How can Myanmar enhance its aggregate fiscal
discipline from medium term to long term?
Swe Zin Maw
Visiting Scholar
Policy Research Institute, Ministry of Finance, Japan
20‐12‐20191

Outline Introduction
 Myanmar economic background and fiscal
condition
 Literature review and analytical framework for
aggregate fiscal discipline Analysis for aggregate fiscal discipline Findings and recommendations
2

I . Introduction• Objectives of the study are• To analyze current practicing mechanisms for aggregate fiscal discipline,• To identify better mechanisms to enhance aggregate fiscal discipline in
Myanmar from medium term to long term.

• Why is enhancing aggregate fiscal discipline important for
Myanmar?
• The requirement to keep balance between resources availability, highdevelopment needs and medium‐term to long‐term fiscal sustainability.
• Using resources as allocated can support the obtainment of the national
economic policy, the objectives of sustainable development and delivery of
public services.
3II. Myanmar Economic Background and Fiscal Condition
II.1. Myanmar Economic BackgroundYear

Subject Descriptor
2011‐2012
Population (million)

2018 (6months)2012‐20132013‐20142014‐2015

2015‐20162016‐20172017‐2018

60.98

61.57

51.99

52.45

52.92

53.39

53.71

53.71

2019‐2020
Estimate

2018‐2019

Gross domestic product, constant prices (growth rate)

5.60

7.30

8.40

8.00

7.00

5.90

6.80

6.50

6.80

7.00

Inflation, average consumer prices

6.83

0.36

5.76

5.14

7.26

9.10

4.62

5.00

8.00

6.71

Current account balance (% of GDP)

‐1.70

‐1.74

‐0.60

‐4.18

‐3.08

‐4.02

‐6.45

‐4.7

‐2.00

‐3.00

Government deficit (including Local Gov) (% of GDP)

‐3.7

‐2.1

‐1.6

‐1.3

‐4.4

‐2.8

‐3.1

‐1.5

‐6.25*‐6.87

Government gross debt (% of GDP)

34.92

35.40

36.41

33.26

38.15

35.60

38.36

37.71

37.11**

Real GDP per Capita at 2010/2011 prices (Kyats)889,744954,969

1,015,273

1,076,763

1,129,828

1,195,548

Unemployment rate (% of total labor forces)

4.01

4.01

4

0.8

2.1

1

1

Human Development Index (value)

0.549

0.564

0.569

0.574

0.578

0.578

1,978,100

2,180,755* revised estimate data and ** data till 30‐6‐2019
Sources: Ministry of Planning and Finance, Ministry of Labor, Immigration and Population and IMF WEO Data

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II.2. Fiscal Condition
Revenue, Expenditure and deficit as nominal value and percentage of GDP
Analytical Aggregate Method

Myanmar Accounting Method
40,000,000

50.00

35,000,000

Expenditure
Deficit
Revenue (% of GDP) (right axis)
Expenditure (% of GDP) (right axis)

25,000,000

20,000,000

30.00

Kyats in Million

20.00

15,000,000

10.00

10,000,000
5,000,000

25.0%

0.00

20.0%
20,000,000
15.0%

15,000,000

Percentages of GDP

25,000,000

Deficit (% of GDP) (right axis)

Percentage of GDP

30,000,000

30,000,000

40.00

Kyats in Million

35,000,000

30.0%

Revenue (Analytical)
Expenditure (Analytical)
Deficit(Analytical)
Deficit to GDP ratio( Analytical) (Right Axis)
Revenue to GDP ratio( Analytical) (Right Axis)
Expenditure to GDP ratio( Analytical) (Right Axis)

Revenue

10.0%

10,000,000

5,000,000

5.0%

0

Fiscal Year

‐15,000,000

5

2019‐2020 (BE)2018‐2019 (RE)2017‐20182016‐20172015‐20162018 (6 Months)

Fiscal Year
‐10,000,000

2014‐20152013‐20142012‐20132011‐20122010‐20112009‐20102008‐2009‐5,000,000

2007‐2008‐20.00‐10,000,000

2006‐2007‐5,000,000

2005‐2006

0
2004‐2005‐10.00

0.0%

‐5.0%

‐10.0%

III.(1) Literature View
 Andrews and Compos (2003) describe that “aggregate fiscal discipline refers to thealignment of public expenditures with total revenues (domestic revenues plus asustainable level of foreign borrowing). Total revenue and expenditure are kept inline with intended targets for the fiscal deficit and do not make unsustainable levelsof public borrowing.” Andrew and Compos (2003) and Shick (1998) state that budget constraints areneed to be set in advance to avoid higher expenditure, unsustainable deficit anddisposal of assets.
 Cangiano (2013), von Hagen(2002), Alensina (1996), von Hagen and Harden (1996),
Shah (2007) state that institutional arrangements such as law, rules andregulations are important to achieve aggregate fiscal discipline.
 Schaechter (2012) and Pattanayak (2018) define that “A fiscal rule imposes a long‐
lasting constraint on fiscal policy through numerical limits on budgetary
aggregates.”6

III.(1) Literature View (Cont.)
 Compos and Pradhan (1996) describe that “Aggregate fiscal discipline will depend upon: (i) the
existence of a medium‐term expenditure framework based upon a consistent macroeconomic
program; (ii) the relative dominance of the central ministries; and (iii) the existence of formal
constraints on spending and the deficits.”
 They argue that “institutional arrangements can be effective only if there are mechanisms thatbind public officials to institutional arrangements.”
 They state that to improve accountability and/or transparency, there is a need to make (i)reconciliation between ex‐ante and ex‐post aggregate spending and deficits; (ii) sanctions
against overspending; (iii) publication and dissemination of the results to the public; and (iv)
integration of all expenditures within the budget, including extra‐budgetary funds.
 The World Bank (1998) states that comprehensiveness and transparency are essential for
effective aggregate fiscal discipline.

7III. (2) Analytical Framework for Aggregate Fiscal Discipline According to the above literature view, aggregate fiscal discipline depends on the alignmentof expenditure with revenue, and setting the constraint, institutional arrangement, long
lasting fiscal rules and laws, comprehensiveness and transparency.
 To analyze aggregate discipline, the paper created an analytical framework by binding themethodology of WB PFM handbook ‐ Diagnostic Questionnaires for aggregate fiscal
discipline which is a questionnaire to assess the quality of institutional mechanisms, andscoring by fiscal‐rule characteristics created by Schaechter (2012) to analyze the fiscal‐rulecharacteristics.
 Scoring by the fiscal‐rule characteristics created by Schaechter (2012) especially focus on
numerical fiscal rules and procedural rules to enforce numerical rules for fiscal discipline.
 The methodology of WB PFM handbook – Diagnostic Questionnaires for aggregate fiscal
discipline is focus on rules and the compliance of the rules for aggregate fiscal discipline.
 To analyze fiscal rules, scores of fiscal‐rule characteristics are more comprehensive but do
not include the mechanisms to analyze the quality of compliance for revenue andexpenditure.
 That is why, the paper uses the following analytical framework by binding these 8 two
methodologies.

III. (2) Analytical Framework for Aggregate Fiscal Discipline (Cont.)
Legal basis : What is the highest legal basis of the rule?
‾1: Political commitment,‾2: Coalition agreement,‾3: Statutory,‾4: Constitutional.

Coverage:oWhich sector of the government is covered by the rule?
‾1: Central government,‾2: General government or wider public sector.

oWhich type of debt is covered?
‾1: Only domestic or foreign,‾2: Both domestic and foreign.
9III. (2) Analytical Framework for Aggregate Fiscal Discipline (Cont.)
Enforcement: Are these enforcement mechanisms in place?
‾Formal enforcement procedure (Yes: 1, No: 0).
‾Monitoring mechanism of compliance outside the government (Yes: 1, No: 0).
‾Imposing and monitoring by the donor (Yes: 1, No: 0).
‾Enforcement to publish actual figures relative to constraint (Yes: 1, No: 0).
‾ Existence of formal rules that guard against overspending by the agencies relative to budgetedamounts (Yes: 1 or No: 0).
‾Publication of reconciliation of actual expenditures versus budgeted amounts (Yes: 1 or No: 0)‾Taking punitive action against overspending agencies (Yes: 1 or No: 0).
‾Enforcement to report on aggregate fiscal outcomes relative to targets (Yes: 1 or No: 0)‾Timely report (Yes: 1, No: 0).
‾ The percentage deviation between the aggregate spending in the annual budget and the total amountactually spent at the end of the fiscal year (less than 5%: 3, no more than 10%: 2, no more than 20%: 1:
more than 20%: 0).
‾ The percentage deviation between the aggregate spending in the annual budget and the total actual
revenue at the end of the fiscal year (less than 5%: 3, no more than 10%: 2, no more than 20%: 1,
more than 20%: 0).
10

III. (2) Analytical Framework for Aggregate Fiscal Discipline (Cont.)
Supporting procedures and institutions: Are these procedures or institutions in place?
‾Multi‐year expenditure ceilings (Yes: 1, No: 0).
‾Publication of multi‐year ceiling. (Yes: 1, No: 0).
‾Fiscal responsibility law (Yes: 1, No: 0).
‾Independent body setting budget assumptions (Yes: 1, No: 0).
‾Independent body monitoring budget implementation (Yes: 1, No: 0).
‾Percentage difference between the aggregate spending in the medium‐term projection and that inannual budget (less than 5%: 3, no more than 10%: 2, no more than 20%: 1, more than 20%: 0).
‾Percentage difference between the aggregate spending ceiling in Ministry of Finance budget circular andthat in the annual budget (less than 5%: 3, no more than 10%: 2, no more than 20%: 1: more than 20%:0).
‾Percentage difference between the aggregate spending proposed by the Cabinet and the legislature (lessthan 5%: 3, no more than 10%: 2, no more than 20%: 1, more than 20%: 0).

Flexibility: Are these flexibility characteristics in place?
‾Clearly‐defined escape clauses (Yes: 1, No: 0).
‾Fiscal balances defined in cyclically adjusted terms (Yes: 1, No: 0).
11

IV. Analysis for Aggregate Fiscal Discipline
Institutional
Arrangement
1. Legal basis

Scores3

2. Coverage

42(a). Sectoral
coverage22(b). Coverageof types ofdebt

2

Findings of Author
The Budget Law that is approved by Parliament includes aborrowing limit (debt rule).

The borrowing limit that is enacted in the Union Budget Law
covers all government organizations including state‐owned
economic organizations and Region and State (Local) Government.
But it does not set a detailed sector limit separately.
Borrowing limit covers both domestic and foreign. But it does not
set domestic and foreign borrowing separately. Nor is it constantover the medium term.
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IV. Analysis for Aggregate Fiscal Discipline (Cont.)
3. Enforcement
3(a). Formal enforcement procedure

8.5
1 The Debt Management Law 2016 has been enacted to manage the debt by the Government andMinistry of Planning and Finance, and to report to the Parliament.
3(b). Monitoring mechanism of
1 The representatives of the Parliament check the compliance of borrowing limit by comparing thecompliance outside the government
actual borrowing with enacted borrowing limit in the annual debt report.
3(c) Imposing and monitoring by thedonor
3(d) Enforcement to publish actual
figure relative to constraint3(e) Existence of formal rules that
guard against overspending by theagencies relative to budget
amounts

0.5 The IMF conducts debt sustainability analysis and releases the debt sustainability benchmark. Although
the government does not follow this benchmark officially, they check the borrowing limit bylooking at IMF‐suggested debt sustainability benchmark.
0.5 Although it was not promulgated to publish the actual figures relative to the constraints in Debt
Management Law, the government reports actual figures relative to the borrowing constraint, andthe parliament checks the government debt through the annual debt report. The borrowing limit
was kyats 5,400 billion and actual borrowing was kyats 3,847 billion in 2017‐2018 fiscal year.
1

There is a formal rule. According to Financial Management Regulation 35/2017, any governmentorganization cannot overspend more than the total amounts that are enacted in the
Budget Law and Supplementary Appropriation Law. The Budget Department informs the enacted
budget and issues budget sanctions in accordance with Budget Law and Supplementary Appropriation
Law to the ministries and organizations, and sends a copy of the sanctions to the Myanmar Economic
Bank, Auditor General Office and Treasury Department every year. The Myanmar Economic Bank
monitors so as not to spend more than total stipulated amount in the Budget Sanctions. The Auditor
General Office checks annually the implementation of the ministries and organizations.
13IV. Analysis for Aggregate Fiscal Discipline (Cont.)
3 (f) Publication of actual
expenditures versus budget
amounts reconciliation
3(g) Taking punitive action against
overspending agencies

0

As the reconciliation between the actual expenditure versus budget amounts
are not made, the reconciliation is not published.

‐

3 (h) Enforcement to report on
aggregate fiscal outcomes
relative to targets

1

There is not that kind of action. The procedural rule (regulations on Financial
Management of Myanmar (Ministry of Planning and Finance’s Notification No.
35/2017) has already issued the duties and responsibilities of the controlling
officer and drawing officer, and it includes the clause not to spend more thanbudget. Moreover, the Myanmar Economic Bank monitors the ministries’
accounts to make sure not to spend more than total stipulated amount in the
Budget Sanctions.
The procedural rule (the law relating to drafting and submitting the Union
Budget) has already been enacted and it includes the clauses to report theimplementation of the government organizations to the Parliament. The
Ministry of Planning and Finance reports monthly reports, quarterly reports,
semi‐annual reports and annual reports to the Union Government and theGovernment reports semi‐annual reports and annual reports to the Parliament.
Quarterly reports, semi‐annual reports and annual reports are published on
Ministry’s website.
14

IV. Analysis for Aggregate Fiscal Discipline (Cont.)
3 (j) Timely report

0.5 The quarterly reports are published within two months and semi‐annual
reports are published within a quarter. Temporary actual reports are
published within 4 months but the provisional actual and actual takenearly 1 year.

3 (k) The percentage deviation
between the aggregate
spending in the annual
budget and the total amountactually spent at the end of
the fiscal year

1

The percentage deviation of the aggregated actual spending was ‐2% on
the original approved budget and ‐11.4% on the revised estimate(approved by legislature) in 2017/18 fiscal year.

3 (l) The percentage deviation
between the aggregate
revenue in the annual
budget and the total actual
revenue at the end of the
fiscal year2

The percentage deviation of the aggregated actual revenue was 7.1%
on the original approved budget and ‐5.6% on the revised estimate(approved by legislature) in 2017/18 fiscal year.

15IV. Analysis for Aggregate Fiscal Discipline (Cont.)
4. Supporting procedures and institutions 4
4(a) Multi‐year expenditure ceilings

0 The government does not practice multi‐year expenditure ceilings.

4(b) Publication of multi‐year
ceiling.
4(c) Fiscal responsibility law

0 It is not published.
0 Although Myanmar does not have a fiscal responsibility law, the duties andresponsibilities of the implementing agencies, the government, the Ministry ofPlanning and Finance and the parliament are enacted in the 2008 Constitution,
the law relating to drafting and submitting the Union Budget, and rules andregulations on Financial Management of Myanmar (Ministry of Planning and
Finance’s Notification No. 35/2017).

4(d) Independent body setting budget 0 Myanmar does not have independent body setting budget assumptions.
assumptions
4(e) Independent body monitoring
1 The Union Auditor General Office and the Parliament monitor the budget
budget implementation
implementation.
0 The percentage difference between the total budget ceiling and total spending in
4(f) Percentage difference between
annual budget is 31% in the 2019‐2020 fiscal year.
the aggregate spending in themedium‐term projection and that in
the annual budget
16

IV. Analysis for Aggregate Fiscal Discipline (Cont.)
4(g) Percentage difference between 0 The percentage difference between the total budget ceiling and the Cabinet
approved budget was 32% in the 2019‐2020 fiscal year.
the aggregate spending ceilingin Ministry of Finance budget
circular and that in the Cabinet
approved budget
4(h) Percentage difference between 3 The percentage deviation between aggregate spending proposed by the Cabinet andthe legislature approved budget was ‐1.3% in the 2019‐2020 fiscal year.
the aggregate spending
proposed by the Cabinet andthe legislature
5. Flexibility
05(a). Clearly‐defined escape
0 The escape clauses are not defined. If the government assumes to add additionalclausesborrowing requirements before the enactment of the Supplementary Appropriation
Law, they can increase the borrowing limit by adding a clause for an additionalborrowing limit on the Union Supplementary Appropriation Law. If the government
needs additional borrowing after enacting Union Supplementary Appropriation Law,they cannot increase the additional borrowing limit.
5(b). Fiscal balances defined incyclically adjusted terms

0 As the calculation of cyclically adjusted fiscal balances needs a lot of capacity andreliable information, the government cannot define cyclically adjusted fiscal
balances.
17

V. Findings and Recommendations
V.(1) Findings on current practicing mechanisms to improve aggregate fiscal discipline
Myanmar has some basic foundations that can support improvements in aggregate discipline
for short‐ term
• Good legal basis – enacting a borrowing limit annually in the Budget law with the approval of Parliament,• Good coverage – covering the whole public sectors’ borrowing limit, and both domestic and foreign debt,• Good enforcement on existing rules:⁻
The responsibilities for monitoring and reporting to the Parliament by the government and Ministryof Planning and Finance are enacted in debt management law;⁻The procedural rules to monitor and guard against overspending by the departmental head andmonitoring by the office of the Auditor General and the Parliament for compliance;⁻
Conducting debt sustainability analysis and releasing the debt sustainability benchmark by the IMF
and checking the actual borrowing and debt outstanding with the IMF‐suggested benchmark by thegovernment.
18

V.(1) Findings on current practicing mechanisms to improve aggregate fiscal discipline
Mechanisms that need to improve are Setting the limit is only one debt rule and it is unsecure for compliance of unforeseeable
events such as natural disasters. The government breached the borrowing limit in 2008‐2009 fiscal year and 2015‐2016 fiscal year due to Cyclone Nargis, and heavy floods andlandslides, and has been setting the borrowing limit incrementally every year since then.
 Non‐existent medium‐term budget ceiling consistent with macroeconomics conditions
and medium‐term investment planning based on resource availability.
 High deviation•

between the forecasting and approval by Cabinet,•

between the forecasting and approval by Parliament,•

between the actual expenditure and the legislature‐approved budget in the revised
estimate.

 Lack of comprehensive management in assets and liabilities and fiscal risk

19

V.(2) Policy Recommendations
 Recommendations for enhancing Myanmar aggregate fiscal discipline from medium term tolong term areTo strengthen medium‐term forecasting and developing the capacities forMacroeconomic assumptions and outlook,o Organize the technical team for macroeconomic forecasting under the five implementation teams,
o Forecasting once a quarter on macroeconomic conditions by the technical team and reporting
their forecasting results to the implementation teams,
o The implementation teams review and recommend their respective sector, and get agreementon the forecasting results and report to the Macroeconomic Management Coordination Group,o Review their forecasting and actual situation quarterly.

Fiscal framework binding with debt sustainability and revenue forecasting,Investment planning,
The analysis on any major deviations, taking the necessary actions and explaining any
major changes.
20

V.(2) Policy Recommendations (Cont.)
 To submit medium‐term fiscal framework and medium‐term investment
planning to the Cabinet and getting approval from them and reporting the
medium‐term revenue floor and expenditure ceiling to the line agencies.
 To upgrade the numerical fiscal rules by Setting for the medium term and avoiding raising it year by year, Adding the escape clauses for natural disasters,
 Adding additional fiscal rules such as a current revenue to expenditure ratio.

 To reduce the supplementary grants gradually and enforce theenhancement of budget monitoring by the departmental heads to makesure the budget is spent as they planned and achieved the intended
objectives.
21

V.(2) Policy Recommendations (Cont.)
To initiate the management ofFiscal risks, start from contingent liabilities of public corporations andthe Social Security Board,Assets and liabilities.
 To improve the legal framework, enforcement and compliance for medium‐
term forecasting and ceiling, medium‐term investment planning, and the
management of assets and liabilities, these three areas should be added in
the Public Finance Management Bill that has been discussed between
executive branch and legislative branch for four years since 2015.

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Thank you for your attention
ご清聴ありがとうございました
23