The IMF last week sent US$350 million in cash to the Burmese government, part of a no-strings-attached emergency aid package to help it battle the COVID-19 pandemic.
Days later, Burmese military leaders seized power and detained Burmese State Counsellor Aung San Suu Kyi and other elected officials, in what the US Department of State on Tuesday said constituted a coup.
There appears to be little the IMF can do to claw back the funds, part of rapid-disbursing COVID-19 financing programs with almost no conditions and approved by the IMF board on Jan. 13, sources familiar with the payments and international finance experts said.
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“We are following the unfolding developments closely. We are deeply concerned about the impact of events on the economy and on the people of Myanmar,” an IMF spokesperson said in a statement on Tuesday, confirming that the payment was completed last week.
US President Joe Biden, facing his first international crisis since taking office less than two weeks ago, has threatened new sanctions against the Burmese generals, and the state department said that it would review its foreign assistance to the Southeast Asian country.
The US is the dominant shareholder in the IMF, which has provided Myanmar with US$700 million in emergency COVID-19 financing over the past seven months, including last week’s payment, which included US$116.6 million through the IMF’s Rapid Credit Facility and US$233.4 million through the Rapid Financing Instrument.
The IMF on Jan. 13 said in a statement that the money would help Myanmar meet “urgent balance-of-payments needs arising from the COVID-19 pandemic, especially the government’s recovery measures to ensure macroeconomic and financial stability while supporting affected sectors and vulnerable groups.”
Unlike the IMF’s regular financing programs, which disburse funds in smaller increments as performance benchmarks are met for agreed policy reforms, COVID-19 emergency aid has been sent quickly, often all at once.
“It’s not a program that was negotiated, there isn’t conditionality and there aren’t forward-looking reviews with disbursements tied to those reviews,” said Stephanie Segal, a former IMF economist and US Treasury official who works with the Center for Strategic and International Studies in Washington.
“I’m not aware of any precedent where money that’s been approved by the IMF board can be recalled,” Segal added.
The IMF has since the beginning of the COVID-19 crisis provided emergency financing to 80 countries.
The timing of the latest payment to Myanmar was unfortunate, two sources familiar with the disbursement said, pointing to the risks of using rapid financing that gives governments broad discretion over how they spend the money.
The best-case scenario is that a Burmese administration that emerges from the current political turmoil would spend the money appropriately because it wants to have a productive relationship with the IMF, one of the sources said.
The sources expressed hope that the Central Bank of Myanmar can maintain its independence from the Burmese Ministry of Planning, Finance and Industry.
However, on Tuesday, the military appointed Than Nyein as the new central bank governor, reinstating him to a post he held from 2007 to 2013, during the rule of the last junta.
The World Bank, which has provided more than US$150 million in financing to Myanmar since the pandemic started, said on Monday that it was gravely concerned about the military takeover, warning that it risked a major setback to the country’s transition and its development prospects.
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