WASHINGTON—The World Bank said it will open a Burma office in June as the body re-engages with the impoverished nation two decades since its last projects ended there.
The bank’s regional vice-president for East Asia and the Pacific, Pamela Cox, said on Thursday that its experts will analyze the country’s development needs and capacity to manage its budget and economy.
She said re-establishing a full program would require first clearing Burma’s arrears of US $393 million to the World Bank and about $500 million to the Asian Development Bank.
The bank stopped lending to Burma in 1987, when it stopped repaying its debt, a year before Western nations began imposing sanctions over the suppression of democracy. The last projects ended in the early 1990s.
Isolation and mismanagement during five decades of military rule has left what was once a rice-basket of Southeast Asia the region’s most impoverished nation.
Key donor nations including the US and the European Union are moving to ease or suspend economic sanctions and restart aid to the country, officially known as Myanmar, to reward its democratic reforms over the past year. Japan, Burma’s main creditor, last week announced it will forgive debt of $3.7 billion.
The United States, the bank’s largest shareholder, in February lifted its opposition to the multilateral development banks giving limited technical assistance for Burma, but other sanctions still require the US to oppose new lending.
Cox, who will visit Burma in June for talks with the government, said the pace of the bank’s re-engagement would depend on the consensus of the bank’s stakeholders. She described the easing of sanctions by various nations as a “positive sign.”
She said the bank would seek opportunities to boost people’s incomes so they can see the benefits of the government’s reforms.
“Unless we generate real economic benefits for people, particularly in areas that have experienced conflict, there won’t be broad-based support in the future,” she told reporters at the bank’s Washington headquarters.
Cox said resolving the arrears would need to be done under the framework of the Paris Club—an informal group of major economies that discuss debt restructuring issues—and the International Monetary Fund (IMF), which would conduct a mission to Burma in May to gather more economic information to help assess the best way to achieve that.
She said the bank has been discussing the issue with its partners over the past month, including at last week’s spring meetings of the bank and the IMF. She said the full extent of Burma’s debts to bilateral creditors, including China, was not yet clear, and the IMF would further analyze Burma’s capacity to sustain any new borrowing.
Cox said Burma was in less severe straits than Vietnam was when it re-engaged with the bank and the international community in the early 1990s but had a lower government capacity in economic management.
The bank also plans to help Burma establish a legal framework to cope with an expected influx of foreign investment as sanctions are lifted and on budget management, as well as assist in financial sector reforms needed for a functioning foreign exchange market.
In April, Burma unified its dual exchange rate system. The government also sent its budget to parliament for scrutiny for the first time this year.
