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Press Release – IMF Advice and Inequality in Myanmar
PRESS RELEASE
December 10, 2013
Christine Lagarde calls for investment, inclusion and integration of Myanmar, Overlooks recent IMF research linking financial openness and inequality
New Myanmar agreement would be opportunity for IMF to show commitment to reducing inequality
On December 6th and 7th IMF Managing Director Christine Lagarde visited Myanmar for the first time to assure the people of Myanmar that the IMF will stand at their side for the long-haul and laid out a three point program focusing on investment, inclusion and integration.
In her speech on December 7, Ms. Lagarde emphasized that Myanmar should be integrated into the regional economy and that “[Asia’s] openness has been essential to its success”. In general Ms. Lagarde utilized repeatedly key phrases like “openness”, “cooperation”, “greater financial integration”, and “access to larger markets” to paint a prosperous picture of Myanmar in the future.
However, Ms. Lagarde’s advice seemed to overlook recent research at the IMF that warns of the costs of financial openness and integration. The research pinpoints two distinct causes of increased inequality in the last 10 years: 1) capital account liberalization, meaning the opening up of domestic capital markets to all different capital; and 2) and fiscal consolidation – or austerity measures.
Beyond Ms. Lagarde’s remarks, the IMF’s dismissal of the impact of its policy advice has real consequences. Based on the IMF cooperation agreement (Staff-Monitored Program) with Myanmar from January 2013, the IMF program advises the government of Myanmar to aim for near-future fiscal consolidation. Furthermore, the IMF strategy seeks to enable foreign capital inflows. The IMF maintains that these policies will establish a stable environment for foreign investors. Dr. Jo Marie Griesgraber, Executive Director at New Rules for Global Finance, an NGO focused on reducing poverty and inequality through more responsible global institutions, responded to Lagarde’s recent trip to Myanmar:
“Economic integration is very important for a burgeoning economy like Myanmar, but it must be properly managed if the resulting inflows and investments are to benefit real people and the real economy. Furthermore, fiscal consolidation should only take place after the economy is in a sustainable growth pattern.
IMF agreements with any country must permit governments to manage any liberalization of capital and eventual fiscal consolidation very prudently. These cautions especially apply to fragile economies such as Myanmar.”
As an economy which remains highly vulnerable to shocks, and given both its current narrow dependence on natural resources and low-productivity in the agricultural sector, hasty capital account liberalization and fiscal consolidation could lead to greater inequality in Myanmar.
The IMF’s current cooperation agreement with Myanmar comes to an end this month. Any new agreement between the IMF and Myanmar should be consistent with the recent IMF research which cautions the uncritical opening of the capital account and rigid fiscal consolidation.
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Notes to Editor:
New Rules for Global Finance is a 501(c)3 non-profit organization that promotes reforms in the rules and institutions that govern international finance; in order to support just, inclusive and sustainable economic development.
For more information, please visit www.new-rules.org.
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