 1310 
kyat for one US dollar, but said officials frequently put 
pressure on the money changers to maintain stability.  The 
Burmese also cited slowing business and the closure of border 
trade as other factors depressing the demand for US dollars. 
 
¶8.  (C) Charge asked if the IMF had discussed the wide 
variation in the official exchange rate (6 kyat/US$1) and the 
market rate with numerous other in-between rates.  Teo said 
they have repeatedly tried to address this over the years, 
but officials express great reluctance to make any 
adjustments.  The Burmese participants said almost all 
Burmese used the market rate anyway, so concluded that the 
official rate just distorts Burma's national income accounts. 
 Teo acknowledged that the team had also been unable to 
resolve differences about Burma's national accounts and GDP, 
but indicated some GOB receptivity to technical assistance in 
this area. 
 
¶9.  (C) Comment:  The IMF team clearly recognized that there 
is little they could do as long as the larger political 
issues remain unresolved.  Greater transparency would reveal 
the military's mismanagement of the economy.  For that 
reason, we do recommend that the IMF be encouraged to provide 
technical assistance that increases transparency. 
VILLAROSA