YANGON, Myanmar (AP) — The World Bank on Sunday announced a long-awaited deal to allow Myanmar to clear part of its huge decades-old foreign debt, opening the door for lending to jump-start its lagging economy.
The bank’s Washington headquarters said in a statement that the Japan Bank for International Cooperation, the country’s overseas development bank, will provide a bridge loan to Myanmar to allow it to cover outstanding debt to the World Bank and the Asian Development Bank, which totals about $900 million.
Myanmar stopped payments on its old loans in about 1987, making it ineligible for new development lending.
The deal is a major breakthrough for Myanmar, with loans likely to go to upgrading its dilapidated infrastructure, including electricity and ports. A result could be to bring in more foreign direct investment, already attracted by the country’s relatively low-cost economy.
The deal is also likely to draw criticism, because it comes as Myanmar’s army is pushing hard against ethnic Kachin rebels in the country’s north, echoing the counterinsurgency campaigns of previous military governments.
A former general, Thein Sein, became the country’s elected president in 2011 and began reversing almost five decades of military repression by instituting political and economic reforms.
He won the substantial easing of economic and political sanctions imposed against the junta by the United States and other nations. But some democracy activists say the rewards have been too much, too fast, allowing some abuses to continue, like repression of ethnic minorities.
Myanmar ran up $8.4 billion of debt during the socialist government of Gen. Ne Win from 1962 to 1988, and $2.61 billion of debt after a new military junta took over in 1988, making for a total of a little more than $11 billion.
The largest creditor before 1988 was Japan, with loans of $6.39 billion, and the biggest post-1988 creditor was China, with $2.13 billion.
Article source: http://www.nytimes.com/2013/01/28/business/global/myanmar-signs-deal-with-world-bank-over-debt.html?partner=rss&emc=rss