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SPDC/SLORC IN FOREIGN-DEBT CRISIS



/* Written Wed 12 Aug 6:00am 1998 by drunoo@xxxxxxxxxxxx in igc:reg.burma */
/* ----------------"SPDC/SLORC IN FOREIGN-DEBT CRISIS "------------------ */

SPDC/SLORC IN BALANCE OF PAYMENT CRISIS
***************************************
Various economic reports from reliable sources indicate that the Burmese
military junta is in financial dire straits. The junta in recent years
have not been able to service all of its external debt. It reported
to be capable of making interest payments to multilateral donors only.
Burmese junta cannot make any repayments, i.e. the interest and 
principal, 
to its bilateral donors such as Japan and Germany. These interests due
are accumulating as short-term debts, as the following table suggested.

BURMA'S EXTERNAL DEBT
($million unless otherwise indicated;debt stocks as at the year-end)

                                   1991    1993    1995
--------------------------------------------------------
TOTAL EXTERNAL DEBT                4,875   5,757   5,771

LONG TERM DEBT                     4,580   5,394   5,378
SHORT-TERM DEBT(INTEREST ARREARS)    248     362     393
--------------------------------------------------------
PUBLIC & PUBLICLY GUARANTEED:                   
LONG TERM DEBT                     4,580   5,394   5,378
         (MULTILATERAL)            1,258   1,348   1,311
         (BILATERAL)               3,068   3,758   3,680
         (PRIVATE CREDITORS)         253     289   1,367
--------------------------------------------------------
TOTAL DEBT SERVICE, PAID              80     111     250
          PRINCIPAL                   29      22     180
          INTEREST                    51      89      70
--------------------------------------------------------
RATIOS IN PER CENT(%)
(SHORT-TERM DEBT)/(TOTAL DEBT)       6.1     6.3     6.8
      DEBT-SERVICE RATIO            13.1    11.8     N/A
--------------------------------------------------------
(SOURCE: EIU COUNTRY PROFILE 1997/98, REF.TABLE 29)

These figures do not include the debts owed to China resulting from
the purchase of arms. The foreign exchange reserves have close to
a collapse; in April 1998 it reported to be around $80-100 million.
However, the junta reportedly secured $150 million loan from
China to stabilize its reserve position. Following is its reserve
position:

BURMA'S FOREIGN EXCHANGE ($ million)
----------------------------------------------------------------
        1996                                   1997
Mar     Jun     Sep     Dec         Mar     Jun     Sep     Dec
----    ----    ----    ----        ----    ----    ----    ----
504.0   297.4   193.5   229.1       207.2   155.6   186.5   249.8
-----------------------------------------------------------------
(SOURCE: IMF, INTERNATIONAL FINANCIAL STASTISTICS, EIU 2nd Qtr 1998)

Because of Junta's limited capacity to repaid, the interest re-payment
in 1996 was only $18m, down from $68m in 1995, and $120m in 1994
respectively.

In addition to this external debt repayment crisis, more profound
problem the junta now facing is its internal budget deficit. This
resulted in printing more Kyat-notes, fuelling the inflation inside
the country (The internal financial situation can be look at recent
report appeared on BurmaNet-l by Bohmu Aung etc.).

Burma owed about 54% of its external bilateral debt to Japan and 10%
to Germany. With this level of poverty, Burma may have been eligible
for generous debt relief grants from its creditors. However, in 1995
U.S. has secured with an agreement with Paris Club donors(known as G10:
Belgium, Canada, France, Germany, Italy, Japan, the Netherland, Sweden,
U.K. and U.S.) that the debt settlement with Burma be made through
miltialteral route on the basis of an agreement with the IMF.

It is rather unfortunate that the Chinese are able to give loan to
the junta at this crucial time. However, Burma's total external debt
will have to be settled, in any case, through IMF. This task, settling
of Burma's national debt, can only be done by the authority of
parliament. Burma's bilateral donors, Japan and Germany, on the other
hand, can be urged to pressure on Burmese junta by collecting their
arreared short-term debts on Burma.

With best regards, U Ne Oo.

/* Endreport */