Myanmar clears 60% of foreign debt

Myanmar pagodaMyanmar on January 28 announced a deal with international lenders to cancel or refinance nearly $6 billion of its debt, almost 60 per cent of what it owes to foreign lenders. The debt clearance paves the way for aid organisations and donors to directly contribute to Myanmar’s economic recovery after years of Western-led sanctions.

The Paris Club, an informal grouping of 19 creditor nations including France, Germany and the US, agreed to relieve Myanmar of half the arrears it owes, unburdening the country of approximately $2.2 billion in debt, with the remaining amounts to be rescheduled over 15 years.

Japan has committed to cancel arrears worth more than $3 billion while Norway is writing off $534 million. The Myanmar government said other bilateral donors were expected to follow suit.

The moves follow a string of dramatic political reforms in Myanmar, which is seeking development assistance and foreign investment to boost its ailing economy as it emerges from decades of military rule.

Meanwhile, the exchange rate between the US dollar and Myanmar’s currency, the Kvat, has stabilised. Myanmar has started a managed float of  the kyat on April 1, 2012, setting the US dollar at 818 kyat.

On January 29, the dollar was officially traded at 855 kyat, while Foreign Exchange Certificates were trading for 862 kyat. The black market rate – at independently run currency exchanges at major markets – was offering 857-862, according to Myanmar-based travel agencies.