Written by U Ne Oo on 1998-08-12
Various economic reports from reliable sources indicate that the Burmese military junta is in financial dire straits. The junta in recent years have not been ableve not been able to service all of its external debt. It reported to be capable of making interest payments to multilateral donors only. Burmese junta cannot make any repayments, i.e. the interest and principal, to its bilateral donors such as Japan and Germany. These interests due are accumulating as short-term debts, as the following table suggested.
($million unless otherwise indicated;debt stocks as at the year-end)
| . | 1991 | 1993 | 1995 |
| TOTAL EXTERNAL DEBT | 4,875 | 5,757 | 5,771 |
| Long-term Debt | 4,580 | 5,394 | 5,378 |
| Short-term Debt(interest arrears) | 248 | 362 | 393 |
| PUBLIC & PUBLICLY GUARANTEED: Long-teng-term Debt |
4,580 | 5,394 | 5,378 |
| (multilateral) | 1,258 | 1,348 | 1,311 |
| (bilateral) | 3,068 | 3,758 | 3,680 |
| (private creditors) | 253 | 289 | 1,367 |
| TOTAL DEBT SERVICE, PAID | 80<> | 111 | 250 |
| Principal | 29 | 22 | 180 |
| Interest | 51 | 89 | 70 |
| RATIOS IN PER CENT(%) (Short-term Debt)/(Total Debt) |
6.1 | 6.3 | 6.8 |
| Debt-service Ratio | 13.1 | 11.8 | N/A |
These figures do not include the debts owed to China resulting from the purchase of arms. The foreign exchange reserves have close to a collapse; in April 1998 it reported to be around $80-100 million. However, the junta reportedly secured $150 million loan from China to stabilize its reserve position. Following is its reserve position:
($ million)
| 1996 | 1997 |
| Mar | Jun | Sep | Dec | Mar | Jun | Sep | Dec |
| 504.0 | 297.4 | 193.5 | 229.1 | 207.2 | 155.6 | 186.5 | 249.8 |
Because of Junta's limited capacity to repaid, the interest re-payment in 1996 was only $18m, down from $68m in 1995, and $120m in 1994 respectively.
In addition to this external debt repayment crisis, more profound problem the junta now facing is its internal budget deficit. This resulted in printing more Kyat-notes, fuelling the inflation inside the country (The internal financial situation can be look at recent report appeared on BurmaNet-l by Bohmu Aung etc.).
Burma owed about 54% of its external bilateral debt to Japan and 10% to Germany. With this level of poverty, Burma may have been eligible for generous debt relief grants from its creditors. However, in 1995 U.S. has secured with an agreement with Paris Club donors(known as G10: Belgium, Canada, France, Germany, Italy, Japan, the Netherland, Sweden, U.K. and U.S.) that the debt settlement with Burma be made through miltialteral route on the basis of an agreement with the IMF.
It is rather unfortunate that the Chinese are able re able to give loan to the junta at this crucial time. However, Burma's total external debt will have to be settled, in any case, through IMF. This task, settling of Burma's national debt, can only be done by the authority of parliament. Burma's bilateral donors, Japan and Germany, on the other hand, can be urged to pressure on Burmese junta by collecting their arreared short-term debts on Burma.
With best regards, U Ne Oo.
