$3bn Deficit Forecast for 2016-17 Budget

By Kyaw Hsu Mon 23 December 2015

RANGOON — Observers say the next government will face a massive challenge in overhauling public spending when it takes office at the end of March, after the Finance Ministry submitted a budget proposal forecasting another rise in the Union government’s deficit.

During a Lower House session on Tuesday, lawmakers considered a 21 trillion kyat (US$16.1 billion) spending bill for the 2016-17 fiscal year, which begins on Apr. 1, after its submission by Union Finance Minister Win Shein. The bill estimates a 3.9 trillion kyat ($3 billion) deficit for the period, an 8 percent rise on the current forecast budget deficit of 3.6 trillion kyats ($2.8 billion) for 2015-16.

In previous years, the budget bill was debated by the Union Parliament in February. The 2016-17 budget has been brought forward due to the transfer of power to the new government after the Nov. 8, resoundingly won by the National League for Democracy (NLD). New lawmakers will take their seats in Naypyidaw at the end of January.

The budget was proposed according to the current structure of Burma’s bureaucracy and includes funds allocated to state and divisional governments, according to the bill’s explanatory notes. The NLD has pledged to reduce the overall number of ministries currently in operation, but at a recent Naypyidaw meeting with selected civil servants, party leader Aung San Suu Kyi said that there would be no job cuts in the public sector.

Phyo Min Thein, an NLD lawmaker member of the Lower House Finance and Development Committee, said that the government’s consistent deficits since the transfer to quasi-civilian rule in 2011 had taken a toll on Burma’s economic prospects.

“Every budget needs more money every year, that’s the big barrier for the country’s economic development,” he said.

“If country continues down the path of budget deficits it faces a dangerous situation. It is a big challenge for the new government. Our inflation rate has risen from 8 to more than 11 percent. The government has said they will try to lower it to 5 percent, but at present it’s impossible.”

Burma’s current gross domestic product is around $64 billion on current exchange rates, according to Ministry of Finance Figures, with the 2016-17 budget proposal forecasting a deficit to GDP ratio of 4.66 percent. Offsetting expenditure is 350 billion kyats ($268 million) of direct aid from international agencies for the next fiscal year.

Nyo Nyo Thin, an outgoing independent lawmaker in the Rangoon Division Parliament, said that efforts to restrain government expenditure at a regional level had failed.

“The current government is not leaving a healthy inheritance for the new government,” she said. “Every year we have fought in parliament to solve the budget deficit, but we always lost. For as long as the current government couldn’t take action on it, it will be a challenge for the next government too.”

In October, the World Bank forecast economic growth to reach 8.5 percent in 2014-15 before dropping back to 6.5 percent in the following fiscal year.