World Bank Loan Will Not Be Used for Govt Salary Increases, Says President’s Office Spokesperson

By Kyaw Hsu Mon 9 August 2016

RANGOON — Government employees’ salaries will not increase despite plans to take out a loan worth US$100 million from the World Bank, aimed at covering a state deficit by separating salaries from the budget, according to government officials.

Burma’s President Htin Kyaw sent a message on August 5 to the Union Parliament speaker about pursuing the World Bank loan in order to implement projects under the Myanmar Monetary Sector Development Plan.

After the letter was shared, reports came out suggesting that the President planned to increase staff salaries by taking loans from the World Bank. Zaw Htay, spokesperson from the President’s Office told The Irrawaddy that this was the result of a misunderstanding.

“We have a big budget deficit. After taking loans from the World Bank, we will pay for the government staff salaries from this amount, so the state deficit will be lower. It doesn’t mean civil servant salaries will increase,” he said.

“After spending the amount required for salaries, we will use the rest of the money for development projects,” Zaw Htay added.

In Tuesday’s Union Parliament session, Maung Maung Win, deputy minister of National Planning and Finance, said the World Bank’s International Development Association will provide a US$100 million loan interest-free for 38 years starting from 2017.

“It’s a no-interest loan, but the service fees per year will be 0.75 percent of the total loan amount,” he explained. Of this, $75 million is earmarked for the Ministry of Planning and Finance and $25 million for the Central Bank.

According to the Myanmar Financial Sector development project plan, $60 million will be used to provide monthly pay and allowances for civil servants, $7 million will be allocated to technical assistance in reforming state-owned banks, $5 million will go toward the development of the microfinance, insurance and monetary sectors and establishment of a better information technology system, and $3 million is for capacity building for the staff of the Ministry of National Planning and Finance.

“If the financial sector develops, the country’s economy will also develop,” Maung Maung Win said. “$60 million can cover the state budget deficit for government servants.”

Maung Maung Win said that the $60 million will be received within four years. Estimates suggest it will come in increments: $20 million in 2017, $15 million in 2018, $10 million in 2019 and $5 million in 2020.

Khin Saw Oo, deputy governor of the Central Bank of Myanmar said in the Parliament that the bank will use the $25 million loan for four projects: $15 million will go toward upgrading the transactions system, $6 million will be used for capacity building and establishment of a monetary training school, $2 million will be designated for a capacity development plan, an IT system and improvement of financial management systems, and $2 million will be for capacity building for the staff of the Central Bank.

Khin Maung Nyo, an economist and columnist, said it is better to spend the World Bank’s loans on government salaries to reduce the heavy state budget deficit in Burma.

“State budget is always facing a deficit, so it’s better if some expenses are separated out of the loan amount,” he said.