Myanmar yesterday announced a deal with international lenders to cancel nearly US$6 billion of its debt, another milestone in the rapid transformation of the former junta-ruled nation.
The former pariah state also cleared its arrears to the World Bank and the Asian Development Bank (ADB) with the help of a bridge loan from Japan, removing another key hurdle for the resumption of international aid.
Myanmar said the Paris Club of creditor nations had agreed at a meeting on Friday to write off half of its debts to the group in two phases, with the remaining amounts to be rescheduled over 15 years.
There was no immediate comment from the Paris Club, an informal grouping of industrialized nations formed in 1956.
According to Myanmar, Japan has committed to cancel arrears worth more than US$3 billion while Norway is writing off US$534 million.
It said other bilateral donors were expected to follow suit.
Burmese Finance Minister Win Shein said the agreement heralded the beginning of “an era of new relationships in which Myanmar is committed to fully cooperate with all the members of the Paris Club,” according to a government statement.
He said Myanmar would use the resources made available by the debt relief for development and poverty reduction programs.
Japan had already announced plans to cancel some of Myanmar’s debt, saying in April last year that it would forgive ￥300 billion (US$3.3 billion) of the ￥500 billion it was owed.
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.
In another landmark, Myanmar restructured more than US$900 million of debts to the World Bank and the ADB, enabling the two development lenders to resume assistance to the country after a decades-long absence.
“Myanmar has come a long way in its economic transformation, undertaking unprecedented reforms to improve people’s lives, especially the poor and vulnerable,” said Annette Dixon, the World Bank’s Myanmar director.
“Much work remains to be done. We are committed to helping the government accelerate poverty reduction and build shared prosperity,” she added.
The World Bank in November last year pledged US$245 million of aid to support Myanmar’s economic development.
The Washington-based institution closed its Yangon office in 1987 and ceased new lending after the then-ruling junta stopped making payments on debts worth hundreds of millions of dollars left from previous programs.
The Manila-based ADB yesterday said it planned “major investments” in road, energy, irrigation and education projects, hailing its return to Myanmar as a “historic tipping point.”
Burmese President Thein Sein has overseen a series of dramatic reforms since taking office in 2011, including the release of political prisoners and the election of Nobel Peace Prize laureate Aung San Suu Kyi to parliament.
In response, the West has begun rolling back sanctions and foreign firms are lining up to invest in the country, eyeing its huge natural resources, large population and strategic location between China and India.