A long-awaited deal to allow Burma to clear part of its huge decades-old foreign debt was announced by the World Bank today, opening the door for new much-needed lending to jump-start its lagging economy.
The bank’s Washington headquarters announced in a statement that the Japan Bank for International Cooperation, the country’s overseas development bank, will provide a bridge loan to Burma to allow it to cover outstanding debt to the World Bank and the Asian Development Bank, which totals about $900m.
Burma stopped payments on its old loans in about 1987, making it ineligible for new development lending.
The deal is a major breakthrough for Burma, with loans likely to go to upgrading its dilapidated infrastructure, including electricity and ports. The knock-on effect would be to bring in more foreign direct investment, already attracted by the country’s relatively low-cost economy.
The deal is also likely to draw criticism, because it comes as Burma’s army is pushing hard against ethnic Kachin rebels in the country’s north, in an echo of the notorious counter-insurgency campaigns of previous military regimes.
A former general, Thein Sein, became the elected President in 2011 and began reversing almost five decades of military repression by instituting political and economic reforms.
He won the substantial easing of economic and political sanctions imposed against the junta by the United States and other nations.
But some pro-democracy activists say his administration has been rewarded too much, too fast, allowing some abuses to continue, such as repression of ethnic minorities.